natural gas prices hit 13½ year high after a six-fold increase in less than 2 years; US oil exports at a 26 month high even with SPR at a 34½ year low & US oil supplies at a 17 year low; total oil + products inventories at a new 13½ year low even with highest refinery utilization rate since 2019 & greatest refinery throughput in 11 months; rigs down first time in 31 weeks
oil prices rose for the fifth consecutive week as a European embargo of Russian oil began to seem more likely...after rising 2.5% to $113.23 a barrel last week as fuel prices hit record highs on tight supplies and pulled nearby crude prices higher, trading in the contract of US light sweet crude for June delivery expired, so on Monday oil price quotes were referencing the contract price for US light sweet crude for July delivery, which had ended last week priced at $110.28 a barrel, after rising 1.5% on the week...that contract opened this week higher as U.S. fuel demand, tight supplies, and a weaker dollar supported prices while Shanghai prepared to reopen after a two-month lockdown, but failed to hold the early momentum and finished trading little changed, settling up a penny at $110.28 a barrel, as worries over a possible recession weighed against the outlook for higher fuel demand with the upcoming U.S. summer driving season and Shanghai's plans to reopen...oil prices held steady early Tuesday as Chinese efforts to cushion the impact of anti-virus lockdowns, including policies to help people buy cars, failed to reassure traders, and then turned lower as Hungary continued to hold up the EU's planned embargo on Russian oil, before settling down 52 cents on the session at $109.77 a barrel, as concerns over a possible recession and China’s COVID-19 curbs outweighed tight global supply and expectations of a summer driving season pick-up in fuel demand...oil prices rallied in early morning trading on Wednesday, led by the rising front-month gasoline contract, after the American Petroleum Institute reported gasoline stockpiles in the United States fell by a larger-than-expected margin, leaving supplies at their lowest level for this time of the year since 2013, and extended their gains after the EIA reported crude stockpiles fell by a million barrels, and that refiners had picked up the pace of processing last week, boosting capacity use to its highest since December 2019, and settled 56 cents higher at $110.33 a barrel after the Fed minutes revealed that while the central bank was sticking to its commitment to lift short-term interest rates, Fed officials were not planning more aggressive measures in tightening monetary policy....oil prices then jumped about 3% to a two-month high early Thursday after European Council President Charles Michel said he was confident an agreement to ban Russian supplies could be reached before the council's next meeting on May 30. and extended the early gains to settle $3.76 higher at $114.09 a barrel amid signs that the EU was closing in on a deal with Hungary and Czech Republic to ban Russian oil imports, at a time when global supplies were already slipping further into deficit...oil prices moved higher again early Friday, supported by a tight market due to rising gasoline consumption in the US and the possibility of an EU ban on Russian oil, and settled 98 cents higher at $115.07 a barrel after a volatile trading session, drawing support from strong worldwide demand for fuel, while the price of Brent, the global benchmark, jumped 3.5% on reports that Iran had seized two oil tankers in the Strait of Hormuz...so for the week, Brent crude finished 6 percent higher, while US oil prices rose 1.5%, even as the contract price for US light crude for July delivery, which just became the quoted front month contract on Monday, finished 4.3% above its price of the prior Friday..
meanwhile, natural gas prices rose the ninth time in eleven weeks and hit a 13½ year high as demand increased while supplies remained tight... after rising 5.5% to $8.083 per mmBTU last week as output slipped while demand for power generation and for exports remained high, the contract price of natural gas for June delivery jumped 66.1 cents, or more than 8%, to a near 13-year high of $8.744 per mmBTU on Monday, as US consumers cranked up their air conditioners to escape a spring heatwave and LNG exports plants consumed more of the fuel....prices then rose 5.2 cents and went on to close at new 13 year high of $8.796 per mmBTU on Tuesday, as gas volumes flowing to liquefied natural gas export plants jumped to the highest in seven weeks, and on raised forecasts for demand next week...natural gas prices then soared to over $9 for the first time since August 2008 on Wednesday, and hit $9.399 per mmBTU in a furious rally amid robust calls for U.S. exports and worries that fragile supplies might prove inadequate to meet summer cooling demand, before pulling back to settle 17.5 cents higher at $8.971 per mmBTU, as power generators and LNG export plants continued to consume more of the fuel.....natural gas prices opened higher and shot up to another 13 year high at $9.401 per mmBTU on Thursday, as traders digested a weak storage report and renewed concerns about a supply crunch, but pulled back in volatile trading ahead of the contract expiration on forecasts for lower demand this week than was previously expected, and settled 6.3 cents lower at $8.908 per mmBTU, while the new front month contract price of natural gas for July delivery fell 9.8 cents to $8.895 per mmBTU...that July contract price fell again on Friday, giving up 16.8 cents to settle at $8.727 per mmBTU, on rising output and lowered forecasts for demand over the next two weeks, but still finished 6.7% higher on the week, even as Reuters and other media outlets call it an 8% gain for the week, referencing the difference between the June contract starting price and the July contract ending price...
with natural gas prices hitting a 13½ year high this week, we'll include a price graph for them and take a look at how it relates....
the above is a screenshot of the interactive natural gas price chart from barchart.com, which i have reset to show weekly natural gas prices over the past 3 years, in order to show the recent lower prices...this same chart can be reset to show prices of front month or individual monthly natural gas futures contracts over time periods ranging from 1 day to 30 years, as the menu bar on the top indicates, and also to show natural gas prices by the minute, hour, day, week or month for each...each bar in the graph shown above represents the range of natural gas prices for a single week, with weeks when prices rose indicated in green, and weeks when prices fell indicated in red, with the small sticks above or below each weekly bar representing the extent of the price change above or below the opening and closing price for the week in question.....likewise, the bars across the bottom show trading volume for the weeks in question, again with up weeks indicated by green bars and down weeks indicated in red...you'll note that by positioning our cursor over the week of June 22 2020, indicated by a thin vertical line, we have caused that week's natural gas prices to be displayed in red in the upper left corner of the graph...there we can see that natural gas prices opened at $1.671 per mmBTU on Monday of that week, fell to as low as $1.440/mmBTU, and closed that week at $1.544/mmBTU, all prices that are less than one-sixth of the $9.401 per mmBTU that front month natural gas prices hit this week...we can also use that interactive graph feature to determine that natural gas prices finished trading at $3.579/mmBTU on December 31st of 2021, and were still as low as $4.748 per mmBTU during the week beginning March 21st of this year...those readings serve to establish that natural gas prices have increased by more than sixfold in less than two years, that they had at one time this week increased by 263% year to date, and had nearly doulbed over the past nine weeks...
The EIA's natural gas storage report for the week ending May 20th indicated that the amount of working natural gas held in underground storage in the US rose by 80 billion cubic feet to 1,812 billion cubic feet by the end of the week, which still left our gas supplies 387 billion cubic feet, or 17.6% below the 2,199 billion cubic feet that were in storage on May 20th of last year, and 327 billion cubic feet, or 15.3% below the five-year average of 2,139 billion cubic feet of natural gas that have been in storage as of the 20th of May over the most recent five years....the 80 billion cubic foot injection into US natural gas working storage for the cited week was less than the average forecast for a 87 billion cubic foot injection from an S&P Global Platts survey of analysts, and it was also less than the average injection of 97 billion cubic feet of natural gas that had typically been added to our natural gas storage during the same week over the past 5 years, and was much less than the 109 billion cubic feet that were added to natural gas storage during the corresponding week of 2021...
The Latest US Oil Supply and Disposition Data from the EIA
US oil data from the US Energy Information Administration for the week ending May 20th indicated that after another jump in our oil exports, another oil withdrawal from the SPR, and even after an increase in oil supplies that could not be accounted for, we had to pull oil out of our stored commercial crude supplies for the 3nd time in 8 weeks, and for the 26th time in the past 43 weeks …our imports of crude oil fell by an average of 82,000 barrels per day to an average of 6,486,000 barrels per day, after rising by an average of 299,000 barrels per day during the prior week, while our exports of crude oil rose by 821,000 barrels per day to a 26 month high of 4,341,000 barrels per day during the week, which together meant that our trade in oil worked out to a net import average of 2,145,000 barrels of oil per day during the week ending May 20th, 903,000 fewer barrels per day than the net of our imports minus our exports during the prior week…over the same period, production of crude oil from US wells was reportedly unchanged at 11,900,000 barrels per day, and hence our daily supply of oil from the net of our international trade in oil and from domestic well production appears to have totaled an average of 14,045,000 barrels per day during the cited reporting week…
Meanwhile, US oil refineries reported they were processing an average of 16,269,000 barrels of crude per day during the week ending May 20th, an average of 334,000 more barrels per day than the amount of oil than our refineries processed during the prior week, while over the same period the EIA’s surveys indicated that a net of 999,000 barrels of oil per day were being pulled out of the supplies of oil stored in the US....so based on that reported & estimated data, this week’s crude oil figures from the EIA appear to indicate that our total working supply of oil from storage, from net imports and from oilfield production was 1,225,000 barrels per day less than 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 inserted a (+1,225,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet in order to make the reported data for the daily supply of oil and for the consumption of it balance out, a fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there must have been an error or omission of that magnitude in this week’s oil supply & demand figures that we have just transcribed..... moreover, since last week’s EIA fudge factor was at (-214,000) barrels per day, that means there was a 1,439,000 barrel per day difference between this week's balance sheet error and the EIA's crude oil balance sheet error from a week ago, and hence the week over week supply and demand changes indicated by this week's report are completely worthless.... however, since most everyone treats these weekly EIA reports as gospel, and since these figures often drive oil pricing, and hence decisions to drill or complete oil wells, we’ll continue to report this data just as it's published, and just as it's watched & believed to be reasonably accurate by most everyone in the industry...(for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….
week's 999,000 barrel per day decrease in our overall crude oil inventories left our total oil supplies at 951,814,000 barrels at the end of the week, our lowest oil inventory level since January 7th, 2005, and thus a 17 year low….this week's oil inventory decrease came as 146,000 barrels per day were being pulled our commercially available stocks of crude oil, while 853,000 barrels per day of oil were being pulled out of our Strategic Petroleum Reserve at the same time....that draw on the SPR would now include the initial emergency withdrawal under Biden's "Plan to Respond to Putin’s Price Hike at the Pump", that is expected to supply 1,000,000 barrels of oil per day to commercial interests from now up to the midterm elections in November, in the hope of keeping gasoline and diesel fuel prices from rising further up until that time, as well as the previous 30,000,000 million barrel release from the SPR to address Russian supply related shortfalls, and the administration's earlier plan to release 50 million barrels from the SPR to incentivize US gasoline consumption....including other withdrawals from the Strategic Petroleum Reserve under recent release programs, a total of 124,136,000 barrels of oil have now been removed from the Strategic Petroleum Reserve over the past 22 months, and as a result the 532,013,000 barrels of oil still remaining in our Strategic Petroleum Reserve is now the lowest since September 4th, 1987, or at a 34 1/2 year low, as repeated tapping of our emergency supplies for non-emergencies or to pay for other programs has already drained those supplies considerably over the past dozen years....furthermore, the total 180,000,000 barrel drawdown over the next six months will remove almost a third of what remains in the SPR, and leave us with what would be less than a 20 day supply of oil at today's consumption rate, as the following graph illustrates...
The above graph comes from a post by oil and gas researcher Rory Johnston at Substack, wherein he discusses the implications of the million barrel per day SPR release, and it shows the historical quantity of oil held in our Strategic Petroleum Reserve, beginning from its inception following the Arab Oil Embargo of 1973-74 to the present day...the graph is further annotated to indicate the reasons for major additions to and withdrawals from the SPR, most of which were due to disruptions to oil supplies following hurricanes in the Gulf (you can get a better view of those annotations by clicking on the graph, or even better yet, view the enlarged original at substack.com....on the far right, Rory has projected where the strategic petroleum Reserve will end up after the Biden withdrawals are complete, which will take the SPR back to its level of 1983, while it was still being filled....based on an estimated average daily US oil consumption of 18,000,000 barrels per day, the US will have roughly 18 1/2 days of oil supply left in the Strategic Petroleum Reserve this November, after all three of the Biden administration's SPR withdrawal programs have run their course ...
Further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports rose to an average of 6,414,000 barrels per day last week, which was 8.6% more than the 5,906,000 barrel per day average that we were importing over the same four-week period last year….this week’s crude oil production was reported to be unchanged at 11,900,000 barrels per day even though the EIA's rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day lower at 11,400,000 barrels per day, because Alaska’s oil production was 13,000 barrels per day higher at 460,000 barrels per day and thus added 100,000 barrels per day to the final rounded national total (by the EIA's math, not mine)...US crude oil production had reached a pre-pandemic high of 13,100,000 barrels per day during the week ending March 13th 2020, so this week’s reported oil production figure was 9.2% below that of our pre-pandemic production peak, but was 41.2% above the interim low of 8,428,000 barrels per day that US oil production had fallen to during the last week of June of 2016...
US oil refineries were operating at 93.2% of their capacity while using those 16,269,000 barrels of crude per day during the week ending May 20th, up from the 91.8% utilization rate of the prior week, and the highest refinery utilization rate since December 2019…the 16,269,000 barrels per day of oil that were refined this week were the most in 11 months, 6.8% more barrels than the 15,239,000 barrels of crude that were being processed daily during week ending May 21st of 2021, and 25.2% more than the 12,991,000 barrels of crude that were being processed daily during the week ending May 22nd, 2020, when US refineries were operating at what was then a much lower than normal 71.3% of capacity during the first wave of the pandemic, but still 3.0% less than the 16,767,000 barrels that were being refined during the prepandemic week ending May 24th 2019, when refinery utilization was at a more normal 91.2% for the third weekend of May...
Even with the increase in the amount of oil being refined this week, gasoline output from our refineries was again lower, decreasing by 151,000 barrels per day to 9,423,000 barrels per day during the week ending May 20th, after our gasoline output had decreased by 142,000 barrels per day over the prior week.…this week’s gasoline production was 3.3% less than the 9,748,000 barrels of gasoline that were being produced daily over the same week of last year, and 4.7% below our gasoline production of 9,883,000 barrels per day during the week ending May 17th, 2019, ie, the year before the pandemic impacted gasoline output....on the other hand, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 267,000 barrels per day to 5,147,000 barrels per day, after our distillates output had decreased by 2,000 barrels per day over the prior week…and after other recent production increases, our distillates output was 10.3% more than the 4,665,000 barrels of distillates that were being produced daily during the week ending May 21st of 2021, but still 1.1% less that the 5,206,000 barrels of distillates that were being produced daily during the week ending May 10th, 2019...
With the decrease in our gasoline production, our supplies of gasoline in storage at the end of the week fell for the fifteenth time in sixteen weeks, decreasing by 482,000 barrels to 219,707,000 barrels during the week ending May 20th, after our gasoline inventories had decreased by 4,779,000 barrels over the prior week....our gasoline supplies decreased by less this week than last because the amount of gasoline supplied to US users decreased by 229,000 barrels per day to 8,798,000 barrels per day, and because our exports of gasoline fell by 183,000 barrels per day to 774,000 barrels per day, while our imports of gasoline fell by 29,000 barrels per day to 847,000 barrels per day....but even with 15 inventory drawdowns over the past 16 weeks, our gasoline supplies were still only 5.5% lower than last May 21st's gasoline inventories of 232,481,000 barrels, and 8% below the five year average of our gasoline supplies for this time of the year…
With the big jump in our distillates production, our supplies of distillate fuels increased for the 5th time in nineteen weeks and for the 12th time in thirty-eight weeks, rising by 1,657,000 barrels to 105,264,000 barrels during the week ending May 20th, after our distillates supplies had increased by 1,235,000 barrels during the prior week….our distillates supplies rose this week even though the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 51,000 barrels per day to 3,867,000 barrels per day, and even though our exports of distillates rose by 122,000 barrels per day to 1,124,000 barrels per day, while our imports of distillates fell by 8,000 barrels per day to 114,000 barrels per day....but.after forty-one inventory withdrawals over the past fifty-eight weeks, our distillate supplies at the end of the week were 17.2% below the 129,082,000 barrels of distillates that we had in storage on May 21st of 2021, and about 21% below the five year average of distillates inventories for this time of the year…
Meanwhile, with this week's big increase in our oil exports, our commercial supplies of crude oil in storage fell for the 16th time in 26 weeks and for the 33rd time in the past year, decreasing by 1,019,000 barrels over the week, from 420,820,000 barrels on May 13th to 419,801,000 barrels on May 20th, after our commercial crude supplies had decreased by 3,394,000 barrels over the prior week…with this week’s decrease, our commercial crude oil inventories remained about 14% below the most recent five-year average of crude oil supplies for this time of year, but were still about 18% above the average of our crude oil stocks as of the third weekend of May over the 5 years at the beginning of the past decade, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first topped 400 million barrels....since our crude oil inventories had jumped to record highs during the Covid lockdowns of spring 2020, and then jumped again after last year's winter storm Uri froze off US Gulf Coast refining, our commercial crude oil supplies as of this May 13th were 13.3% less than the 484,349,000 barrels of oil we had in commercial storage on May 21st of 2021, and were also 21.4% less than the 534,422,000 barrels of oil that we had in storage on May 22nd of 2020, and 11.9% less than the 476,493,000 barrels of oil we had in commercial storage on May 24th of 2019…
Finally, with our inventories of crude oil and our supplies of all products made from oil remaining near multi year lows, we are also continuing to keep track of the total of all U.S. Stocks of Crude Oil and Petroleum Products, including those in the SPR....the EIA's data shows that the total of our oil and oil product inventories, including those in the Strategic Petroleum Reserve and those held by the oil industry, and thus including everything from gasoline and jet fuel to propane/propylene and residual fuel oil, fell by 5,315,000 barrels this week, from 1,691,379,000 barrels on May 13th to 1,686,064,000 barrels on May 20th, after our total inventories had fallen by 7,939,000 barrels during the prior week....that left our total liquids inventories down by 102,369,000 barrels over the first 18 weeks of this year, and at the lowest since Nov 7th, 2008, or at a 13 1/2 year low...
This Week's Rig Count
The number of drilling rigs running in the US decreased for the first time in 31 weeks and for just the 7th time over the prior 87 weeks during the week ending May 27th, and still remained 8.4% below the prepandemic rig count.....Baker Hughes reported that the total count of rotary rigs drilling in the US decreased by one to 727 rigs this past week, which was still 270 more rigs than 457 rigs that were in use as of the May 28th report of 2021, but was also 1,202 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, a week before OPEC began to flood the global market with oil in an attempt to put US shale out of business….
The number of rigs drilling for oil was down by 2 to 574 oil rigs during this week, after rigs targeting oil had increased by 13 during the prior week, and there are still 215 more oil rigs active now than were running a year ago, even as they still amount to just 35.7% of the shale era high of 1609 rigs that were drilling for oil on October 10th, 2014, and as they are still down 16.0% from the prepandemic oil rig count….at the same time, the number of drilling rigs targeting natural gas bearing formations rose by 1 to 151 natural gas rigs, which was the most natural gas rigs deployed since September 13th, 2019, and up by 53 natural gas rigs from the 98 natural gas rigs that were drilling during the same week a year ago, even as they were still only 9.4% of the modern high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008…in addition to rigs targeting oil and gas, Baker Hughes continues to show two "miscellaneous" rigs active; one is a rig drilling vertically for a well or wells intended to store CO2 emissions in Mercer county North Dakota, and the other is also a vertical rig, drilling 5,000 to 10,000 feet into a formation in Humboldt county Nevada that Baker Hughes doesn't track...a year ago, there were no such "miscellaneous" rigs running...
The offshore rig count in the Gulf of Mexico was down by two to fifteen rigs this week, with all of this week's Gulf rigs drilling for oil in Louisiana waters....that's still one more than the count of offshore rigs that were active in the Gulf a year ago, when all 14 Gulf rigs were drilling for oil offshore from Louisiana…but in addition to rigs drilling in the Gulf, now there's also an offshore rig drilling in the Cook Inlet of Alaska, where natural gas is being targeted at a depth greater than 15,000 feet, while year ago, there were no offshore rigs other than those deployed in the Gulf of Mexico....and in addition to rigs offshore, we also have a water based directional rig, drilling for oil at a depth between 10,000 and 15,000 feet, inland in the Galveston Bay area, while during the same week of a year ago, there was also one such "inland waters" rig deployed...
The count of active horizontal drilling rigs was up by 2 to 666 horizontal rigs this week, which was also 251 more rigs than the 415 horizontal rigs that were in use in the US on May 28th of last year, but still 51.5% less than the record 1,374 horizontal rigs that were drilling on November 21st of 2014....on the other hand, the directional rig count was down by 3 to 36 directional rigs this week, even as those were still up by 9 from the 27 directional rigs that were operating during the same week a year ago…meanwhile, the vertical rig count was unchanged at 25 vertical rigs this week, while those were up by 10 from the 15 vertical rigs that were in use on May 28th of 2021….
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 May 27th, the second column shows the change in the number of working rigs between last week’s count (May 20th) and this week’s (May 27th) count, the third column shows last week’s May 20th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running on the Friday 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 28th of May, 2021...
for all the sturm und drang we've seen with oil & natural gas prices recently, changes to drilling activity remain pretty tranquil...the 3 rig decrease in Louisiana includes the 2 Gulf of Mexico oil rigs that were idled in the state's offshore waters, and a rig pulled out of the Haynesville shale region in the northern part of the state, but one that was apparently not targeting the Haynesville....in Oklahoma, a natural gas rig was added in the Arkoma Woodford, an oil rig was added in the Cana Woodford, an oil rig was added in the Mississippian shale near Kansas, while an oil rig was pulled out of the Granite Wash basin near the border with the Texas panhandle...since the Oklahoma count was only up by one, we have to figure there was also a rig removed elsewhere in the state from a basin that Baker Hughes doesn't track...in Texas, the Rigs by State file at Baker Hughes shows us that a rig was added in Texas Oil District 2, which accounts for the oil rig added in the Eagle Ford shale, and that a rig was removed from Texas Oil District 6, which accounts for the oil rig pulled out of the Haynesville shale...by checking the North America Rotary Rig Count Pivot Table (Feb 2011 - Current) for the record of that Haynesville rig, we find it had been drilling in Panola County, Texas, while the other two Haynesville shale oil rigs are in Caddo Parish, Louisiana, in the northwest corner of that state....elsewhere in Texas, we find that a rig was pulled out of Texas Oil District 7C, which is in northernmost part of the Permian Midland, and that rigs were added in Texas Oil District 5 and in Texas Oil District 9, both of which are apparently targeting basins that Baker Hughes doesn't track...finally, since there was an oil rig added in the DJ Niobrara chalk of the Rocky's front range, we have to figure there was also a rig removed from a basin that Baker Hughes doesn't track in either Colorado or Wyoming to offset that, since both states rig totals are unchanged...
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Ohio Bill Pitches Local Tax Incentives For Natural Gas Projects – Law360 - Ohio would allow localities to create special taxing districts to encourage the development of natural gas pipelines and related infrastructure under a bill introduced in the state House of Representatives....
OH HB 685 | 2021-2022 | 134th General Assembly | LegiScan - Status: Introduced on May 25 2022 - Summary: To amend sections 166.01, 166.02, 166.08, 4929.16, and 5727.11 and to enact sections 122.161, 122.162, 166.31, 166.32, 4929.164, 4929.168, and 4929.169 of the Revised Code to authorize the creation of areas within which tax and other incentives are available to encourage the development of natural gas pipelines and other infrastructure and to make an appropriation.
MWCD Signs Lease for 7,300 OH Acres – $5,500/Acre + 20% Royalties | Marcellus Drilling News- For the better part of a decade, MDN has brought you stories about shale development in the Muskingum Watershed Conservancy District (MWCD), an agency formed in 1933 to help control flooding and promote water conservation in the Muskingum River watershed area of Ohio, an area that covers 8,000 square miles. Over the years MWCD has leased thousands of acres for Utica Shale drilling and cut deals to sell water to drillers for fracking. It’s been a while since the last lease announcement. MWCD has just completed negotiations to lease more of its land for drilling. We have all the details.
MWCD Reaches Lease Deal with Encino Energy | wtuz.com -- Some 7,300 acres will be leased by the Muskingum Watershed Conservancy District at Tappan Lake to Encino Energy for Utica Shale development.The deal was reached this week, and relates to non-surface work, with no new well pads or structures on the property, and 15 wells drilled over the initial five years with a three-year option also available.Set to generate $5,500 per acre over a five-year period with gross royalties of 20 percent, Marketing and Communications Director for MWCD Adria Bergeron says that the funds will be put to use improving recreational opportunities at Tappan.“We have invested all of the dollars that we have received from oil and gas back into recreational opportunities by upgrading our facilities and our campgrounds, improving all of our recreational offerings that we currently have, as well as offering opportunities for communities for improved water quality.”Additionally, the deal puts a heavy emphasis on minimizing negative impacts on the lake or watershed’s health, along with the recreational activities for visitors.Water testing, erosion control, reclamation plans, and visual impact analysis were all a part of negotiations for the lease. Funds generated are expected to be used in Phase Two of MWCD’s Master Plan, which adds amenities such as playgrounds, trails, increased connectivity speed, and more.
High air pollution from fracking in Ohio county -Sensors pinpoint emissions missed by expensive EPA instruments. Some residents of Belmont County in eastern Ohio have long suffered from headaches, fatigue, nausea and burning sensations in their throats and noses. They suspected these symptoms were the result of air pollution from fracking facilities that dominate the area, but regulators dismissed and downplayed their concerns. With the technical assistance of volunteer scientists at Columbia University's Lamont-Doherty Earth Observatory, MIT and the American Geophysical Union's Thriving Earth Exchange, local advocacy groups set up their own network of low-cost sensors. They found that the region's three EPA sensors were not providing an accurate picture: The sensors revealed concerning levels of air pollution, and correlations between local spikes and health impacts. The results are published today in the journal Environmental Research Letters. Nestled in an Appalachian valley, Belmont has been booming with new infrastructure to extract and process natural gas. Fracking is known to emit pollutants including particulate matter and volatile organic compounds such as benzene, toluene and ethylbenzene, which have been linked to respiratory and cardiovascular health problems. Lung and bronchus cancer have become the leading cause of cancer deaths in Ohio. A 2017 Yale Public Health analysis confirmed the need for additional monitoring and regulation for chemicals associated with unconventional oil and gas development.Concerned about the fumes in certain areas of the community and the lack of information and transparency, two activist groups, Concerned Ohio River Residents and the Freshwater Accountability Project, wanted to set up a high-density monitoring network. After submitting their proposal to the Thriving Earth Exchange, which enables collaborations between community groups and volunteer scientists, they were paired with Garima Raheja, a PhD candidate who studies air pollution at Lamont-Doherty."We realized that the Thriving Earth Exchange program would give us valuable aid to validate the complaints we often receive from those living near pollution sources in a way that would provide credible and actionable data to improve air quality in the region," said Lea Harper, managing director of Freshwater Accountability Project.With advice from Raheja and other scientists, the community members bought 60 low-cost sensors to monitor particulate matter and volatile organic compounds in the air. Then they identified areas of highest concern, and recruited residents to install and maintain the sensors in backyards, churches and schools in those areas.The new study presents the first two years of data from the sensor network. The team found that many sites frequently experienced days when air pollution exceeded levels recommended by the World Health Organization. For example, in the city of Martins Ferry, where a sensor took measurements for 336 days, it measured unsafe levels of air pollution on 50 of those days."It is kind of wild," said Raheja, "considering that it's generally a clean area. I think any number of days above WHO guidelines is really concerning for an area like this."She sees a clear link to the area's fossil fuel development. "If there wasn't fracking in this area, there would be no reason for bad air pollution. It's not an urban area. There's not a lot of cars or rush hour or anything like that which usually causes air pollution."
Train strikes truck in Harmar, sending derailed cars into inlet near Allegheny River - More than a dozen train cars derailed Thursday afternoon after a train collided with a dump truck in Harmar, sending many of the cars into an inlet about 100 yards from the Allegheny River. County dispatchers said the derailment occurred around 3:15 p.m. in the 2400 block of Freeport Road in Harmar. The area is between the Hulton Bridge and Route 910 and near the Allegheny Valley Joint Sewage Authority Treatment Plant. The train, operated by Norfolk Southern, collided with a dump truck crossing the tracks, the company said in a statement. Officials said 17 train cars derailed and that nine of them were in the water after the train struck the truck as it was crossing the tracks near the treatment plant. Of those nine cars in the water, four carried oil. The driver of the truck and two people in the train engine were injured and taken to the hospital, the official said. There was no information on their identities, the extent of their injuries or the hospital. Shortly after 7 p.m., local and Allegheny County officials briefed reporters along Freeport Road. One of the overturned rail cars was visible just off the road behind them as they spoke, and large rigs needed to remove the cars were staging nearby. Four of the cars were carrying a sweet crude, said Steve Imbarlina, assistant chief of the county emergency services, oil similar to diesel. Other cars served as buffers for the cars carrying the combustible material. Though officials initially said none of the sweet crude on board the tanker cars had leaked into the water, a county spokeswoman confirmed shortly after 11 p.m. that leakage into the river had occurred. Mr. Imbarlina earlier said that crews had boomed the water, a containment strategy for oil spills that involves a floating barrier, between Deer Creek and the Allegheny River. The booming then was a precaution that would prove to be necessary. Mr. Imbarlina likened the boom device to a floating pool noodle that traps oil on top of the river before it flows out into the larger body of water. Water authority intakes were notified downstream from the accident. A water line severed by the accident cut service in Harmar. It was restored after about two hours. Allegheny County hazmat crews and the Salvation Army were on the scene, in addition to police, fire and EMS crews. According to Mr. Imbarlina, railroad ties were knocked off of the bridge that the train was passing over, although the bridge itself did not collapse. The size of the truck contributed to the extent of the damage, Mr. Moretti said. “The size of the truck didn’t help,” he said. “It’s a large construction vehicle, so it did a lot of damage.”
PIT, CNX Develop Fuel Strategy to Reduce Emissions, Costs for Aviation - On Friday, Pittsburgh International Airport officials announced a new phase of their ongoing partnership with locally based natural gas exploration, production, midstream, and technology company CNX Resources Corp. aimed at further reducing carbon emissions in the transportation industry and related sectors by using natural gas produced at the airport and converting it into alternative fuel with CNX proprietary technology. “We feel that natural gas and derivative products provide a path for the transportation industry both to reduce carbon emissions in the short term while working toward a goal of net-zero in the long term as hydrogen and other potential solutions mature,” said airport CEO Christina Cassotis. The agreement comes on the heels of an announcement earlier this week from Pennsylvania Gov. Tom Wolf about a statewide initiative to secure a hydrogen hub and large-scale carbon storage system in Pennsylvania, bringing further partnership opportunities to PIT. The hydrogen initiative would build what it calls a “regional ecosystem” for the transition to clean hydrogen and carbon capture and storage, large-scale investments that leaders say put the region on a path to sustainability while creating jobs. Airport and CNX officials say their agreement builds on the statewide initiative. CNX has developed proprietary technology to cost-effectively convert on-site dry natural gas into liquefied natural gas (LNG), compressed natural gas (CNG) and electricity for various uses including as a hydrogen feedstock. These technologies will reduce local emissions and further reduce operating costs at the airport. The strategy also envisions a sustainable fuel hub at PIT using locally sourced, lower-cost, lower-carbon-intensity LNG and CNG fueling depots for airlines, transit, cargo, fleet, military, and other energy-intensive business purposes.As part of the agreement, CNX will develop the Utica shale on airport property, representing the first wells from this formation completed and brought into production in Allegheny County, where Pittsburgh is located. The Utica shale yields a dry gas which is more easily converted into LNG and CNG alternative fuels and hydrogen.
CNX, Pittsburgh Airport to Showcase Natural Gas Aviation Potential with Utica Project - Pittsburgh International Airport, known to fliers by the three-digit code PIT, is stepping up its natural gas development partnership with Appalachian Basin-focused independent CNX Resources Corp. PIT and CNX earlier this month launched another phase of their public-private partnership. It currently includes a revenue-sharing deal for CNX-operatedMarcellus Shale wells on airport property and a 20-MW natural gas-solar microgrid that supplies all of the airport’s electricity. Under the latest deal, CNX plans to develop Utica Shale wells on airport property. It would deploy proprietary autonomous separation technology to convert dry gas produced onsite into liquefied natural gas (LNG), compressed natural gas (CNG) and electricity. Electricity also could be used to produce hydrogen, among other uses.“In a nutshell, it’s a technology that leverages the ultra-high pressure of a Utica well and uses that pressure to create LNG and CNG and electricity,” CNX’s Yemi Akinkugbe, chief excellence officer, told NGI.He said the technology could be deployed at the wellsite to create the derivative product, LNG or CNG, as well as “generate electricity that could be the feedstock for a future maturation of hydrogen.” “LNG is improving as a potential aviation fuel going forward,” Akinkugbe said. “The key is getting the industry to embrace LNG as a sustainable aviation fuel. We’re saying this is an alternative that has a low cost, a much lower emissions signature, and also benefits the region.”PIT would “help bring more partners to the table” on the sustainability front, airport CEO Christina Cassotis told NGI.“We’ve already been moving in this direction,” she said. “Last year we became the first airport in the world to be completely powered by a microgrid powered by natural gas and solar energy.”Besides LNG, CNG could be used for airport ground transportation and hydrogen could ultimately be used to fuel planes as well as ground vehicles, he said.CNX and PIT, whose partnership began nine years ago with the airport authority signing a deal with then-Consol Energy Inc., also envision creating a “sustainable fuel hub at PIT” with LNG and CNG fueling depots for airlines, transit, cargo, fleet, military, and other purposes.“Natural gas and derivative products provide a path for the transportation industry both to reduce carbon emissions in the short term while working toward a goal of net-zero in the long term as hydrogen and other potential solutions mature,” said Cassotis.She called the Utica deal with CNX “a massive opportunity to both lead the way on a transformational fuel strategy to reduce carbon emissions while cementing Pittsburgh’s role as an innovative world leader.”
Monolith Materials and Key State Made Important Announcements at Appalachian Hydrogen & Carbon Capture Conference - -- Last month’s Appalachian Hydrogen & Carbon Capture Conference, held south of Pittsburgh, in the Marcellus/Utica Shale plays’ bosom, had two companies making major announcements. Monolith Materials said that their first commercial scale unit, Olive Creek which has been in commercial production since 2020, proved the concept of methane pyrolysis to produce hydrogen and carbon black. Renewable electricity is the only other input. Olive Creek I produces 4,000 metric tonnes of hydrogen annually, along with 13,000 MT of carbon black with one pyrolysis reactor. Olive Creek 2 will be the model as Monolith considers expansion locations across North America and worldwide. The Appalachian Basin is one such location Monolith is actively exploring for expansion. The region offers abundant natural gas for conversion to clean hydrogen and cleanly made carbon black. Monolith is also excited about the workforce in the area and its potential for helping to bring manufacturing jobs back to America. At its Nebraska facility, it was noted that the long-term, high-paying, advanced manufacturing jobs offered by Monolith are the kinds that families and communities are built on. Monolith was also quick to note that Congress passing PTC (production tax credit) legislation would help expedite their decisions around possible expansion, including into the Appalachian Basin. A potential site in the Appalachian Basin could mirror Olive Creek in more than design. Modeling their success in Hallam, Nebraska, Monolith could locate in or near a small town where the plant can help economically rejuvenate the area. The other announcement was KeyState LLC, already in Pennsylvania building the state’s first natural-gas-to-blue-hydrogen plant, plans to construct a second facility in Pennsylvania and a third in a state to be identified.
EHN reporter wins Golden Quill award for "Fractured" reporting - Environmental Health News -- EHN reporter Kristina Marusic won an award at the 2022 Golden Quill Awards for her reporting on the health impacts of fracking.The Golden Quills competition, held by the Press Club of Western Pennsylvania, honors excellence in print, broadcast, photography, videography and digital journalism in western Pennsylvania and nearby counties in Ohio and West Virginia. This was the 58th year for the annual awards, which were presented at an awards dinner in Pittsburgh on May 24.Marusic was presented with an award for Excellence in Written Journalism in the Science/Environment category for her four-part series Fractured: The Body Burden of Living Near Fracking, which documented exposure to harmful chemicals in Pennsylvania families living near fracking wells.In the investigation, Marusic collected air samples, water samples, and urine samples, and found that five families who live near oil and gas wells are exposed to higher-than-average levels of a long list of toxic chemicals used by the industry, prompting a group of more than 30 state lawmakers to call on Pennsylvania Governor Tom Wolf to do more to protect Pennsylvanians. Marusic also won two Golden Quill awards in 2020 for her reporting on air pollution and cancer in western Pennsylvania, including a Best in Show Ray Sprigle Memorial Award.
FERC enforcement ramp-up spurs pipeline wars - Last year, the head of the Federal Energy Regulatory Commission delivered a message to the energy industry: “The cop is back on the street.” Chair Richard Glick was referring to FERC’s Office of Enforcement, which seeks to ensure energy and power companies comply with the independent agency’s rules. Last fiscal year, the office opened 12 new investigations compared to six the previous year. The uptick in cases includes a new focus on energy infrastructure, including the country’s pipelines — and how companies handle their construction and operation. The bottom line, Glick said, is that pipeline companies must abide by the conditions in the permits that FERC issues. “The message is you’ve got to live up to your commitments,” Glick told reporters in December. “If you don’t do that, we’re going to come down on you, because that’s our role.” But as the agency seeks to penalize pipelines for permit violations — including pursuing record-setting fines — developers are hitting back with legal challenges that, if successful, could chip away at the commission’s enforcement powers. That in turn could make it more difficult to penalize companies for spills, groundwater contamination and failure to restore the land they trench through to build the lines. Since Congress boosted FERC’s enforcement authority in 2005, the Office of Enforcement has not typically gone after pipeline violations, focusing more on wrongdoing in energy and power markets. But that has recently begun to change, some legal experts said. Glick’s leadership has undoubtedly spurred FERC to increase oversight on pipelines, said Carolyn Elefant, a former FERC attorney who now represents landowners affected by pipelines. Before the Democrat was tapped by President Joe Biden to serve as FERC chair last January, “pipeline stuff was completely below the radar,” she said. Now, FERC is accusing two multibillion-dollar pipeline developers of failing to abide by the conditions and standards they agreed to when they were granted permits. In one case, the enforcement office is proposing its biggest-ever fines in a pipeline construction case. Increased enforcement from FERC may send a message to the natural gas industry that the agency is prepared to hold developers accountable for the terms and conditions included in their permits, said Carrie Mobley, an associate at the law firm McGuireWoods LLP. “We’ve seen a lot of interest that maybe wasn’t previously taken in pipeline cases,” Mobley said. “[The cases] are indicating that the commission is interested in ensuring compliance and is willing to be a little bit creative in their approach.”
TVA wants gas. Enbridge and Kinder Morgan want pipelines. Tennesseans want protection. Years before the company Plains All American proposed an oil pipeline in Memphis, the company obtained what’s known as a “Nationwide Permit 12” from the Army Corps of Engineers. It allowed the pipeline company to skip public input, because the Corps assumed the project would not harm the environment. “They did not communicate with the community,” said Angela Johnson, of Memphis, and “they were taking away generational land that belonged to people in our community.” Johnson spoke during one of several public meetings held by the Army Corps to reexamine the use of Nationwide Permit 12 for oil and gas pipelines. The Corps cited concerns about environmental justice, climate change and drinking water — along with the now-defunct pipeline project in Memphis — in its public notice for the review. “Nationwide permits are a type of general permit and are designed to regulate with little, if any, delay or paperwork certain activities in federally jurisdictional waters and wetlands,” the Corps explained. In addition to dodging public comments, pipeline developers have been skipping environmental assessments through this process. “It’s an absolute crime for the people who have to live with these projects, forever,” Heath Frantzen, of San Antonio, said during a meeting. Similar to Memphis, the Texas city sits above an aquifer that supplies local drinking water. Amanda Garcia, of the Southern Environmental Law Center, says this isn’t an academic question in Tennessee, since the state’s largest utility, the Tennessee Valley Authority, is planning two gas pipelines right now. “It’s important for Tennesseans in particular to have a voice in this process, because we have seen unjust and unwise pipeline proposals in the past and we’re seeing them going into the future,” Garcia said. TVA is planning to build new gas plants at its Cumberland and Kingston sites. Two major pipeline companies, Kinder Morgan and Enbridge, have already requested permits from the Federal Energy Regulatory Commission — these companies both submitted objections to FERC last month when the agency considered a new rule to review greenhouse gases before approving new pipelines. The Corps, which did not directly respond to a request for comment, said in its review that it wants to restore science, quoting President Biden’s 2021 executive order that directs federal agencies to review regulations and “commence work to confront the climate crisis.” Climate justice is also an important consideration for the communities most affected by pipelines, according to Garcia. “The effects of climate change — the flooding, the severe heat — those types of effects are going to disproportionately affect people of color and low-wealth communities,” she said. “Those are the communities that are also being left out of the process of these pipelines and being burdened with the direct impact of them.”
Major gas pipelines face 1.3 million Dth/d of expiring contracts in Q2 | S&P Global Market Intelligence - Major U.S. natural gas pipelines have more than 1.3 million Dth/d of firm gas transportation contracts slated to expire during the second quarter, according to an analysis of S&P Global Market Intelligence data. WBI Energy Transmission Inc. could see nearly 22% of its contracted capacity drop off when a contract with Montana-Dakota Utilities Co. ends June 30. A spokesperson for MDU Resources Group Inc., which owns the 3,800-mile WBI Energy pipeline system spanning the northern Plains and Rocky Mountain regions from Wyoming to Minnesota, declined to comment about whether the capacity had been recontracted. WBI Energy in February completed its 60-mile, 12-inch diameter North Bakken natural gas pipeline expansion in North Dakota. Kinder Morgan Inc.'s Stagecoach Pipeline & Storage Co. LLC could see more than 6% of its contracted capacity roll off when a contract for 150,000 Dth/d of firm transportation ends June 30. A spokesperson for Kinder Morgan said the company does not comment on contract expirations. Kinder Morgan acquired the 185-mile Stagecoach system, which sends Marcellus Shale gas to Northeastern markets, in the second quarter of 2021. Tallgrass Energy LP's Rockies Express Pipeline LLC faced a pair of short-term contract expirations that totaled about 5.2% of the capacity of the 1,700-mile pipeline network that spans from Colorado to Ohio. The contracts with Freepoint Commodities LLC and BP Energy Co. each covered 150,000 Dth/d of firm transportation. A Tallgrass spokesperson said both contracts were seasonal. The S&P Global Market Intelligence analysis, which used an index of customers and tariff data, covered U.S. interstate gas pipeline contracts with maximum daily transportation of over 100,000 Dth/d and their estimated reservation charges, if available. Pipelines provide gas transportation service to shippers such as producers, utilities, industrial customers, power generators and energy marketers, often under firm contracts. Most of these agreements feature fixed reservation charges that are paid monthly regardless of the actual gas volumes moved or stored, plus a tariff component based on volume to compensate pipelines for their variable costs. S&P Global Market Intelligence estimates of monthly reservation revenue used the maximum revenue because negotiated rates are often not disclosed. Market observers' expectations for the midstream sector were largely bullish headed into the first-quarter 2022 earnings reporting season, with analysts watching for signs that the sector was pursuing infrastructure growth opportunities unlocked by high commodity prices and favorable sentiment for oil and gas because of the energy crisis in Europe. Midstream executives in a series of earnings calls anticipated that growing demand for new U.S. LNG capacity would drive investment in other midstream expansions.
As liquified gas exports surge at Port Everglades, risk of catastrophic accident rises - More than a half-million men, women and children in South Florida who live near truck and rail routes used to ship surging supplies of volatile liquefied natural gas (LNG) are at risk of a potentially catastrophic accident, according to a national non-profit environmental advocacy group.Those residents, as well as 228 schools and 13 hospitals, are within the U.S. Department of Transportation’s recommended one-mile evacuation radius if an LNG “tank, rail car, or tank truck is involved in a fire.”“A container rupture, truck crash or train derailment could result in fireballs, flammable vapors, toxic fumes, and devastating fires that burn so hot that they are exceedingly difficult to extinguish and nearly impossible to contain,” says a research report released Tuesday by Food & Water Watch (FWW). “First responders often lack training in responding to liquified gas releases.”The group is calling on Broward County commissioners to “protect residents by halting the transport of liquified gas at the Port and conducting an investigation into the operation.” Food & Water Watch made a similar overture in January. A press conference is scheduled noon Tuesday.Port Everglades Director Jonathan Daniels has expressed confidence in the ability of Broward Sheriff’s Office firefighters at the port to handle any LNG fire. And so far, the commission has not seen fit to address the issue in a public meeting.Safety concerns, however, appear to be taking a back seat to the growing economic importance of booming LNG exports, here and around the nation.A story last September in The Maritime Executive, headlined “LNG Exports Helped Drive Historic U.S. Trade Surplus in Energy,’’ says, “Thanks in large part to LNG sales, America exported more energy than it imported last year, according to the U.S. Energy Information Agency. It is the first time that the U.S. has recorded a net energy-trade surplus since at least 1974…In 2020, the trade balance of America’s energy products – petroleum, natural gas, coal, and electricity exports – ran a net surplus of $27 billion.’’
U.S. natgas futures soar 8% on jump in LNG and power usage (Reuters) - U.S. natural gas futures jumped about 8% to a near 13-year high on Monday as power generators and liquefied natural gas (LNG) exports plants consumed more of the fuel. Power and gas prices soared last week as homes and businesses cranked up their air conditioners to escape a spring heatwave. To keep the lights on, generators burned more gas to produce power. In addition, there is usually less wind when it's extremely hot. That means generators need to burn even more gas to make up for the lost wind power. Wind produced about 12% of the nation's power last week, down from as much as 16% in recent weeks, while gas produced about 37%, up from just 33% in recent weeks. U.S. front-month gas futures for June delivery rose 66.1 cents, or 8.2%, to settle at $8.744 per million British thermal units (mmBtu), the highest since it closed at a 13-year high of $8.783 on May 5. With Monday's gain, U.S. gas futures were up about 135% since the start of the year as higher global prices kept demand for U.S. LNG exports strong since Russia's Feb. 24 invasion of Ukraine. Gas was trading around $27 per mmBtu in Europe and $22 at in Asia. U.S. futures lag far behind global prices because capacity constraints inhibit LNG exports. Data provider Refinitiv said average gas output in the U.S. Lower 48 states climbed to 95.0 billion cubic feet per day (bcfd) so far in May from 94.5 bcfd in April. That compares with a monthly record of 96.1 bcfd in November 2021. Refinitiv projected average U.S. gas demand, including exports, would ease from 89.4 bcfd this week to 88.0 bcfd next week. Those forecasts were lower than the Refinitiv forecast on Friday. The average amount of gas flowing to U.S. LNG export plants has risen to 12.4 bcfd so far in May from 12.2 bcfd in April. It hit a monthly record of 12.9 bcfd in March. The United States can turn about 13.2 bcfd of gas into LNG. On a daily basis, LNG feedgas was on track to hit a seven-week high of 13.3 bcfd on Monday. Gas stockpiles in Northwest Europe - Belgium, France, Germany and the Netherlands - were about 11% below the five-year (2017-2021) average for this time of year, down from 39% below the five-year norm in mid-March, according to Refinitiv. Storage was currently about 39% of full capacity. That is healthier than U.S. inventories, which were around 15% below their five-year norm, and helped cause European futures on Monday to fall to their lowest since Feb. 22 - two days before Russia invaded Ukraine.
U.S. natgas hits 13-year high on soaring LNG exports, higher demand - U.S. natural gas futures edged up about 1% on Tuesday, closing at a 13-year high, as gas volumes flowing to U.S. liquefied natural gas (LNG) export plants jumped to the most in seven weeks on raised forecasts for demand next week. U.S. front-month gas futures for June delivery rose 5.2 cents, or 0.6%, to settle at $8.796 per million British thermal units (mmBtu) on Tuesday, a day after they soared 8%. It was their highest close since August 2008. With the June contract expiring this week, analysts at energy advisory EBW Analytics said in note that "Amplified volatility remains likely ahead of options expiration and final settlement (Wednesday) and Thursday." The 8% rise on Monday established "a bullish technical outlook suggesting natural gas could soon clear $9." U.S. gas futures were up about 135% year to date, as soaring global prices fed strong demand for U.S. LNG exports, especially since Russia's Feb. 24 invasion of Ukraine stoked fears Moscow might cut of gas supplies to Europe. Still, while U.S. futures have soared about 30% over the past month, European gas prices slid about 8% as Russia kept sending supplies via pipeline while LNG vessels delivered cargoes. Gas has been trading around $27 per mmBtu in Europe and $22 in Asia. On a daily basis, LNG feedgas was on track to hit a seven-week high of 13.3 bcfd on Monday. The export facilities can pull in a little more gas than they can turn into LNG because they use some of the fuel to run plant operations. Since the United States cannot produce much more LNG soon, it has worked with allies to divert exports from elsewhere to Europe to help break the region's dependence on Russian gas. Russia exported around 7.4 bcfd of gas to Europe on Monday, the same as Sunday, on the three mainlines into Germany: North Stream 1 (Russia-Germany), Yamal (Russia-Belarus-Poland-Germany) and the Russia-Ukraine-Slovakia-Czech Republic-Germany route. That was down sharply from an average of 11.9 bcfd in May 2021.
Natural gas surges above $9, hits the highest since 2008 as inventories stay low -- Natural gas surged above $9 per million British thermal units, or MMBtu, on Wednesday, hitting the highest level in more than a decade as dwindling inventories push prices higher. U.S. prices surged more than 6% at one point to hit a high of $9.399 per MMBtu, the highest since August 2008. The contract later gave back the bulk of those gains, ending the day 1.99% higher at $8.971 per MMBtu. Still, prices remain elevated in what's been a blistering rally for natural gas as Russia's war on Ukraine sends energy markets reeling. David Givens, head of natural gas and power services for North America at Argus Media, pointed to three key catalysts fueling the rally: little production growth, high liquified natural gas exports, and storage levels that are roughly 17% below the five-year average. Rapidly rising prices are adding to inflationary pressures across the economy. Drivers are already grappling with record high prices at the gas pump, and now utility bills are set to increase too. While utility companies might have once switched to coal as a cheaper alternative, coal-fueled power is also now in short supply with a number of plants going offline due in part to ESG — environmental, social and governance — concerns. Campbell Faulkner, senior vice president and chief data analyst at OTC Global Holdings, said the drought in the Western U.S. has curtailed hydropower production. "[G]as is being forced to fulfill a significantly greater portion of power burn during a summer that looks to top records for electricity load," he said. "Gas for many years was the waste by-product of continued shale drilling across producing basins in the U.S. which kept prices unusually low. Since the 2020 low in drilling, the market has been pushed into a tight supply demand situation which will not be remedied quickly," he added. Natural gas is now up nearly 30% in May, the third straight month when gains have topped 20%, and prices are now up around 150% for 2022.
Cash Prices, June Natural Gas Futures Extend Furious Rally - Natural Gas Intelligence -- Natural gas futures on Wednesday soared past $9.000/MMBtu for the first time since 2008 amid worries that fragile supplies may prove inadequate to meet summer cooling demand and robust calls for U.S. exports. Traders through most of the year also have bought aggressively ahead of the prompt month’s final settlement, preferring to bet on bullish momentum given the supply/demand imbalance concerns. At its intraday peak Wednesday, the front month hit $9.399. The June Nymex gas futures contract, a day before rolling off the books, later gave back some of the gains in afternoon trading but still advanced 17.5 cents day/day and settled at $8.971. July jumped 15.7 cents to $8.993. After mounting a rally one day earlier, NGI’s Spot Gas National Avg. packed on a 48.5-cent gain to $8.900 on Wednesday. U.S. liquefied natural gas (LNG) export volume, uneven in recent weeks because of maintenance projects, gathered momentum this week and hit a two-month high on Wednesday above 13 Bcf. That put exports near the 14 Bcf-plus record level reached earlier this year amid robust demand from Europe. Europe escalated calls for U.S. exports of the super-chilled fuel to supplant Russian supplies. Countries across the continent are clamoring for American LNG as part of an ongoing effort to dramatically reduce reliance on Russian gas ahead of next winter. Now, Rystad Energy analyst Lu Ming Pang noted, Asian demand for U.S. LNG is on the rise as China and other major countries in the region brace for the summer cooling season. This could draw LNG away from Europe and toward Asia in coming weeks, elevating competition for U.S. supplies. “All factors remaining constant,” Pang said, “we may see a rebalance of LNG vessels.” Forecasts call for above-average domestic heat this summer, further fueling elevated demand expectations. At the same time, amid maintenance work, U.S. production is relatively anemic. It has held around or below 95 Bcf/d this spring – at times as low as 92 Bcf – far from the 97 Bcf peak of the past winter. All of this has pressured U.S. supplies and undergirded a market that could finish the current injection season light on gas in storage for next winter, Bespoke Weather Services said.
US Natural Gas Futures Spiked to Highest since 2008, Tripled in a Year: Why We Kissed that Dirt-Cheap Natural Gas Goodbye --By Wolf Richter - Natural gas futures spiked to $9.40 per million Btu earlier today, the highest since dirt was young, well, since the huge twin spikes between 2005 and 2008. In afternoon trading, the price dipped to around $9 again, having tripled from a year ago, when it was $2.98, and having more than tripled from the $2-3 that predominated from 2011 through the spring of 2021.Natural gas prices can spike and plunge, periodically taking down hedge funds that got caught on the wrong side. But this time, it’s different; this time, there are large-scale structural changes in the US natural gas market that have been in the works for years: Booming exports of natural gas as LNG has created a connection to the demand and prices in the rest of the world.And the fracking boom that caused prices to collapse in the US starting in 2009, while prices soared elsewhere, is now being leveraged to export LNG, and we already kissed those collapsed natural gas prices of $2-3 per million Btu goodbye.The fracking boom that took off in serious 15 years ago made the US the world’s largest producer of natural gas. Before the boom, the US had been a major natural gas net-importer (via LNG globally and via pipeline from Canada), and prices were influenced by global prices and by supply limitations in the US.Production from the fracking boom created so much supply in the US by 2009 that the price collapsed. Between 2003 and 2021, marketed production of natural gas nearly doubled. Note the spike in production in 2018 and 2019:This surge in production in the US triggered a series of events: Major natural gas producers, such as fracking pioneer Chesapeake, filed for bankruptcy;power production switched massively from coal to natural gas, causing coal miners to file for bankruptcy; and big industries sprouted in the US around cheap natural gas, including fertilizer producers which use natural gas as feed stock.And starting in 2016, more and more LNG export terminals were being built to arbitrage the cost differential between US natural gas and global pricing of LNG; and pipeline capacity was added to export more natural gas from US producing areas near the border to Mexico.Exports of pipeline natural gas to Mexico have grown at a steady clip (green line). But exports of LNG have exploded (purple line), starting from nearly nothing in 2016, to over 3.5 trillion cubic feet in 2021. And total exports reached 6.7 trillion cubic feet in 2021, roughly 18% of US marketed production:LNG exports require very capital-intensive liquefaction facilities that are connected to producing areas via pipeline. Export capacity soared from less than 1 billion cubic feet per day (Bcf/d) in 2015 to about 12 Bcf/d at the end of 2021. More large-scale LNG export facilities are under construction, and still more have been approved, and still more are in earlier stages of the process.As US export capacity continues to grow, global demand for US LNG is competing to an ever-larger extent with demand in the US, which intensifies the link between global LNG prices and US natural gas prices.And those dirt-cheap prices of natural gas of 2009 through mid-2021 that consumers, power generators, and industrial companies benefited from, and that bankrupted many oil & gas producers that specialized in fracking for natural gas, and that bankrupted coal miners, is now a thing of the past. Much higher prices, in line with pricing globally, are what the US has to deal with now.
US gas storage stocks rise 80 Bcf to 1.812 Tcf; NYMEX futures breach $9/MMBtu | S&P Global Commodity Insights - Scorching temperatures across Texas and the Midcontinent last week limited net injections to US gas storage, expanding the inventory deficit while further fuelling a rally in the NYMEX gas futures contract. The US Energy Information Administration May 26 reported an 80 Bcf injection to US inventories for the week ended May 20, undershooting most storage analysts' expectations for a slightly larger build. The injection was 7 Bcf less than an S&P Global Commodity Insights survey of analysts that called for an 87 Bcf addition to stocks and 17 Bcf below the prior-five year average build for the corresponding week. As a result, US working gas inventories climbed to 1.812 Tcf. The shortfall to 2021 widened to 387 Bcf, leaving stocks nearly 18% below the year-ago level of 2.199 Tcf. The inventory deficit to the prior five-year average expanded to its widest yet this season, leaving stocks 327 Bcf, or about 15%, below the historical average of 2.139 Tcf, EIA data showed. The NYMEX Henry Hub's soon-to-expire June contract surged about 30-40 cents immediately following the release of the EIA's storage report to trade around $9.30/MMBtu, CME Group data showed. Unseasonably hot weather across Texas and the Midcontinent was a key driver behind the bullish EIA storage report, revealing the market impact that hot weather may have on US gas supply this summer. Last week, temperatures across Texas, Oklahoma, and the Central Plains soared into the 90s Fahrenheit, with some locations hitting afternoon highs at over 100 F, or about 20-30 degrees above normal. In Texas, gas-fired power burn hit record highs for mid-May at nearly 5.6 Bcf/d. In the Midcontinent, burns nearly topped 2 Bcf/d—also a record high for late spring, according to S&P Global Commodity Insights data. For the South Central storage region, which includes Texas and most of the Midcontinent states, the EIA estimated just a 16 Bcf injection to gas storage last week, undershooting the region's five-year average injection for the corresponding week by 12 Bcf. The latest estimate now puts stocks in the key industrial and export demand region at 128 Bcf below the historical average, EIA data shows. The seemingly outsized pressure on South Central's strong inventories last week is a worrisome sign for injection demand in other storage regions this summer. Short-term storage outlooks for the week ending May 27 are already predicting another below-average injection to inventory, with early estimates ranging from 63-70 Bcf, potentially widening the deficit by more than 35 Bcf. Longer-term, many storage analysts are now projecting US season-ending stocks to finish below 3.5 Tcf, in a potentially bullish scenario for Henry Hub gas prices in winter 2022-2023.
Mild Early-June Forecast Sinks July Natural Gas Futures; Cash Off Too -- July natural gas futures debuted at the front of the Nymex curve with a thud, tumbling 16.8 cents to $8.727/MMBtu ahead of the Memorial Day holiday weekend. Spot gas prices also softened amid light demand, with NGI’s Spot Gas National Avg. sliding 80.0 cents to $7.850. After falling to hold intraday gains on Thursday, bearish technical pressure took hold of Friday’s trading session early. The July Nymex contract opened less than a dime lower at around the $8.880 mark but quickly fell below $8.500 as trading got underway. While technical factors were in play, fundamentals also weighed on prices. For example, weather forecasts cooled a bit for the next week overall, aside from a brief period of strong national demand from Sunday to Tuesday. The period through June 8 appeared to be “mostly comfortable,” according to NatGasWeather. There is potential for hotter weather to arrive around June 9-14, although the data has more to prove, the forecaster said. In addition, long-range forecasts reflected a rather bearish set-up for the first half of June, with notable heat not materializing until the second half of the month. “Essentially, the longer range European Centre wasn’t quite as hot as needed the front half of June but was relatively bullish the second half of June,” NatGasWeather said. Even with the cooler forecast, gas demand for power generation has remained strong. Tudor, Pickering, Holt & Co. (TPH) analysts said power burns capped the week at 29 Bcf/d, tracking as much as 1.5 Bcf/d ahead of norms in recent days. As warmer weather kicks power generation demand into high gear in the coming weeks, “supply remains a key focal point,” according to TPH. The analyst team said production backtracked toward around 94 Bcf/d in recent days after a sustained run in the 95 Bcf/d range over the last three weeks. TPH said lower volumes primarily were from the Permian Basin, where output trended toward 13.3 Bcf/d to exit the week. This is down around 1 Bcf/d from the prior week’s average of 14.1 Bcf/d. The supply/demand balance portends a continuation of the tightness observed in the latest government inventory report. The Energy Information Administration (EIA) on Thursday reported a smaller-than-expected 80 Bcf injection into storage for the week ending May 20. The build reflected a market that was about 1 Bcf/d undersupplied, according to TPH. With the injection, inventories rounded out the week at 1,812 Bcf, which is around 15% below the five-year average of 2,139 Bcf.
Texas Natural Gas Exports Via Corpus Christi Up 50%-Plus - For the first four months of 2022, liquefied natural gas (LNG) exports from Texas’ Port of Corpus Christi were up 56.2% over the previous tonnage record set in January through April 2020, the port authority said Monday. The Port of Corpus Christi’s CEO Sean Strawbridge said “we have the table set for meeting the increasing energy demands of the global markets both today and well into the future.” LNG exports totaled 5.4 million tons in January through April of this year. The port is home to Cheniere Energy Inc.’s Corpus Christi Liquefaction (CCL) facility, which boasts about 15 million metric tons/year (mmty) of production capacity across three trains. Cheniere plans to make a final investment decision this summer on an expansion project that would add 10 mmty of liquefaction capacity at CCL. Bolstering the case for the CCL expansion is a supply deal that Cheniere made with EOG Resources Inc. in February. EOG is developing the estimated 21-Tcf Dorado natural gas play in the Austin Chalk and Eagle Ford Shale in South Texas. In addition to record-setting LNG volumes, the Corpus Christi port recorded strong growth in tonnage for crude oil and refined product exports. The 34 million tons of crude oil that moved through the port from January through April represented an increase of about 9% from the corresponding period in 2020, the port authority said. Refined product exports, which totaled 10.6 million tonnes during the first four months of this year, are up 17.8% from the early 2020 level.
FERC Approves Gas Pipeline Projects To Increase U.S. Exports - The U.S. Energy Information Administration recently updated its Natural Gas Pipeline Project Tracker with recently approved and completed natural gas pipeline projects. In the first quarter of 2022, the Federal Energy Regulatory Commission (FERC) approved three projects intended to increase U.S. natural gas exports via pipeline and as LNG. The tracker also lists pipelines that were completed last quarter. FERC approved two projects that connect to LNG terminals in Louisiana. The Evangeline Pass Expansion Project is a 1.1 billion cubic feet project owned by the Tennessee Gas Pipeline Company. The project includes 13.1 miles of new pipeline and two new compressor stations that will deliver natural gas to the proposed Plaquemines LNG Project in Plaquemines Parish, Louisiana. The Alberta Xpress Project is a 0.17 Bcf/d project owned by TC Energy that will use existing capacity on the Great Lakes Gas Transmission system and the ANR pipeline and will add a new compressor station in Evangeline Parish, Louisiana. The project expands capacity from the Great Lakes receipt point at the Minnesota-Manitoba border to delivery points in the U.S. Midwest and U.S. Gulf Coast, increasing the available capacity for LNG export facilities in the region. This project also improves the domestic natural gas infrastructure in those areas. The third project FERC approved expands capacity by 0.5 Bcf/d to transport U.S. natural gas via pipeline to the Energia Costa Azul LNG Export Project in Baja California, Mexico. TC Energy’s North Baja Xpress Project modifies existing facilities and compressor stations along its 86-mile North Baja Pipeline. Two notable projects were completed in Florida and North Dakota this past quarter. The Putnam Expansion Project is a 0.17 Bcf/d expansion project on the Florida Gas Transmission pipeline that facilitates natural gas deliveries to a Seminole Generation Cooperative natural gas-fired power plant in Putnam County, Florida. The North Bakken Expansion Project is a 62-mile extension of the Williston Basin Interstate pipeline system. The project provides 0.25 Bcf/d of additional takeaway capacity for natural gas produced in the core production area of the Bakken region in North Dakota and connects to the Northern Border Pipeline. We estimate that over 0.43 Bcf/d of new natural gas pipeline capacity was completed in the first quarter of 2022. In 2021, the EIA estimates that the United States added 7.44 Bcf/d of new pipeline capacity, the lowest amount added to interstate transmission since 2016.
U.S. Drilling Activity Eases Lower on Drop in GOM Count, BKR Data Show - A decline in Gulf of Mexico (GOM) drilling activity helped ease the U.S. rig count one unit lower to 727 for the week ended Friday (May 27), updated figures from oilfield services provider Baker Hughes Co. (BKR) show. Total GOM rigs fell two units to 15 for the period, while land drilling increased by one rig overall, according to the BKR numbers, which are based partly on data from Enverus. Changes domestically for the week included a two-rig decline in oil-directed drilling, partially offset by a net gain of one natural gas-directed rig. The 727 active U.S. rigs as of Friday represent a 270-rig increase over the 457 rigs active in the year-earlier period. Three directional rigs exited the patch in the United States for the week, while two horizontal rigs were added. Directional drilling was unchanged week/week, the BKR data show. The Canadian rig count, meanwhile, surged 15 units higher to reach 103 for the period, with the net increase entirely resulting from a jump higher in oil-directed drilling. The Canadian count ended the week 41 units ahead of its year-earlier total of 62. Broken down by major basin, there were small adjustments spread across a variety of drilling areas during the week, according to the BKR numbers. The Arkoma Woodford, Cana Woodford, Denver Julesburg-Niobrara, Eagle Ford Shale and Mississippian Lime each saw net increases of one rig. On the other side of the ledger, the Granite Wash, Haynesville Shale and Permian Basin each posted one-rig declines. Counting by state, Louisiana saw a net loss of three rigs week/week. Oklahoma and Texas added one rig each, BKR data show.
Few new oil refineries planned despite high profit margins - A barrel of West Texas Intermediate oil costs about $110; and Brent crude, mainly refined into diesel fuel and gasoline, is at $113. The national average price of gasoline:$4.59 a gallon.Late last week, the House of Representatives passed a bill that would outlaw what it calls predatory gas prices and also expand federal authority to investigate price gouging allegations.But getting that oil out of the ground and turning it into something we can put into our cars and trucks isn’t that simple. Even if our refineries are doing it as fast as they can, they’re producing a lot less than they were just a couple of years ago.In fuel refining circles there’s a phrase that gets thrown around quite a bit: crack spread.“The crack spread is the difference between the petroleum product price, such as diesel or gasoline, and crude oil prices,” said Jeff Barron, an economist at the U.S. Energy Information Administration.It’s basically a refiner’s profit margin, he said. Right now, the crack spread is entering record-breaking territory. That’s one reason the price of gasoline or diesel doesn’t drop even when the price of oil does.Jason Gabelman, a director at Cowen, said refiners aren’t holding anything back to try to inflate prices. “You know, they’re trying to produce as much as they can, because refining margins are where they are. So they have every economic incentive to run all in,” he said.According to the Energy Information Administration, the United States will be using about 95% of its refining capacity in June. Yet, we’re refining about a million barrels per day less than we were just a couple of years ago. Why?When COVID-19 hit and demand for fuel fell dramatically, a lot of refining companies shut plants down, he said.“Some refineries just shut down because of lack of demand, and they’re not coming back on. Then there was some weather-related issues also,” Daigle said. Last year’s freeze in Texas knocked several refineries offline, and some are still not operating at full capacity. But if refiner’s margins are so big and they’re making a killing on every barrel of fuel they get to market, why don’t energy companies just build more refineries while the money’s there?It takes a lot of money and time to build refineries. Additionally, “investors do not want to see companies pouring money into organic oil and gas growth,” Gabelman said.The long-term prospects for fossil fuels are uncertain. Most investors don’t want to be asked to chip in for long-term growth. In the present economic climate, they’re demanding a quicker return on their investment.
Biden's White House Eyes Restarting Idle Oil Refineries to Tame Gas Prices - The Biden administration is reaching out to the oil industry to inquire about restarting shuttered refineries, as the White House scrambles to address record high-gasoline prices that are setting off political alarm bells ahead of the midterm elections. Members of the National Economic Council and other officials have inquired within the industry about factors that led some refining operations to be curtailed and if plans are underway to restart capacity, a person familiar with the matter said. The person, who wasn’t authorized to speak on the record, added no direct ask to restart operations was made.
Oil Inventories Down to Dangerously Low Point - Crude oil inventories are down to a dangerously low point across Europe, North America, and OECD Asia just as OPEC+ spare production capacity has dwindled to the lowest levels since April 2020. That’s according to a new BofA Global Research report, which was sent to Rigzone on Monday. The report also highlighted that petroleum product inventories have fallen to “precarious levels” for middle distillates and gasoline “as the market heads into the peak of the U.S. driving season”. “As a result, refined petroleum cracks have recently spiked to record levels, contributing to boost volatility across the oil complex,” the BofA Global Research report stated. “Most worryingly, strategic oil barrels held by OECD governments are already low and set to decline steeply going forward, leaving consumers exposed to any future negative supply shock,” the report added. Only China appears to have a reasonable inventory cushion against the unexpected, according to the report, which noted that this rising inventory buffer could be explained because “Chinese fuel demand is exceptionally weak (an unplanned buildout) or because China has been hoarding oil to protect itself against the next energy crisis (a conscious effort)”. The BofA Global Research report warned of risks to BofA Global Research’s oil price forecasts, but also highlighted the role of low inventory levels in pushing prices higher. “With monetary policy tightening and recession at the top of investors’ minds, a downturn in global oil consumption is a risk to our projected Brent average of $102 per barrel for 2022 and 2023,” the report stated, adding that higher Russian petroleum exports to countries outside the West is another risk to watch. “However, low inventory levels, limited spare capacity, and a post pandemic demand recovery in EMs should combine to press Brent above $120 per barrel over the coming months,” the report added. At the time of writing, the price of Brent crude oil stood at $112.29 per barrel. Brent has closed above $120 per barrel on several occasions this year, including on March 7 ($123.21 per barrel), March 8 ($127.98 per barrel), and March 25 ($12.65 per barrel). According to the Energy Information Administration’s (EIA) latest weekly petroleum status report, which was published on May 18 with data for the week ended May 13, U.S. commercial crude oil inventories, excluding those in the Strategic Petroleum Reserve, decreased by 3.4 million barrels from the previous week. The EIA report outlined that, at 420.8 million barrels, U.S. crude oil inventories are about 14 percent below the five year average for this time of year. Total motor gasoline inventories also decreased by 4.8 million barrels and are about eight percent below the five year average for this time of year, the EIA report highlighted, adding that finished gasoline and blending components inventories also decreased. Distillate fuel inventories increased by 1.2 million barrels and are about 22 percent below the five year average for this time of year, while Propane/propylene inventories increased by 0.3 million barrels and are about 10 percent below the five year average for this time of year, according to the EIA report, which highlighted that total commercial petroleum inventories decreased by 2.9 million barrels.
Permian oil producers about to slow despite $100 crude -In a world crying out for more oil, a dusty stretch of West Texas and southeastern New Mexico is one of the only places that can deliver. But even with crude above $100 a barrel, producers in the Permian and other US shale basins are riding the brakes. For most of the past decade, the Permian was an unstoppable drilling machine. Its vast, low-cost reserves helped transform the US into the world’s swing oil supplier, primed to turbocharge output as soon as prices soared or to halt when they collapsed. Because shale producers amassed a backlog of wells that could be tapped in just a few weeks, a crude rally was sure to incite a fracking frenzy that would help replenish global stockpiles and cool off prices.But not this time.After Russia invaded Ukraine in late February, crude prices surged to a 13-year high. Gasoline is above $4 a gallon in every US state for the first time. Jet fuel in New York spiked to a record last month. Yet shale explorers show no sign of riding to the rescue. Their business model has fundamentally changed, reshaped by pressure to curb growth and divert cash to investors with dividends and buybacks. Inflation is also taking a toll. US oil output this year is expected to expand by less than half the amount it did in 2018, when crude traded around $65. That means more pain for consumers, with JPMorgan Chase & Co. predicting US gasoline at $6.20 a gallon by August.“The US oil and gas supply system remains very potent, but at any given price, growth will be smaller and slower,” said Raoul LeBlanc, vice president for North American upstream oil and gas at S&P Global. “Without the subsidy that shale shareholders provided, consumers can expect to pay higher prices.”Publicly traded independent oil companies, which produce more than half of U.S. crude, are now giving about a third of their cash flow back to investors. This means shale needs a new pricing floor of about $60 to $70 a barrel, up from $40 to $50 a barrel previously, to enable drilling broadly across the major U.S. oil plays, according to S&P Global. The pressure to prioritize shareholders over production is a direct result of the industry’s pre-pandemic, grow-at-any-cost model that, according to Deloitte LLP, led to nearly $300 billion of cash burn over the previous decade. Though shale output will rise this year, forecasters say there's minimal additional growth coming as a result of the war in Ukraine, despite the rally in crude prices. The US will add about 900,000 barrels a day of oil production this year, according to the average of five major forecasters: S&P Global, Rystad Energy, Bloomberg NEF, Enverus and the US Energy Information Administration. That compares with 1.9 million a day in 2018. This year’s growth was planned before Russia’s invasion of Ukraine, and analysts only see a modest increase of about 800,000 barrels a day next year, which would finally bring US output to pre-pandemic levels. In the field, operators say forecasters’ current estimates may even be too optimistic. Several OPEC producers, meanwhile, are struggling to fill their output quotas, leaving the global crude market increasingly tight.Wall Street isn’t the only source of shale’s growing pains. The global supply-chain crisis is particularly acute in the Permian Basin, which will make up 80% of this year’s US production growth, according to research and data firm Enverus.Disruptions to equipment supplies mean if a company wants to increase production, it would now take a year or more between drilling to pumping oil, up from three to four months before the pandemic, Linhua Guan, CEO of Permian driller Surge Energy, said in an interview. Guan planned for 16% cost inflation this year and says that will increase next year. As a result, Surge expects a 12% annual production growth rate this year, down from 29% in the 12 months through the first quarter. Even so, Guan expected the U.S. subsidiary of China’s Shandong Xinchao Energy Co. will make record profits this year if prices remain elevated.The cost of casing, a lining that helps to stabilize wells, is three times higher than usual and lead times to fill orders are much longer, said Dena Demboski, vice president of operations at Permian producer UpCurve Energy LLC. “Rig rates are higher than I've ever seen them” at more than $30,000 a day, she said. Pioneer Natural Resources Co., a major Permian driller, expects the cost of contracts for new rigs to rise as much as 40% next year. “It's just more difficult to get some of the key products that we need, whether that's pipe or sand,” said Travis Thompson, CEO of FireBird Energy LLC, a producer active in the Permian’s Midland Basin. “If we wanted to increase activity, say from three rigs to four or five, we would certainly have to plan on that a lot further out than what you would have had to a year or two back.”
Thai Billionaire Isara Vongkusolkit’s Banpu Buys Exxon Mobil’s Texas Gas Fields For $750 Million -Banpu—controlled by billionaire Isara Vongkusolkit and his family—has agreed to buy natural gas fields in Texas from Exxon Mobil for $750 million as the Thai coal miner accelerates its transition into cleaner energy.Under the deal announced late Friday, Banpu’s BKV Corp. will acquire 160,000 net acres in the Barnett Shale field—which holds about 93% stake across 2,100 wells that produce 225 million cubic feet equivalent (CFE) of natural gas per day—from Exxon Mobile subsidiaries XTO Energy and Barnett Gathering. The transaction will boost Banpu’s natural gas output by about 32% to 5.8 trillion CFE per day.“Our gas business is now well-positioned to scale up with extensive synergies and technology enhancement to build sustainable value,” Somruedee Chaimongkol, CEO of Banpu, said in a statement. “Today, BKV is a leading natural gas operator in the U.S. with an integrated approach to the value chain that allows the company to certify its responsibly sourced gas at the well head.”The latest acquisition follows the acquisition of a 768-megawatt combined cycle gas-fired power plant in Texas last August for $430 million. Banpu is deepening investments in power projects that use cleaner fuel to achieve its goal of expanding the group’s electricity generation capacity to 6,100 megawatts by 2025 from over 3,300 megawatts currently, according to Banpu’s website.The investments are starting to payoff, with Banpu reporting a first quarter net profit of 10.26 billion baht ($311 million) on sales of 41.5 billion baht. “Our strong first quarter earnings were driven by global economic recovery across industrial sectors and rising energy demand, with growing cash flow generated from both existing businesses and new acquisitions,” Chaimongkol said when the company announced its quarterly results earlier this month.
Canes Midstream Snaps Up Sizeable Permian Midland Asset Package - Private equity-backed Canes Midstream LLC said Wednesday it has closed on its acquisition of Permian Basin midstream firm Cogent Midstream LLC. Located in the southern portion of the Permian’s Midland sub-basin, the Cogent assets include 520 MMcf/d of natural gas processing capacity, over 800 miles of pipelines, 42 compressor stations, a crude oil gathering system, “and substantial acreage dedications from a diverse group” of Midland-focused producers, Canes management said. The Cogent system spans 10 Texas counties, with most of the infrastructure located in Reagan and Irion counties. “I was with these assets at inception and am excited to return and continue to grow them,” said Canes CEO Scott Brown. “With our newer facilities and the significant capital invested by Cogent to date, we are well positioned to grow the system and provide best-in-class midstream services to our existing and future customers. “I believe Canes will be the preferred midstream service provider in the Southern Midland Basin.” Founded in 2019, Canes is a Dallas-based portfolio company of EIV Capital and Denham Capital. “With fresh capital, Canes will continue to expand the system and support Permian production growth,” said EIV partner Greg Davis. “Canes, via this acquisition, is well positioned to drive differentiated outcomes for area producers,” added Denham’s James Obulaney, managing director. “We look forward to supporting Scott and team as they grow this tier-1 system to service new and existing customers in the Permian Basin.” The Permian is driving drilling, completions, permitting and production growth in the Lower 48 amid strong global commodity pricing and undersupplied oil and natural gas markets. Also on Wednesday, Crestwood Equity Partners LP announced plans to more than double its natural gas processing footprint in the Permian’s Delaware sub-basin through a $600 million acquisition of Sendero Midstream Partners LP. With natural gas takeaway constraints looming amid seemingly insatiable liquefied natural gas export demand, several initiatives to expand offtake capacity from the basin have been announced in recent days. These include sanctioning of the 2.5 Bcf/d Matterhorn pipeline, as well as planned expansions of the Whistler, Gulf Coast Express and Permian Highway pipelines.
Interior announces $33 million to clean up orphaned oil and gas wells on federal land - Officials from the Interior Department and the White House announced Wednesday they will spend $33 million to clean up 277 idle oil and gas wells on federal lands in nine states.Wednesday's funding allocation will go to clean up so-called orphaned wells in national forests and national parks in California, Kentucky, Louisiana, Ohio, Oklahoma, Pennsylvania, Texas, Utah and West Virginia.The funding comes from the bipartisan infrastructure law, which included $4.7 billion to clean up orphaned wells across the country. Over $1 billion of that funding has already been released to states to help them tackle orphan well clean-up. States have identified over 130,000 orphan wells around the country and estimated it will take around $8 billion to clean those wells up, said Laura Daniel-Davis, Interior's principal deputy assistant secretary for land and mineral management."These are environmental hazards that jeopardize public health and safety by contaminating groundwater and emitting noxious gases like methane," Interior Secretary Deb Haaland said Wednesday.Methane is a powerful greenhouse gas, and scientists have said it should be prioritized in efforts to address the climate crisis. It is also highly flammable (it's the main component of the gas that's used to power stoves, ovens and furnaces), and high concentrations of it can displace the oxygen in the air and lead to blurred vision, nausea, vomiting and headache, among other health issues.The US Environmental Protection Agency estimates there are around 3 million idle or unproductive oil and gas wells around the nation, and orphaned wells are a subset of that number. Oil and gas companies are responsible for cleaning up wells that reach the end of their productive life, but when companies go bankrupt and "orphan" their wells, the cleanup is left to federal and state governments.Daniel-Davis estimated there are about 15,000 orphaned wells on federal land; Wednesday's funding allocation is meant to be the first round of $250 million to help clean up those wells.Now that funding is being released, she said officials expect agencies will immediately begin the process of cleaning up and capping the wells. Four federal bureaus receiving this funding will measure emissions of methane coming from the wells -- a super pollutant that is 80 times more potent than carbon dioxide.The program will require federal contractors to measure methane emissions both when they start and end the remediation process, to measure how effective well capping is.
New Mexico County to Ease Oil & Gas Drilling Rules Despite New Evidence of Health Dangers - A mapping project released today by nonprofit environmental groups EarthWorks and FracTracker shows that more than 12.3 million people live within a half-mile of an oil and gas facility in the United States — 144,377 of them in New Mexico. And earlier this month, a mostly rural county just south of Albuquerque passed an ordinance that could increase that number further.In early May, the Valencia County Board of Commissioners passed a zoning “overlay” that would allow anyone in the county to apply to exploit any natural resources on property not along the Rio Grande greenbelt (which bisects the county) and not in an incorporated area. They also would not lose the original county zoning classification of the property. Proposals would still need to meet county and state guidelines for resource development, but the overlay would dramatically reduce the administrative steps and public hearings required by the county for zoning changes.The change could help landowners exploit all sorts of resources, says County Commissioner Joseph Bizzell, who sponsored the bill. “It could be gravel, it could be hydrogen,” he says. He also has his own business idea: “I’m trying to go after the brackish water.” Bizzell says that water deposits in the west of the county could be tapped, desalinated and sold for both clean water and the resulting salt. Currently, that would require an industrial zoning change, he says, and if the brine ran out, he’d have to apply again to revert the land to either agricultural or residential use.But the overlay has uses beyond rocks or salty water.Harvey Yates Jr. of Albuquerque, a county to the north, told the commission, “I think there’s a good chance that we could develop a new industry that would mean a better economy for Valencia County.”And maybe a better economy for Yates, too.The one-time head of the state Republican party runs Jalapeño Corporation, an oil and gas drilling and exploration company based in Albuquerque. He’s also part of New Mexico’s best-known and wealthiest oil family. It was a Yates who drilled the first successful oil well in New Mexico in 1907. And in 2016, the family sold Yates Petroleum to EOG Resources for $2.5 billion. While the family’s businesses no longer primarily revolve around owning oil and gas wells, a search at the New Mexico Oil Conservation Division shows that other companies still own nearly 320 wells with “Yates” in the name.
Why Won’t the EPA Fine New Mexico’s Greenhouse Gas Leakers? --In the fall of 2019, the Environmental Protection Agency (EPA) hired a helicopter equipped with a leak-detecting infrared camera to criss-cross the Permian Basin looking for gaseous emissions, part of a monitoring program undertaken at the behest of and in partnership with the New Mexico Environment Department (NMED). Over the course of nine days, the EPA found leaking valves, leaking hatches, unlit and partially lit gas flares on wells, leaking tank batteries and compressor stations. In all, the flights documented 111 emissions at facilities run by 23 different oil and gas companies. In 2020, the EPA did it again, this time undertaking 15 days of flights and expanding their range to include part of the San Juan Basin in northern New Mexico. They found 244 facilities emitting gases. At least one site had five separate emission sources. Then, in March of this year, the EPA issued consent agreements with 11 companies — some of the biggest producers in the country, including Chevron, ConocoPhillips and Occidental — for violations of the Clean Air Act based on the 2019 flights. Yet under those agreements, two and a half years in the making, only one company was fined for environmental violations, despite the fact that all of the companies were cited for “directly releasing emissions to atmosphere.” The EPA fined another company for a paperwork violation. The other 21 operators of leaking wells weren’t fined anything at all. The Permian Basin is 75,000 square miles of mostly flat, mostly treeless scrubland straddling the Texas-New Mexico border. This one-time ranchland is now the nation’s most productive oil and gas field, with more than 38,000 active wells and associated facilities just on the New Mexico side. But that wealth of resources comes at a cost. Recent studies show that Permian wells emit much more methane — a greenhouse gas 80 times more potent than CO2 in its first 20 years in the atmosphere — than previously thought, a finding backed up by new reporting requirements from the state’s Oil Conservation Division. Operators themselves are reporting dramatically more venting, flaring and leaks than ever. And that’s on top of the unreported releases documented by the EPA flights. All of these emissions fuel climate change, which poses a deep and immediate threat to New Mexico. Massive forest fires supercharged by long-term aridification have charred more than a half-million acres across the state already this year, months before the usual start of fire season. This includes the largest single fire in the state’s recorded history. The need for proper monitoring and crackdowns on violators could hardly be more pressing, but the EPA has been slow in enforcement. Its recent consent agreements cover only what the agency found on the first round of flights. According to an EPA spokesperson, the 2020 flights are still being assessed, a year and a half after they concluded. No flights were conducted in 2021. But it’s not clear what the EPA will do about what it found in 2020 — those flights happenedbefore the EPA began notifying operators of the previous year’s violations.It’s also not clear why the EPA didn’t fine companies for their violations of the Clean Air Act. After days of costly helicopter flights, infrared camera rentals and more than two years of office and inspection work confirming that the companies had vented unknown amounts of methane and other gases into the atmosphere, the EPA wrote to most of the companies: “Upon review, EPA hereby confirms that you have completed all requirements … satisfactorily.”
Federal judge halts gas fracking plan for Western Slope forests – A U.S. District Court judge blocked a plan approved by federal agencies for 35 fracked gas wells across 30,000 acres of U.S. Forest Service land between Gunnison and the Grand Mesa, handing a victory to environmental groups suing the government for failing to take climate change into account in approving new drilling. U.S. District for Colorado Judge Marcia Krieger vacated previous approvals by the Forest Service and the Bureau of Land Management allowing Gunnison Energy LLC to drill and frack wells as part of the North Fork Mancos Master Development Plan. Gunnison Energy has already drilled one well under the plan, Krieger’s opinion said. The plan allowed for 35 wells to be drilled from five pads spread across the area. “Based on the court’s ruling, the agency must start over if they’re going to approve fossil fuel development in the area,” said Peter Hart, an attorney with Wilderness Workshop, part of the coalition that had sued to block the drilling plan. “This will give BLM a chance to reconsider whether this is the right decision in the first place, and to contemplate alternatives that don’t destroy the headwaters of the North Fork, pristine roadless areas and our climate,” Hart said. Krieger wrote that she based her decision to vacate the drilling plan on the federal agencies’ own admission during lawsuit proceedings that they had failed some required steps in the National Environmental Policy Act process for considering well permits. Those admitted missteps, the judge wrote, included “the analysis of the potential impact of the new wells on emissions of greenhouse gases such as methane.” The Forest Service and Bureau of Reclamation agreed the plan should be remanded to them for reassessment, but asked the judge not to vacate or block the drilling plan entirely. They told the judge one well was drilled and other permits had already been approved, and vacating the plan “would be unnecessarily disruptive to the operator,” Krieger’s opinion said. “By the agencies’ own admission, the plan should never have been approved in the first place . . . ,” Krieger wrote. “In this court’s view, allowing the agency the opportunity to fix the error is more important than forcing the public to abide by a decision that the agency concedes was improper.” The environmental coalition’s 2021 lawsuit against the master plan said the federal agencies’ drilling approvals ignored recent executive orders and other rulings that they must weigh any proposal’s contributions to greenhouse gases and climate change. Previously, required steps under the National Environmental Policy Act had focused more on impacts on wildlife, air pollution and water quality. The coalition, which included WildEarth Guardians, the Center for Biological Diversity, High Country Conservation Advocates and others, said releases of methane and other greenhouse gases during fracking would worsen climate change that has already raised Western Slope temperatures faster than other parts of North America.
Judge: BLM underplayed climate risk in Colo. fracking plan - A federal judge last week blocked hydraulic fracturing over 35,000 acres on Colorado’s Western Slope after finding federal officials had failed to do enough to account for climate risk.Senior Judge Marcia Krieger of the U.S. District Court for the District of Colorado on Friday ordered the Bureau of Land Management and Forest Service to redo the North Fork Mancos Master Development Plan, which had allowed construction of 35 new wells in parts of Grand Mesa and the Uncompahgre and Gunnison national forests.The order reinforces that the federal government cannot avoid disclosing the climate impacts of its actions, Melissa Hornbein, a senior attorney with the Western Environmental Law Center, said in a statement Friday.“This is a victory for the integrity of a biologically and economically diverse area,” she said.“The Bureau of Land Management has to confront the dissonance between its proposal for fracking in an area already disproportionately affected by climate change,” she continued, “and the reality that, to maintain any chance of keeping warming below the critical 1.5°C threshold, the government cannot approve any new fossil fuel projects.”The law center represented Citizens for a Healthy Community and other environmental groups that had challenged the Trump administration’s approval of the management plan in an area that was already experiencing severe warming (Energywire, May 12).They argued that the agencies violated procedural law and the National Environmental Policy Act by not doing enough to consider the climate or water impacts in the analyses underpinning their decisionmaking. The agencies had also failed to present reasonable alternatives to the plan, the groups said.Rather than defend the development plan, BLM and the Forest Service under President Joe Biden acknowledged there were “substantial concerns with the NEPA analysis” by the prior administration but argued that sending the decisions back to the agencies would be enough to correct the problems identified in the lawsuit.Krieger, a George W. Bush appointee, was unconvinced that the case met the standard for sending back an agency decision for reconsideration without requiring the government to start from scratch.The agencies had only discussed the consequences of tossing out the plan at “a high level of abstraction,” other than to point out that the move would “call into question” permits that had already been issued, Krieger said.
North Dakota extends deadline for gas pipeline proposals (AP) — A panel that regulates North Dakota’s energy industry voted Monday to extend the deadline for proposals to build a natural gas pipeline from western North Dakota’s oil patch to the eastern part of the state.The three-member, all-Republican North Dakota Industrial Commission headed by Gov. Doug Burgum moved the deadline for proposals to Aug. 15 after no applications were received by the deadline this month. The North Dakota Legislature in November set aside $150 million in federal coronavirus aid to help construct such a trans-state pipeline for natural gas, which is a byproduct of oil production. The idea, pushed by Burgum, was to help cut down on the wasteful flaring at well sites and pipe it to communities in the gas-poor eastern part of the state, hoping to spur industrial development.Despite the promised subsidies, no applications were submitted for the pipeline. WBI Energy, a subsidiary of Bismarck-based MDU Resources Group, said the project is not viable due to regulatory uncertainty, limited in-state demand and rising construction, labor and land-acquisition costs. MDU resources is North Dakota’s only Fortune 500 company.WBI Energy owns and operates more than 3,700 miles of transmission and storage pipelines in the Dakotas, Minnesota, Montana and Wyoming.
Billions in new industries coming to Williams County- State commerce officials say there is about $40 billion invested in new projects for the state. About $5 billion of that is planned in northwest North Dakota, where leaders are looking to add more value to the oil and gas industry. Williams County may be known for drilling oil and gas, but new, value-added projects are looking to add more opportunities. “I think what we will become over the course of time and what’s happening right now is we will be the value-add to the oil and gas production that is happening around here,” said Steve Kemp, Williams County Commissioner. Soon, work will begin on a number of facilities such as the Cerilon gas-to-liquids plant, the SAFuelsX plant, and Wellspring Hydro. These facilities will turn byproducts into valuable materials such as diesel fuel and even lithium. “This gas-to-liquids project will be the single-largest one in North America. Within the Bakken, we believe there is quite a substantial market that we could locally supply these products,” said Ron Opperman, CEO of Cerilon GTL. Leaders in charge of these programs spoke earlier this month about the benefits these industrial facilities can bring including carbon storage and reducing emissions. For homeowners, Kemp said these large projects can alleviate some property taxes. “Having this industrial base buildup, especially in the billions of dollars that we are talking about, will start to help relieve some of the burdens for homeowners,” said Kemp. It will take years before these industrial dreams are realized, but Kemp said these projects will help stabilize the region and make it less reliant on the success of the oil market.
Plains All American Agrees to $230 Million Oil Spill Settlement -Plains All American Pipeline LP and Plains Pipeline LP will consent to paying $230 million under a settlement reached over a 2015 oil spill in California, but the companies also told a federal judge in the state that they don’t “endorse the content” of the plaintiffs’ filing for initial approval of the agreement. Members of the fishing industry and property owners sued after an onshore pipeline at a beach in Santa Barbara County, Calif., ruptured and sent oil into the Pacific Ocean. The group says the oil spill affected fishing blocks and coastal properties. Plains will pay $184 million to the fishing class and $46 million to the property owner class, according to the settlement filed May 13. The settlement avoids the “inevitable” delays the classes would’ve suffered if the case went to trial and was appealed, according to the filing. Plaintiffs argued Plains should’ve known about the pipeline’s corrosion through inspections performed in 2007 and 2012. But the company says it “acted reasonably by performing in-line inspections and the required digs and repairs.” Plains also argues the spill volume “was a fraction of what plaintiffs’ asserted,” according to the motion for preliminary settlement approval. The spill volume could’ve affected liability and limited damages for each class, the filing says. The settlement will be distributed among the fishing class based on the share and value of fish purchased by each fish processor, the filing says. The plan for distribution for the property class will consider the value of each property, the number of days it was oiled, and the level of oiling, according to the agreement. Class counsel will seek about $75.9 million in attorneys’ fees and no more than $6.5 million in costs, the filing says. Plaintiffs will also seek up to $15,000 for class representatives, the filing says. Plains told the US District Court for the Central District of California May 20 that it doesn’t oppose the settlement. Judge Philip S. Gutierrez oversees the case.
ExxonMobil challenges denial of oil trucking operations permit - Irving, Texas-based Exxon Mobil Corp is accusing Santa Barbara County of unconstitutionally denying the company a permit to transport oil on Highways 101 and 166 in California.In a lawsuit recently filed by ExxonMobil in a California federal court, the company claims the Santa Barbara County Board of Supervisors unlawfully denied a permit request to haul oil by truck, violating its constitutional rights.ExxonMobil’s Santa Ynez Unit is seeking a permit to resume operations of three offshore platforms off the Santa Barbara County coast and an onshore processing center in Las Flores Canyon. Since operations began in 1970, oil from the platforms was transported to the processing center via pipeline.In 2015, one of the two pipelines ruptured, forcing both pipelines to shut down. Exxon Mobil was forced to transport the remaining 400,000 barrels of oil, or 2,500 truckloads, via truck to the Phillips 66 pump station in Santa Barbara. According to the complaint, it did so without incident.Since then, operations have ceased, but ExxonMobil has spent about $100 million each year to maintain the Santa Ynez Unit. In 2017, the oil company filed a permit application with Santa Barbara County to restart operations. This time, the primary mode of transportation will be trucks. However, that will only be temporary until a new pipeline becomes available.During the four years of working with the local government, ExxonMobil claims it submitted a wealth of evidence detailing the safety of the operations.
Biden officials eyeing diesel stockpile to ease shortage --The Biden administration is in talks to tap to into a federal diesel reserve to address energy shortfalls, an official with knowledge of the matter confirmed to The Hill on Monday. An interagency team of officials has been monitoring East Coast diesel supplies and developing policy recommendations to address them, the official said. “The team has prepared emergency declarations for President authorize release from the Northeast Home Heating Oil Reserve if conditions deteriorate,” they added. “We would call this a bridge to deal with short-term supply shortfalls.” The Northeast Home Heating Oil Reserve, created in 2000, is a Northeast-based stockpile of about 1 million barrels of home heating oil. Due to its relatively small size, the reserve is considered to be of limited long-term use, about a day’s worth of supply for the region, according to the White House. It has only been tapped once before, in 2012, after Superstorm Sandy battered the East Coast. The White House official framed the crunch as a consequence of Russia’s invasion of Ukraine, a frequent refrain from the Biden administration as the war has thrown global energy markets into disarray. “In recent weeks, the team noted a worrisome decline in diesel inventories in the Northeast (below 20M barrels), as well as on-the-ground reports of supply issues, resulting from a lack of supply in part resulting from Putin’s actions in Ukraine and the disruption in the energy market,” the official said.
White House explores tapping emergency diesel reserve to ease price spike - The White House is considering an emergency declaration that would enable President Joe Biden to release diesel from a rarely used stockpile in a bid to address a major supply crunch, a senior White House official told CNN.The deliberations about tapping the Northeast Home Heating Oil Reserve underscore the level of concern inside the White House about record-high prices for diesel.Diesel is a vital fuel for the US economy, powering not only farm and construction equipment but the trucks, trains and boats that move goods across the country. Skyrocketing diesel prices are likely to get passed along to families, contributing to America's worst inflation crisis in four decades.Inventories of diesel in the Northeast have plunged to record lows in recent weeks because of a confluence of factors that include the war in Ukraine and surging demand."The system is definitely under strain," the senior White House official said.The impact from such a release would be limited by the relatively small size of the reserve, which only contains 1 million barrels of diesel — equal to about a day's worth of supply in the region."It's small potatoes. It might buy a couple of weeks or even months, but it doesn't solve the underlying issues," Andy Lipow, president of Lipow Oil Associates, told CNN.The national average price for diesel stood at $5.56 a gallon as of Sunday, just shy of the record of $5.58 set last week, according to AAA. This marks a 75% increase from a year ago and at least one leading energy economist recently told CNN the price could spike to $10 a gallon by the end of the summer.But the situation is even worse in the Northeast, a region that has fewer refineries. For instance, the average price for a gallon of diesel in New York is $6.52 a gallon, up 102% from a year ago, according to AAA.Alarmed by plunging inventories and soaring prices, Biden officials began extensive internal briefings and consulted with fuel retailers to better understand the situation, the official said.Now they are considering releasing diesel from the Northeast Home Heating Oil Reserve, a step that has only been done once before: in the aftermath of Superstorm Sandy in 2012. The reserve was originally launched in 2000 as a way to meet a supply crunch caused by a severe winter storm. In 2011, it was converted from home heating oil to ultra-low sulfur distillate, a cleaner-burning diesel used to power engines in trucks, tractors and other vehicles.
Grim Diesel - Principal among the fossil fuels in its importance is diesel, one of the most abundant products derived from refining a barrel of oil (second to gasoline). Diesel engines are ideal for long-haul truckers and heavy-equipment operators because they provide superior torque at low RPM, critical for pulling heavy loads. Diesel engines are efficient, reliable, and durable. Without the fuel to power these engines, our supply chains would quickly seize up, grocery store shelves would be stripped bare, mining of all critical ores would cease, and riots would soon follow.An urgent crisis is unfolding in the global supply of diesel – something Bloomberg energy and commodities columnist Javier Blas has been flagging for many months, both on Twitter and in print (emphasis added throughout):“The dire diesel supply situation predates the Russian invasion of Ukraine. While global oil demand hasn’t yet reached its pre-pandemic level, global diesel consumption surged to a fresh all-time high in the fourth quarter of 2021. The boom reflects the lopsided Covid-19 economic recovery, with transportation demand spiking to ease supply-chain messes.European refineries have struggled to match this revival in demand. One key reason is pricey natural gas. Refineries use gas to produce hydrogen, which they use to remove sulphur from diesel. The spike in gas prices in late 2021 made that process prohibitively expensive, cutting diesel output.” Without a doubt, Russia’s invasion of Ukraine was an accelerant, turning years of terrible policies into today’s many catastrophes. It also gave cover for our leaders to externalize the blame for their prior missteps, making it unlikely we will course correct in an intelligent manner any time soon. Tell yourself a lie long enough and you start to believe it.As we have covered on several occasions, the natural gas crisis in Europe and the supply chain disruptions resulting from our reaction to the Covid-19 pandemic continue to reverberate in seemingly unexpected ways. The diesel shortage is exacerbated by both. To visualize the best path forward, we must appreciate the interconnected nature of integrated chemical processes, the whereabouts of supply chain pinch points, and the complexities of co-product economics.In their journey from sedimentary rock to the gas tank, the molecules manipulated out of oil and gas are handled, transformed, transported, and otherwise interacted with by dozens of highly specialized companies, many of whom run capital intense, low margin, and highly volatile businesses. There are drillers, oil field services companies, pipeline operators, railroad owners, refiners, distributors, and gas station retailers, just to name a few. A simplified flow diagram follows, and the orange box highlights the origination point of the current diesel price pressure – Crude Oil Refining.:Suffice it to say, the common assumption by the lay consumer (fed by politicians and pundits) that high prices at the pump result from gouging couldn’t be further from reality. Let’s dig in.
UK Petrol Pump Prices Soar to Record High -The average UK gasoline price at the pump surged to a fresh record on Monday, according to the RAC motoring organization. The cost of unleaded petrol -- a British term for gasoline -- hit 169.61 pence ($2.12) a liter on Monday, RAC data show. That’s up from 168.67 pence on Thursday last week. Diesel edged lower on Monday to 181.37 pence a liter, down from 181.48 the day before. “The high cost of diesel is not only hard for the 12 million-plus drivers who rely on it, but also for the majority of businesses which move products or deliver services by road,” RAC fuel spokesperson Simon Williams said. UK fuel prices have broken record after record in recent days, despite the government in March reducing fuel duty by 5 pence a liter. Russia’s invasion of Ukraine has helped to push commodity prices, including fuels, higher, fanning inflation. “As ever-rising fuel prices are contributing to the cost-of-living crisis, we’re surely reaching a point where further intervention from the Chancellor is required to take the pressure off households and businesses,” Williams said. Eye-watering fuel prices aren’t just a UK phenomenon. Gasoline retail costs have also recently hit record levels in the US, while in European wholesale markets, the fuel’s premium to crude oil is well above the seasonal norm.
UK diesel shortage shows need for caution on sanctions: Kemp -(Reuters) - Like the east coast of the United States, Britain was experiencing a severe shortage of distillate fuel oil even before Russia's invasion of Ukraine, which sanctions now threaten to make much worse. UK diesel and gas oil inventories had fallen to 1.57 million tonnes by the end of February, down from 2.23 million at the same point a year earlier, and the lowest seasonal level since 2014/15 and before that 2008. The country's passenger vehicle fleet is split between diesel and gasoline but long-distance freight transport, local delivery services, small businesses and construction all rely on diesel. Distillate consumption has rebounded much faster than gasoline, reflecting the resurgence in business activity and commercial journeys compared with commuting and leisure. Distillate use was down by just 2% in February from the same month before the pandemic, compared with a 12% decline for gasoline, according to data from the Department for Business, Energy and Industrial Strategy (BEIS). Diesel and gas oil inventories had fallen by almost 30% over previous twelve months compared with only 8% for gasoline ("Energy trends: UK oil and oil products", BEIS, April 28). As a result, the ratio of distillate stocks to consumption has fallen to its second-lowest level for decades, a sign of how tight inventories have become. The shortage has pushed retail diesel prices to a premium of 13-14 pence per litre (8-9%) over gasoline, the highest since 2008 ("Weekly road fuel prices," BEIS, May 24). High prices are intended to conserve inventories by discouraging consumption while incentivising more imports from abroad. Britain relied on net imports to cover almost 40% of its distillate consumption in 2021. Russia was the single largest source, accounting for 33% of all distillate imports and 17% of total consumption. Diesel imports from Russia can be substituted relatively easily from other sources since the volumes involved are not large on a global scale. Britain has announced it will wind down Russian imports over the course of 2022 ("U.K. to phase out Russian oil imports", BEIS, March 8). But there is not enough diesel and gas oil available from other sources for all European countries to make the same substitution at the same time. Planned EU sanctions on Russian petroleum will need to include more generous treatment for distillates or stocks are likely to fall critically low across Europe, risking shortages at retail level. The United States and Britain, both of which have already announced sanctions on Russian diesel, are therefore tacitly relying on the European Union to continue importing it to avoid sparking a worldwide crisis.
Cuba joint venture spuds second big exploration well - The second of two large oil exploration wells is under way in Cuba as a follow-up to the promising Alameda-1 oil discovery. Drilling of the Zapato-1 exploration well began on 21 May in Block 9 onshore Cuba. Operator Melbana Energy said Zapato-1 will test a target with a best estimate prospective resource of 95 million barrels of oil, with a 23% chance of success. Melbana’s assessment is that the large Zapato structure (with nearly 1000 metres of vertical relief) may be the primary structure, and thus the source of oil for the shallow Motembo oilfield discovered in the late 19th century that reportedly contained a very light oil at surface. Melbana is partnered in Block 9 by Sonangol, the national oil company of Angola. Melbana said it has a 30% interest with Sonangol meeting 85% of the exploration costs. The first well in the campaign — Alameda-1 — encountered up to 300 metres of net hydrocarbon pay across three independent zones, but early and short tests of the deeper oil intervals could not be done effectively using the current well design due to high formation pressures. The joint venture aims to do this testing following completion of Zapato-1.
Peru sues Repsol for $4.5 billion after oil spill -- Four months after an estimated 6000 barrels of crude spilled from the Mare Doricum tanker near the coast of Peru, the country’s government is backing its national legal agency in suing Spanish company Repsol for $4.5 billion.Peru’s government said in a statement that 700,000 people were affected by the spill, along with their businesses in tourism and fishing around Ventanilla, Callao, located just north of the capital Lima.The government said the estimated damages exceed $3 billion, along with collective non-material damages of $1.5 billion.Repsol has consistently claimed the oil spill was uncontrollable, the result of a tsunami from a volcanic eruption and landslide in Tonga, and said it was taking its own steps toward remediation.The Spanish producer said it mobilised more than 2900 workers to clean up the spill and has paid nearly $8 million to the 5500 affected citizens it has identified.“The cost of the containment, cleaning, and remediation of the coastline has been assumed by Repsol from the very beginning and the aid and advance payments provided allow us to reasonably calculate the number of people affected by the spill and the estimated amount of compensation for the damages. The overall amount of these items would be around $150 million,” Repsol said.“Therefore, the claim announced by the National Institute for the Defense of Competition & Protection of Intellectual Property (INDECOPI) is baseless, inadmissible, and inconsistent, because it does not address the causes of the spill; nor the clean-up and remediation work already completed by Repsol; nor the means established by the company to attend to those affected, through collaboration with the Peruvian Government; and because its estimates lack even the slightest basis to support the figures indicated.”INDECOPI’s lawsuit was filed before the 27th Civil Court of the Superior Court of Justice of Lima against several other defendants as well, including La Pampilla Refinery, Peruvian martime company Transtotal Maritime Agency, and Italian shipping company Fratelli d'amico Armatori.
North Sea oil and gas rig workers end wildcat strike as Unite lines up with employers - Wildcat action across 16 platforms in the North Sea last week has been ended, according to the two main contractors operating the rigs for the oil and gas companies. The company Wood stated that its workers had ended the unofficial action Friday evening. Bilfinger UK, which bore the brunt of the stoppages, reported that all workers had returned to their posts by Saturday evening. According to one of the organisers, thousands of workers participated in the stoppages. The action started on Tuesday night and spread rapidly. It developed entirely outside of the trade unions, Unite, the GMB and the RMT, which are part of a collective agreement with fourteen contractors through the Energy Services Agreement (ESA). The ESA sets minimum standards of pay and conditions for 5,000 offshore workers. Its priorities are ensuring stability and certainty “for industry and investors” and the “sustainability of supply lines.” The strikers had demanded a “wage revolution.” Crucially, the message circulated by its organisers stated that the action was not directed at one company but the “industry world-wide as a whole.” Wage negotiations in recent years have been characterised by the absence of any pay demand by the trade unions. In contrast, those involved in the walkouts drew up a concrete demand for a £7 increase in the base hourly rate of pay. They explained that wages had declined or stagnated while prices have soared. Pointing to the profits extracted by the energy giants and contractors from their labour, the strikers referenced the current price of a barrel of oil which had risen to $100 plus. Among the installations hit by the action were the ETAP and Clair Field oil platforms operated by BP, which has reported expected profits of £15.5 billion this year.
The surreal, but also real, problem of Britain's gas glut -The UK energy system is drowning in natural gas. There is so much of the stuff in this country that for the time being at least no-one is quite sure what to do with it. If at this stage you're wondering whether I've lost my mind or that you're reading an article from a year or two ago: no. It is the middle of May 2022; the war in Ukraine is still raging; Europe is attempting desperately to pivot away from Russian natural gas and UK household energy bills (including, yes, gas bills) are at record levels. And I promise I haven't lost my marbles. The UK really is experiencing an almost unprecedented glut of natural gas. This probably still sounds implausible, so consider as proof, the spot price of gas on wholesale markets right now. We're talking here about what are known as "day ahead" prices: the price you'd pay for natural gas if you wanted it delivered tomorrow.The main North European price (TTF, as it's known) has come down a little since the Russian invasion of Ukraine but it is nonetheless considerably higher than before the invasion, and more than double the level it was last summer.Now look at the main UK wholesale gas price, the NBP or "national balancing point" to give it its technical name. It has fallen from around 285p a therm in late March to just 38p a therm a few days ago. At the time of writing it had bounced up to 100p a therm, but was still far lower than before the Russian invasion. In fact, these wholesale prices are at the lowest level for nearly 18 months.What's going on here? Why are UK prices so low, while they remain so high on the other side of the Channel?To understand the answer, you need to remember energy markets are in large part, a product of physical infrastructure. Not only do you need to get natural gas out of the ground, you also need to build the pipelines to get it into people's homes. When it comes to gas, geography matters; steel tubes matter. Much of Europe is, as we all know, highly reliant on Russian gas, most of which is piped in via a string of pipelines across eastern Europe, the Baltic and Black Sea into central Europe. Germany, in particular, is deeply dependent on this flow of gas. And, as you also know, everyone in Europe is doing everything they can to reduce their reliance on Russian gas.In recent months, there has been an enormous amount of LNG redirected to Europe (attracted by the high gas price), but the ships are running out of places to put their gas. This brings us back to the UK, where plenty of LNG has been flowing off tankers, through regasification facilities and into the gas grid in recent weeks. The two gas pipelines which connect the UK with the rest of Europe are running at full capacity right now (indeed, they have been running at 20 per cent above capacity recently). The problem, however, is these pipes simply aren't big enough to push all the gas coming into the UK via those LNG tankers through into continental Europe. And since we don't have much domestic storage in this country and since it's quite warm right now and most of our boilers are turned off, there isn't really anywhere else for the gas to go.
Shell shareholder meeting disrupted by protesters singing "We will stop you!" - Shell's annual shareholder meeting was temporarily suspended on Tuesday after dozens of climate protesters caused disruption, chanting slogans and holding banners. "Can I assume that you do not want me to speak?" Shell chair Andrew Mackenzie asked over chants such as "we will stop you" -- sung to the tune of Queen's "We Will Rock You" -- and "Shell must fall", which delayed the start of proceedings. Police arrived at the venue in central London but allowed protesters to continue chanting for over an hour after the meeting was supposed to start. "We're here to embarrass them and hold them to account," said Aidan Knox of activists Money Rebellion, which is linked to climate protest group Extinction Rebellion.Both Mackenzie and Shell Chief Executive Ben van Beurden stayed on the podium, watching the protests stone-faced, even as a screen behind them said the meeting was "temporarily paused" and non-protesting shareholders were asked to leave.After almost two hours, Mackenzie said police had asked all Shell employees, including board members, to leave the venue. Once they had left, the protesters departed voluntarily with police watching on. Shell said in a statement: "We respect the right of everyone to express their point of view and welcome any engagement on our strategy and the energy transition which is constructive. However, this kind of disruption ... is the opposite of constructive engagement.".
NPD Grants Slew of Drilling Permits The Norwegian Petroleum Directorate (NPD) announced a slew of drilling permits this week. On May 24, the NPD revealed that it had granted Aker BP ASA a drilling permit for well 6507/2-6, and on May 23, the organization revealed that it had granted the company a drilling permit for well 6507/3-15 and well 6507/3-16. The NPD also announced that it had granted Equinor Energy AS a drilling permit for well 30/3-11 S on May 23. Wellbore 6507/2-6 has a planned entry date in May and will be drilled by the Deepsea Nordkapp, according to the NPD’s website, which outlines that wellbore 30/3-11 S also has a planned entry date in May and will be drilled by the Deepsea Stavanger. Wellbores 6507/3-15 and 6507/3-16 both have a planned entry date of June and will be drilled by the Deepsea Nordkapp, the NPD’s site shows. Aker BP ASA holds a 70 percent stake in wellbore 6507/2-6 and an 80 percent stake in wellbores 6507/3-15 and 6507/3-16, according to the NPD’s website. Equinor Energy AS and Lundin Energy Norway AS each hold a 40 percent stake in wellbore 30/3-11, with Source Energy AS holding the remaining 20 percent interest, the NPD highlights. The NPD describes itself as a governmental specialist directorate and administrative body. Established in 1972, it reports to the Norwegian Ministry of Petroleum and Energy. Its primary objective is to contribute to the greatest possible values from the oil and gas activities to the Norwegian society, through efficient and responsible resource management, the NPD’s website states. Last week, the organization announced that preliminary production figures for April 2022 showed an average daily production of 1.871 million barrels of oil, NGL and condensate. Oil production in April was 10.6 percent lower than the NPD’s forecast and 5.4 percent lower than the forecast so far this year, the organization highlighted in an NPD statement at the time.
"It's Sick": Polish PM Says Norway Should Share "Gigantic" Oil & Gas Profits --One by one European countries have cut energy ties with Russia, but often at a significant cost, and inter-EU rifts are beginning to show as the inevitable consequence of higher prices are felt. At the same time, Norway as western Europe’s largest oil and gas producer is reaping the profits windfall. Polish Prime Minister Mateusz Morawiecki has taken the unusual step of urging for Norway to share its "gigantic" profits made as a result of soaring oil and gas prices, posing during a Sunday Q&A at a political youth forum, "But should we be paying Norway gigantic money for gas — four or five times more than we paid a year ago?" He then asserted in the negative, "This is sick." "They should share these excess profits. It’s not normal, it’s unjust. This is an indirect preying on the war started by Putin," the Polish leader stressed. That's when he presented the controversial 'solution', saying: "Write to your young friends in Norway…They should share it, not necessarily with Poland [but] for Ukraine, for those most affected by this war. Isn’t that normal?"There will likely be further such possible similar scathing rebukes to come and sour grapes expressed at least behind close doors, given some 'frontline' European countries see themselves as first to make the greatest energy and economic sacrifices for the sake of supporting the West's economic war on Putin, while others on the periphery indirectly reap the benefits.
Poland terminates Yamal gas pipeline contract with Russia – Poland’s climate and environment minister has told PAP that the government has adopted a resolution terminating an agreement with Russia on the construction of a system of gas pipelines to carry gas through Polish territory. Anna Moskwa said the resolution was adopted on May 13 and concerned the withdrawal from an agreement on building a gas pipeline system and delivering Russian gas to Poland, which was signed in Warsaw on August 25, 1993. The agreement had been annexed multiple times and the last protocol amending it was signed by Polish and Russian officials on October 29, 2010. Moskwa explained that the agreement was an international contract so the appropriate notification will be made by Poland's Foreign Ministry in a message expected to be sent on Monday. "For years the government has consistently carried out a strategy of diversifying sources of gas deliveries to Poland and we have prepared ourselves to end the contract with Gazprom at the end of 2022 and not to buy more gas from Russia," Moskwa told PAP. "In 2019, (Polish gas company - PAP) PGNiG terminated and did not extend a contract on gas deliveries from Russia, the so-called Yamal contract. The propriety of the government's determination aimed at complete independence from Russian gas was confirmed by Russia's aggression against Ukraine. We have always known that Russia is not a reliable partner. The years 2006, 2009 and 2014 were marked by further unwarranted breaks in deliveries by Russia." Moskwa added that since 2010, the operator of the Yamal pipeline has been Polish firm Gaz-System. "As the years passed, the Polish operator's control over the pipeline was successively increased, in line with European law," Moskwa explained. "In 2022, a law was adopted which stipulates that the operator has the right to exclusively use the assets of this network's owner, essential to fulfilling the operator's obligations," she continued. "The operator will be responsible for issuing connection conditions and concluding and carrying out contracts for connection to the network. It will also set the tariffs for sending gas through the system and will submit them for approval to the president of the URE (Energy Regulatory Office - PAP). Provisions of international agreements, being contrary to European law, should not be binding." The climate minister went on to explain that the Yamal pipeline functions in a way fully compliant with European law, as a result of which so-called Physical Reverse Flow is possible, enabling gas to be sent to Poland from Germany. Moskwa also said the government's adoption of the resolution was a natural step following Russia's cessation of gas deliveries to Poland. "When Russia de facto breached the terms of the contract by cutting us off from deliveries, the Polish government considered it non-binding due to important conditions being broken," she said.
Oil spill in Baltic Sea hits Estonian islands - Baltic News Network - In the Baltic Sea, western Estonian islands have been hit by mazut pollution as authorities called on volunteers to help collect chunks of the oil product on beaches,Estonian public broadcaster ERR reports.The pollution was noticed on Vormsi and Hiiumaa islands last week. Police, Estonian Rescue Board and the Environmental Board have been involved in collecting the pollution, but Hiiumaa Municipality Mayor Hergo Tasuja called on all locals, friends of Hiiumaa, the Defence League and women’s voluntary defence organization Naiskodukaitse to come and help.«I hope more than a few people can find the time and will to help out,» Tasuja noted.The Hiiumaa Municipality Mayor noted that the pollution needs to be picked up in pieces. «Heavy fuel oil mostly occurs in what could be described as chunks. It is necessary to use protective equipment, such as gloves and suitable clothing and a bag for the mazut,» he said.The source of the pollution is currently unknown, ERR reports.
Russian Electricity Imports Halted To Another EU Nation - Lithuania has become the second European country within a month to have electricity supplies from Russia halted. Inter RAO, the only importer of electricity from Russia to Lithuania, confirmed the suspension of deliveries would begin on Sunday, according to Russian state-media Tass News Agency. Earlier this month, Inter RAO's Nordic branch stopped sending power to Finland after formally applying to join NATO. "According to the decision of the electricity exchange operator Nord Pool, trading in electricity generated in Russia, which was carried out by Inter RAO (through its subsidiary Inter RAO Lietuva), is terminated" starting from May 22, Lithuania's Energy Ministry said in a statement. It wasn't immediately clear why power trading between both countries was halted, though it comes as the Baltic nation (and NATO member) was the first European Union member to slash natural gas imports from Russia last month. Lithuanian Energy Minister Dainius Kreivys said Friday that cutting imports of Russian energy supplies, including oil, electricity, and natural gas, has allowed it to become "energy independent." While Lithuania says halting Russian energy imports is a move toward energy freedom, Inter RAO explained that the country could not pay for electricity. "Inter RAO has received notices from [exchange operator] Nord Pool about the suspension of trading by subsidiaries due to the risk of being unable to pay for Russian electricity," the company told TASS.Russian President Vladimir Putin recently declared that "unfriendly countries" countries must pay for energy products in rubles. He said if any country refuses to settle in Russian currency, "existing contracts will be suspended." Form Sunday, Lithuania will ramp up domestic electricity generation and increase imports from other EU countries. The latest figures show Lithuania, in 2021, imported 17% of all its domestic electricity demand from Russia. What's apparent is that Russian energy supplies are being reduced towards NATO countries or countries attempting to join NATO, along with ones who refuse to pay rubles.
EU Russian Oil Snub Appears to Be Gathering Momentum - Producers of Russian crude are finding it increasingly difficult to sell barrels in their traditional European market since President Vladimir Putin launched an assault on Ukraine. While the European Union has failed so far to impose a ban on oil imports from Russia, that hasn’t stopped the bloc’s refiners from shunning seaborne deliveries of crude from its key Baltic Sea export terminals. That shift seems to have gotten more pronounced since May 15, when tougher EU sanctions on the banking sector came into effect. The extent to which Europe avoids Russian oil is critical to the global market. The continent’s refineries have been forced to pile into the market for premium crudes instead, driving up prices. Cargoes shipped from Primorsk and Ust-Luga, Russia’s two main Baltic Sea oil ports, are being forced to take much longer voyages to refineries in Asia and to just a handful of buyers in the Mediterranean. Deliveries to the more usual destinations in the Netherlands and France have all but halted. The switch began in earnest in mid-March, after European buyers and shippers began to avoid Russian barrels. The tougher EU sanctions that came into effect on May 15 have made it even harder to ship barrels to European countries. “EU sanctions prohibit a whole number of things from May 15,” Mike Muller, head of Asia at Vitol Group, the world’s largest independent oil trader, said a week before the deadline on a podcast produced by Dubai-based Gulf Intelligence. The international banking system “just cannot make payments to Russian entities work,” he said. Before the invasion, northwest Europe took more than 70% of all Urals crude cargoes shipped from the Baltic. That slipped below 40% in the aftermath of the invasion. While it is tricky to make a definitive judgment on just a few days of shipments, flows to northern European countries have so far fallen further since May 15, to just 20% of the total. Standard Baltic Sea cargoes are 100,000 tons a piece. The abundance of shipments to the Mediterranean is misleading. Shipments to the region from Primorsk have by and large been ending up either in Turkey, or at a refinery owned by Russian oil company Lukoil PJSC on the Italian island of Sicily. Only three cargoes loaded at Primorsk since the invasion have been delivered elsewhere in the Mediterranean. Self-sanctions and other measures taken against Russia in the wake of the Ukraine invasion may be having only a modest impact on overall crude export volumes, but they are increasingly forcing exports from the country’s western ports on much longer, and more costly, voyages to other regions.
Germany wants Russian oil embargo with or without Hungary: economy minister - German Economy Minister Robert Habeck is disappointed that the EU has not yet agreed to an oil embargo targeting Russia, he said in a radio interview, adding that Germany would be willing to forego Hungary's participation to speed up the proposed ban. "If the Commission president says we're doing this as 26 without Hungary, then that is a path that I would always support," Habeck told the Deutschlandfunk broadcaster ahead of talks with political and industrial leaders at the World Economic Forum in Davos. "But I have not yet heard this from the EU," he added. Among the 27 EU member states, Hungary is the most vocal critic of the planned embargo on Russian oil.
Russia's Oil Export Loophole Runs Through Greece - Well, it appears that Russia won't be lacking new buyers of its deeply discounted Urals any time soon.Refinitiv Eikon via Reuters has just reported that Greece has emerged as a new hub for Russian oil via ship-to-ship (STS) loadings. According to the report, April shipments of Russian fuel oil with Greece as a destination clocked in at nearly a million tonnes, about double March levels, and are expected to reach new highs in May.Russia has been increasing fuel exports to Greece, with shipments set to jump to about 2.5 million barrels, according to data from oil analytics firm Vortexa.Trading Russian crude and oil products remain legal for now because EU members cannot seem to agree on the methodology of a complete ban.For all the tough talk about abandoning Russian energy commodities, Russia is still managing to sell a good amount of its oil and gas, thanks to the fact that some of the world's biggest commodity traders have little compunction against financing Putin's war machine. According to ship tracking and port data, Switzerland's Vitol, Glencore,andGunvor as well as Singapore's Trafigura, have all continued to lift large volumes of Russian crude and products, including diesel.
Russia cuts off gas exports to Finland in symbolic move -— Russia halted gas exports to neighboring Finland on Saturday, a highly symbolic move that came just days after the Nordic country announced it wanted to join NATO and marked a likely end to Finland's nearly 50 years of importing natural gas from Russia. The measure taken by the Russian energy giant Gazprom was in line with an earlier announcement following Helsinki’s refusal to pay for the gas in rubles as Russian President Vladimir Putin has demanded European countries do since Russia invaded Ukraine on Feb. 24. The Finnish state-owned gas company Gasum said that “natural gas supplies to Finland under Gasum’s supply contract have been cut off” by Russia on Saturday morning at 7 a.m. local time (0400 GMT). The announcement follows Moscow’s decision to cut off electricity exports to Finland earlier this month and an earlier decision by the Finnish state-controlled oil company Neste to replace imports of Russian crude oil with crude oil from elsewhere. After decades of energy cooperation that was seen beneficial for both Helsinki — particularly in the case of inexpensive Russian crude oil — and Moscow, Finland’s energy ties with Russia are now all but gone. Such a break was easier for Finland than it will be for other European Union nations. Natural gas accounts for just some 5% of total energy consumption in Finland, a country of 5.5 million. Almost all of that gas comes from Russia, and is used mainly by industrial and other companies with only an estimated 4,000 households relying on gas heating.Gasum said it would now supply natural gas to its customers from other sources through the undersea Balticconnector gas pipeline running between Finland and Estonia and connecting the Finnish and Baltic gas grids.
EU Leans Toward Delaying Pipeline Ban to Clinch Oil Deal - Some European Union leaders are leaning toward a deal that would ban seaborne oil while temporarily sparing deliveries through a key pipeline to give landlocked Hungary more time, as the bloc tries to reach an agreement on a new sanctions package targeting Russia for its war in Ukraine. EU governments are discussing a plan with the European Council and European Commission that would make shipments of oil through the giant Druzhba pipeline exempt for a limited period of time from a broader ban on oil deliveries to the bloc, according to people familiar the matter. The compromise would buy time for Hungarian Prime Minister Viktor Orban to iron out technical details of phasing out pipeline supplies to his country, said the people, who asked not to be identified because the talks are private. Hungary has for several weeks opposed a proposal that would give it until 2024 to give up Russian oil, almost two years longer than what would be required of most other member states. Since unanimity is required for EU sanctions decisions, Hungary has an effective block on the package, which also includes restrictions on Russian banks, consultancy services and buying real estate. Budapest indicated that at least 770 million euros ($826 million) would be needed to revamp its oil industry, including investments on infrastructure in Croatia, plus an unspecified amount of additional funds to adapt to potential oil price spikes. The commission, as part of a broader strategy to wean Europe off Russian energy, said it would commit infrastructure investment needs of up to 2 billion euros for member states, but even that has yet to convince Hungary. The EU and member states are expected to continue discussing the various options on Friday, according to the people. Other possibilities have included removing all oil-related measures from the package and continuing with efforts to reach an agreement with Hungary to keep the suite of actions intact, one of the people said. Politico reported earlier that some EU leaders were willing to exempt pipeline oil from the sanctions package. Even a compromise agreement is not certain, as some countries had previously opposed splitting seaborne and pipeline oil over a concern that their supplies would be hit disproportionately. Others worry about further weakening the package, which could lead to other member states seeking exemptions. A proposal to ban tankers from shipping Russian oil to third countries anywhere in the world was dropped earlier this month after Greece objected to that provision. The proposed actions on oil also include a ban on European companies from providing services, such as insurance, needed to transport oil to third countries around the world.
Europe accepts Putin’s demands on gas payments to avoid more shut-offs— European energy companies appear to have bent to Russian President Vladimir Putin’s demand that they purchase natural gas using an elaborate new payment system, a concession that avoids more gas shut-offs and also gives Putin a public relations victory while continuing to fund his war effort in Ukraine.The system, which involves the creation of two accounts at Gazprombank, enables Europe to say it is technically paying for natural gas in euros, while Russia can say it is receiving payment in rubles — a requirement Putin imposed on “unfriendly” nations.Putin’s insistence on rubles may be more about forcing European countries to scramble at his behest than about shoring up his country’s currency, some economists and energy experts suspect. European Union countries have been touchy about the notion they might violate their sanctions on Russia, and questions about the arrangement tested European unity, leading to weeks of chaos and contradictory guidance from Brussels. It also got countries talking about how much they still need Russian gas, even as they debate a Russian oil embargo.NATO Secretary General Jens Stoltenberg urged Western countries to not trade security for economic profit, referring to debates over the use of Russian gas. (Video: Reuters)In the short term, they are willing to jump through some hoops to avoid an energy crisis.But that also means sending money to Russia even as they condemn the Kremlin-launched war, sanction oligarchs and supply weapons to Ukraine.Russia had already used strict capital controls and a massive interest rate hike to stabilize the ruble. With Europe now signaling that it will use the payment system as bills come due this week, the currency is strengthening all the more.Under the new billing system, gas payments will continue to be invoiced and sent in euros. The noteworthy change is that Russia will then take the money from the European energy company’s euro account, convert the euros into rubles, transfer the money into a special ruble account also belonging to the energy company, and then take the money once and for all.“This is a transaction where everybody saves face,” said Alessandro Lanza, a professor at Rome’s LUISS University and a former economist at Eni, Italy’s major energy company. A broad European refusal to adjust its payment terms to Gazprom, the Russian state-owned energy giant, would have pushed prices even higher for consumers and potentially led to rationing measures across the bloc. Two European Union members — Poland and Bulgaria — had their supplies cut in late April by Gazprom after refusing to go along with the new system, in what Poland’s prime minister called a “direct attack.” Finland this week was subject to a similar cutoff, as retaliation for its NATO application. But most European countries have appeared to go a different route, moving away from rhetoric about refusing to be blackmailed and making peace with an arrangement based on the technicalities. “Timely payment for the received gas deliveries from Russia is ensured,” said a statement from OMV, the Austrian oil-and-gas company.
We have to accept in the West that we are going to be a bit poorer, Dutch leader says - Dutch Prime Minister Mark Rutte on Wednesday said there is a "limit to what a government can do" to help people amid surging inflation. Speaking at the World Economic Forum in Davos, Switzerland, Rutte told CNBC's Steve Sedgewick that the Dutch government would help people on lower and lower-middle class incomes with their rising energy bills. However, he added that "you cannot help everyone so ... we in the West will be a bit poorer because of the high inflation, the high energy costs." Inflation hit 9.6% in the Netherlands in April, according to the Dutch statistics body CBS. This was slightly lower than the 9.7% inflation recorded in March, though it remained historically high. The Dutch government in March announced support measures to help with the burden of rising prices. This included raising its one-off energy allowance to 800 euros ($852), for people with incomes around the country's social assistance benefit level. Rutte acknowledged that rising prices would present "societal pressures," which he said could be seen playing out in elections across Europe. But he added that "people generally understand that there is a limit to what a government can do, as long as they feel that it is done in an honest way that you've supported people who need it most." Rutte said that one of the priorities for his coalition government, which was installed in January and took nearly 10 months to form, was social mobility. He said the government wanted to deal with the country's "meritocracy trap" and that other factors, including education, could help people to become part of what he called the "Dutch dream." With regards to the European Central Bank's approach to tackling inflation in the eurozone, Rutte said there are "ramifications coming out of the energy crisis and out of the Ukraine crisis which are unavoidably also impacting on the macroeconomic figures that I cannot blame the central bankers for this."
Iran, Russia Sign Energy, Banking MoUs – Iranian and Russian officials have signed three memoranda of understanding (MoU) to broaden energy and banking relations. The MoUs were signed during a meeting in Tehran attended by Iran’s Petroleum Minister Javad Owji and Russian Deputy Prime Minister Alexander Novak. The two officials serve as co-chairs of the Iran-Russia economic and trade cooperation commission. Owji said in the meeting that Iran and Russia had agreed to use national currencies for settlement of trade and energy payments. Novak has also told Russia’s official TASS news agency that Moscow and Tehran had agreed to “move to the highest possible level of mutual settlements in national currencies”. Novak said Iran and Russia will continue talks to connect their electronic payment systems as well as their financial messaging systems. According to Owji, Iran and Russia had also signed MoUs on joint projects in the upstream and downstream of their oil and gas sectors. Under the deals, Iran will be able to export petrochemicals and technical and engineering services to Russia, including a home-grown technology on catalyst manufacturing. Reports suggest that under new agreements with Russia, Iran will be able to use the Russian territory to carry out swap deliveries of natural gas to other countries. Under a similar agreement, Iran currently supplies gas to Azerbaijan in return for gas delivered to its northeastern border from Turkmenistan. Iran’s Petroleum Minister says annual trade exchanges between the country and Russia will increase 10-fold from the current 4 billion dollars. Javad Oji said the current trade volume is 4 billion dollars per annum and as per agreements between Iran and Russia during President Ebrahim Raisi’s visit to Moscow last year, this figure will increase to 40 billion dollars. Oji added that the trade will take place in the fields of energy, roads and industries as well as medical and agricultural equipment. Russia and Iran are to use each other’s currencies and monetary treaties and link their credit systems to each other as well. The oil minister elsewhere said the Islamic Republic has used half of a 5-billion-dollar credit line granted by Russia for the implementation of projects in various fields. He added that the two sides have entered into good deals aimed at developing joint oil and gas fields and joint ventures, production of petrochemical products, developing g technical know-how, swapping gas, oil products and even crude oil. Oji said Iran will import 5 million tons of wheat or grains from Russia. He noted that an agreement was finalized for this purpose during a visit to Moscow by an Iranian delegation Iran and Russia also may introduce major barter arrangements to facilitate trade between the two countries, including a plan that could allow Iran to import steel from Russia in return for exports of car parts and gas turbines to the country. Iranian trade and industries minister Reza Fatemi Amin said on Thursday that Iran will use barter trade with Russia to ensure supplies of raw materials for use in its metals and mining sector. Speaking on the sidelines of Iran-Russia joint economic and trade cooperation commission in Tehran, Fatemi Amin said Iran will need to import raw metals like zinc, lead and alumina from Russia to respond to a growing domestic demand. He said, however, that Iran and Russia had agreed to introduce barter arrangements for certain goods and commodities, including for Russian steel. The minister said Iran will be able to export car parts and gas turbines to Russia in return for Russian steel imports. He said some Iranian companies have signed deals to supply or repair gas turbines in Russian power plants.
Turkey dreams of gas pipeline with Israel - Turkey is ready for energy cooperation with Israel after years of hostility, reviving a project to pipe Israeli gas to Europe as Ankara seeks to reduce its dependence on Russia. But the plan faces Israeli scepticism over past diplomatic tensions and seems a pipe dream in the eyes of experts due to its logistical complexity and cost. President Recep Tayyip Erdogan has voiced readiness to “cooperate (with Israel) in energy and energy security projects” with the prospect of shipping Israeli gas to Europe through Turkey as the conflict in Ukraine triggers supply fears. Israeli President Isaac Herzog made a landmark visit to Ankara in March to build relations with his Turkish counterpart when both leaders proclaimed a new era following more than a decade of diplomatic rupture. Turkish Foreign Minister Mevlut Cavusoglu will visit Israel on Wednesday. But according to some experts, there is little Israeli interest in energy cooperation with Turkey. “Energy relations are forged by cooperative, trusting states — certainly not how one would describe the current dynamics between the two countries,” Gabi Mitchell, policy fellow at the Mitvim Institute in Israel, told AFP. “There are those in Israel who argue that Erdogan is an untrustworthy party,” he said. The Turkish leader is known for his angry outbursts at the Jewish state, especially over its policy toward the Palestinians. In 2009, he stormed out of a Davos panel after a heated exchange with the then Israeli president, Shimon Peres. NATO member Turkey had been Israel’s key ally in the Muslim world until a 2010 crisis where 10 civilians died in an Israeli raid on a ship seeking to breach a blockade on the Gaza Strip. In 2016, the two countries agreed to start examining the feasibility of an undersea pipeline to pump Israeli gas to Turkish consumers and on to Europe. But no progress has been made amid the tension between the two sides, with Erdogan seeing himself as a champion of the Palestinian cause and a strong backer of Hamas. Yet Erdogan has been muted in his criticism in recent months and only voiced sadness over the Israeli-Palestinian violence at the flashpoint Al-Aqsa mosque compound. The pipeline project runs through controversial waters in the eastern Mediterranean, where Turkey and EU members Cyprus and Greece are often at odds. Mitchell said: “This isn’t something Israel is interested in pursuing as it would damage relations” with Cyprus, Greece and the European Union. “I’ve never thought the project feasible,” the Foreign Policy Research Institute’s Middle East Program director Aaron Stein told AFP. “The idea of the project comes back every time there is a thaw, but the logistics needed to take it from a dream to reality is complicated and expensive.”
Oil Production Halves At Kazakhstan's Giant Kashagan Field - Kazakhstan’s offshore oilfield, Kashagan, has cut its production by nearly half since early May due to maintenance, sources told Reuters on Tuesday. The maintenance began on May 19 and will continue for months—until August 3. Production will stop completely at the giant Kashagan field in June due to that same maintenance. Kazakhstan’s oil production quota assigned by the OPEC+ group for May sits at 1.638 million bpd. For June, it will be lifted to 1.655. But Kazakhstan has been producing more than its quota. Due to the maintenance, however, Kazakhstan’s actual production fell on May 22 to 1.66 million bpd—from around 1.85 million bpd earlier in May. CNPC, Eni, ExxonMobil, Inpex, KazMunayGaz, Shell, and Total, form the field’s consortium. The production loss comes at a time when all eyes are on OPEC and nonOPEC members of the group formed to keep the oil market in balance, known as OPEC+. Kazakhstan suffered another oil disruption in March and April of this year, when the pipeline that the country uses to export most of its oil was rendered mostly unusable due to damage caused by a storm. The Caspian Pipeline Consortium said that two of three tanker-loading facilities were not operable. It wasn’t back up and running at full capacity for a month, until the week of April 26. The CPC restoration was slow going because the parts needed for repair were disrupted by the sanctions on Russia. Kazakhstan sends more than two-thirds of its oil to Europe via the CPC pipeline. Kazakstan said earlier this week that it expects to produce between 90 million tonnes and 93 million tonnes of oil in 2023, up from 87.5 million tonnes per year this year—contingent upon the expansion of the Tengiz field, which could be delayed.
Indian Oil posts highest revenue by any Indian co, record profit in FY22 --Indian Oil Corporation (IOC), the nation's biggest oil firm, on Tuesday reported a 31.4 per cent drop in the fourth quarter net profit as record refining margins were wiped away by a margin squeeze in petrochemicals and losses on auto fuel sales. Standalone net profit of Rs 6,021.88 crore, or Rs 6.56 a share, in January-March, compared with Rs 8,781.30 crore, or Rs 9.56 per share, in the same period a year back, the company said in a stock exchange filing. Sequentially, the profit was higher than Rs 5,860.80 crore in the previous quarter. For the fiscal April 2021 to March 2022, IOC posted the highest-ever revenue by any Indian corporate at Rs 7.28 lakh crore or USD 96 billion (standalone). Consolidated revenue, after including earnings of subsidiaries like CPCL, came at Rs 7.36 lakh crore. Reliance Industries Ltd had earlier this month reported Rs 7.92 lakh crore revenue for the fiscal FY22. This was claimed to be the highest ever by an Indian company but it included GST, which the company collected on behalf of the government on sale of products and is obligated to transfer to the government. IOC revenues do not contain the GST element. "IOC reported the highest-ever revenue from operations by any corporate during FY22," said company director-finance Sandeep Gupta. For the full fiscal 2021-22 (April 2021 to March 2022), IOC reported the highest ever net profit of Rs 24,184.10 crore, up from Rs 21,836.04 crore last year. "This is the highest profit by IOC ever," he said. For FY22, Reliance had reported a net profit of Rs 60,705 crore. According to stock exchange filing, IOC made record margins on turning crude oil into fuel but they were wiped away by lower cracks on naphtha as well as losses on petrol, diesel and domestic LPG sales. IOC earned USD 18.54 on turning every barrel of crude oil into fuel during January-March as compared to USD 10.59 per barrel gross refining margin a year back. After excluding inventory gains arising from processing crude oil bought at lower prices, core GRM in the fourth quarter of 2021-22 fiscal came to USD 13.52 per barrel as opposed to USD 2.51 a year back. But these gains were done in by fuel marketing losses. IOC and other public sector oil companies held petrol and diesel prices for a record duration despite a surge in the cost of raw materials (crude oil) to a 14-year high. They started raising prices only on March 22. And even after the Rs 10 per litre increase in petrol and diesel prices between March 22 and April 6, they continue to make losses as international crude oil prices have stated above USD 100 per barrel.
56,000 Litres Of Diesel Leaks Out From Bpcl Pipeline At Kandla - Times of India --Close to 56,000 kilo litres of high-speed diesel leaked out near Deendayal Port Trust (DPT) following an alleged pilferage attempt.The leakage happened in the pipeline of state-run Bharat Petroleum Corporation Ltd (BPCL) pipeline that originates at the oil jetty at the Kandla port on Sunday early morning. It took about 12 hours of constant effort by DPT’s fire department team to plug the leakage and suck the spilt diesel, officials said. The spillage happened about two km from the port and officials denied that any diesel had flown into the sea.No official complaint was lodged with the police in this regard.According to sources, an attempt was made to pilfer the petroleum from the BPCL pipeline which is six km long connecting to the company’s terminal.“A puncture was made in the pipeline at around 6am on Sunday. However, a guard of BPCL found this leakage and immediately asked for help from port officials. The fire brigade team of DPT used a vacuum system that sucked the oil that was spilled on the ground and saved 56,000 kilo litres which is equivalent to five tankers,” a source in the know of the incident said.Asim Chakraborty, fire officer of DPT and two station officers Devendra Gujarand Edward had controlled this leakage along with BPCL officials.BPCL officials said: “We believe that there was an attempt of oil theft from the pipeline but there is no concrete evidence, so we have initiated an internal investigation of the incident. There is no oil spill in the sea and there is no environmental concern. We have to ascertain the wastage quantity but it could be around 1,000 litres.”
Japan's Eneos gets much higher fuel oil requests from utilities for April-Sept - : Japan's top oil refiner Eneos Holdings Inc has received higher requests from local utilities for fuel oil to be used in oil-fired power plants for April-September, but it will be able to meet only a part of the request, its chairman said. For the first half of this financial year that started on April 1, Eneos has received strong requests for fuel oil that is 112 per cent higher than a year earlier, but it can only offer limited supply that is 44 per cent higher than a year earlier, Eneos Chairman Tsutomu Sugimori told a news conference.
China demand must remain weak or we'll have big trouble in the oil markets, IEA chief says --The executive director of the International Energy Agency spoke of the current challenges facing global oil markets on Monday, highlighting the significant influence Chinese demand could have over the next few months. In an interview with CNBC at the World Economic Forum in Davos, Switzerland, Fatih Birol painted a stark picture of the current situation, describing oil prices as being "very high." "They are risky for economic recovery around the world, but especially in the importing countries in the emerging world," he said. "It's a big risk, together with the food prices being very, very high, and I think that it may well trigger us, the world … step by step to a recession." With geopolitical tensions elevated following Russia's invasion of Ukraine and continued concerns about supply casting a shadow over oil markets, the price of Brent crude currently sits at around $113 a barrel. Looking ahead, Birol went on to lay out some of the challenges markets may face in the coming months. "I very much hope that the increase coming from [the] United States, from Brazil, Canada this year, [will] be accompanied by the increase coming from the key producers in Middle East and elsewhere," he said. "Otherwise, we have only one hope that we don't have big trouble in the oil markets in summer, which is hoping … that the Chinese demand remains very weak." Chinese oil demand weakened in recent months as the country imposed a number of stringent lockdowns in a bid to curb the spread of Covid-19. If China went back to the usual oil consumption and oil demand trends, "then we will have a very difficult summer around the world," Birol said.
Russia’s imminent oil ban puts Nigeria’s low output on the spot - - Nigeria has, more than ever before, been exposed as a country that is unable to meet its OPEC’s quota of 1.772 million. It is unable not take advantage of the looming Russian oil ban to ramp up its revenue. Following the war between Russia and Ukraine, the European Commission recently proposed an oil embargo on Russian crude oil and refined products as part of the sixth sanction package being discussed by the European Union. The crude oil embargo would come into effect after six months and the refined product embargo would come into effect at the end of this year. While the European Union alone imports some 3.5 million barrels of crude oil and refined products from Russia, the country’s supply quota in OPEC’s cut deal is 7 million barrels per day. Since a supply gap would be created when Russia’s ban takes effect, Europe is currently putting pressure on OPEC to increase output to compensate for the loss. However, OPEC has refused to increase output due to its alliance with Russia in the ongoing Declaration of Corporation, DoC, which has been in place since 2014. It is rather warning that “no capacity in the world can replace Russia’s oil”. Nigeria, also being one of OPEC’s strongest members, is torn between working to increase exploration by all means in order to take advantage of Russia’s oil ban to earn more revenue, and remaining loyal to OPEC’s quota. Yet, Nigeria’s eagerness to latch on the opportunity about to be created by the ban may be a mere wish, especially since the country currently battles vandalism, oil theft, low investments, technical issues and other forms of menace, which have kept it from producing more than 1.2 million barrels per day despite an opportunity that allows it to churn out more. Although OPEC has increased output quota twice this year, Nigeria is unable to meet its target, as the country’s output hovers around 1.2 million barrels per day for the past two years. Europe and Asia are Nigeria’s largest buyers of crude oil. Between October and December 2021, Nigeria exported over N4 trillion worth of crude oil. In the fourth quarter of 2021, crude oil exported to Europe amounted to about N2 trillion, while exports to Asia followed with around N1.4 trillion. If Russia’s ban comes into effect, Nigeria could be one of those countries that Europe would turn to Nigeria for succour. However, experts say the country is unprepared. An oil and gas expert, Dr. Dauda Garuba, said Nigeria did not prepare for the coming opportunity posed by the Russian ban, and therefore, would not, in any way, take advantage of it. “Nigeria is not, in any way, positioned to take advantage of what’s happening now because it is already under-producing,” he said. According to him, the issue at hand was a global one, “and even OPEC has already expressed its inability to bridge the gap that will be created by the ban. Nigeria didn’t prepare for this because, since 2017, the country’s reserves have remained static at 37 billion barrels. Although the government expressed interest to increase it to 40 billion barrels, this is all word of mouth. Practically, the government is not doing anything about it. What we can do is just to sit and watch the turn of events. It’s an unfortunate situation but it’s the reality,” he said.
Clean up underway after Algoa Bay oil spill Clean-up operations are underway after an oil spill in Algoa Bay.According to the South African Maritime Safety Authority (SAMSA), the oil spill took place on Monday at around noon, during a ship-to-ship transfer of oil."SAMSA has initiated all relevant oil spill response teams as per the National Oil Spill Contingency Plan to assist with the containment and clean-up operation," said SAMSA spokesperson Tebogo Ramatjie."All the relevant pollution response units have been activated, and booms deployed to contain the oil around the vessels."Teams worked through the night to collect the oil and the two ships would remain attached to help with the containment of the oil, added Ramatjie.[On Monday], SAMSA officials boarded the vessels to inspect the extent of the spill and will be conducting an aerial survey this morning. More information will be released in due course. All relevant authorities including the Department of Forestry, Fisheries and Environment are supporting the response where possible.The Southern African Foundation for the Conservation of Coastal Birds (SANCCOB) is also ready to receive oiled birds.SANCCOB's preparedness and response manager Monica Stassen said the organisation was working closely with the relevant authorities."No oiled seabirds have been reported at this stage. However, as part of our internal preparedness strategy, our response teams in Cape Town and Gqeberha are on standby in the event that we need to mobilise people and equipment.
Oman increases oil output by 9.2% as exports jump -- Oman’s daily average production of oil continued to remain above one million barrels per day (bpd) mark during the first four months of 2022, up by more than nine per cent in comparison to the daily average output recorded in the same period of last year. Oil production during January – April period of this year increased to 1.04mn bpd compared with 952,800 bpd in the corresponding period of 2021, the data released by National Centre for Statistics and Information (NCSI) showed. The sultanate’s total oil production in the first four months of 2022 grew by 9.2 per cent to 124.8mn barrels compared to 114.3mn barrels in the same period of 2021. Of the total production, crude output jumped by 12.8 per cent year-on-year to 98.9mn barrels during January – April period from 87.6mn barrels in the same period of last year, while condensates output decreased 2.9 per cent to 25.9mn barrels during these four months. Oman’s total oil exports grew by 16.5 per cent during January – April period of 2022 to 108.8mn barrels compared with 93.3mn barrels exports recorded in the corresponding period of 2021. The sultanate’s total oil exports for the full year 2021 had inched up 0.7 per cent to 288.9mn barrels from 287mn barrels in 2020. Exports to China, the biggest buyer of Oman’s crude, accounted for around 78 per cent of the sultanate’s total oil exports during the first four months of this year, lower than its shares in the previous months. In absolute terms, however, Oman’s oil exports to China rose 6.8 per cent to 84.7mn barrels during January – April period of this year compared to 79.3mn barrels in the same period of the previous year.
Iran to revive gas pipeline project to Oman: IRNA : Iran's oil minister has agreed to revive a long-stalled project to lay an undersea pipeline to carry gas to Oman, the Iranian state news agency IRNA reported on Saturday. Iran sits on one of the world's largest gas reserves, which Oman has been eyeing as it hopes to feed energy-intensive industries and liquefied natural gas (LNG) export plants. IRNA said the agreement to revive the project was reached during a trip to Oman by Iranian Oil Minister Javad Owji ahead of an official visit to the Gulf Arab state by Iranian President Ebrahim Raisi on Monday. In 2013, the two countries signed a deal, valued at $60 billion over 25 years, for Iran to supply gas to Oman through an undersea pipeline. In 2016, the two countries renewed efforts to implement the project, and Iran said in 2017 that it had agreed with Oman to change the route of the planned pipeline to avoid waters controlled by the United Arab Emirates. The project was subsequently delayed by price disagreements and U.S. pressure on Oman to find other suppliers before the United States withdrew from a 2015 nuclear deal between world powers and Iran, and reimposed sanctions in 2018. Tehran and Washington have held indirect talks in Vienna over the past year to revive the nuclear agreement which led to the lifting of sanctions, but the negotiations have stalled.
Saudi Arabia Says It Has Done All It Can for the Oil Market -Saudi Arabia’s foreign minister said there’s nothing more the kingdom can do to tame oil markets, implying that the world’s biggest crude exporter has no plan to accelerate its gradual production increases. “As far as we are aware there is no shortfall of oil,” Prince Faisal bin Farhan said, speaking on a panel at the World Economic Forum in Davos, Switzerland. “We have to be sure that while we transition to a renewable future, there is enough energy in the market. The kingdom has done what it can.” Prince Faisal was responding to a question about what the US, which has put pressure on the Saudis and other members of OPEC+ to pump faster, could offer Riyadh in return for more crude. His comments echoed those of Saudi Energy Minister Abdulaziz bin Salman, who said in an interview this month that a refining crunch was to blame for soaring fuel prices. “It’s much more complex than just bringing barrels to the market,” Prince Faisal said. “Our assessment is that actually oil supply right now is relatively in balance.” Oil prices have climbed almost 70% in the past year to around $110 a barrel, first as demand rebounded from the coronavirus pandemic and then after Russia invaded Ukraine. The Organization of Petroleum Exporting Countries and its partners, a 23-nation group led by Riyadh and Russia, are raising daily crude production by around 430,000 barrels each month. Major importers including the US and Japan have called on the alliance, known as OPEC+, to increase output more quickly. The group’s struggling to reach even its current monthly target, with many members pumping below their quotas. Pump prices for gasoline and diesel have hit record highs in the US in recent weeks, pushing up inflation putting pressure on US President Joe Biden ahead of November’s mid-term elections. Saudi Arabia and neighboring United Arab Emirates have said that fuel prices have jumped so much because of a lack of investment in refineries across the world in the past several years. Pumping more crude would do little to help the market because refineries are largely at full capacity, they’ve argued.
Oil prices firm on weak dollar, tight supply as US driving season looms (Reuters) -Oil prices gained on Monday with U.S. fuel demand, tight supply and a slightly weaker U.S. dollar supporting the market, as Shanghai prepares to reopen after a two-month lockdown that fuelled worries about a sharp slowdown in growth. Brent crude futures rose $1.12 or 1% to $113.67 a barrel at 0912 GMT, while U.S. West Texas Intermediate (WTI) crude futures climbed 96 cents, or 0.9%, to $111.24 a barrel, adding to last week's small gains for both contracts. "Oil prices are supported as gasoline markets remain tight amid solid demand heading into the peak U.S. driving season," "Refineries are typically in ramp-up mode to feed U.S. drivers' unquenching thirst at the pump." The U.S. peak driving season traditionally begins on Memorial Day weekend at the end of May and ends on Labor Day in September. Analysts said despite fears about soaring fuel prices potentially denting demand, mobility data from TomTom and Google had climbed in recent weeks, showing more people were on the roads in places like the United States. A weaker U.S. dollar also sent oil higher on Monday, as that makes crude cheaper for buyers holding other currencies. Market gains have been capped however by concerns about China's efforts to crush COVID-19 with lockdowns, even with Shanghai due to reopen on June 1. Lockdowns in China, the world's top oil importer, have hammered industrial output and construction, prompting moves to prop up the economy, including a bigger-than-expected mortgage rate cut last Friday. The European Union's inability to reach a final agreement on banning Russian oil following its invasion of Ukraine, which Moscow calls a "special operation", has also stopped oil prices from climbing much higher.
Oil Settles Nearly Flat; Recession Worry Vies With Higher Demand Outlook (Reuters) -Oil prices were little changed on Monday, settling just slightly higher as worries over a possible recession vied with an outlook for higher fuel demand with the upcoming U.S. summer driving season and Shanghai's plans to reopen after a two-month coronavirus lockdown. U.S. West Texas Intermediate (WTI) crude settled up 1 cent, or 0.01%, at $110.29 a barrel, while Brent crude futures settled up 87 cents, or 0.7%, to at $113.42. Multiple threats to the global economy topped the worries of the world's well-heeled at the annual Davos economic summit, with some flagging the risk of a worldwide recession. International Monetary Fund Managing Director Kristalina Georgieva said she did not expect a recession for major economies but could not rule one out. Oil's losses were limited by expectations gasoline demand would remain high. The United States was set to enter its peak driving season beginning on Memorial Day weekend at the end of this week. Despite fears that soaring fuel prices could dent demand, analysts said mobility data from TomTom and Google had climbed in recent weeks, showing more drivers on the road in places such as the United States. To address a major supply crunch and blunt rising prices, the White House is weighing an emergency declaration to release diesel from a rarely used stockpile, an administration official said. The White House is considering tapping the Northeast Home Heating Oil Reserve, created in 2000 to help with supply issues and used only once in 2012 in the wake of Hurricane Sandy. The impact from such a release would be limited by the relatively small size of the reserve, which only contains 1 million barrels of diesel.
Crude oil futures tick lower as uncertainty lingers over EU ban on Russian oil --Crude oil futures were lower in mid-morning Asian trade May 24 as Hungary continues to hold up the EU's planned embargo on Russian oil, but some support came from a weaker US dollar and tighter US gasoline inventories. At 10:39 am Singapore time (0239 GMT), the ICE July Brent futures contract was down 62 cents/b (0.55%) from the previous close at $112.80/b, while the NYMEX July light sweet crude contract fell 61 cents/b (0.55%) to $109.68/b. The EU continues to stall its unilateral decision to ban Russian oil as Hungary has been holding out on it, requesting more time to find alternative sources. "The EU has offered to phase in the sanctions to 2024, while Hungary has indicated it needs at least Eur770 million to revamp its oil industry," Meanwhile, a weaker US dollar added support, though analysts said that crude would trade rangebound. The ICE US Dollar Index was trading at 102.325 at 10:39 pm Singapore time (0239 GMT) May 24, down 1.05% on the week. A weaker dollar results in dollar-denominated assets like oil futures becoming more attractive to investors holding foreign currencies. Some additional support came from US gasoline inventory draws, which likely extended into the week ended May 20, analysts surveyed by S&P Global Commodity Insights said May 23. Dubai crude swaps and intermonth spreads were lower in mid-morning trade in Asia May 24 from the previous close. The July Dubai swap was pegged at $102.84/b at 10 am Singapore time (0200 GMT), down $1.00/b (0.96%) from the May 23 Asian market close. The June-July Dubai swap intermonth spread was pegged at $3.21/b at 10 am Singapore time, down 7 cents/b over the same period, and the July-August intermonth spread was pegged at $2.52/b, down 13 cents/b. The July Brent-Dubai EFS was pegged at $9.71/b, down 12 cents/b.
Oil near flat after choppy trade; U.S. says export ban not ruled out --Oil prices were near flat on Tuesday after choppy trade as tight supply worries offset concerns over a possible recession and China's COVID-19 curbs. Brent crude rose 14 cents to settle at $113.56 a barrel. U.S. West Texas Intermediate (WTI) crude fell 52 cents to settle at $109.77 a barrel. Oil has surged this year with Brent hitting $139 in March, the highest since 2008, after Russia's invasion of Ukraine exacerbated supply concerns. Prices fell on Tuesday after U.S. Energy Secretary Jennifer Granholm said U.S. President Joe Biden had not ruled out using export restrictions to ease soaring domestic fuel prices. "Initially the assumption is that is going to reduce the prices for products in the United States," said Phil Flynn, an analyst at Price Futures Group. Also weighing on prices were worries about threats to the global economy, a main theme of the Davos meeting this week. Beijing is stepping up quarantine efforts to end its COVID-19 outbreak while Shanghai's lockdown is due to be lifted in a little more than a week. Prices earlier were supported as the European Union moved closer to agreeing to a ban on Russian oil imports. Such an embargo is likely to be agreed to "within days," Germany's economy minister said on Monday. Travel during the upcoming U.S. Memorial Day weekend is expected to be the busiest in two years as more drivers hit the road and shake off coronavirus lockdowns despite high pump prices.
Oil Climbs as Report Shows Tightening US Gasoline Stockpiles - Oil rose after a two-day decline as an industry report showed US gasoline stockpiles shrunk further ahead of the summer driving season and Saudi Arabia said there’s nothing more it can do to tame the market. West Texas Intermediate futures traded near $111 a barrel. The American Petroleum Institute reported that inventories of the motor fuel fell by 4.22 million barrels last week, according to people familiar with the figures. Stockpiles are at the lowest level for this time of the year since 2013. The market has been gripped by a volatile period of trading since late February following Russia’s invasion of Ukraine and a Covid-19 resurgence across China. Saudi Arabia’s foreign minister said that the kingdom has done what it could for the oil market, adding that there was no shortfall of crude. The war in Ukraine has upended trade flows and fanned inflation worldwide, with pump prices in the US repeatedly breaking records. Unseasonably high gasoline exports from America are also eroding domestic stockpiles ahead of the summer driving season that starts this weekend. US distillate inventories — a category that includes diesel — fell by 949,000 barrels last week, while crude stockpiles rose, the API said. Energy Information Administration data is scheduled to be released later Wednesday. Prices WTI for July delivery rose 1.5% to $111.44 a barrel on the New York Mercantile Exchange at 11:02 a.m. in London. Brent for July settlement gained 1.3% to $114.98 a barrel on the ICE Futures Europe exchange. Saudi Foreign Minister Prince Faisal bin Farhan said “oil supply right now is relatively in balance,” during a panel session at the World Economic Forum in Davos, Switzerland. “The kingdom has done what it can.” The US is leading a co-ordinated release of global crude reserves in an effort to tame rising energy prices. The Department of Energy made its latest announcement on the sale of strategic stockpiles, offering as much as 40.1 million barrels of predominantly sour crude.
WTI Holds Gains After Small Gasoline Draw, Distillates Build - Oil prices are higher overnight following API's report of a small crude build and large gasoline draw and the ongoing geo-economic push-pull. "The oil market remains caught between fears of recession and the consequences of the zero-Covid policy in China on the one hand, and tight supply, especially of oil products, coupled with the prospect of US gasoline demand picking up during the summer driving season on the other," .All eyes for now are on the official inventory data and any signs of demand destruction. API
- Crude +576k
- Cushing -731k
- Gasoline -4.223mm
- Distillates -949k
DOE
- Crude -1.02mm (-778k exp)
- Cushing -1.061mm
- Gasoline -482k
- Distillates +1.657mm - biggest build since Jan 2022
The official DOE data showed a significantly smaller gasoline draw than API and also showed a slightly bigger than expected crude draw. This was still the 8th straight week of gasoline draws (and 15th of last 16 weeks). Distillate inventories rose by the most since Jan 2022... Crude stocks at Cushing, Oklahoma, have resumed their slide, falling for a third straight week and dropping below 25 million barrels again.Many traders think critical levels at Cushing are likely around the 22 million-barrel level, so this will be closely watched heading into the summer months.Gasoline stocks remain dramatically below normal for this time of year...
Oil edges higher on tight supply, rising US refining activity – CNA -- Oil prices rose on Wednesday, buoyed by tight supplies and as U.S. refiners drove processing activity to their highest level since before the coronavirus pandemic started. Brent crude futures for July settled up 47 cents to $114.03 a barrel, while U.S. West Texas Intermediate (WTI) crude for July delivery ended up 56 cents to $110.33 a barrel. U.S. crude stockpiles fell 1 million barrels last week, the government said, with gasoline inventories also sliding modestly. Distillate stocks rose by 1.7 million barrels. Refiners picked up the pace of processing, boosting capacity use to 93.2 per cent, its highest since December 2019. Refiners have had to keep facilities running at full-tilt to deal with heavy demand, especially from overseas, as refined product exports rose to more than 6.2 million barrels per day last week. High exports and a reduction in refining capacity means gasoline stocks have dwindled in the United States. This upcoming weekend's U.S. Memorial Day travel is expected to be the busiest in two years, causing fuel demand to rise as more drivers hit the road and shake off coronavirus pandemic restrictions despite high fuel prices. "We're not seeing any elasticity in refined products demand,""People are still going to drive; people are still driving." Global crude supplies continue to tighten as buyers avoid oil from Russia, the world's second-largest exporter, after the invasion of Ukraine, which Moscow calls a "special military operation". The EU hopes to be able to agree on sanctions that would phase out Russian oil imports before the next meeting of the European Council, the council's president, Charles Michel, said on Wednesday. Even without a legal ban, self-sanctioning by numerous European companies has led to a record amount of Russia's Urals crude oil sitting in vessels at sea as it struggles to find buyers. On the flip side is the strict approach to the COVID-19 pandemic from China, the world's biggest oil importer. Beijing has imposed new curbs while Shanghai plans to keep most restrictions in place this month.
Oil Gains as US Crude Stocks Fall, Fed Signals Moderation - Oil futures nearest delivery settled Wednesday's session higher after Federal Reserve minutes for their meeting in early May revealed that while the central bank is sticking to its commitment to lift short-term interest rates, Fed officials are not planning more aggressive measures in tightening monetary policy. Major equity indices advanced Wednesday and the U.S. dollar index bounced off a one-month low to settle modesty higher at 102.077 following the afternoon release of minutes from the Federal Open Market Committee's May 3-4 meeting. While many market watchers have worried the central bank was set to pilot an aggressive monetary tightening path that could tip the U.S. economy into recession, minutes show Fed officials expect the U.S. economy to rebound from a first quarter contraction, as both business and household spending remained strong, and the job market remained robust. This led to a conclusion to hike the federal funds rate 50 basis points, announced May 4, and to begin reducing its holdings of Treasuries and mortgage-backed securities beginning June 1, while continuing to monitor economic developments. Midmorning Wednesday, Energy Information Administration reported a 1-million-barrel (bbl) draw in commercial crude oil inventory occurred during the week-ended May 20 that was more than expectations for a 600,000 bbl decline and countered a 567,000 bbl build reported late Tuesday by the American Petroleum Institute. Missed expectations coincide with the highest refinery run rate since the end of 2019 at 93.2%, up 1.4% from the previous week, with crude inputs topping 16 million bpd at 16.269 million barrels per day (bpd) for the first time since mid-August 2021. Crude inputs increased 334,000 bpd or 2.1% during the week reviewed, with the weekly input rate the third highest over the past 12 months. EIA also showed U.S. crude exports surged by 821,000 bpd or 23.3% last week to 4.341 million bpd, as crude oil released from the U.S. Strategic Petroleum Reserve continues to head to U.S. ports for export. EIA reported crude oil from the SPR was drawn down 6 million bbl last week to 532 million bbl. At settlement, July West Texas Intermediate futures gained $0.56 to $110.33 bbl, and ICE July Brent crude advanced $0.47 to $114.03 bbl. NYMEX June RBOB gained 2.07 cents to $3.8317 gallon, while front-month ULSD rallied 8.46 cents to $3.8664 gallon.
Oil prices jump 3% to 2-month high as EU seeks to ban Russian supply - (Reuters) -Oil prices rose about 3% to a two-month high on Thursday on signs of tight supply ahead of U.S. summer driving season, as the European Union (EU) wrangled with Hungary over plans to ban crude imports from Russia over its invasion of Ukraine. Brent futures for July delivery rose $3.21, or 2.8%, to $117.24 a barrel by 11:15 a.m. EDT (1515 GMT). U.S. West Texas Intermediate (WTI) crude rose $3.98, or 3.6%, to $114.31. Brent was up for the sixth straight day in a row and on track for its highest close since March 25. WTI was headed for its highest close since March 23. "The fundamental backdrop ... is getting price supportive as the driving season is approaching and will turn even more bullish once the EU sanctions on Russian oil sales are endorsed by all parties involved," European Council President Charles Michel said he was confident an agreement can be reached before the council's next meeting on May 30. Germany's economy minister Robert Habeck said the EU can strike a deal on an oil embargo within days or look to "other instruments." Hungary remains a stumbling block, as EU sanctions require unanimous support. Hungary is pressing for about 750 million euros ($800 million) to upgrade its refineries and expand a pipeline from Croatia. Even without a formal ban, much less Russian oil is available as buyers and trading houses have avoided suppliers from the country. Russia's oil production should decline to 480-500 million tonnes this year from 524 million tonnes in 2021, state-run news agency RIA reported, citing Deputy Prime Minister Alexander Novak. OPEC+ meets on June 2 and is expected to stick to an oil production deal agreed last year and raise July output targets by 432,000 barrels per day, six OPEC+ sources told Reuters, rebuffing Western calls for a faster increase to control prices. Other factors also are supporting oil prices. "Shanghai is preparing to reopen after a two-month lockdown, while the U.S. peak driving season begins with the Memorial Day weekend," "All of the variables are pointing to further gains in oil prices going ahead." The U.S. government confiscated an Iranian oil cargo held on a Russian-operated ship near Greece and will send the cargo to the United States aboard another vessel. Britain announced a 25% windfall tax on oil and gas producers' profits, alongside a 15 billion pound ($18.9 billion) package of support for households struggling to pay energy bills. Hungary also announced new windfall taxes worth 800 billion forints ($2.19 billion) on "extra profits" earned by banks, energy companies and other firms.
Crude Futures Climb to Two-Month High Russian Oil Embargo Chatter -- Oil futures settled Thursday's session sharply higher along with rallying equity markets amid signs that the European Union is closing in on a compromise with Hungary and Czech Republic to ban Russian oil imports at a time when global oil markets slip further into supply deficit. Oil futures spiked more than 3% on Thursday as investors fretted over a potential EU embargo on Russian crude oil imports after Germany reportedly offered a compromise to the Hungarian government on financing projects for alternative oil supplies. Hungary is pressing for about 750 million euros to upgrade its refineries and expand a pipeline from Croatia to enable it to switch away from Russian oil. Germany's Economy Minister Robert Habeck indicated the new deal could be reached within days or look to "other instruments" to limit imports of Russian oil if no agreement is reached. Last month, EU proposed a phased-out approach to banning Russian oil imports, with several states including Hungary, Slovakia, and Czech Republic having been granted a longer period to transition away from Russian oil. Even without a formal ban, there is less Russian oil available to the market as buyers and trading houses avoid dealing with crude and fuel suppliers from the country. Russia's oil production is expected to decline to between 480 and 500 million metric tons this year from 524 million metric tons in 2021, Deputy Prime Minister Alexander Novak said, state-run news agency RIA reported on Thursday. In financial markets, U.S. equity futures rallied on Thursday, while the dollar eased against its global currency peers, as investors weighed the impact of the Federal Reserve's inflation fight. Minutes from the Federal Open Market Committee's May 3-4 policy meeting published Wednesday afternoon show a broad consensus for 50 basis point rate hikes at meetings in June and July. Participants did note the possible need for faster and deeper moves with a more "restrictive policy stance" that sustained market bets for a 75-basis point hike at some point in the tightening cycle. Minutes further showed that Fed's officials expect the U.S. economy to rebound from a first quarter contraction, as both business and household spending remained strong, and the job market remained robust. Bureau of Economic Analysis this morning released its second estimate of first quarter U.S. gross domestic product, which contracted 1.5% on an annualized basis versus an expected 1.3% contraction. Further supporting oil prices, a bigger-than-expected drawdown from U.S. commercial crude oil inventories in the week-ended May 20 while exports soared. U.S. refiners picked up run rates, boosting overall capacity use to the highest level since before the pandemic at 93.2%, Energy Information Administration data shows. Refinery crude inputs topped 16 million bpd at 16.269 million barrels per day (bpd) for the first time since mid-August 2021. Crude inputs increased 334,000 bpd or 2.1% during the week reviewed, with the weekly input rate the third highest over the past 12 months. EIA also showed U.S. crude exports surged by 821,000 bpd or 23.3% last week to 4.341 million bpd, as crude oil released from the U.S. Strategic Petroleum Reserve continues to head to U.S. ports for export. EIA reported crude oil from the SPR was drawn down 6 million barrels (bbl) last week to 532 million bbl. At settlement, July West Texas Intermediate futures rallied $3.76 to $114.09 bbl, and ICE July Brent crude advanced $3.37 to $117.40 bbl. NYMEX June RBOB rose 4.57 cents to $3.8774 gallon, while front-month ULSD rallied 10.16 cents to $3.9680 gallon.
Oil edging higher supported by the prospect of a tight market --Oil prices edged higher on Friday supported by the prospect of a tight market due to rising gasoline consumption in the United States in summer, and also the possibility of an EU ban on Russian oil. Brent crude was up 58 cents, or 0.5%, at $117.98 at 1545 GMT, while U.S. West Texas Intermediate (WTI) crude rose 14 cents, or 0.1%, to $114.23 a barrel. "Oil prices have risen to the highest level since end of March, benefiting from renewed declines in U.S. oil inventories," U.S. gasoline stocks fell by 482,000 barrels last week to 219.7 million barrels, U.S. Energy Information Administration said on Wednesday. The start of summer driving season in the United States normally entails increased consumption. "The U.S. driving season and strong travel demand should help (prices). With supply growth lagging demand growth, the oil market is likely to stay undersupplied. Hence, we remain positive in our outlook for crude prices," Staunovo added. Both benchmark crude contracts were also supported as the European Commission continued to seek unanimous support of all 27 EU member states for its proposed new sanctions against Russia, with Hungary posing a stumbling block. European Union countries are negotiating a deal on Russian oil sanctions that would embargo shipment deliveries but delay sanctions on oil delivered by pipeline to win over Hungary and other landlocked member states, officials said. Hungary's resistance to oil sanctions – and the reluctance of a handful of other countries – has held up implementation of a sixth package of sanctions by the 27-member EU against Russia over its invasion of Ukraine. "We believe that a sharp contraction in Russian oil exports could trigger a full-blown 1980s style oil crisis and push Brent well past $150 per barrel," An agreement could be reached by envoys of European Union governments in Brussels on Sunday, in time for their leaders to endorse it at their May 30-31 summit, officials said. Meanwhile, Russian President Vladimir Putin told Austrian Chancellor Karl Nehammer on Friday that Moscow would meet its natural gas delivery commitments. "He also raised the subject (and said) that all deliveries would be completed in full," Nehammer said. Prices have gained about 50% so far this year. OPEC and allies, a group known as OPEC+, is set to stick to last year's oil output deal at its June 2 meeting and raise July production targets by 432,000 barrels per day, six OPEC+ sources told Reuters. OPEC+ members would thereby rebuff Western calls for a faster increase to lower surging prices.
OIL FUTURES: Brent, WTI crude benchmarks edge down; market stays strong | S&P Global Commodity Insights -Brent and WTI crude oil benchmarks edged down in midday Europe trading May 27 after gaining throughout the week toward two-month highs amid tight supply and rising demand. At 12:40 pm BST, ICE July Brent crude futures was down 48 cents/b on the day at $116.92/b while NYMEX July WTI futures fell 81 cents/b at $113.28/b. The UK introduced May 26 a windfall tax on energy companies -- a temporary measure effective until 2025 that is expected to raise GBP5 billion. The market remained divided over the newly announced measure. North sea oil and gas operators said this tax would make it less attractive for investors and lead to a production decrease. BP, which previously said the tax will not affect plans, is set to review its North Sea investments. The government is also looking at extending this tax to electricity generators in future. Across the Atlantic, increasing US refining activity drew down crude oil stockpiles. The upcoming Memorial Day weekend is when the summer driving season starts, and the market would watch whether high pump prices impact driving demand this year. The market also would be following the OPEC+ meeting June 2 to see if the producer alliance addresses Western calls to increase crude output. Additionally, an EU summit May 30-31 will have Russian oil ban as its main focus, with an embargo still to be agreed among all the bloc's members. An interim measure to impose an EU tariff on Russian oil, supported by the US, is under discussion. Commerzbank in a report raised its oil price forecast by $5 in each of the next three quarters. Crude prices are expected to rise less sharply due to the EU agreeing on a Russian oil embargo, according to Daniel Briesemann at Commerzbank. Although initially the ban would support prices but sufficient supply in the second half of the year would ease the pressure on the wider market, Commerzbank said.
Brent Nears $120 on Geopolitical Risk, Tighter Oil Supply - Heading into the Memorial Day holiday weekend, oil futures erased earlier losses to settle Friday's session with gains between 1% and 3.5% on reports suggesting Iran seized two oil tankers in the Strait of Hormuz -- a critical water passage for millions of oil barrels at a time when the global market is sliding further into a supply deficit amid disruption to Russian crude oil exports and limited capacity from OPEC+ nations to quickly ramp-up emergency crude production. A combination of bullish market fundamentals and geopolitical factors propelled the international crude benchmark towards $120 barrel (bbl) on Friday -- reaching the highest price point since March 23. Brent outpaced gains for the West Texas Intermediate that settled the session at $115.07 bbl, up $0.98. Brent settled the session $2.03 higher at $119.43 bbl. Media airwaves were hit with reports on Friday indicating Iran seized two Greek oil tankers in the Persian Gulf that were loaded with crude oil from Basra, Iraq. The action could be retaliation for Greek assistance in the U.S. seizure of crude oil from an Iranian-flagged tanker this week in the Mediterranean Sea. The Iranian tanker reportedly violated Washington's sanctions on trading crude oil originated from the Islamic Republic. The incident might not affect the global supply-demand balances but further highlights the challenges in reaching a comprehensive nuclear agreement with Iran that could see sanctions relief free up millions of barrels of oil. Talks in Vienna stalled last month with top U.S. diplomats suggesting the prospects of reviving the 2015 nuclear deal are "tenuous at best." On Wednesday, the United States said it was sanctioning an international oil smuggling and money laundering network that has facilitated the sale of oil for Iran's Islamic Revolutionary Guard Corps-Qods Force and the Iran-backed Hezbollah group. Iran's seizure on Friday was just the latest in a string of hijackings to roil the Strait of Hormuz -- a narrow waterway of the Persian Gulf through which a fifth of all traded oil passes. The incidents began after former U.S. President Donald Trump unilaterally withdrew the United States from Iran's nuclear deal with world powers. Against this backdrop, the European Union is set to announce a sixth sanction package against Russia for its illegal invasion of Ukraine that will likely include a ban on Russian oil imports. The measure, however, could spell out carveouts for oil imports through a Russian pipeline into the landlocked countries of Hungary and Czech Republic. The Hungarian government has remained a major opponent to banning Russian oil imports, comparing it to a "nuclear bomb" being dropped on the Hungarian economy. Media reports indicate Hungary is pressing for about 750 million euros to upgrade its refineries and expand a pipeline from Croatia to enable the switch. On the session, NYMEX RBOB June contract rose 13.84 cents or 3.5% to $4.0158 gallon, while front-month ULSD advanced 3.49 cents to $4.0029 gallon.
Oil Posts Fifth Straight Weekly Gain As Warnings Of Brent Hitting $150 Surface - --With abundant signs that the oil market is tight globally and a warning that Brent futures could soar to $150 per barrel, crude prices on Friday posted a fifth straight weekly gain.Prices also were said to have risen due to news that Iran’s paramilitary Revolutionary Guard had seized two Greek oil tankers in the Persian Gulf. West Texas Intermediate settled up 98 cents to $115.07 per barrel, while Brent settled up $2.03 at $119.43 per barrel; and the WTI December December spread touched a fresh record high on Friday, reflecting what Livia Gallarati, senior oil analyst at Energy Aspects, described as reflecting “the risk of tank bottoms at Cushing and the need to keep more barrels at home.” For the week, Brent rose 6 percent while WTI gained 1.5 percent. Meanwhile, the latest development in lockdown China on Friday was that people familiar with the matter claim the government may issue state refiners additional fuel-export quotas to refiners in order to clear high inventories that have swelled (to what consultancy JLC thinks could total 3.5 million tons).But China appears to be an anomaly in a world thirsty for more fossil fuel, and Bank of America analysts led by Francisco Blanch wrote in a report released Friday that “If supply does not recover, oil demand may have to ease,” adding that Brent could top $150. Indeed, although it has steadfastly refused to open the taps, the Organization of the Petroleum Exporting Countries (OPEC) on Friday were yet again urged – this time by the Group of Seven – to reconsider their stance in advance of a meeting next week. The Group also stated in a letter that it was a matter of “special urgency” for the European Union to decrease its dependency on Russian natural gas, and stressed the important role increased supplies of liquefied natural gas (LNG) could play “in order to mitigate potential supply disruptions of pipeline gas, especially to European markets.” But it’s doubtful whether the cartel will respond, especially in light of de facto leader Saudi Arabia stating earlier this month that it would stand by Russia as a participant of OPEC despite tightening western sanctions on Moscow. Also on Friday, pushback to the U.K.’s announcement of a 25 percent tax on oil and gas firms (which is expected to raise about $6.3 billion and will finance grants to the poorest households in the nation) took the form of BP stating it will review its investment plans, giving credence to critics who warned that the tax proposal doesn’t include enough incentives to preserve investment overall.
US Warns Turkey Over 'Putting Americans Forces At Risk' In New Syria Offensive - The US State Department has raised deep concerns about reports of a planned Turkish military offensive in northern Syria, saying they worry about the civilian population, and that more fighting would put the US troops there at risk. - The area of northern Syria being targeted includes a lot of Kurdish territory. The Turkish government is constantly at odds with the local YPG, and the US statement acknowledged "Turkey’s legitimate security concerns."State Department spokesperson Ned Price said Tuesday, "We are deeply concerned about reports and discussions of potential increased military activity in northern Syria, and in particular, its impact on the civilian population there." "We recognize Turkey's legitimate security concerns on Turkey's southern border, but any new offensive would further undermine regional stability and put at risk US forces and the coalition’s campaign against ISIS," he said. The YPG had been US allies in the fight against ISIS in Syria, and while the US isn’t hostile with them after that, they’ve largely not done anything about Turkish incursions in the area. Turkey’s President Erdogan says the new operations will create a 30 km deep safe zone along the Syrian zone, saying it was necessarily to combat the "terrorists." He spoke about it as if it's 'unfinished business' which started in 2019. "We will soon take new steps regarding the incomplete portions of the project we started on the 30km deep safe zone we established along our southern border," Erdogan said.
Iran Deal Has Sunk As Biden Keeps IRGC On Terror List; Tehran "Evaded" Nuclear Inspectors For Years - At this point it looks like hopes for a restored Iran nuclear deal have effectively sunk, given that Politico is reporting President Biden has decided against taking the Islamic Revolutionary Guard Corps (IRGC) off the designated terrorist list. "President Joe Biden has finalized his decision to keep Iran’s Islamic Revolutionary Guard Corps on a terrorist blacklist, according to a senior Western official, further complicating international efforts to restore the 2015 Iran nuclear deal," Politico writes Wednesday.The Israeli government has already been informed: "Another person familiar with the matter said Biden conveyed his decision during an April 24 phone call with Israeli Prime Minister Naftali Bennett, adding that the decision was conveyed as absolutely final and that the window for Iranian concessions had closed," according to the report.But removing the designation was of course a key stipulation of the Iranians in Vienna. Tehran has blamed Washington for the indefinite pause in talks, waiting for this final hurdle towards a restored JPOA to be removed. At the same time Biden's lead envoy on the Iran nuclear talks, Rob Malley, told a Senate panel Wednesday the status of the talks are now "tenuous at best".The Biden White House is fully aware that this action is likely to torpedo a nuclear deal which has long been in the negotiating process for most of last year. The irony is that the IRGC being a designated terror group has little to no impact on its financing or operations, according to the consensus of many reports over prior months.For example, geopolitical analyst Daniel Larison writes that the US actually has nothing to gain in terms of degrading the Islamic Republic's military capabilities with such a move:Biden’s decision to leave the entire IRGC on the list is the wrong one, but more than that it is a remarkably stupid decision because the designation has served no purpose. This is not a case of weighing between different priorities and considering the tradeoffs between them. If the US gained something from keeping the IRGC on the list, there might at least be something to debate, but the administration itself doesn’t believe that the designation matters. As Peter Beinart pointed out earlier this month, “By its own admission, the Biden administration is risking the Iran nuclear deal for nothing.” Biden is jeopardizing what should be a major policy success for the sake of preserving an empty gesture of hostility.He further calls the question of the IRGC's designation "likely the last chance that Biden had to salvage the nuclear deal" - which had been a year in the making, taking up much of the first part of Biden's administration. Thus it appears the hawks have won out, but it also comes as a major investigative report in The Wall Street Journal alleges that Iran has been covering up its nuclear weapons aspirations for years by allegedly falsifying a document trail with an eye toward covering up past work on a hidden nuclear weapons program... "Iran secured access to secret United Nations atomic agency reports almost two decades ago and circulated the documents among top officials who prepared cover stories and falsified a record to conceal suspected past work on nuclear weapons, according to Middle East intelligence officials and documents reviewed by The Wall Street Journal."
Unprecedented: US Air Force To Join Israelis In Mock Attack On Iran -As if an intense proxy war with nuclear powerhouse Russia isn’t bringing enough heat, the Biden White House has now given the greenlight for unprecedented U.S. participation in an Israeli drill simulating a massive attack on Iran’s nuclear facilities. According to The Times of Israel, “The U.S. Air Force will serve as a complementary force, with refueling planes drilling with Israeli fighter jets as they simulate entering Iranian territory and carrying out repeated strikes.” The mock attack on Iran will happen this month, as part of a broader Israeli military exercise called “Chariots of Fire.” The US Air Force is joining apartheid Israel to do military exercises simulating entering Iranian territory and launching airstrikes.The US and Israeli militaries are blatantly threatening Iran with war.https://t.co/j8upZD96FR In September, Israeli Defense Forces Chief of Staff Aviv Kohavi said the IDF had “greatly accelerated” preparations for an attack on Iran’s nuclear facilities. “Dozens of Israeli air force fighter jets are expected to take part in the exercise and fly hundreds of miles from Israel to the west above the Mediterranean in a way that simulates a flight route to Iran,” reports Axios. General Michael Kurilla, commander of U.S. Central Command, landed in Israel on Tuesday to observe the exercises.Though there’s no indication of an imminent real-world strike, U.S. participation in the drill is an implicit endorsement of an Israeli-initiated war of aggression—and a signal that the United States might not only agree to it, but participate. If so, it wouldn’t be the first time USAF tankers facilitated aggression in the region: Before a halt was announced in 2018, American tankers controversially aided Saudi strikes in Yemen. In addition to directly killing civilians—including 131 men, women and children gathered at a 2015 wedding celebration—the Saudi campaign has plunged Yemen into one of the world’s largest humanitarian crises. To the Quincy Institute’s Trita Parsi, the hawkish participation in the Israeli drill is a “puzzling” extension of a pattern, as Biden perpetuates an aggressive Trump-like posture toward Iran that Biden previously condemned: “Biden heavily criticized former President Donald Trump’s decision to withdraw from the nuclear deal and opposed his ‘maximum pressure’ strategy seeking to force Iran to capitulate by crushing its economy through unprecedented sanctions. Yet, 18 months into his presidency, Biden has yet to shift away from Trump’s sanctions policy.”The saber-rattling move by Biden comes as talks to revive the 2015 Iran nuclear deal are stalled. A key sticking point: Iran wants the Iranian Revolutionary Guard Corps removed from the list of designated—and sanctioned—terrorist organizations.
US Seizes Russia-Flagged Tanker Full Of Iranian Oil Near Greece --Fresh off of the US targeting a series of companies involved in an Iran-linked oil smuggling network, the US has now seized an oil tanker near Greece, taking the Iranian oil within to be sent to the US.The oil was on a Russian-operated ship, which had been singled out for US targeting in February. It was then called the Pegas. The company renamed the ship the Lana and was Russian flagged. Greece had impounded the Pegas and its Russian crew last month over the invasion of Ukraine, but ultimately released it.Neither the US nor Russia is commenting. Greece says the US informed them the oil was Iranian, and that the US hired a different ship to take the oil to America. Iran has summoned the Greek charges d’affaires and called the incident a "clear example of piracy."The US accused the tanker of loading 700,000 Bbls of oil from Iran in August 2021. The tanker mostly sent oil to China.Earlier in the week The Maritime Executive detailed that "The story of a shadowy Russian oil tanker took a new turn... as the U.S. Department of Justice seized the oil aboard the vessel and according to reports is in the process of transferring the oil to the United States on a chartered tanker.""The vessel was detained nearly seven weeks ago in Greece when authorities thought it was covered by the European Union sanctions on Russian assets, but later held for mechanical deficiencies while watchdog groups announced that it was actually smuggling sanctioned Iranian oil."The report continued: "The Aframax tanker arrived off Greece early in April with reports of a possible mechanical failure and indications that they were looking for assistance to make repairs to continue their voyage. When she anchored south of the Greek island of Evia the 115,520 dwt tanker was being identified as the Russian-flagged Pegas." And the initial "assumption at the time was that it was laden with a Russian crude oil cargo," according to the report.The seizure of the tanker, and oil, comes amid tensions on the ongoing nuclear talks. Iran believes, and not unfairly, that the oil was just stolen from them, and the US position, while yet to be public, is that the oil is now theirs.It’s not a great precedent, but generally Iran can’t do much about it, and the US is keen to have the oil.
Iran Seizes 2 Greek Tankers In Gulf As Retaliation For US Taking Oil - Iranian military operatives have seized two Greek oil tankers in the Persian Gulf on Friday. The Associated Press initially reported that the US Navy is "looking into" the reports. The tankers were boarded in international waters in the gulf, with the AP in follow-up saying that IRGC operatives now have control of the ships.The IRGC has announced it is in possession of the seized vessels, with Bloomberg reporting, "The Guard's announcement comes as tensions remain high between Iran and the West over stalled negotiations regarding its rapidly advancing nuclear program." And more according to the AP:The Guard issued a statement on its website, accusing the unnamed tankers of unspecified violations.Greece’s Foreign Ministry said Iranian authorities “violently took over” the two ships in an “act of piracy.”Industry monitor Lloyd's List maritime intelligence describes that its "sources confirmed that in two seemingly similar operations the suezmaxes Delta Poseidon (IMO: 9468671) and Prudent Warrior (IMO: 9753545), both under Greek flag, were approached by Iranian helicopters on Friday afternoon.""They were both boarded by military personnel and later escorted by naval vessels from international traffic lanes to Iranian waters a few miles off the coast," the report continues. #BREAKING A second Greek-flagged oil tanker, Prudent Warrior, has also been seized by the Iranian military, according to @LloydsList. The seizure of the two vessels comes in response to Greece's move to seize an Iranian tanker and letting the US confiscate its crude oil. pic.twitter.com/R2THAMo1d4Earlier in the day Tehran threated "punitive measures" after the United States seized a Russian flagged tanker transporting Iranian oil off Greece.Iranian sources stated following the tanker seizure in the Mediterranean, "The Islamic Republic has decided to take punitive measures against Greece after it seized an Iranian tanker and let the US government confiscate its crude oil, Nour News, affiliated to Iran's Supreme National Security Council, reports."
Shots Fired During Tanker Loading -Protesters at Port of Marsa al Hariga, Libya, fired shots in a failed attempt to halt operations and stop the loading of one million barrels of crude to a berthed tanker, Dryad Global’s latest Maritime Security Threat Advisory (MSTA) has revealed. “Protesters were prevented from entering the port. The tanker was not hit in the crossfire and no injuries were reported,” the MSTA, which was published on May 23, noted. “Zueitina and Brega oil port both remain under force majeure despite claims that blockades would be lifted. Within wider Libya, Prime Minister Bashagha forcibly entered Tripoli on the 18th May 22, with his militia in a failed attempt to take control of the capital,” the MSTA added. “Bashagha’s forces miscalculated the scale of military opposition and were forced to retreat hours after following clashes with militias loyal to Prime Minister Dbeibah,” MSTA continued. On May 8, Libya’s National Oil Corporation (NOC) revealed that the chairman of the board of directors of NOC had received the adviser of the secretary-general of the United Nations on Libya, Stephanie Williams, and her accompanying delegation at the NOC headquarters. During a meeting between the parties, the situations of the oil sector and the “difficulties and challenges it faced during the past period” were discussed, NOC highlighted. “In this regard, the advisor Williams emphasized the full support of the UN mission for the oil sector and its stability, so that the NOC can achieve its plans and objectives to increase production rates, in the interests of the Libyan people, she also stressed the technical and non-political role of the NOC, aimed at supporting the Libyan economy despite all the challenges it faced,” NOC said in a statement posted on its website. According to BP’s latest statistical review of world energy, Libya’s oil production dropped from 1.3 million barrels per day in 2019 to 390,000 barrels of oil per day in 2020. The country’s natural gas production also dipped from 14.5 billion cubic meters in 2019 to 13.3 billion cubic meters in 2020, the review highlighted.
Bankrupt Sri Lanka Takes Russian Crude As Fuel Crisis Depletes Stocks, Mulls Loan From China - A foreign exchange shortage has resulted in the worst financial crisis Sri Lanka has ever endured, with shortages of everything from food to crude. Fuel supplies are down to just days, food has run out at supermarkets, and social-economic chaos has unfolded across the island country in South Asia.However, there's short-term hope, and somehow the bankrupt country found enough money to pay for a shipment of Russian crude. Bloomberg said Ceylon Petroleum Corp., the country's only refinery, is set to take shipment of Russian grade Siberian Light on May 28. It will be the first time the refinery has processed crude to produce high-value products such as gasoline and diesel in two months. Fuel supplies on the island nation are so low that the government has told citizens to stop waiting in long lines at filling stations. The government has run out of foreign reserves to pay for essential imports.Last week, newly-appointed prime minister, Ranil Wickremesinghe, said his government needed $75 million for critical imports such as crude. "At the moment, we only have petrol stocks for a single day. The next couple of months will be the most difficult ones of our lives."We must prepare ourselves to make some sacrifices and face the challenges of this period," Wickremesinghe said. Sapugaskanda Refinery will commence operations for first time since March 20th with a Crude Oil cargo unloading tomo. The refinery will start producing Fuel Oil in 6 days. Stocks on 26 May - Ship-tracking data compiled by Bloomberg shows the Nissos Delos tanker carrying Siberian Light has moved towards a mooring point where it can begin discharge operations. The vessel loaded up on March 29 at Novorossiysk, a port city on the Black Sea in southern Russia. Bloomberg wasn't exactly sure how Sri Lanka paid for the Russian crude, considering it owes more than $50bn in overseas debt. It's seeking a $4bn loan from the IMF and has asked China to renegotiate at least $3.5bn in debt.China recently offered a few hundred million dollars in lending to help alleviate a shortage of essential goods."It's quite substantial. It would be a few hundred million dollars," Ranil Wickremesinghe, who was appointed Sri Lanka's prime minister this month, told the Financial Times in an interview. "It'll still help us get hold of essential consumer items, fertilizers. . . the ministry of finance is having discussions on some of the items."
China is shuttling small ships to tankers at sea to transport cheap Russian oil amid sanctions, report says -China is sending small vessels out to huge tankers at sea in an effort to transport cheap Russian oil to Asia, Bloomberg reported.Following the sanctions imposed over Russia's invasion of Ukraine, more shipowners and insurers are refusing to handle Russian oil, leading to Chinese buyers using risky ship-to-ship transfers to keep crude coming into the country, shipbrokers told Bloomberg.Shipbrokers told the outlet that at least one Chinese buyer is shuttling smaller vessels between the port of Kozmino in Russia and the coastline of Yeosu in South Korea. From there, the oil is transferred onto a massive oil tanker, which then makes its way to China, they said.Bloomberg cited an example from ship-tracking data which showed two of China's Cosco Shipping Holdings smaller tankers, Yang Li Hu and Yang Mei Hu, stocking up with Russian oil ESPO in mid-May in Kozmino port and sailing to Yeosu to transfer the cargo onto the Yuan Qiu Hu tanker, which then traveled to China three-quarters full of crude.It's unusual for Russian ESPO oil to be transported in this way. Normally, it's ferried directly to the buyer in China via small tankers, Bloomberg reported.The availability of oil tankers has dropped because of the financial sanctions against Russia, per Bloomberg. The ship-to-ship transfers allow the oil producers and buyers to deploy their fleet of vessels in a more effective manner, the shipbrokers told Bloomberg. However, it's not being done to avoid sanctions, they reportedly added.Shipbrokers told Bloomberg that the process takes longer for the oil to reach the buyer and costs more. The news comes as China has ramped up purchases of discounted Russian oil, which the West has shunned, Reuters reported. Data from Vortexa Analytics, which was cited by Reuters, said that China is set to import 1.1 million barrels per day of Russian oil brought by sea.Last month, we reported that India had doubled down on Russian oil after the west slapped a chain of sanctions on Moscow. India has never been a big buyer of Russian crude despite needing to import 80% of its needs. In a typical year, India imports just 2-5% of its crude from Russia, roughly the same proportion as the United States did before it announced a 100% ban on Russian energy commodities. Indeed, India imported only 12 million barrels of Russian crude in 2021, with the majority of its oil coming from Iraq, Saudi Arabia, the United Arab Emirates, and Nigeria.But reports emerged of a "significant uptick" in Russian oil deliveries bound for India. Matt Smith, the lead oil analyst at Kpler, told CNBC that since the beginning of March, five cargoes of Russian oil, or about 6 million barrels, have been loaded and are bound for India. In other words, India imported half as much crude from Russia in one month as it did in an entire year.China, on the other hand, had seen crude imports from Russia in the first two months of the year actually declined 9.1% to 1.57 mb/d largely due to agovernment crackdown on private Chinese refiners known as teapots. But with years of experience shipping banned Iranian oil using various cloaking methods, China is expected to remain one of Russia's biggest oil customers.
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