Strategic Petroleum Reserve at a new 39½ year low after largest draw from US oil supplies since Labor Day 2016, lowest May gasoline supplies since 2014; distillates supplies at 12 month low
US oil prices finished higher for a second week following 4 straight weekly declines, on a big jump in gasoline demand and on the largest drawdown of commercial oil supplies since Thanksgiving…after rising 2.1% to $71.55 per barrel last week on hopes for a debt ceiling deal as Canadian oil supplies were reduced by widespread wildfires, the contract price for the benchmark US light sweet crude for June delivery fell 1% in Asian trading early Monday as continuing uncertainty about the safety of US public debt led oil traders to avoid risks, but rebounded Monday morning in New York after US House Speaker McCarthy said debt ceiling negotiations had been productive, and settled 44 cents higher at $71.99 a barrel as traders balanced concerns over supply disruptions in Canada and Iraq against the potential risk of U.S. defaulting on its debt, as trading in the June oil contract expired…with Tuesday's oil quotes referencing the contract price of the benchmark US crude for July delivery, which had risen 36 cents to $72.05 a barrel on Monday, oil traded higher in a narrow price range Tuesday, as the market waited for news on the debt ceiling negotiations, then rallied after the S&P Purchasing Managers' Index indicated that US business activity had expanded at the sharpest pace in over two years, and settled 86 cents higher at $72.91 a barrel as Saudi Arabia’s Energy Minister warned traders against betting on continued declines in oil prices...oil prices then extended those gains to about 2% in post-settlement trade Tuesday evening after figures from the American Petroleum Institute showed large draws from crude and gasoline supplies, leaving gasoline inventories at the lowest pre-Memorial Day levels since 2014...oil prices rose in Asian trade early on Wednesday, following estimates of a large U.S. inventory draw and the warning from the Saudi energy minister for short sellers, then extended those gains in New York trading after the EIA reported the largest crude draw since November and a big gasoline draw on rising demand, and continued to trend higher to settle with a gain of $1.43 at a three week high of $74.34 a barrel as demand for gasoline jumped to the second highest weekly rate so far this year…..however, oil prices fell in early Asian trading on Thursday after uncertainty that the United States would avoid a debt default weighed against the prospect of further OPEC+ production cuts, and then retraced nearly all of their gains of the first three days of this week in the New York session after Russia’s Deputy Prime Minister Alexander Novak said he did not believe additional OPEC+ cuts were likely, and settled down $2.51 at $71.83 a barrel on the day as a stronger US dollar fueled by positive US economic data and expectations for a Fed rate hike next month added to the downward momentum...but oil prices edged higher on a weaker dollar early Friday, as debt ceiling negotiations seemed to be entering the home stretch and fears of a US government shutdown subsided, and settled 84 cents higher $72.67 a barrel after the number of oil-targeted rigs in the United States decreased for the fourth consecutive week to the lowest level in a year….for the week, oil prices ended 1.6% higher, while the July oil contract, which had closed the prior week at $71.69 a barrel, finished 1.4% higher...
Meanwhile, US natural gas prices finished lower for just the second time in seven weeks, as weather driven demand was nowhere to be found…..after rising 14.1% to $2.592 per mmBTU last week on prospects for a production pullback and tighter supplies, the contract price of US natural gas for June delivery opened 10 cents lower on Monday as temperature forecasts for early June remained unsupportive, and tumbled throughout the morning before stabilizing and settling 18.5 cents lower at $2.400 per mmBTU, as traders took profits after the contract price had soared last week ..natural gas prices opened lower Tuesday and traded within three cents of $2.360 for the majority of the morning, as cooling demand remained elusive and production levels held strong, and settled the session 7.9 cents lower at $2.321 per mmBTU as exports from Canada increased with U.S. well output on track to hit a monthly record high...however, natural gas prices opened 5 cents higher and stabilized at that level for the duration of the session, as traders overlooked bearish weather forecasts and instead focused on the declining rig count, as prices settled 7.7 cents higher at $2.398 per mmBTU on warmer forecasts that should boost demand more than was previously expected through early June...natural gas prices opened a few cents lower on Thursday, but briefly jumped to an intraday high of $2.410 per mmBTU right after 10:30AM, after the natural gas storage report landed on the bullish side of expectations, but resumed its slide shortly thereafter to settle 9.1 cents lower at $2.307 per mmBTU on record U.S. output, rising Canadian exports and forecasts for milder U.S. weather and lower demand over the next two weeks than was previously expected....natural gas prices opened lower and tumbled throughout the Friday session, as listless demand and strong production levels kept prices in check, and settled down 12.6 cents at a three week low of $2.181 per mmBTU, on record U.S. output, rising Canadian exports and forecasts for milder U.S. weather and lower demand next week, as global gas prices collapsed and trading in the June contract expired, thus ending 15.9% lower for the week...
The EIA's natural gas storage report for the week ending May 19th indicated that the amount of working natural gas held in underground storage in the US increased by 96 billion cubic feet to 2,336 billion cubic feet by the end of the week, which left our natural gas supplies 529 billion cubic feet, or 29.3% above the 1,807 billion cubic feet that were in storage on May 19th of last year, and 340 billion cubic feet, or 17.0% more than the five-year average of 1,996 billion cubic feet of natural gas that were in storage as of the 19th of May over the most recent five years…note, however, that the oft quoted national average obscures the fact that gas supplies are still 37.4% below normal for this date in the West, while 32.2% and 27.6% above normal in both the East and Midwest regions of the country at the same time....the 96 billion cubic foot injection into US natural gas working storage for the cited week was less than the 100 billion cubic feet addition to supplies that was expected by industry analysts surveyed by Reuters, but it was more than the 87 billion cubic feet that were added to natural gas storage during the corresponding week of 2022, while it matched the average 96 billion cubic feet addition to natural gas storage that has been typical for the same Spring week over the past 5 years…
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 19th showed that after a big drop in our oil imports, and an even bigger drop in new oil supplies that the EIA could not account for, we needed to pull oil out of our stored commercial crude supplies for the 6th time in 9 weeks, and for the 15th time in the past 39 weeks, even as oil continued to be released from our Strategic Petroleum Reserve .. Our imports of crude oil fel by an average of 1,010,000 barrels per day to 5,850,000 barrels per day, after rising by an average of 1,306,000 barrels per day the prior week, while our exports of crude oil rose by an average of 232,000 barrels per day to 4,549,000 barrels per day, which combined meant that the net of our trade in oil worked out to a net import average of 1,301,000 barrels of oil per day during the week ending May 19th, 1,249,000 fewer barrels per day than the net of our imports minus our exports during the prior week. Over the same period, production of crude from US wells was reportedly 100,000 barrels per day higher at 12,300,000 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 averaged a total of 13,601,000 barrels per day during the May 19th reporting week…
Meanwhile, US oil refineries reported they were processing an average of 16,069,000 barrels of crude per day during the week ending May 19th, an average of 79,000 more barrels per day than the amount of oil that our refineries processed during the prior week, while over the same period the EIA’s surveys indicated that an average of 2,013,000 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, the crude oil figures provided by the EIA for the week ending May 19th appear to indicate that our total working supply of oil from net imports, from oilfield production and from storage was 456,000 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 [+456,000] 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 was an omission or error of that magnitude in the week’s oil supply & demand figures that we have just transcribed….Moreover, since last week’s “unaccounted for crude oil” was at (+1,614,000) barrels per day, that means there was a 1,158,000 barrel per day difference between this week's oil balance sheet error and the EIA's crude oil balance sheet error from a week ago, and hence the changes to supply and demand from that week to this one that are indicated by this week's report are complete nonsense...However, since most oil traders treat these weekly EIA reports as accurate, and since these weekly figures therefore 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 reliable 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)….(NB: there is also a more recent twitter thread from an EIA administrator addressing these errors, and what they hope to do about it)
This week's 2,013,000 barrel per day decrease in our overall crude oil inventories was the largest since September 2nd, 2016, beating the often cited November 25, 2022 draw by 16,000 barrels per day....it came as an average of 1,779,000 barrels per day were being pulled out of our commercially available stocks of crude oil, while 233,000 barrels per day of oil were being pulled out of our Strategic Petroleum Reserve at the same time, the seventh straight draw on the SPR this year, wherein government owned oil is being sold into the domestic markets as part of an earlier budget balancing withdrawal mandated by congress, and as a result the 357,954,000 barrels of oil that still remain in our Strategic Petroleum Reserve is now the lowest since September 16th, 1983, or at a new 39 1/2 year low, as repeated tapping of our emergency supplies for non-emergencies or to pay for other programs had already drained those supplies considerably over the past dozen years, even before the Biden administration's big SPR releases of last year. However, those Biden administration releases amounted to about 42% of what was left in the SPR when they took office, and that left us with what is now less than a 19 day supply of oil at the current consumption rate.
Further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to an average of 6,166,000 barrels per day last week, which was 3.9% less than the 6,414,000 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 100,000 barrels per day higher at 12,300,000 barrels per day because the EIA's rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day higher at 11,900,000 barrels per day, while Alaska’s oil production was 34,000 barrels per day higher at 438,000 barrels per day, but still added the same 400,000 barrels per day to the rounded national total as it did last week...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 6.1% below that of our pre-pandemic production peak, but was 26.8% above the pandemic low of 9,700,000 barrels per day that US oil production had fallen to during the third week of February of 2021.
US oil refineries were operating at 91.7% of their capacity while using those 16,069,000 barrels of crude per day during the week ending May 19th, down from their 92.0% utilization rate during the prior week, but still a rate that's on the high side of normal for mid May... The 16,069,000 barrels per day of oil that were refined this week were 1.2% less than the 16,269,000 barrels of crude that were being processed daily during week ending May 20th of 2022, and 3.1% less than the 16,578,000 barrels that were being refined during the prepandemic week ending May 17th, 2019, when our refinery utilization rate was at 89.9%, close to normal for this time of year...
With the increase in the amount of oil being refined this week, the gasoline output from our refineries was much higher, increasing by 833,000 barrels per day to 10,315,000 barrels per day during the week ending May 19th, after our gasoline output had decreased by 341,000 barrels per day during the prior week. This week’s gasoline production was 9.5% more than the 9,423,000 barrels of gasoline that were being produced daily over the same week of last year, and 4.4% more than the gasoline production of 9,883,000 barrels per day during the prepandemic week ending May 17th, 2019. Meanwhile, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 19,000 barrels per day to 4,856,000 barrels per day, after our distillates output had increased by 250,000 barrels per day during the prior week. Even with those increases, our distillates output was 5.3% less than the 5,147,000 barrels of distillates that were being produced daily during the week ending May 20th of 2022, and 6.4% less than the 5,206,000 barrels of distillates that were being produced daily during the week ending May 17th, 2019...
Even with this week's big increase in our gasoline production, our supplies of gasoline in storage at the end of the week fell for the twelfth time in fourteen weeks, and for the 43rd time in 65 weeks, decreasing by 2,053,000 barrels to 216,277,000 barrels during the week ending May 19th, after our gasoline inventories had decreased by 1,381,000 barrels during the prior week. Our gasoline supplies fell by more this week despite the much higher production because the amount of gasoline supplied to US users rose by 529,000 barrels per day to 9,437,000 barrels per day, and because our imports of gasoline fell by 81,000 barrels per day to 763,000 barrels per day, while our exports of gasoline fell by 219,000 barrels per day to 711,000 barrels per day. After twelve gasoline inventory decreases over the past ourteen weeks, our gasoline supplies were 1.6% below last May 20th's gasoline inventories of 219,707,000 barrels, and about 8% below the five year average of our gasoline supplies for this time of the year…
Meanwhile, even with this week's increase in our distillates production, our supplies of distillate fuels decreased for the ninth time in eleven weeks, falling by 561,000 barrels to a twelve month low of 106,233,000 barrels during the week ending May 19th, after our distillates supplies had increased by 80,000 barrels during the prior week. Our distillates supplies fell this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, increased by 462,000 barrels per day to 4,198,000 barrels per day, even as our exports of distillates fell by 322,000 barrels per day to 914,000 barrels per day, and as our imports of distillates rose by 18,000 barrels per day to 156,000 barrels per day.... After 65 inventory withdrawals over the past one hundred and four weeks, our distillate supplies at the end of the week were 1.2% below the 106,921,000 barrels of distillates that we had in storage on May 20th of 2022, and are now about 18% below the five year average of our distillates inventories for this time of the year...
Finally, after the big drops in our oil imports and of our new oil supplies that the EIA could not account for, our commercial supplies of crude oil in storage fell for the 7th time in 22 weeks and for the 24th time in the past year, decreasing by 12,456,000 barrels over the week, from 467,624,000 barrels on May 12th to 455,168,000 barrels on May 19th, after our commercial crude supplies had increased by 5,040,000 barrels over the prior week. Even after several large oil supply increases in the weeks following the Christmas refinery freeze offs, our commercial crude oil inventories now 3% below the most recent five-year average of commercial oil supplies for this time of year, but are around 27% above the average of our available crude oil stocks as of the third weekend of May over the 5 years at the beginning of the past decade, with the apparent disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first topped 400 million barrels. After our commercial crude oil inventories had jumped to record highs during the Covid lockdowns of the Spring of 2020, then jumped again after February 2021's winter storm Uri froze off US Gulf Coast refining, but then fell in the wake of the Ukraine war, our commercial crude supplies as of this May 19th were 8.4% more than the 419,801,000 barrels of oil we had in commercial storage on May 20th of 2022, but were 6.0% less than the 484,349,000 barrels of oil that we still had in storage in the wake of winter storm Uri on May 21st of 2021, and now 14.8% less than the 534,422,000 barrels of oil we had in commercial storage after the pandemic effects took hold on May 22nd of 2020…
This Week's Rig Count
The number of drilling rigs active in the US decreased for the eleventh time in the past fifteen weeks during the week ending May 26th, and is now 10.3% below the prepandemic rig count, despite increasing ninety-nine times over the past 138 weeks... Baker Hughes reported that the total count of rotary rigs drilling in the US fell by 9 rigs to 711 rigs over the past week, which was 16 fewer rigs than the 727 rigs that were in use as of the May 27th report of 2022, and was also 1,218 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 fell by 5 to 570 oil rigs during the past week, after the number of rigs targeting oil had fallen by eleven rigs during the prior week, and there are now four fewer oil rigs active now than were running a year ago, as they amount to just 35.4% of the shale era high of 1609 rigs that were drilling for oil on October 10th, 2014, and while they are now down 16.5% from the prepandemic oil rig count of 683….at the same time, the number of drilling rigs targeting natural gas bearing formations was down by four to 137 natural gas rigs, which was also down by 14 natural gas rigs from the 151 natural gas rigs that were drilling during the same week a year ago, and as they now amount to just 8.5% of the modern high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008….
In addition to those rigs specifically targeting oil and natural gas, Baker Hughes shows that four rigs they've labeled as "miscellaneous" are drilling this week: those include a directional rig drilling to between 10,000 and 15,000 feet into a formation in Beaver county Utah, a directional rig drilling to between 5,000 and 10,000 feet on the big island of Hawaii, a directional rig drilling to between 5,000 and 10,000 feet into a formation in Lake county California that Baker Hughes doesn't track, and a directional rig drilling to between 5,000 and 10,000 feet into a formation in Pershing county Nevada, also into a formation unnamed by Baker Hughes. While we haven't seen any details on any of those wells, in the past we've identified various "miscellaneous" rig activity as being for exploration rather than production, for carbon dioxide storage, and for utility scale geothermal projects....Four such rigs operating at once is unusual; a year ago, there were two such "miscellaneous" rigs running...
The offshore rig count in the Gulf of Mexico was down by one to 20 rigs this week, with 18 of those rigs drilling for oil in Louisiana's offshore waters, and two drilling for oil in Texas waters; the rig that had been drilling for natural gas offshore from Vermilion, Louisiana, was shut down this week ....that Gulf rig count is still up by 5 from the 15 Gulf rigs running a year ago, when all 15 Gulf rigs were drilling for oil offshore from Louisiana…however, since there was a rig drilling offshore from Alaska during the same week a year ago, the national total of 20 rigs drilling offshore is up by 4 rigs from the national offshore count of 16 a year ago..
In addition to rigs running offshore, there are still two inland water based deployed this week...one is a vertical rig drilling for natural gas to between 10,000 and 15,000 feet on a lake in Jefferson Parish Louisiana, while the other is a directional rig drilling for oil at a depth of between 10,000 and 15,000 feet through an inland body of water in Lafourche Parish, Louisiana...a year ago, there was just one such rig drilling on inland waters...
The count of active horizontal drilling rigs was down by eight to 642 horizontal rigs this week, which was 24 fewer rigs than the 666 horizontal rigs that were in use in the US on May 27th of last year, and only 46.7% of the record 1,374 horizontal rigs that were drilling on November 21st of 2014…at the same time, the vertical rig count was down by 2 at 19 vertical rigs this week, and those were down by 8 from the 25 vertical rigs that were operating during the same week a year ago....on the other hand, the directional rig count was up by 1 to 52 directional rigs this week, and those were up by 16 from the 36 directional rigs that were in use on May 27th of 2022…
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 26th, the second column shows the change in the number of working rigs between last week’s count (May 19th) and this week’s (May 26th) count, the third column shows last week’s May 19th 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 27th of May, 2022...
the five rig drop in Oklahoma includes the two oil rigs that were pulled out of the Cana Woodford and three rigs which had been drilling in a basin o basins that Baker Hughes doesn't cover, most likely in some part of the Anadarko; the two rigs pulled out of Utah had been deployed in the Uintah basin, where all of Utah's drilling is taking place, but also a basin not tracked by Baker Hughes....in Louisiana, two natural gas rigs were pulled out of the Haynesville shale in the northwest quadrant of that state, and another natural gas that had been drilling offshore from Vermilion was also removed, while a land rig targeting a basin not tracked by Baker Hughes was added in the southern part of the state...there was also an oil rig removed from the DJ Niobrara chalk in Colorado, and an oil rig pulled off of Alaska's North Slope..meanwhile, the rig added in Wyoming was likely set up in one of the three active basins in that state not tracked by Baker Hughes..
next, in checking the Rigs by State file at Baker Hughes for the changes in the Texas Permian, we find that there was a rig pulled out of Texas Oil District 8, which overlies the core Permian Delaware, but that a rig was added in Texas Oil District 7C, which includes the counties over the southern Permian Midland, and that four more rigs were added in Texas Oil District 8A, which includes the counties over the northern Permian Midland, while two rigs were pulled out of Texas Oil District 7C, which includes a county or two over the far eastern Permian Midland.....since those changes seem to indicate that the Texas Permian rig count was up by 2 while the national Permian count was up by 1, we can thus conclude the that rig pulled out of New Mexico had been drilling in the far western Permian Delaware in the southeast corner of that state...elsewhere in Texas, we find that a rig was added in Texas Oil District 1, which accounts for a natural gas rig addition in the Eagle Ford shale, that a rig was pulled out of Texas Oil District 5, which accounts for the oil rig removed from the Barnett shale, and that another rig was pulled out of Texas Oil District 6, which accounts for the third natural gas rig pulled from the Haynesville shale, while a rig was added in Texas Oil District 10, accounting for the oil rig addition in the Granite Wash basin..
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Appalachia's Ascent Turning to Liquids, Market Diversification Amid Low Natural Gas Prices -- Ascent Resources Utica Holdings LLC is pivoting to the liquids-rich window of its acreage and marketing most of its natural gas outside the Appalachian Basin to offset price volatility, according to management. CEO Jeff Fisher hosted a conference call earlier this month to discuss first quarter results of Oklahoma City-based Ascent, a Utica Shale pure-play and the largest privately held gas producer by volume in the Lower 48, according to a new ranking by Enverus. Ascent produced 2.04 Bcf/d of gas during the first quarter, up from 1.82 Bcf/d in the same period last year. Ascent turned 12 wells in-line, seven of which “were located in the liquids rich window of the play, adding meaningful oil volumes to our production mix and helping provide a buffer against depressed prices...
12 New Shale Well Permits Issued for PA-OH-WV May 15-21 | Marcellus Drilling News - New shale permits issued for May 15-21 in the Marcellus/Utica took a substantial hit. There were only 12 new permits issued, down by more than half from the 26 new permits issued the previous week. Last week’s tally included 10 new permits for Pennsylvania, 2 new permits for Ohio, and no new permits in West Virginia. Last week the top receiver of new permits was a tie–Coterra Energy and Chesapeake Energy each received 3 new permits, with Coterra’s permits issued in Susquehanna County, PA, and Chessy’s permits in Bradford County, PA. Range Resources and Olympus Energy each received 2 new permits, and Southwestern Energy and EOG Resources each received 1 new permit. Allegheny County, Bradford County, Chesapeake Energy, Coterra Energy (Cabot O&G), Energy Companies, EOG Resources, Guernsey County, Harrison County, Lycoming County, Olympus/Huntley & Huntley, Range Resources Corp, Southwestern Energy, Susquehanna County
New Permits to Drill in M-U, Other Gas Plays, Saw Big Drop in April | Marcellus Drilling News -- According to analysts at Evercore ISI, natural gas (and oil) permits to drill new shale wells dropped dramatically in April from previous months in both the Marcellus/Utica and other shale plays. Evercore tracks new drilling permits and says Marcellus permits fell by 25%. The M-U’s main competitor, the Haynesville, saw an even bigger 40% drop. We did a bit of analysis ourselves, and while new permits did drop quite a bit in April, that doesn’t tell the whole story. Please Login to view this content.
Mountain Valley Pipeline given the green light for construction on national forest land - WCBC Radio podcast --The Mountain Valley Pipeline, a long-delayed natural gas pipeline that will run through Virginia and West Virginia, was given the green light for construction on national forest land last week. The 303-mile pipeline, which will transport natural gas from Ohio and Pennsylvania, still has a number of federal hurdles to clear before it can be completed, but the approval from the US Forest Service is an important step in the process. West Virginia US Senator Joe Manchin specifically mentioned the need to approve the Mountain Valley project when discussing permitting reform last week…. Jill Gottesman, the Southern Appalachian Landscape Director for The Wilderness Society, says the ruling will mean environmental activists will have no choice but to take the matter to court
Green Radicals Protesting MVP Rush Stage at POLITICO Event | Marcellus Drilling News -- The Democrat Party has created a monster. They have brainwashed a considerable portion of their members to believe in the imminent toasting of Mom Earth by burning fossil fuels. Well into the second generation of mind-numbed robots, the issue is that many of these people are miseducated and have no sense of basic God-given (not man-given) human rights–like free speech. Example: The dunderheaded Jennifer Granholm, Secretary of Energy, was giving a talk at a Democrat POLITICO energy summit in the D.C. swamp yesterday. She was asked a question about Mountain Valley Pipeline. She simply mouthed support for it (and it was lukewarm support at best), and a couple of unhinged wackos rushed toward the stage screaming. Did they wet their pants and howl at the moon too?
Joyce, Miller, Reschenthaler unveil Mountain Valley Pipeline Completion Act -- Republicans on May 18 proposed legislation that would expedite the completion of the under-construction Mountain Valley Pipeline, a natural gas system that spans approximately 303 miles from northwestern West Virginia to southern Virginia.“Ensuring that the natural resources beneath the feet of my constituents in Pennsylvania are able to reach Americans across the country is critical to returning our nation to energy dominance,” said bill sponsor U.S. Rep. John Joyce (R-PA). “Congress must clear the way to complete the Mountain Valley Pipeline and allow natural gas to flow to those who need it in the southern United States.”Rep. Joyce introduced the Mountain Valley Pipeline Completion Act, H.R. 3500, alongside five original cosponsors, including U.S. Reps. Carol Miller (R-WV), Guy Reschenthaler (R-PA), and Mike Kelly (R-PA). “The construction of the 303-mile Mountain Valley Pipeline equates to more good-paying jobs, lower energy costs, and increased energy independence for Pennsylvania and the entire region,” Rep. Reschenthaler said. “I thank Rep. John Joyce for his diligence in ensuring this project — which is already 94 percent completed — can be seen through to the finish line for our shared states’ benefit.“It’s past time to cut the liberal red tape and complete the Mountain Valley Pipeline once and for all,” added Rep. Reschenthaler.Specifically, H.R. 3500 would declare that the timely completion of construction and operation of the Mountain Valley Pipeline is required in the national interest and will serve demonstrated natural gas demand in the Northeast, Mid-Atlantic, and Southeast regions, according to the text of the bill.H.R. 3500 also would help increase the reliability of natural gas supplies and the availability of natural gas at reasonable prices, allow natural gas producers to access additional markets for their product, and reduce carbon emissions and facilitate the energy transition. Under H.R. 3500, Congress also would ratify and approve all authorizations, permits, verifications, extensions, biological opinions, incidental take statements, and any other approvals or orders issued pursuant to federal law related to the Mountain Valley Pipeline in an effort to hasten its completion.Within months of the completion, the pipeline would provide up to two billion cubic feet of natural gas per day from the Marcellus and Utica shale formations to consumers in North Carolina and South Carolina, according to a bill summary provided by the lawmakers.Additionally, the pipeline will create new job opportunities and sustain roughly 5,800 jobs and $5.9 billion in economic activity in West Virginia and Virginia, while also bringing revenue to West Virginia.“What’s one thing Presidents Obama, Trump, and Biden agree on? They all wanted the Mountain Valley Pipeline completed,” said Rep. Miller, the lead original cosponsor of H.R. 3500. “The Mountain Valley Pipeline Completion Act will finish this necessary project that has been held up by the radical, left-wing courts and will implement a needed check on our judicial system.”The American people are depending on domestic energy production so energy prices will finally go down,” the congresswoman added. “I look forward to the Mountain Valley Pipeline Completion Act passing into law shortly to unleash American energy,” she said.
Thousands Of Gallons Of Oil Spill From Storage Tank In Kanawha County - An oil spill Sunday in Kanawha County does not appear to pose any threat to waterways or wildlife, but officials continue to monitor the situation. An open valve on a storage tank spilled potentially several thousand gallons of crude oil, the Kanawha County Commission said Monday. After an odor was reported in the upper Blue Creek area, officials from Kanawha County Emergency Management, the West Virginia Department of Environmental Protection and the Cedar Grove Volunteer Fire Department were able to close the valve. Booms and heavy machinery have been moved in to clean up the spill. Officials have been checking Blue Creek down to the point where it meets the Elk River. They report no evidence of a sheen or any harm to aquatic life. The county’s spring trout release was supposed to take place at Clendenin and Blue Creek on Monday, but will now take place on Tuesday as a result of the spill.
Zydeco pipeline to restart 26 May: US Coast Guard - Shell's 250,000 b/d Zydeco crude pipeline is expected to restart on 26 May, after being shut for nearly one month following an oil spill, according to the US Coast Guard.The pipeline — which is a key conduit for sweet crude shipped from the Houston area to Louisiana — has been offline since 25 April after an oil spill was detected by a regular air patrol.Excavation of the underwater section of pipe that leaked is nearly complete, the Coast Guard toldArgus. Next a barrier will be placed around the section of pipe so it can be exposed and repaired.Light Louisiana Sweet (LLS) prices for June delivery have risen compared with Nymex-quality WTI by roughly $1/bl since the pipeline shut, to a $2.70/bl premium yesterday.LLS is comprised in part by crude from the Houston area, which is blended to create LLS. The Zydeco outage would reduce the amount of supply delivered to Louisiana.
US natgas falls 5% on rising output, forecasts for less demand next week - U.S. natural gas futures dropped about 5% on Monday on rising output and forecasts for less demand next week than previously expected. The price decline came even though U.S. power generators have burned more gas in recent weeks to produce electricity due to low wind power, and as gas exports from Canada remain lower than normal due to wildfires in Alberta. The amount of U.S. power generated by wind last week dropped to just 8% of the total versus a recent high of 17% during the week ended April 21, according to federal energy data. That means there will be less of the fuel available to go into storage. The amount of power generated by gas hit 42% last week, up from a recent low of 37% during the windy week ended April 21. Front-month gas futures NGc1 for June delivery on the New York Mercantile Exchange fell 13.6 cents, or 5.3%, to $2.449 per million British thermal units (mmBtu) at 9:36 a.m. EDT (1336 GMT). But after gas prices rose 14% last week, speculators switched their futures and options positions on the NYMEX and Intercontinental Exchanges to net long from net short for the first time since mid-April, according to the U.S. Commodity Futures Trading Commission’s Commitments of Traders report. Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 101.5 billion cubic feet per day (bcfd) so far in May, which would top April’s monthly record of 101.4 bcfd. Over the past few weeks, the average amount of gas flowing from Canada to the U.S. averaged just 7.0 bcfd as wildfires in Alberta and other western provinces caused some producers to shut oil and gas output, according to Refinitiv. That is well below the 8.4-bcfd average amount of gas Canada exported to the U.S. since the start of the year and 2022’s average of 9.0 bcfd. About 8% of the gas consumed in, or exported from the U.S., comes from Canada. Meteorologists projected the weather in the Lower 48 states would remain mostly near normal through June 6. Refinitiv forecast U.S. gas demand, including exports, would slide from 90.2 bcfd this week to 89.5 bcfd next week. The forecast for this week was higher than Refinitiv’s outlook on Friday, while its forecast for next week was lower.
US natgas falls 7% on rising output, forecasts for less demand next week (Reuters) - U.S. natural gas futures dropped about 7% on Monday as traders took profits after the contract soared about 14% last week and on rising output and forecasts for less demand next week than previously expected. The price decline came even though U.S. power generators have burned more gas in recent weeks to produce electricity due to low wind power, and as gas exports from Canada remain lower than normal due to wildfires in Alberta. The amount of U.S. power generated by wind last week dropped to just 8% of the total versus a recent high of 17% during the week ended April 21, according to federal energy data. That means there will be less of the fuel available to go into storage. The amount of power generated by gas hit 42% last week, up from a recent low of 37% during the windy week ended April 21. Front-month gas futures for June delivery on the New York Mercantile Exchange fell 18.5 cents, or 7.2%, to settle at $2.400 per million British thermal units (mmBtu). It was the contract's biggest daily price drop since falling about 8% in late April. The drop also pushed the front-month out of technically overbought territory for the first time in three days. In the spot market, mild weather and ample hydropower in the U.S. West pressured next-day gas prices for Monday at the PG&E Citygate in Northern California to $3.52 per mmBtu, the lowest since March 2021. Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 101.5 billion cubic feet per day (bcfd) so far in May, which would top April's monthly record of 101.4 bcfd. Over the past few weeks, the average amount of gas flowing from Canada to the U.S. averaged just 7.0 bcfd as wildfires in Alberta and other western provinces caused some producers to shut oil and gas output, according to Refinitiv. That is well below the 8.4-bcfd average amount of gas Canada exported to the U.S. since the start of the year and 2022's average of 9.0 bcfd. About 8% of the gas consumed in, or exported from the U.S., comes from Canada. Meteorologists projected the weather in the Lower 48 states would remain mostly near normal through June 6. Refinitiv forecast U.S. gas demand, including exports, would slide from 90.2 bcfd this week to 89.5 bcfd next week. The forecast for this week was higher than Refinitiv's outlook on Friday, while its forecast for next week was lower.
US natgas falls 4% to near 2-wk low on record US output (Reuters) - U.S. natural gas futures fell about 4% to a near two-week low on Thursday on record U.S. output, rising Canadian exports and forecasts for milder U.S. weather and lower demand over the next two weeks than previously expected. Prices declined despite a federal report showing a slightly smaller-than-expected U.S. storage build last week, when mild weather limited demand for the fuel for both heating and cooling. It also defied other bullish factors, including a lack of wind power in recent weeks that has forced power generators to burn more gas to produce electricity. Traders said that lack of wind power likely had something to do with last week's smaller-than-expected storage build. The U.S. Energy Information Administration (EIA) said utilities added 96 billion cubic feet (bcf) of gas into storage during the week ended May 19. That was lower than the 100-bcf build analysts forecast in a Reuters poll and compared with an increase of 88 bcf in the same week last year and a five-year (2018-2022) average increase of 96 bcf. Last week's increase boosted stockpiles to 2.336 trillion cubic feet (tcf), or 17.0% above the five-year average of 1.996 tcf for that time of year. The amount of U.S. power generated by wind has dropped to 7% of the total so far this week versus a high of 17% during the week ended April 21, according to federal energy data. That means there will likely be less gas available to go into storage. The amount of power generated by gas has averaged 41% so far this week, up from a low of 37% during the windy week ended April 21. On its second-to-last day as the front month, front-month gas futures for June delivery fell 9.1 cents, or 3.8%, to settle at $2.307 per million British thermal units (mmBtu), their lowest close since May 12. Futures for July, which will soon be the front month, fell 9 cents to settle at $2.476 per mmBtu. In the spot market, mild weather and ample hydropower in the U.S. West pressured next-day gas prices for Thursday at the PG&E Citygate in Northern California to $3.15 per mmBtu, their lowest since August 2020.
US natgas futures drop 6% to three-week low on lower demand forecast (Reuters) - U.S. natural gas futures fell about 6% to a three-week low on Friday as global gas prices collapsed, a U.S. contract expired and on record U.S. output, rising Canadian exports and forecasts for milder U.S. weather and lower demand next week including the U.S. Memorial Day holiday on Monday. Prices declined despite a lack of wind power in recent weeks that forced power generators to burn more gas to produce electricity, reducing the gas put in storage. The amount of U.S. power generated by wind dropped to 7% of the total so far this week versus a high of 17% during the week ended April 21, according to federal energy data. The amount of power generated by gas averaged 41% so far this week, up from a low of 37% during the windy week ended April 21. On its last day as the front month, gas futures for June delivery on the New York Mercantile Exchange fell 12.6 cents, or 5.5%, to settle at $2.181 per million British thermal units (mmBtu), their lowest close since May 5. For the week, the front-month was down about 16%, which would erase last week's 14% gain. In the spot market, mild weather and ample hydropower in the U.S. West pressured next-day gas prices for Friday at the PG&E Citygate in Northern California to $2.80 per mmBtu, their lowest since August 2020 for a second day in a row. Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 101.5 billion cubic feet per day (bcfd) so far in May, which would top April's monthly record of 101.4 bcfd. As firefighters make significant progress in tackling wildfires in Alberta, the amount of gas exported from Canada to the U.S. was on track to hold around 8.0 bcfd for a fourth day in a row on Friday, according to Refinitiv, up from an average of 7.0 bcfd from May 6-22 when some fires were still raging out of control. Meteorologists projected the weather in the Lower 48 states would switch from cooler than normal from May 26-29 to mostly near normal from May 30-June 10. Refinitiv forecast U.S. gas demand, including exports, would ease from 90.8 bcfd this week to 89.7 bcfd next week with the coming of milder weather and the Memorial Day holiday on Monday before rising to 93.8 bcfd in two weeks as the weather turns seasonally warmer. Some analysts have questioned whether this year's gas price collapse in Europe and Asia could force U.S. exporters to cancel LNG cargoes this summer after mostly mild weather over the winter left massive amounts of gas in storage. In 2020, at least 175 LNG shipments were canceled due to weak demand. But for now, most analysts say energy security concerns following Russia's invasion of Ukraine in February 2022 should keep global gas prices high enough to sustain record U.S. LNG exports in 2023. Gas was trading at a 25-month low of around $8 per mmBtu at the Dutch Title Transfer Facility (TTF) benchmark in Europe TRNLTTFMc1 and a 24-month low of $9 at the Japan Korea Marker (JKM) in Asia JKMc1. That put TTF down about 67% and JKM down about 68% so far this year.
$141M Permian Basin oil and gas deal finalized as more companies move into region - A $141 million acquisition in the Permian Basin became the latest sale to close in the region as it was expected to continued growing in production of both oil and natural gas. Kimbell Royalty Partners said May 17 it completed a deal announced in April to buy assets on the eastern Midland sub-basin of the Permian in Howard and Borden counties in Texas. The acquired assets included about 60,000 acres in the region, expected produce about 1,901 barrels of oil equivalent per in the next year – 77 percent oil and 12 percent natural gas. The assets also included 806 royalty acres, and about 5.3 million barrels of proven oil reserves, along with three active rigs as of March 31 and 300 producing wells. Meanwhile, Epsilon Energy of Houston said it planned to spend about $14 million to acquire a 25 percent interest in about 12,373 acres in Ector County, Texas, also in the Midland Basin, participating in drilling 2 wells through the rest of the year. This was Epsilon’s second Permian Basin acquisition of the year, following its purchase of a 10 percent interest in two wells recently drilled in Eddy County, in the western Delaware sub-basing that straddles the border between southeast New Mexico and West Texas. “These investments add liquids to our production mix and the potential for a significant future investment runway in the Ector County project with a well-aligned and basin focused operator,” said Epsilon Chief Executive Officer Jason Stabell. He said the Eddy County deal would help the company grow its presence in the nation-leading basin, position for future growth and future deals throughout the Permian. “We see this as a first step toward our growth objectives and a blueprint for future transactions.” The Permian Basin’s oil and gas production were expected to grow in the next month, according to data from the Energy Information Administration (EIA), by 15,000 barrels per day (bpd) and 82 million cubic feet per day (cfd), respectively. This would raise production in the basin to 5.7 million bpd of oil and 22.5 billion cfd of natural gas, the EIA reported. That’s why Midland-based exploration and production company Garrison Energy Holdings drew a $500 million line of credit to seek out new drilling assets throughout the region in both the Delaware and Midland basins, according to a company announcement. “There is an abundance of opportunity in the region, and we are already evaluating deals ranging from as small as a section with high quality inventory to as large as upwards of one billion dollars, given our investor's ability to add additional equity capital for the right opportunity,”
New Mexico's fracking water contains cancer-causing chemicals, study says -- New Mexico fossil fuel companies are using cancer-causing chemicals to aid in their fracking operations, increasing the risk of a highly toxic byproduct contaminating groundwater, according to a report by a medical watchdog group.State records indicate companies injected thousands of pounds of PFAS into about 260 sites in the past decade during hydraulic fracturing, known as fracking, and possibly far more because the state’s trade secrets law allows operators to conceal many of the chemicals they use, according to Physicians for Social Responsibility’s 55-page report.Industry advocates dismiss the report as biased toward anti-fossil fuel groups, arguing it made unfounded assertions about a process shown to be safe for people and the environment.
Protests rally ahead of federal oil and gas lease sale in New Mexico - Federal land managers planned to offer more than 10,000 acres of public land for auction to the oil and gas industry in New Mexico and Kansas this week, drawing protests from environmental groups demanding the sale be halted.The Bureau of Land Management’s May 25 lease sale was set to include about 3,279 acres in Eddy, Lea and Chaves counties, in southeast New Mexico’s Permian Basin region, and another 6,844 acres in Cheyenne County, Kansas.The lands sold at the auction would be leased for 10 years or as long as oil or gas is produced.Letters of opposition to the sale were delivered to the BLM’s field offices in Carlsbad, Farmington, Las Cruces and Albuquerque this week, with a rally planned outside BLM New Mexico headquarters in Santa Fe on the day of the sale.The letter was signed by more than 200 environmental groups in New Mexico and other western states, calling on the agency to end the use of public land for fossil fuel extraction.“We are shocked and dismayed that in spite of a clear scientific, political, and public consensus that action for the climate requires we begin to phase out fossil fuels, the BLM is continuing the legacy of sacrifice zones in New Mexico by moving forward with the auction of additional public and ancestral lands to more oil and gas leasing and drilling,” read the letter.The letter called out President Joe Biden for promises the groups contended Biden made on the campaign trail to phase out oil and gas drilling.
Keystone pipeline owners knew of defect years before Kansas spill - Owners of the Keystone pipeline knew a defect had formed years before the strain finally caused the pipeline to burst and flood a Kansas creek with oil last year. The Keystone pipeline, owned by TC Energy, burst near the Kansas-Nebraska border late last year, spilling almost 13,000 barrels of oil onto adjacent farmland and into Mill Creek. It was the largest spill since the pipeline started operating a decade ago and larger than all the others combined. While the December spill was the most severe, it was caused by a manufacturing defect that worsened under stress, like most earlier breaches. Bill Caram, executive director of Pipeline Safety Trust, said any failure that affects the environment is alarming. “But the fact that we have a history of these construction issues on this pipeline and we have another failure because of that — I think it calls into question the condition of the pipeline itself,” Caram said. Following the December spill, the federal Pipeline and Hazardous Materials Safety Administration ordered the section of the pipeline shut down and issued TC Energy a corrective action order that required the company to have the pipeline analyzed and study the root causes of the failure. The resulting study, quietly posted to the administration’s website, painted a picture of a company that overlooked warning signs and lacked appropriate safety controls. It determined a faulty weld, which was further strained by bending and a misshapen section of pipe, failed and caused the rupture.“This root cause analysis…points to inadequate oversight in TC Energy’s policies and procedures. The fact that they had to replace this piece of the pipeline a couple times and it still went in defective speaks a lot to that,” Caram said. TC Energy didn’t respond directly to the findings of the study.
Intensity of methane emissions by U.S. oil and gas industry declined, report finds - The intensity of methane emissions from oil and gas production fell 28% between 2019 and 2021 among the industry’s 100 biggest emitters. Greenhouse gas emissions intensity - which includes carbon dioxide, nitrous oxide and methane - dropped 30%, according to an analysis of public data published today by the nonprofits Clean Air Task Force and Ceres, and ERM. The organizations’ goal in pursuing the study, the third annual version, is to make it easier to compare greenhouse gas emission data that regulated companies submit annually to the U.S. Environmental Protection Agency. The oil and gas industry’s CO2 emissions mostly come from burning fossil fuels during the production process or flaring methane, which converts methane to carbon dioxide. Methane is 81 times more powerful than CO2 in the medium term (20 years). Methane intensity is a ratio of emissions and produced gas. Greenhouse gas intensity is calculated as each company’s CO2, methane (CH4) and nitrous oxide (N2O) emissions divided by produced gas and its oil sales. This year’s results reflect a decline in the total emissions reported to the EPA and an increase in oil and gas production. The authors hope their analysis of emissions intensity helps standardize reporting across the industry, to make clearer who’s emitting how much. For example, the report shows that Hilcorp, a Houston-based oil and gas producer, is the top two emitter, behind ConocoPhillips - even though it’s the 12th largest producer. Hilcorp produces half the oil and gas of the largest producer, Exxon Mobil, and in 2021 put out 108% of the latter’s emissions. Hilcorp increases its production mainly by buying aging oil-and-gas facilities, many of which can emit a lot before they’re renovated. After acquisitions, the company invests in new infrastructure and equipment, thereby reducing emissions while raising output, said Nick Piatek, a Hilcorp spokesperson. He said it takes several years to update new production and the new “report only provides a nearly two-year-old snapshot.” The sizable average emissions intensity decline from 2019 to 2021 masks annual fluctuations among companies and the basins they operate in, and also a growing gap between the polluters with the highest and lowest intensity. Companies in the top 25 have an average methane emissions intensity that’s 26 times higher than those in the bottom quarter. For greenhouse gases, the top quarter’s average emissions intensity is 13 times the bottom quarter’s.
Interior's oil plan is coming. Here's what to watch. - Biden administration officials in recent weeks hosted private listening sessions with environmental groups and oil companies ahead of the release of proposed oil and gas regulations that could represent some of the White House’s most lasting steps on public lands to help address climate change. Major oil companies like Exxon Mobil Corp., as well as influential environmental groups like the Sierra Club, met with Interior Department and White House officials, according to the administration’s regulatory agenda, in efforts to shape the long-anticipated draft regulations on bonding, fees and other economic aspects of drilling on public land. Originally planned for release in 2022, the rules were heavily influenced by the Inflation Reduction Act, last year’s climate law that included new floors for bonding and royalties. A draft of the Interior Department’s rules is expected to come out by next month, according to recent testimony in a federal court case from Nada Culver, deputy director of policy and programs at the Bureau of Land Management. A key question is whether Interior will use the regulations as a vehicle for more aggressive climate reforms. Over the objections of the oil and gas industry, some green groups are urging the White House to do more than what was laid out in the Inflation Reduction Act to limit the oil industry’s reach on federal land. When it comes to public lands, the White House so far hasn’t taken the step that President Joe Biden promised on the 2020 campaign trail: retire the federal oil and gas program. Instead, the Interior Department has so far adopted a more gradual approach with less leasing, more climate accounting and steeper costs for drillers. This approach was made more lasting when codified into law by the Inflation Reduction Act.During several meetings in late April and early May, environmental and climate organizations were explicit in their requests that the administration embrace more progressive reforms, according to documents submitted to the Office of Information and Regulatory Affairs. They want the White House to consider climate-impact screening to any new leasing decisions and explore simply phasing out oil and gas over a period of years.The Interior Department declined to comment for this story. “The federal government itself is this country’s single largest source of fossil fuels,” Earthjustice lawyer Michael Freeman said. “The oil and gas rule is a prime opportunity for BLM to address our climate goals and bring the federal program into alignment with what we’re trying to do as a nation.”
U.S. Shale Production Is Set For A Rapid Decline - I have argued in several Oilprice articles, and most recently in February 2023, that the era of increasing output from shale wells did not have much more room to run absent a price signal that caused a huge increase in drilling. A price signal similar to the one the market received with the onset of the Ukraine invasion, that added 153 rigs in U.S. shale plays from January to June of 2022. Instead, as the market adapted to the loss of Russian oil and gas, and worries about the strength of the economy cast doubt on demand, prices began to soften throughout the rest of the year. As we approach the midpoint of 2023, WTI prices have mostly stayed in a $70-$80 range, continuing a pattern that established itself in late Q-4, 2022. There is nothing in the next few months that will interrupt this pattern, but if we look a little farther out, in the next six to eight months, we can make a case for a transformative drop in U.S. domestic production. The chart below is a little busy, so we will spend some time decoding it. The multi-colored, vertical bars show changes in the drawdown of Drilled, but Uncompleted (DUC) wells over the last four years. Low oil prices from 2019 through December, of 2021 drove a decline in DUCs from ~4,000 to 1,446, more than 75%. During this period, oil companies desperate for revenue and needing to control costs thanks to oil prices below $70 per barrel, turned to DUCs to maintain output. Post-January 2022, higher oil and gas prices drove a rapid increase in drilling, and attenuated the trend toward DUC activation as the year wore on. From January of 2023, both DUC withdrawals and drilling have declined and shale output has essentially flatlined around 9,300 mm BOPD, according to the monthly EIA-Drilling Productivity Report. The most recent results of which are captured in the graph below, along with rig data from Baker Hughes and frac spread count data from Primary Vision. One final point I’ll make regarding the graph above, and I will have to ask you to use your imagination as I didn’t graph this, but you will notice the slope of the decline curve for DUCs is largely a mirror image of the increase in production from January of 2021. The takeaway being that DUC withdrawal is responsible for much of the 1.7 mm BOEPD added since Jan-2021.
Colorado Frackers Doubled Freshwater Use During Megadrought -- "Oil and gas operators dramatically increased their reliance on high-quality water for fracking even though they produced enough wastewater to supply the operations." "In the middle of the longest-running drought in more than a thousand years, Colorado energy companies diverted rising volumes of the state’s freshwater resources for fracking, a new analysis shows. Colorado operators doubled their use of high-quality water to prepare wells for fracking over the last 10 years, with diminishing returns on oil production, the nonprofit group FracTracker Alliance reported earlier this month. Average volumes of water used per well quadrupled over that time, the analysis found. Colorado standards governing what water sources energy companies can access for fracking and how they dispose of wastewater are unsustainable and “incredibly wasteful,” concluded Kyle Ferrar, FracTracker’s western program coordinator, in the report. Fracking, short for hydraulic fracturing, injects water, sand and chemicals of varying toxicity under high pressure to splinter rock and prepare wells for extracting oil and gas trapped within rock formations. Completing wells can prove water- and energy-intensive as operators extend the length of horizontal wells to reach sequestered fossil fuels. It can also yield massive amounts of wastewater, known as produced water."
Coalition Turns to CO Voters to Phase Out Fracking Permits - A coalition of grassroots groups is turning to Colorado voters in an effort to phase out all new oil and gas leases by 2030. Kate Christensen – an organizer with Safe and Healthy Colorado – said even after state lawmakers passed legislation mandating that oil and gas regulators prioritize the protection of public health and the environment, they continue to permit hundreds of wells – many right in the middle of highly populated areas already in violation of Environmental Protection Agency ozone pollution limits. “And that is why we need a ballot initiative,” said Christensen, “because every other move hasn’t got us the results that we need for our climate crisis, and for our air quality, and for our water. Nothing else has worked, we have to do this.” Leading global scientists have repeatedly warned that fossil fuels cannot continue to be extracted and burned if we are to avoid catastrophic climate change. The Colorado Oil and Gas Association says if voters approve the measure, there will be significant job losses and higher fuel prices. They argue even if permits stop, the demand for oil and gas won’t. Christensen pointed to a recent report which found the oil and gas industry in Colorado contributes less than 1% of the state’s total employment. And she said the industry’s own research shows there are ample oil and gas reserves to meet future demand. “The International Energy Association – not a green group, just an energy group,” said Christensen, “came out with a report last year that said we have already extracted all the fossil fuels we need to extract to make a transition to renewables by 2050.” Christensen said setting a timeline for phasing out drilling permits is critical for communities that are dependent on fossil fuels to build an exit strategy and get the support they need to transition to the new clean-energy economy. If the coalition can collect 125,000 signatures to make the 2024 ballot, she said the effort could embolden people in other states.
Chevron boosts US shale footprint with $6.3bn deal -- Chevron has agreed to buy Denver-based PDC Energy for $6.3bn in stock, doubling down on its Colorado shale business to make it one of the oil major's top five assets for production and free cash flow. The oil major agreed to pay $72/share for the US oil and gas independent, representing a 14pc premium to PDC's prior 10-day average closing stock price. The takeover of PDC would increase Chevron's proved reserves by 10pc at an acquisition cost of under $7/bl of oil equivalent (boe). Chevron would gain 275,000 net acres in the DJ basin of Colorado and Wyoming, as well as 25,000 net acres in the Permian basin of west Texas and eastern New Mexico. Flush with near-record cash flow after last year's run-up in oil prices, producers are stepping up mergers and acquisitions in the shale patch, with the top-performing Permian basin likely to attract the most interest. In a separate announcement today, Chord Energy agreed to snap up assets in the Williston basin from ExxonMobil for $375mn in cash. Chevron produced just over 140,000 boe/d from the DJ Basin in 2022. With the acquisition, its output from the basin is poised to increase to about 400,000 boe/d in 2024 and move slightly higher in 2027. Chevron had previously said it would be hesitant to engage in deals while oil prices were at the upper end of the commodity cycle. The transaction, which has been approved by the boards of both companies, would add about $1bn to annual free cash flow for Chevron. "Focusing on the DJ basin likely allows Chevron to acquire undeveloped upside at more favorable pricing," said Andrew Dittmar, director at Enverus Intelligence Research. Chevron looks to have paid less than $5,000/acre, with more than 80pc of the total deal value allocated to existing production, which compares favorably to the higher valuations in the Permian basin, he said. As a result of the acquisition, Chevron expects to boost capital expenditures by around $1bn a year, raising its annual guidance range to $14bn-$16bn through 2027. It anticipates savings from the combination of about $400mn. The deal, which is expected to close before the end of the year, is valued at $7.6bn including debt.
PDC Energy Deal Makes Chevron Even More Formidable in Colorado -- Monday morning provided some corporate M&A fireworks as Chevron announced the purchase of PDC Energy for nearly $8 billion. That’s what Enverus Director Andrew Dittmar told Rigzone, adding that the deal makes Chevron an even more formidable operator in Colorado “by tacking an additional 275,000 net acres onto the significant DJ position the company acquired in 2020 with its purchase of Noble Energy”. Dittmar, who highlighted that PDC also holds 25,000 net acres in the Delaware position, said the company’s split of assets between those two plays makes Chevron a sensible strategic buyer as it can leverage operational synergies in both plays “with the company expected to capture about $100 million in annual operational synergies”. “Another key fact, although one not unique to Chevron, is the much higher multiple its equity trade at, versus SMID-cap operators like PDC, with Chevron trading at 5.6x 2023E EBITDA versus PDC at 3.3x,” Dittmar noted. “That allows the company to pay a modest premium for PDC, 14 percent based on a 10-day volume weighted average and 10.5 percent based on a prior-day close while maintaining financial accretion,” he added. “Chevron says the deal will drive accretion to EPS, CFPS, FCFPS and ROCE with about $1 billion in incremental annual free cash flow. The company also noted the combination would lower its carbon intensity with no routine flaring in the DJ Basin,” Dittmar continued. While using all equity in the deal from Chevron does cut into financial accretion a bit, it also helps mitigate commodity price risk and has been used in the past by buyers and sellers at uncertain points in the commodity market price cycle, the Enverus Director stated. “Chevron management noted that at its current share buyback pace the company is on track to buy back all the shares issued in this transaction in two quarters,” he highlighted. Besides favorable ESG metrics and the immediate financial accretion that comes from buying from the smaller sized E&P peer group that has been discounted by the market, focusing on the DJ Basin likely allows Chevron to acquire undeveloped upside at more favorable pricing, Dittmar said. “The company looks to have paid less than $5,000 per acre with more than 80 percent of the total deal value allocated to existing production,” he added. “That compares to the Permian Basin where equity valuations for companies with equivalent inventory tend to be higher and M&A markets more competitive,”
Citizen scientist group: More problems along Line 3 pipeline corridor suspected- Enbridge’s oil replacement pipeline known as Line 3 has officially been in operation for more than a year. The construction of the pipeline in Northern Minnesota led to several aquifer breaches, millions of dollars in fines for the company and even criminal charges.While the pipeline has been a flashpoint for environmentalists, tribal communities and the oil industry, internal records from the state and the company itself reveal Enbridge was aware of some problems a lot earlier than the company let on.On a recent cold April day in Northern Minnesota, a group of citizen scientists hiked their way through fresh snow to continue their work monitoring the Line 3 oil pipeline corridor. The pipeline spans more than 300 miles of Minnesota wilderness from Canada to Superior, Wisconsin."Our team regularly snowshoes and/or canoes and has to travel significantly to access these sites that are far away from the public eye," said Emma ‘Haze’ Harrison, a volunteer with the group Waadookawaad Amikwag (which translates to "those who help beaver.")The oil pipeline crosses several tribal treaty areas, which is land once taken from Native Americans in exchange, in part, for preserving their right to hunt, fish and gather on the land.Victoria McMillen is an Indigenous consultant for Waadookawaad Amikwag."[The pipeline] is a big scar on the land because this is her body," McMillen said. "They dredge, they trenched all the way through and then they put an implant in."McMillen fears damage done by the pipeline has compromised the land’s natural resources, from the wild rice beds to the waters that sustain them. "It’s a violation of our treaty rights," McMillen said.Line 3 became fully operational in October 2021. However, case records obtained by the FOX 9 Investigators reveal Enbridge was aware of problems a lot sooner than the company let on.In Clearwater County, an uncontrolled water flow was first noticed in January 2021 after large sheets of metal used to reinforce the soil breached an aquifer. When an aquifer is breached, it can create quicksand-like conditions and compromise the natural flow of groundwater, with the potential to disrupt the environment. State records reveal Enbridge did not notify the state of the problem at first – and even after the company issued itself an "unacceptable report" in March 2021, Enbridge again did not bring the issue to the state’s attention. Internal emails reveal it wasn’t until six months after the problem was first detected that the state caught wind of it. One state official in an email called it a "serious situation" with about 15 gallons of water per minute gushing out of the aquifer.In total, three aquifer breaches were identified by the state, which led to $11 million in fines for Enbridge. The company claims on its website to have fixed those breaches.Enbridge declined the FOX 9 Investigators request for an interview but referred to company-produced videos that detail their restoration efforts.
ExxonMobil Sells Williston Assets --Chord Energy Corp. has entered a deal to acquire hydrocarbon development areas in the Williston Basin owned by ExxonMobil Corp. for $375 million. The definitive agreement with XTO Energy Inc. and affiliates, which are ExxonMobil subsidiaries, adds about 62,000 net acres to Chord’s inventories, it said in a press release Monday. Around 77 percent of the acreage to be transferred is undeveloped. Upon the closure of the transaction, expected June, the Houston city-based exploration and production company would have 123 net 10,000-foot equivalent locations. The assets to be divested currently can produce 6,000 barrels of oil equivalent per day (Mboepd), according to the announcement. Customary closing conditions remain before the deal could be fulfilled, Chord said. The purchase follows the acquisition by Oasis Petroleum Inc., which joined hands with Whiting Petroleum Corp. 2022 to form Chord, of Diamondback Energy Inc.’s oil and gas assets in the Williston Basin. Spanning the states of Montana and North and South Dakota, the basin is estimated to hold 83 million barrels of oil and 351 billion cubic feet of gas in undiscovered, technically recoverable mean resources in its Paleozoic strata, according to an assessment by the United States Geological Survey published November 8, 2018. Chord earlier this month said it was selling non-Williston, non-core assets for about $35 million. The transactions involving 1,100 Mboepd are projected to close the second quarter of 2023. The divestments allowed Chord to raise forecast output for the year to as high as 168.2 Mboepd, it said in its earnings report for the first quarter released May 3. The company produced 164.7 Mboepd in January-March, within the range of Chord’s projection, according to the results report. Chord logged $297 million in net income for the 2023 opening quarter. It expects to fulfill payments for the acquisition of the ExxonMobil assets through cash on hand, which stood at $592 million as of March, according to Monday’s announcement. The value of the transaction is subject to price adjustments.
Saltwater, crude oil spill reported in Renville County - — Cobra Oil and Gas Corp. notified state agencies on Sunday of a saltwater and crude oil spill at a site it operates near Glenburn in Renville County. Initial reports indicate 6,300 gallons of saltwater and 420 gallons of crude oil released, impacting agricultural land. The incident resulted from the malfunction of an oil-water separator. The North Dakota Department of Environmental Quality reports its personnel are on location and will continue to oversee remediation.
How an energy giant helped police quell the Standing Rock protests - Grist -- By March 2017, the fight over the construction of the Dakota Access Pipeline had been underway for months. Leaders of the movement to defend Indigenous rights on the land — and its waterways — had a new aim: to march on Washington. Native leaders and activists, calling themselves water protectors, wanted to show the newly elected President Donald Trump that they would continue to fight for their treaty rights to lands including the pipeline route. The march would be called “Native Nations Rise.” Law enforcement was getting ready, too — and discussing plans with Energy Transfer, the parent company of the Dakota Access Pipeline. Throughout much of the uprising against the pipeline, the National Sheriffs’ Association talked routinely with TigerSwan, Energy Transfer’s lead security firm on the project, working hand-in-hand to craft pro-pipeline messaging. A top official with the sheriffs’ public relations contractor, Off The Record Strategies, floated a plan to TigerSwan’s lead propagandist, a man named Robert Rice. A security firm led by a former member of the U.S. military’s shadowy special forces, TigerSwan was no stranger to such deception. The company had, in fact, used fake reporters before — including Rice himself — to spread its message and to spy on pipeline opponents. The National Sheriffs’ Association’s involvement in advocating for a similar disinformation campaign against the anti-pipeline movement has not been previously reported. The email from the National Sheriffs’ Association PR shop was among the more than 55,000 internal TigerSwan documents obtained by The Intercept and Grist through a public records request. The documents, released by the North Dakota Private Investigation and Security Board, reveal how TigerSwan and the sheriffs’ group worked together to twist the story in the media so that it aligned with the oil company’s interests — seeking to pollute the public’s perception of the water protectors. The documents also outline details of previously unreported collaborations on the ground between TigerSwan and police forces. During the uprising at Standing Rock, TigerSwan provided law enforcement support with helicopter flights, medics, and security guards. The private security firm pushed for the purchase by Energy Transfer of hundreds of thousands of dollars’ worth of radios for the cops. TigerSwan also placed an order for a catalog of so-called less-lethal weapons for police use, including tear gas. The security contractor even planned to facilitate an exchange where Energy Transfer and police could share purported evidence of illegal activity.
Conoco To Box Suncor Out Of Oil Sands Deal - ConocoPhillips said on Friday that it will purchase the assets for $3 billion and up to $325 million in contingent payments on a deal expected to close in the second half of 2023. Last month, Suncor was said to be looking to make a $4.1 billion deal to acquire French TotalEnergies' Canadian operators, which included a 31.23% interest in Canada's Fort Hills oilsands project and a 50% working interest in Surmont. ConocoPhillips operates the Surmont site, and has the right of first refusal. "This transaction represents a major step in securing long-term bitumen supply to our base plant upgraders at a competitive supply cost," Suncor CEO Rich Kruger said in a press release last month in reference to the deal. "These are valuable oilsands assets that are a strategic fit for us and add long-term shareholder value." The deal was expected to close in the third quarter of this year. Suncor could still go ahead with the Fort Hills portion of the sale, although technically, it could back out of the entire deal now that the terms of the deal have changed, as could TotalEnergies. Each of the parties has the right to terminate the agreement under which Suncor would acquire TotalEnergies' Canadian operations and Suncor will be assessing the transaction in light of this change," Suncor said in a Friday press release.
LNG Terminals Expansion Needed to Hold Down Prices: IMF | Rigzone - The International Monetary Fund (IMF) has said stabilizing liquefied natural gas (LNG) prices in the long term entails building more terminals to achieve market integration, though it warned the cost of expanding the infrastructure poses a “major hurdle”. Natural gas has a “partially fragmented global market” because it relies mostly on pipelines for transport, “unlike the market for crude oil, which is more integrated and tends to trade at a single price in most places”, the Washington-based lender said in an article Tuesday. “Such fragmentation in the natural gas market means not only that prices differ across regions, but also that high prices in one part of the world don’t necessarily transmit to buyers in other places”. Comparing the LNG transport system in the USA and Europe, the IMF said the Russia-dependent continent saw a more dramatic rise in gas prices than the USA due to Europe’s dependence on pipelines. “Pipeline flows to Europe from Russia dropped by 80 percent since mid-2021, sending the continent’s gas prices up 14-fold to a record level in August 2022”, it said. “Prices for globally traded liquefied natural gas saw a similar jump. But LNG prices in the United States merely tripled, remaining several times below Europe and Asia”. The USA is insulated against global shocks in the gas market because it has a competitive terminal network that allows easier export and because gas production and pricing in the country is integrated with oil production and pricing, the IMF said. “Historically, the US market was linked to crude oil prices because gas was mostly a byproduct of oil drilling, but this relationship, sometimes called artificial integration, has been unwinding over the past decade, mainly because of rising shale gas production”, it explained. “And as gas production surged in the US, which surpassed Russia in 2012 as the world’s largest producer, and export terminals were built, it became easier to sell into markets beyond North America”. However, though more terminals allow greater gas outflows, unstable pricing formulas can still keep prices high for consumers, the IMF said. It noted Europe has had the infrastructure to accommodate more LNG imports but the raised capacity has not translated to lower prices because price premiums can change quickly relative to the USA.
North Sea to See Record Strike Action in June | Rigzone --The Unite union has confirmed that around 1,650 contractors will begin two new rounds of 48-hour strike action in June. Across five companies, the contractors will participate in strike action from June 1, at 6.30am local time, to June 3, at 6.29am, and from June 8 to June 10 at the same times, Unite revealed in a statement posted on its website. The prospective action includes electrical, production and mechanical technicians, in addition to deck crew, scaffolders, crane operators, pipefitters, platers, and riggers working for Bilfinger UK Limited, Stork Technical Services, and Sparrows Offshore Services, Unite noted. The union said in the statement that the latest 48-hour strike action will hit multibillion oil and gas operators including Apache, BP, Harbour Energy, Enquest, Ithaca, Repsol, Shell, and TAQA. “With the support of their union Unite, an army of 1,650 offshore workers are taking the fight to multibillion oil and gas corporations,” Unite General Secretary Sharon Graham said in a union statement. “The latest rounds of strike action in June will see the biggest group of offshore workers to date taking strike action,” Graham added. “Unite is determined to deliver better jobs, pay, and conditions in the offshore sector, and deliver we will,” Graham continued. Unite Industrial Officer John Boland said, “Unite’s members deserve a much bigger share of the bonanza profits being recorded by oil and gas operators than the real terms pay cuts currently being offered”. “Around ,1650 members across the companies we are in dispute with remain determined, and fully focused on securing a better deal,” he added. “Unite has one simple message for the contractors and operators - we will stand up for our members, we hold you to account, and in the end we will win,” Boland added. Rigzone has contacted industry body Offshore Energies UK (OEUK) for comment on Unite’s latest strike statement. At the time of writing, OEUK has not yet sent Rigzone a statement commenting on the upcoming strikes. In a separate statement posted on its site last week, Unite announced that around 600 Bilfinger contractors on Ithaca, CNRI, and TAQA assets rejected new pay offers. In that statement, Unite revealed that the workers would participate in the 48-hour June stoppages, along with 200 Bilfinger contractors working on BP and Repsol assets. This statement included a list of offshore installations potentially impacted by any strike action. The following installations were mentioned in the list: Alba North, Andrew, Arbroath, AUK, Bleoholm,, Brae Alpha, Captain FPSO, Captain WPP, Clair, Clair Ridge, Claymore, Clyde, Cormorant Alpha, East Brae, Eider, Etap, FPF1, Fulmar, Glen Lyon, Harding, Leman Alpha, Montrose, Ninian Central, Ninian South, North Cormorant, Piper Bravo, Seafox 4, Sean Papa, Sole Pit Clipper, Tartan Alpha,and Tern Alpha, Back in April, Unite revealed that 1,300 offshore workers would begin a 48-hour stoppage from April 24. In a union statement at the time, Unite noted that the 48-hour strike action would hit multibillion oil and gas operators including BP, CNRI, EnQuest, Harbour, Ithaca, Shell, TAQA, and Total. In May, Unite announced that around 1,200 contractors would resume 48-hour strike action from May 10 to May 12.
Oman enters the world's largest LNG exporter club - The Sultanate of Oman, the largest energy exporter outside OPEC, has become one of the leading global exporters of liquefied natural gas (LNG) due to a rising demand for clean energy sources, according to a report by Oman Observers, a local daily. In April 2023, Oman’s LNG exports reached a record high of 1.16 million metric tonnes (MT), representing a monthly increase of 0.08 million metric tonnes, the report said. As per the monthly gas report from the Gas Exporting Countries Forum (GEFC), the top ten LNG exporters in the world include the US, Qatar, Australia, Russia, Malaysia, Indonesia, Algeria, Nigeria, Oman, and Trinidad and Tobago. According to the report, global LNG exports in April 2023 witnessed a significant year-on-year increase of 6% (1.95 MT), reaching a total of 35.58 MT. Non-GECF countries accounted for the largest share of LNG exports in April 2023, with a market share of 50.2%, up from 47.5% in April 2022. It’s important to note that Oman is not a member of the GECF. Oman’s emergence as a prominent LNG exporter can be attributed to its advantageous location, ample natural gas reserves, and modern infrastructure. The country has made substantial investments in developing its LNG industry in recent years, aiming to capitalize on the growing demand for clean energy in Asia and Europe. A key factor contributing to Oman’s success as an LNG exporter is its proximity to major markets such as China, Japan, and South Korea. These countries are among the largest consumers of LNG globally, and Oman’s geographical location enables it to competitively supply LNG to these markets. Additionally, Oman has focused on expanding its natural gas production capacity through significant investments. The country has discovered several new gas fields, including the Mabrouk field, estimated to hold around 4 trillion cubic feet of gas.
Pakistan to bring 100,000 tons of oil from Russia - Minister of State for Petroleum Musadik Masood Malik has said that the government approved the Greenfield Oil Refining Policy and Pakistan is bringing 100,000 tons of oil from Russia. According to the details, during the press conference in Islamabad, Musadik Masood Malik said that the crude oil will be transported from Russia to Oman in two to three days and then the oil will reach Pakistan through small ships. Speaking during the press conference, Malik said that the new greenfield oil refining policy in Pakistan will attract foreign investment. “We are looking to install a state-of-the-art 4 lakh barrel per day oil refinery. Energy security is essential for economic development,” he said. During the conversation, Malik said that the new refineries will be installed in the special economic zone, and the investors will get tax exemptions. “Investments in oil refining will be protected under the Foreign Investment Act,” he said. The Minister of State for Petroleum said that the LPG air mix policy is being introduced. According to the minister, LPG will be supplied by the private sector in gas-deprived areas. “Our annual requirement of petrol and diesel is estimated at 20 to 21 million tonnes,” he said. Malik said that local refineries provide 50 percent of the country’s needs, furnace oil consumption is beginning to end, and by 2032 the consumption of petrol and diesel will reach 33 million tons per year. The crude oil ship from Russia will arrive in Oman on May 27-28. He said that 100,000 tons of oil will reach Pakistan with the help of small ships. In response to a question, Mossadegh Malik said that I think the IMF should have no objection to a cheap petrol package for a poor country.
Russia's crude oil flows stay high even as Moscow insists cuts made -- Russian crude oil flows to international markets still show no sign of the output cuts the country insists it is making. Four-week average seaborne shipments, which smooth out some of the volatility in weekly numbers, rose for a sixth straight week in the period to May 19, edging close to 4 million barrels a day. Flows are now up by 15% since the first week of April and hit a new high for the period sinceBloomberg began tracking them in detail at the start of 2022. With almost all Russia's crude going to China and India, volumes to Asia also climbed to a new peak. More volatile weekly flows edged lower. Russia pledged to cut oil production by 500,000 barrels a day in March, using February output as a baseline, in retaliation for Western sanctions and price caps on its oil exports designed to punishMoscow for the invasion of Ukraine. Those cuts were subsequently extended for the rest of the year, in line with voluntary reductions made by several of Russia's OPEC+ partners. Russia continues to stress its commitment to the OPEC+ producer group and the output reductions that the group has agreed."All our actions, including those related to voluntary production cuts, are connected with the need to support a certain price environment on global markets in contact with our partners in OPEC+," President Vladimir Putin said at a meeting with his government via video-link on Wednesday.
Cheap Russian Crude Is Replacing Middle Eastern Oil On India’s Spot Market --India’s spot purchases of crude oil from the Middle East have fallen in recent months, as cheaper Russian spot barrels are making their way to the world’s third-largest crude oil importer, according to the head of the largest Indian refiner. “Spot purchases have gone down because somewhere there has to be a dip to make up for all the Russian purchases,” Shrikant Madhav Vaidya, chairman of Indian Oil Corporation, said at the Middle East Oil and Gas Conference in Dubai on Monday, as carried by Reuters. Indian Oil, the largest refiner in the country by capacity, is committed to its term deals with Middle Eastern producers, but spot purchases from the Middle East have dropped amid Russian competition, he said. Rising Indian oil consumption has opened more room for crude oil imports while Russia’s oil is suited for Indian Oil refinery specifications, Vaidya added. India, together with China, is now a top market for Russian crude oil after the EU and the G7 introduced embargoes and price caps on Russian oil exports. Over the course of one year since the Russian invasion of Ukraine, India turned from a marginal buyer of Russian crude to the most important market for Moscow’s oil alongside China. Indian refiners, not complying with the G7 price cap and looking for cheap opportunistic purchases, have snapped up many of the Russian Urals cargoes, which used to go to northwest Europe before the EU embargo.Record imports of cheap Russian crude into India have undermined OPEC’s share of supply to the world’s third-biggest crude importer so much that OPEC’s share of all Indian oil imports has hit the lowest in at least 22 years.As India’s imports of Russian crude surged in the past year, OPEC’s share of Indian oil supply slumped to as low as 59% in the Indian financial year ending March 2023, compared to as much as 72% in the previous fiscal year 2021/2022, according to a Reuters analysis of data from industry sources.
Repairs Force Shell To Cut Oil Imports At Its Singapore Refinery -- Shell has reduced the imports of crude oil for its refinery in Singapore as repair works at the facility have been extended to next month. According to a Reuters report, Shell is using ship-to-ship transfers to move the crude it buys for the Pulau Bukom refinery from Very Large Crude Carriers to Aframax tankers. Total volumes have fallen to some 3 million barrels since the start of May, from 7.65 million barrels for the whole of April, data from Kpler cited by Reuters has shown. Earlier this month, amid the ongoing repairs works on the Pulau Bukom facility’s single buoy mooring segment, Shell also reported “an operational upset” that resulted in gas flaring, Reuters reported. The Pulau Bukom refinery has a daily capacity of 237,000 barrels of crude oil and is the only refinery and petrochemical production facility Shell operates in Asia. It started as an oil storage and refinery complex but over the years grew into a more complex facility that also produces biofuels and recycles plastics, according to the company. The development and transformation of the complex reflect Shell’s new focus on diversifying its operations away from the core oil and gas business. Other big companies with downstream businesses have also diversified into biofuels, some of them notably turning whole refineries into biofuel production plants.In the United States, this has led to something of a crunch in refining capacity that led to a diesel shortage at one point last year. As luck would have it, inflation pressured demand for transportation services, which in turn reduced demand and helped the industry avoid a serious shortage of freight transport fuel.
Beetaloo Traditional Owners speak out on Tamboran fracking pollution -- Traditional Owners continue to oppose fracking for shale gas in the Beetaloo Basin, in particular in the Newcastle Creek which runs across the basin and which has sites protected under the Northern Territory’s Aboriginal Sacred Sites Act. Johnny Wilson, Nurrdalinji Native Title Aboriginal Corporation chair and Jungai (cultural lawman) for the area, said 7.30’s coverage on May 22 of pollution incidents from Tamboran’s exploration well (EP136) on Tanumbirini cattle station in the Beetaloo Basin was a major concern. “This reflects what Traditional Owners have long feared — that fracking will damage our water, country and songlines which mean absolutely everything to us and were passed down for us to care for,” he said. Newcastle Creek also runs across a part of Tanumbirini, a 5000-square-kilometre cattle station near Daly Waters. Tamboran’s exploratory fracking permit covers parts of Tanumbirini Station.The incidents uncovered by the ABC report are: drill water used to manage dust; a break in a bund wall which spilled sediment and potentially toxic chemicals towards a sacred waterway; and what appears to be the pumping of toxic wastewater, containing heavy metals including lead and barium, into a cattle breeding paddock.Nurrdalinji Native Title Aboriginal Corporation, which represents native title holder across the Beetaloo Basin, has been working with Rallen Australia, which runs Tanumbirini Station, to protect the country. They share concerns about fracking risks to land, water and sacred sites.“This is my grandfather’s country which I have a responsibility to look after. It tears at my heart to imagine how fracking by Tamboran might be damaging what I have been asked to protect,” Wilson said.Janet Sandy Gregory, Djingili Elder and cultural advisor to Nurrdalinji, said they wanted the NT government to “take action against Tamboran” because “we fear for our country”.“This shows us once again why we do not want fracking, which will poison our water, our animals and upset the songlines that run across our country.”
MARINA investigates personnel and revokes CPC in response to major spill incident -- The Maritime Industry Authority (MARINA) has launched a thorough investigation into the personnel responsible for the recent catastrophic oil spill caused by the MT Princess Empress, a tanker owned and operated by RDC Reield Marine Services, Inc. The Department of Transportation (DOTs) said in a statement that as part of their commitment to accountability, MARINA has revoked the Certificate of Public Convenience (CPC) of the shipping company, imposing a significant fine for unauthorized operation. Following a comprehensive examination of the incident, MARINA’s fact-finding team submitted their investigation report to the DOTr and the MARINA Anti-Graft and Corruption Committee. Based on their findings, the maritime authority has initiated inquiries into the alleged administrative violations surrounding the issuance of statutory certificates to the ill-fated vessel. During a media briefing held by MARINA’s spokesperson and legal service director, Atty. Sharon Aledo, it was revealed that the investigation would encompass the entire process, from the vessel’s construction to the issuance of registration and safety certificates. Aledo emphasized that the investigation would adhere to a meticulous procedural framework. “We will look into the alleged violations, pagdating po doon sa naging construction niya hanggang sa issuance po ng statutory certificates including registration and safety certificates and it will follow a process,” said Aledo. The revocation of RDC Reield Marine Services, Inc.’s CPC by the MARINA-National Capital Region was announced, signaling the gravity of the consequences faced by the shipping company, the DOTr said further. If RDC fails to submit an appeal within the prescribed 15-day period from the May 11 revocation, the decision will become final and immediately executory. At that point, the CPC revocation would render RDC unable to resume operations.
PCG detects oil spill in two Batangas towns -On 23th May, the Philippine Coast Guard (PCG), deployed a response team to contain the oil spill that was detected in two municipalities in Batangas.PCG could not confirm where the oil spill caused by the sinking of the MT Princess Empress off Oriental Mindoro which sank in Oriental Mindoro last Feb. 28.In particular, the oil spill was spotted in Brgy, in Calatagan and in Brgy, Klamias in Mabini, said Capt. Vic Acosta, commander of PCG Station Batangas. PCG deployed a response team to contain the oil spill.He said the focus of the clean-up operation is in Mabini as the spillage in Calatagan already evaporated.We immediately deployed an oil spill response team and oil spill response equipment so we immediately contained it...Acosta stated.As informed, the tanker was carrying 800,000 liters of industrial fuel oil when it sank. The sinking of MT Princess Empress resulted to a massive oil spill that reached Batangas, Antique, and Palawan.We are still determining where it came from.…Acosta said. He said there was no other maritime accident that occurred in the area while port operations were halted.
ExxonMobil appeals ruling by Guyanese court in oil spill insurance coverage - - American oil giant ExxonMobil said Friday it had appealed a recent Guyanese court ruling forcing it to set aside hundreds of millions of dollars in the event of a major oil spill off the coast of Guyana. The company said in a statement that the court had failed to consider that Exxon and consortium partners Hess Corporation and China National Overseas Offshore Corporation have the “undoubted ability” to meet their financial obligations in the event of a spill at their operation. The consortium is operating the prolific Stabroek Block near the southeastern border with Suriname. In the ruling two weeks ago, Guyana’s high court ordered the local environmental agency to obtain independent liability insurance from Exxon’s subsidiary Esso Exploration and Production Limited. It also sought an unlimited guarantee from its parent company in the case of damage caused by operations in the South American country. Rights activists and environmentalists fear that a spill could severely impact the country’s marine resources while devastating the tourism economies of nearby Caribbean nations. Exxon, the lead operator in the consortium, has argued that a spill is highly unlikely, and that the court had “failed to recognize the ability of the Stabroek block co-venturers to meet our financial obligations, which are supplemented by the insurance that we already have in place and the agreement we reached with the EPA for financial guarantees that exceed industry benchmarks.” Production began in December 2019, with some 380,000 barrels a day expected to soar to 1.2 million by 2027. Guyana’s government said this week that it supports the appeal, contending the judge had erred in the ruling in part because the environmental agency already has agreed with Exxon on the amount of money to assess for each oil field in the event of a spill.
TotalEnergies and Africa Oil quit Kenya oil project, leaving Tullow without partners -Tullow Oil’s challenging multibillion-dollar South Lokichar project in Kenya has become just that bit more complex after TotalEnergies and Africa Oil decided to quit the oilfield development. The long-delayed project aims to tap about 460 million barrels of oil in multiple fields in Kenya’s remote, arid Turkana county, exporting 130,000 barrels per day via an 895-kilometre pipeline to a terminal in Lamu port. A complex mix of commercial, political, technical and environmental challenges — not to mention the impacts of the Covid-19 pandemic — have pushed the project at least four years behind its original schedule. The departure of the French supermajor and London-based Africa Oil is likely to complicate things further, with Tullow now holding 100% of the asset. Over the past few years, the operator had been trying hard to reduce what until today was its 50% stake in the project, and most recently was in talks with India’s ONGC Videsh and Indian Oil Corporation about one or both becoming “strategic” partners. There have also been reports that China’s Sinopec may be interested in the asset. Africa Oil quit because it sees better potential elsewhere in its portfolio, particularly in the Orange basin offshore Namibia, a play Tullow exited last year just weeks before Shell and TotalEnergies unveiled two huge oil discoveries. Africa Oil chief executive Keith Hill said: “We have taken the decision to exit our Kenya concessions as our strategy has shifted to focus on production and high-potential exploration opportunities, including our Orange basin portfolio where we are now appraising the exciting Venus discovery offshore Namibia.” In a statement released this morning, Africa Oil said it has submitted withdrawal notices on blocks 10BB, 13T and 10BA in Kenya “to unconditionally and irrevocably withdraw from the entirety of the joint operating agreements and production sharing contracts for these concessions”. The company has also submitted notices to Kenya’s Ministry of Energy & Petroleum, requesting the government’s consent to transfer all of its rights and obligations under the PSCs to Tullow. The carrying value of the Kenya was written down to $58.6 million as at 31 December 2022, with Africa Oil intending to further impair this value to zero.
Nigeria Hopes New Refinery Will Cut $26B Import Bill --Nigeria is banking on the operations of a giant new refinery, built by Africa’s richest man Aliko Dangote, to help it eliminate a $26 billion foreign-exchange bill on the import of petroleum products and fertilizer. The 650,000-barrels-per-day facility comprising a petrochemical and urea fertilizer plant as well as a subsea pipeline, could start supplying its first products into the market as early as July, Dangote said at a commissioning ceremony in Lagos on Monday. Nigeria imports almost all of its petroleum products despite being Africa’s top oil producer because its refineries have been largely non-operational for decades. The import bill for refined petroleum products alone averaged $11 billion from 2014 to 2017 before rising to $23.3 billion last year, central bank Governor Godwin Emefiele said at the event. Another about $3 billion was spent on fertilizer and other petrochemicals. “At this rate, the average annual cost of petroleum products imports to Nigeria could reach $30 billion by 2027 if we continued to rely on petroleum imports,” he said. Dangote was confident that the refinery, the biggest on the continent, will meet local fuel demand of about 450,000 barrels a day by the end of the year. Another 40% of production would be exported, once the plant is fully operational, he said, without giving a timeline. The development gives Dangote the possibility of dominating the refined-petroleum-products sector the way he has cement and sugar, two markets he effectively controls in Africa’s largest economy. The refinery, located in a free-trade zone in the country’s commercial hub, was first mooted in 2013, but construction didn’t start until 2017. Its completion was pushed back several times and it’s now being delivered seven years behind its initial projected deadline in 2016. It cost $18.5 billion to build, with 50% equity funding from Dangote and the balance in debt from mainly local banks. Only about $3 billion of the liabilities are outstanding, with Dangote having paid down the rest ahead of the refinery starting operations, Emefiele said. When fully operational, the complex is expected to earn as much as $21 billion in annual income, according to documents distributed at the commissioning.
Sinopec Enters Sri Lanka Retail Fuel Market -- Sri Lanka signed Monday a deal with China Petroleum & Chemical Corp. (Sinopec) adding it to the energy-starved country’s retail fuel suppliers, the president’s office said. The agreement comes after the government opened up to foreign fuel sellers as a solution to local suppliers’ shortage in foreign currency for imports amid an economic crisis in the South Asian nation. China state-owned Sinopec through Sinopec Fuel Oil Lanka (Pvt.) Ltd. can now import and sell petroleum products to the Sri Lankan market. “Sinopec, along with its affiliated companies, is set to commence operations in Sri Lanka within 45 days following the issuance of the license”, the office of President Ranil Wickremesinghe said in a press release. “This development brings hope for a more stable and reliable fuel supply, boosting the country’s energy sector and providing assurance to consumers”. The pact gives Sinopec a 20-year license to operate 150 fuel stations currently run by Ceylon Petroleum Corp., according to Power and Energy Minister Kanchana Wijesekera in a tweet Monday. It also provides for Sinopec investment into 50 new fuel stations, he said. The deal resulted from the energy ministry’s efforts to ensure domestic supply amid the debt-ridden country’s foreign exchange crisis, which has hit traditional suppliers Ceylon Petroleum Corp. and Lanka Indian Oil Co., according to the office. “One of the key requirements for new retail suppliers entering the market was their ability to secure forex requirements without depending on the domestic banking sector”, it noted. “It was mandated that these companies source their own funds for fuel procurement through foreign sources, at least during the initial one-year period of operation”.
Iran reduces gas supplies to Iraq - – The Iraqi Ministry of Electricity announced on Tuesday that Iran reduced gas supplies to Iraq by about 20 million cubic meters during the past two days, according to a statement cited by the Iraqi News Agency (INA). The statement explained that there are no late dues or debts Iraq should pay for the gas it imports from Iran. A delegation headed by the Iraqi Minister of Electricity will visit Iran next week to overcome possible obstacles, the statement revealed. Iraqi officials will inform the Iranian side that Iraq will soon be at the peak of electricity consumption due to summer’s high temperatures, according to the statement. The Iraqi Ministry of Electricity set a plan to reach electricity production of 24,000 megawatts per day, the statement illustrated. The demand for electric power could rise to 35,000 megawatts, and this will negatively affect the Iraqis because electricity production will not be sufficient for consumption in Iraq, the statement mentioned. The Iraqi Ministry of Electricity emphasized that its work will continue to improve and develop the national grid.
Iraq Awaits Turkey’s Go-Ahead To Resume Kurdistan Oil Exports - Iraq is waiting for a final go-ahead from Turkey before resuming oil exports from the semi-autonomous Iraqi region of Kurdistan via a pipeline to the Turkish Mediterranean port of Ceyhan, Iraqi Oil Minister Hayan Abdel-Ghani told Reuterson Tuesday. Kurdistan’s oil exports have been halted for two months now and it will probably take weeks, not days, for oil flows to Ceyhan and to the international markets to resume, according to an Iraqi oil official.Turkish pipeline operator BOTAS has yet to receive instruction from Turkish authorities to resume oil flows from Kurdistan, the official told Reuters on Monday.“We’re talking about weeks, not days, as an expected time frame to resume exports. This issue is more political now than technical,” the source told Reuters.Iraqi oil minister Abdel-Ghani said on Tuesday that Turkey told Iraq that a technical team was evaluating whether the pipeline was damaged as a result of the February earthquake in Turkey and Syria.Kurdistan’s crude oil exports – around 400,000 bpd shipped through an Iraqi-Turkey pipeline to Ceyhan and then on tankers to the international markets – were halted on March 25 by the federal government of Iraq.The suspension of oil flows out of northern Iraq and Kurdistan via Ceyhan forced companies to either curtail or suspend production because of limited capacity at storage tanks.A few days before the halt of exports in March, the International Chamber of Commerce had ruled in favor of Iraq against Turkey in a dispute over crude flows from Kurdistan. Iraq argued that Turkey shouldn’t allow Kurdish oil exports via the Iraq-Turkey pipeline and Ceyhan without approval from the federal government of Iraq. Now that an agreement between Iraq and Kurdistan is in place for the resumption of exports, Iraq is awaiting a response from Turkey. Pipeline operators have not yet received instructions to resume flows and most of Kurdistan’s large oilfields remain shut in.
The Market Awaited News on Further Debt Ceiling Negotiations -- The oil market on Monday traded higher after the market rebounded as traders awaited the resumption of U.S. debt ceiling talks. The market breached its previous low of $70.63 and traded to a low of $70.55 in overnight trading before it bounced off that level and rallied higher. The market retraced its losses and posted a high of $72.36 in afternoon trading after House Speaker, Kevin McCarthy, said debt ceiling negotiations were productive on Monday morning, hours before his scheduled meeting with President Joe Biden on the issue. However, the June WTI contract, gave up some of its gains ahead of its expiration at the close of business. It went off the board up 44 cents at $71.99, while the July WTI contract settled up 36 cents at $72.05. The July Brent contract settled up 41 cents at $75.99. Meanwhile, the heating oil market settled up 42 points at $2.3664 and the RB market ended the session sharply higher, up 7.28 cents at $2.6489. Bloomberg reported House Speaker Kevin McCarthy as saying debt ceiling negotiations were productive on Monday morning, hours before he was scheduled to meet with President Joe Biden on the issue. He said talks over raising the $31.4 trillion debt ceiling were “on the right path” but added that there is no deal yet.OPEC Secretary General, Haitham Al Ghais, said that underinvesting in the oil and gas sector could cause market volatility in the long term and affect growth. He also said the world needs to focus on reducing greenhouse gas emissions rather than replacing one form of energy with another, stressing that major investments were needed in all energy sectors. Mike Muller, president of Vitol Asia, said oil demand is set to increase in the second half of the year with as much as 2 million bpd more needed led by Asian growth. He said demand will increase seasonally and result in stock draws which will mean less excess supply available. He also saw any recession being offset by more constructive factors that would affect the oil market and would "manifest itself in a mild recession, if any".Analysts from Goldman Sachs and JP Morgan said voluntary OPEC+ production cuts have taken effect from May. A JP Morgan analyst said "Latest export data suggest that the eight OPEC+ producers are delivering on their pledges to cut supply." Total exports of crude and oil products from the group fell by 1.7 million bpd by May 16th. JP Morgan said "Our view remains that Russia has cut its oil production by 500,000 bpd from February levels and its exports will likely align with production by late May." Later, Goldman Sachs said increasing fears of a U.S. recession and a China slowdown are likely weighing on oil prices. It said “We estimate that forward curves are pricing all the main bearish risks to our $95/barrel December 2023 Bren forecast.” It said we view the oil market was too pessimistic and expect sustained deficits from June as OPEC+ production cuts fully realize.IIR Energy reported that U.S. oil refiners are expected to shut in 394,000 bpd of capacity in the week ending May 26th, increasing available refining capacity by 160,000 bpd. Offline capacity is expected to fall to 170,000 bpd in the week ending June 2nd.
Oil Gains as Traders Assess Supply Outages, Default Risk -- In tight-range trading, West Texas Intermediate futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled with modest gains Monday, as investors balanced concerns over supply disruptions in Canada and Iraq against potential risk of U.S. defaulting on its debt after high-stakes talks to raise debt ceiling between Biden Administration and House Republicans hit an impasse. Turkey has officially rejected a request from the Iraq government to restart the pipeline transporting oil from Kurdistan to the Mediterranean port of Ceyhan, citing "technical issues." More than 450,000 bpd of crude exports from the Kurdish region of Iraq are now being shuttered indefinitely with no timeline available for a potential restart. A representative for General Energy, a company operating in the Taq Taq oilfield near the regional capital of Erbil, said the 75,000-bpd oilfield has now stopped producing due to the extended stoppage of pipeline flow. Taq Taq is one of three fields that have underpinned Kurdistan's oil production growth over the past decade. The dispute between Turkey and Iraq erupted in late March after Paris-based International Chamber of Commerce ruled that Turkey owed Iraq $1.5 billion for receiving unauthorized exports from Kurdistan between 2014 and 2018. The oil exports from the Kurdistan Region were expected to restart in April following a trilateral deal, but Turkey has not given the green light to export. With a contested presidential election in Turkey set for a runoff on May 28, it is unlikely that the issue will be resolved this month, according to traders. Meanwhile, in Canada more than 2.7 million bbl in daily oil production is now threatened by wildfires that have been burning through the Western region of Alberta since late April. Unusually high temperatures for this time of the year have aided the intense spring wildfires in western Canada, displacing thousands of people and destroying property. Satellite images show that a toxic cloud of burned particles has blanketed the region and dipped across the border into the United States. Against this backdrop, traders assess potential ramifications of the U.S. defaulting on its debt obligations amid an ongoing standoff between the White House and House Republicans. Roughly 20% of income in America comes from the U.S. government in one form or another, including social security checks, Medicaid, Medicare, and unemployment benefits. An abrupt loss of this income would be catastrophic for millions of American households, causing havoc for domestic and global economies all at once. Most economists agree that the government default would lead to a deep recession, making it more difficult for businesses and citizens to borrow money. WTI futures for June delivery expired at $71.99 bbl, up $0.44 bbl, and next month July futures settled a tad above $72 bbl at $72.05 bbl. International crude benchmark Brent advanced $0.41 to settle at $75.99 bbl. NYMEX RBOB June futures rallied $0.0728 to $2.6489 gallon, while ULSD June futures firmed to $2.3664 gallon
Oil Prices Rise As Saudi Energy Minister Threatens Short Sellers - Oil prices rose by nearly 2% early on Tuesday after the Saudi energy minister warned short sellers to “watch out” and as seasonal demand for fuel is set to rise at the start of the U.S. driving season this weekend.As of 9:00 a.m. EDT on Tuesday, WTI Crude, the U.S. benchmark, was up by 1.93% at $73.44. The international benchmark, Brent Crude, traded at $77.29, up by 1.71% on the day.Earlier on Tuesday, Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, warned traders, again, against shorting oil futures, less than two weeks before the OPEC+ panel on production policy meets on June 4.Considering that OPEC+ wrong-footed short sellers when it announced a surprise production cut in early April, today’s comments from the most important oil official in the world’s top crude oil exporter shouldn’t be dismissed, analysts say.Meanwhile, negotiations on raising the U.S. debt ceiling continue after President Joe Biden and House Speaker Kevin McCarthy said on Monday that they had “productive” talks. President Biden said all agreed that “default is not really on the table.”Oil speculators might be wary of carrying too many shorts into the next OPEC+ meeting on June 4, according to ING strategists Warren Patterson and Ewa Manthey.“Positioning data shows that there is still a sizeable gross short in ICE Brent, however, these shorts will want to be careful as we approach the next OPEC+ meeting, which is scheduled for 4 June. OPEC+ have surprised the market a couple of times recently, so market participants may be reluctant to carry too much risk into this meeting,” they said on Tuesday.“Speculators have recently increased their gross short position in WTI and Brent to near the level that was seen prior to the April 2 OPEC+ production cut, and with the Saudi Energy Minister once again telling speculators to “watch out” some (short sellers) may have second thoughts.”
Oil Rallies as US PMIs Signal Summer Gains in Oil Demand -- West Texas Intermediate and RBOB futures nearest delivery settled Tuesday's session higher, propelled by expectations for stronger demand gains this summer amid an ongoing upturn in U.S. business activity and signs of solid consumer discretionary spending ahead of the busy summer travel season, while the ULSD contract was an outlier, softening in afternoon trading. U.S. business activity expanded at the sharpest pace in over two years in May, according to the S&P Purchasing Managers' Index survey, with the headline index jumping to a 13-month high 54.5. The reading was well above consensus for a 52.6-reading. The expansion was once again led by service providers, who reported stronger demand conditions heading into the summer months. Although manufacturers registered growth in production, it was only marginal and slowed from the previous survey period. "While service sector companies are enjoying a surge in post-pandemic demand, manufacturers are struggling with over-filled warehouses and a dearth of new orders as spending is diverted from goods to services," This shift in spending patterns, however, is supportive for U.S. gasoline demand that correlates closely with consumer discretionary spending. American Automobile Association projects a 2.7 million or 7% increase in travel demand for the Memorial Day weekend, expecting 42.3 million Americans to travel 50 miles or more from their home. If realized, it would be the third busiest travel for the holiday, with AAA beginning its holiday travel outlook in 2000. "More Americans are planning trips and booking them earlier, despite inflation. This summer travel season could be one for the record books, especially at airports," said Paula Twidale, senior vice president of AAA Travel. Of that total, 37.1 million Americans expected to drive to their destinations, up more than two million or 6% from a year ago. Nearly 3.4 million travelers are expected to fly to their destinations over the weekend holiday, up 11% from 2022, and 170,000 more passengers or 5.4% higher than before the pandemic in 2019. If realized, air travel would be the busiest since 2005. Tuesday's higher settlements in the oil complex also follow comments from Saudi Arabia's energy minister Prince Abdulaziz bin Salman, who again warned short sellers against taking on bearish positions. The energy minister, speaking at the Qatar Economic Forum in Doha, told speculators looking to short the crude market to "watch out," or they would again be "ouching." His comments come ahead of a planned meeting by the Organization of the Petroleum Exporting Countries on June 4. According to CME OPEC Watch Tool, 70% of investors expect no change to the group's production policy next month, however a growing number of speculators believe the Saudi-led coalition could surprise the markets once again by cutting crude output. On April 2, OPEC announced a surprise production cut of 1.157 million bpd that took effect on May 1, but the output curb failed to support prices beyond a couple of weeks. At settlement, WTI futures for July delivery were up $0.86 to 72.91 bbl, and ICE July Brent, the international crude benchmark, advanced to $76.84 bbl. NYMEX June RBOB futures were $0.0133 higher at $2.6622 gallon. Moving in an opposing direction, the June ULSD contract softened $0.0047 for a $2.3617 gallon settlement.
Oil rises as US gasoline supplies tighten, Saudi says: 'watch out' (Reuters) -Oil prices rose on Tuesday on forecasts for a tighter gasoline market and a warning from the Saudi energy minister to speculators that raised the prospect of further OPEC+ output cuts. Brent crude futures rose 85 cents, or 1.1%, to settle at $76.84 a barrel, while the U.S. West Texas Intermediate crude (WTI) ended at $72.91 a barrel, up 86 cents, or 1.2%. Both benchmarks extended gains to about 2% in post-settlement trade, after figures from the American Petroleum Institute (API) showed a large draw in crude and gasoline last week, according to market sources. If official inventories data from the Energy Information Administration, due on Wednesday, confirm the industry body's figures, U.S. gasoline inventories would have declined for the third straight week to their lowest pre-Memorial Day levels since 2014. The Memorial day holiday, this year on May 29, traditionally marks the beginning of U.S. peak summer travel. U.S. gasoline futures rose 2% on Tuesday after the API data. Production cuts by some OPEC+ members take effect this month. Fears of a supply squeeze mounted after Saudi Arabia's energy minister said he would keep short sellers - those betting that prices will fall - "ouching" and told them to "watch out". The comments could mean the Organization of Petroleum Exporting Countries and allies including Russia will consider further output cuts at a meeting on June 4, . Some felt oil's upside was limited by U.S. debt ceiling jitters. Another round of debt ceiling talks ended on Tuesday with no signs of progress as the deadline to raise the government's $31.4 trillion borrowing limit or risk default ticked closer. "(Oil) prices are likely to remain within their broad year to date trading range as the economy continues to slow while the refill of the Strategic Petroleum Reserve and OPEC manages prices relative to global demand needs,"
Oil Prices Rise On Signs Of A Tightening Market --Oil prices rose in Asian trade early on Wednesday, following estimates of a large U.S. inventory draw and a warning from the Saudi energy minister for short sellers. In early morning trade in Europe, Brent Crudewas up above $78 per barrel, at $78.06, rising by 1.63%. The U.S. benchmark, WTI Crude, had risen by more than 1.81% and traded at $74.23. Crude oil prices rose for a third consecutive day early on Wednesday, after gains on Monday and Tuesday, as the American Petroleum Institute (API) estimated late on Tuesday that crude oil inventories in the United States fell by 6.70 million barrels last week, compared with analyst expectations of a 525,000-barrel build.Gasoline inventories dropped by 6.398 million barrels after falling in the week prior by 2.46 million barrels. Distillate inventories declined by 1.771 million barrels after decreasing by 886,000 barrels in the week prior, API’s data showed. If the API data is confirmed by the U.S. Energy Information Administration (EIA) later on Wednesday, this would send U.S. gasoline inventories to the lowest level just before Memorial Day since 2014.The U.S. continues to be stuck over negotiations on raising the debt ceiling, which has weighed on market sentiment in recent weeks.However, Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, on Tuesday warned traders, again, against shorting oil futures, less than two weeks before the OPEC+ panel on production policy meets on June 4.The comments from the most important oil official in the world’s top crude oil exporter raised speculation that OPEC+ could surprise markets again when the ministers of the alliance meet in early June.“Energy traders have quickly learned that when it comes to oil prices, you ‘Don’t fight the Saudis’ as they will do whatever it takes to defend prices,”
WTI Extends Gains After Huge Crude Draw, 8th Straight Week Of SPR Drains - Oil prices are extending gains from yesterday after API's reported big crude and gasoline draws which supported earlier gains from comments by the Saudi oil minister on Tuesday warning oil short-sellers should "watch out" ahead of OPEC+'s ministerial meeting set for the first weekend of June."His comments highlighting growing unease (about) the weakness seen during the past month. Some of which has been driven by fresh short selling with the latest Commitment of Traders data showing short sellers have made a comeback. In the week to May 16 the combined gross short in WTI and Brent, held by money managers and Other Reportables reached a near two-year high at 233 million barrels, a 111 million barrel increase in the last five weeks and 40 million barrels higher than the gross short that was registered ahead of the April 2 production cut," Ole Hansen, head of commodity strategy at Saxo Bank, said in a post.With US equity markets chilled by the reality of debt ceiling impasse, crude's next move is as likely driven by a sizable swing in inventories as by some irksome headline from Washington. API
- Crude -6.799mm (+700k exp)
- Cushing +1.711mm
- Gasoline -6.398mm (-1.3mm exp) - biggest draw since Sept 2021
- Distillates -1.771mm (+300k exp)
DOE
- Crude -12.46mm (+700k exp) - biggest draw since Nov '22
- Cushing +1.762mm
- Gasoline -2.05mm (-1.3mm exp)
- Distillates -561k (+300k exp)
The official data confirmed API but was far larger with a 12.5mm barrel crude draw - the biggest draw since Thanksgiving 2022... For the 8th straight week, the Biden admin drew down from the SPR (1.6mm barrels)... Gasoline stocks are at their lowest since 2014 for this time of year... Distillate stocks are at their lowest seasonal level since 2005...The drilling rig count has been in free-fall in recent weeks, recording the largest monthly decline since 2020 after plunging by 35 in just the last three weeks. Initially, declines were largely concentrated among gas rigs, but the slump has since spread into crude operators. As Bloomberg reports, US oil production has pinballed between 12.2 million and 12.3 million barrels a day since January, reflecting the stagnation in drilling activity that took hold in late 2022. A continued pullback in activity may result in a similar regression in crude output in the coming months, especially amid apparently waning productivity from shale wells, possibly snuffing out the chance to surpass pre-pandemic highs anytime soon.
Oil Extends Gains on Summer Demand Outlook as Stocks Slide - -- New York Mercantile Exchange oil futures and Brent crude traded on the Intercontinental Exchange settled Wednesday's session with gains between 1.5% and 2% following the weekly inventory report from the U.S. Energy Information Administration showing a 12.5 million bbl drop in commercial crude oil inventories during the third week of May as demand for gasoline jumped to the second highest weekly rate so far this year ahead of the upcoming three-day holiday weekend that unofficially kicks off the summer travel season. Midmorning inventory data proved bullish for the oil complex, confirming an outsized draw in commercial crude oil inventories last week despite another transfer of crude from the Strategic Petroleum Reserve to the commercial side and a rise in domestic oil production. At 455.2 million bbl, U.S. commercial oil inventories now stand 3% below the five-year average. The draw came even as domestic refiners scaled back the run rate to 91.7% of capacity, processing 16.1 million bpd, roughly the same volume compared to last week. In the gasoline complex, demand for the transportation fuel jumped 529,000 bpd from the previous week to 9.437 million bpd -- the second-highest weekly rate so far this year, according to EIA. Gains for gasoline demand come ahead of the Memorial Day weekend that typically marks the beginning of the busy summer travel season. The American Automobile Association projects 42.3 million Americans will take to the road this Memorial Day weekend, a 2.7 million or 7% increase from a year earlier. If realized, it would be the third busiest travel for the holiday, with AAA beginning its holiday travel outlook in 2000. Commercial gasoline inventories declined by 2.1 million bbl in the reviewed week and are about 8% below the five-year average. Earlier in the week, analysts estimated gasoline stocks would decline by 1.3 million bbl. For diesel, stockpiles fell by 561,000 bbl to 105.7 million bbl, and are now about 18% below the five-year average, EIA said. Analysts estimated distillates inventories would rise by 300,000 bbl last week. Further spurring gains in the oil complex, Saudi oil minister Prince Abdulaziz bin Salman suggested OPEC+ could consider cutting oil production further at their early June meeting to squeeze out short sellers. "I keep advising them that they will be ouching -- they did ouch in April," Prince Abdulaziz bin Salman said at the Qatar Economic Forum in Doha on Tuesday, according to Reuters. "I don't have to show my cards, I am not a poker player…but I would just tell them: Watch out!" On April 2, OPEC announced a surprise production cut of 1.157 million bpd effective May 1 until the end of the year, with Saudi Arabia and other Gulf producers shouldering the lion's share of that output curb. The reduction comes on top of the 2 million bpd cut announced in October 2022 that has so far been the largest cut to OPEC+ output since the start of the pandemic. Arguably, Saudi oil strategy is to defend prices by any means necessary as the kingdom seeks to transition from oil in the coming decades and needs higher prices now to finance this project. OPEC+ will meet next on June 3-4 in Vienna to review production policy for the second half of the year and analysts say another surprise cut should not be ruled out. At settlement, WTI futures for July delivery rallied $1.43 to 74.34 bbl, and ICE July Brent, the international crude benchmark, advanced to $78.36 bbl, up $1.52. NYMEX June RBOB futures settled $0.0590 higher at $2.7212 gallon, while June ULSD futures added $0.0520 to $2.4137 gallon.
Oil down nearly 3% as Russia downplays additional OPEC+ cuts - Oil prices fell on Thursday after Russian Deputy Prime Minister Alexander Novak played down the prospect of further OPEC+ production cuts at its meeting next week. Brent crude futures were down $2.03, or 2.6%, to $76.33 a barrel by 1340 GMT. U.S. West Texas Intermediate crude (WTI) fell $2.10, or 2.8%, to $72.24. “I don’t think that there will be any new steps, because just a month ago certain decisions were made regarding the voluntary reduction of oil production by some countries…” Novak was quoted as saying by Izvestia newspaper. Top OPEC+ producers have given a raft of conflicting messages about next oil policy moves in recent days, making it particularly difficult to predict the outcome of the next meeting. Oil prices were supported by a warning from Saudi Arabia’s energy minister on Tuesday that short-sellers betting oil prices will fall should “watch out” for pain. Some investors took that as a signal that the Organization of Petroleum Exporting Countries (OPEC) and allies including Russia, together called OPEC+, could consider further output cuts at a meeting on June 4. Oil prices buoyed by Saudi warning and falling U.S. stockpiles “The obvious reading is that the Kingdom may either unilaterally cut oil production or orchestrate a wider OPEC+ reduction …thereby supporting prices and stinging speculators that are shorting oil,” analysts at bank MUFG said. Just a week before Prince Abdulaziz’s comment, Russian President Vladimir Putin said that oil production cuts were required to maintain a certain price level. Uncertainty over the U.S. debt ceiling also weighed on prices. Some progress had been made but several issues remained unresolved in negotiations, House Speaker Kevin McCarthy said on Thursday, as the deadline ticked closer to raise the federal government’s $31.4 trillion borrowing limit or risk default. Meanwhile, price declines were limited by an unexpected, massive fall in U.S. crude oil inventories in the week to May 19 reported by the Energy Information Administration on Wednesday. U.S. crude inventories fell by 12.5 million barrels to 455.2 million barrels as imports declined. Analysts had expected an 800,000-barrel rise. Gasoline inventories dropped by 2.1 million barrels in the week to 216.3 million barrels, the EIA said, while distillate stockpiles fell by 600,000 barrels to 105.7 million barrels.
The Oil Market on Thursday Retraced Nearly all of its Gains Earlier This Week -The oil market on Thursday retraced nearly all of its gains seen earlier this week as Russia downplayed the prospect of further OPEC+ production cuts at its meeting next week. The market traded mostly sideways and posted a high of $74.37 in overnight trading. However, the market breached its previous low and began its sharp selloff of over $3.30 as it posted a low of $70.98 by mid-day. The market was pressured after Russia’s Deputy Prime Minister, Alexander Novak, said he did not believe additional OPEC+ cuts were likely. The crude market was also weighed down by the uncertainty surrounding the U.S. debt ceiling. The July WTI contract later retraced some of its losses ahead of the close and settled down $2.51 at $71.83. The July Brent contract settled down $2.10 at $76.26. Meanwhile, the product markets also settled in negative territory, with the heating oil market settling down 6.75 cents at $2.3462 and the RB market settling down 4.77 cents at $2.6735. Top OPEC producers and their main allies have given conflicting messages about their next oil policy moves, making it particularly difficult to predict the outcome of the next OPEC+ meeting in early June. Remarks by Saudi Arabian Energy Minister Prince Abdulaziz bin Salman warning short sellers to “watch out” pushed the market up by as much as 2%. His comments were interpreted by some investors as a signal that OPEC and its allies could consider further output cuts when it meets on June 4th in Vienna. Last week, Russian President Vladimir Putin seemed to be on the same page saying that oil production cuts were required to maintain a certain price level. However, a week later, Russia’s President said oil prices were approaching “economically justified” levels, indicating there could be no immediate change to the group's production policy. On Thursday, Russia’s Deputy Prime Minister, Alexander Novak, said he expected no new steps from the OPEC+ group of oil producers at its meeting in Vienna on June 4th. The state-owned news agency RIA reported that Russia’s Deputy Prime Minister expects the price of Brent crude to be above $80/barrel by the end of the year. The U.S. will hold its first sale of oil and gas drilling rights on federal lands since the passage of President Joe Biden's climate change law, with more than 10,000 acres on offer in New Mexico and Kansas. Colonial Pipeline Co is allocating space for Cycle 32 shipments on Line 20, which carries distillates from Atlanta, Georgia to Nashville, Tennessee. The National Oceanic and Atmospheric Administration said the Atlantic hurricane season will bring an average number of ocean storms and hurricanes this year. NOAA forecasters estimate 12 to 17 named storms of which five to nine of those will develop into hurricanes and one to four will become major hurricanes during the June 1st to November 30th season. NOAA Administrator Rick Spinrad said there is a 40% chance of a normal hurricane season and 30% chances each of an above-average or below-average season. Meanwhile, Matthew Rosencrans, NOAA's lead hurricane forecaster, said NOAA estimates a 93% chance of an El Nino weather phenomenon during the core hurricane season.
Oil up over weaker dollar amid uncertainties of OPEC+ next output move - Oil prices rose on Friday over a weakening US dollar, making dollar-indexed crude oil cheaper for investors, while contradicting statements of top OPEC+ ministers raised market uncertainties ahead of the group’s impending meeting, Kazinform cites Anadolu Agency. International benchmark Brent crude traded at $76.40 per barrel at 09.56 a.m. local time (0656 GMT), a 0.18% rise from the closing price of $76.26 a barrel in the previous trading session on Friday. The American benchmark West Texas Intermediate (WTI) traded at the same time at $72.08 per barrel, up 0.35% from the previous session's close of $71.83 per barrel. The declining value of the dollar was the main factor driving the increase in dollar-indexed oil prices on the last day of the week. The US dollar index, which measures the value of the American dollar against a basket of currencies, including the Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc, declined 0.16% to 104.01 early Friday. However, risks still remain as the credit rating agency Fitch on Wednesday placed the US’s triple-A rating on watch for a possible downgrade while discussions are ongoing on the debt limit in the country. Fitch expressed confidence in a potential agreement but noted that the risk that the government would default on certain of its commitments had grown. House Speaker Kevin McCarthy, however, said negotiations with the White House over raising the US debt limit were still hung up over a disagreement on future spending plans. Meanwhile, commercial crude oil inventories in the country recorded a massive plummet of around 12.5 million barrels to 455.2 million barrels, higher than the American Petroleum Institute's expectation of a drop of 6.7 million barrels. The markets are currently monitoring a forthcoming meeting of the OPEC+ group, and investor concern has increased due to conflicting statements made by two of the organization's key producers, Russia and Saudi Arabia. Investors anticipate that OPEC+ producers will decide to reduce output once more starting next week after Saudi Energy Minister Abdulaziz bin Salman warned oil traders to «watch out.» However, Russia's deputy prime minister Alexander Novak hinted that the group's present production strategy will continue when he declared on Thursday that energy prices were approaching «economically justified» levels. Novak also said the price of Brent crude oil may slightly exceed $80 per barrel by the end of this year, fueled by an increase in demand in the summer and OPEC+ output reductions.
Oil Posts Weekly Gain as US Rig Count Falls -- New York Mercantile Exchange oil futures and Brent crude traded on the Intercontinental Exchange settled Friday's session higher, with West Texas Intermediate notching a weekly gain after the number of oil-targeted rigs in the United States decreased for the fourth consecutive week through May 26th to the lowest level in a year amid higher operating costs as inflation unexpectedly accelerated heading into the summer months. Personal Consumption Expenditures index, the Federal Reserve's preferred inflation measure, picked up pace to 0.4% in April as consumer spending accelerated, lifting the annualized rate of inflation to 4.4%. Analysts mostly expected a softer monthly reading of 0.3% and for a 4.3% yearly advance. Core PCE, which excludes the energy and food categories to provide a less volatile picture of underlying inflation, increased at an even faster rate of 4.7% over the last 12 months. That is a problem for Fed officials who voiced their concern over the slow pace of disinflation, particularly in the services sector. Services continue to be the major driver of U.S. inflation, with core PCE stuck just under 5% for the past six months. The April reading for inflation comes at a time when investors are increasingly wondering if the Fed will hike interest rates again at their June 14th Federal Open Market Committee meeting. Immediately after the data release, investors repriced the odds for another increase in the federal funds rate when they meet next month, with over 60% of investors anticipating the central bank would lift the overnight bank borrowing rate to a 5.25% to 5.5% target range. Further supporting the case for another rate hike, figures released Thursday by the Labor Department show initial jobless claims for the week ended May 20 remained little changed at 229,000, roughly in line with 2019 pre-pandemic average of 218,000 first-time claim filings. Despite the most aggressive rate hiking campaign in decades, the labor market remains a strong point in the cooling economy, exerting upward pressure on wages and prices paid in the services industry. Faced with these headwinds, domestic producers reduced the number of oil-targeted rigs by five this week to 570, the lowest oil rig count since May 13, 2022, according to data from Baker Hughes this afternoon. Permian basin in west Texas, east New Mexico, the most prolific basin in the United States, recorded a weekly oil rig tally of 350, only marginally higher from the 342 rigs recorded in the comparable week a year ago. The number of active rigs in Permian decreased for three out of past four weeks. WTI crude continues to trade above $70 per barrel (bbl), which is considered a favorable price environment for exploration and production activity. However, the U.S. rig count has been falling consistently in recent weeks, raising concerns that issues facing domestic producers are structural in nature, including regulatory burdens and labor shortages among others. Baker Hughes data also shows a decline in natural gas-targeted drilling by four to 137 rigs. June natural gas futures on NYMEX expired down $0.126 at $2.181/MMBtu three-week low Friday amid high storage, which is up 29% against the comparable period in 2022. At settlement, WTI futures for July delivery advanced $0.84 to $72.67 bbl, and ICE July Brent, the international crude benchmark, gained $0.69 to $76.95 bbl. NYMEX June RBOB futures settled $0.0299 higher at $2.7034 gallon, and June ULSD futures moved up $0.0231 to $2.3693 gallon.
US, British, French Naval Commanders Transit Hormuz Strait in Message to Iran - The Middle East-based naval commanders from the US, British, and French navies transited the Strait of Hormuz on a US warship on Friday in an unusual show of force aimed at Iran.The US Navy’s Fifth Fleet said its commander, Vice Adm. Brad Cooper,made the transit with his British and French counterparts aboard the guided-missile destroyer USS Paul Hamilton.The show of unity near Iran’s coast came after the White House announced that the US was increasing its military presence in the Persian Gulf following Iran’s seizure of two oil tankers. Before Iran seized the two tankers, the US seized a ship in the region that was carrying Iranian oil and stole its cargo. The US has a history of taking Iranian oil and gas shipments using sanctions enforcement as a pretext.Tensions between the US and Iran have been soaring since indirect negotiations between the two countries to revive the nuclear deal, known as the JCPOA, failed in the fall of 2022. Axios reported last week that the US had proposed to Israel to conduct joint military planning on potential attacks on Iran.
US Building New Base in Northern Syria - The US is building a new military base in Syria’s northern province of Raqqa, The New Arab reported, citing a source close to the Kurdish-led Syrian Democratic Forces (SDF).The US backs the SDF and keeps about 900 troops in eastern Syria, allowing the US to control about one-third of Syria’s territory. The report said there are currently about 24 US-led military sites spread throughout eastern Syria. While the US says it’s in Syria to fight ISIS, the presence is part of Washington’s economic war against Damascus, which includes crippling economic sanctions. ISIS also holds no significant territory, and the Syrian government and its allies would continue to fight the remnants of the terror group if the US withdrew. But the construction of a new base demonstrates the US plans to continue the occupation indefinitely. In March, the House voted downa resolution introduced by Rep. Matt Gaetz (R-FL) that would have ordered President Biden to withdraw from Syria. The legislation failed in a vote of 103-321, with 56 Democrats and 47 Republicans voting in favor of the bill.The House also recently voted to maintain sanctions on Syria after an earthquake killed thousands of Syrians. Only two members of Congress voted against the legislation.The US could come under pressure to withdraw from Syria and lift sanctions on the country as more and more regional countries are normalizing ties with the government of Syrian President Bashar al-Assad. Saudi Arabia spearheaded an effort to bring Syria back into the Arab League despite US objection.
Pentagon Admits It Doesn't Know Who It Killed in Syria Drone Strike - US military officials are walking back claims that a drone strike Central Command (CENTCOM) launched on May 3 in northwest Syria killed a senior al-Qaeda leader after evidence emerged that a civilian was killed. When the strike was first launched in Syria’s northwest Idlib province, reports immediately emerged that the strike killed a sheep herder with no ties to any militant groups. The Associated Press spoke with family members and neighbors of the victim, Lotfi Hassan Misto, who insisted he was innocent. According to The Washington Post, Misto was a 56-year-old father of 10, and the paper spoke with terrorism experts who said it was unlikely he was affiliated with al-Qaeda.“We are no longer confident we killed a senior AQ official,” an unnamed military official told the Post. Another official claimed the person they killed was al-Qaeda but offered no evidence. “Though we believe the strike did not kill the original target, we believe the person to be al-Qaeda,” the official said. CENTCOM’s initial press release on the strike did not name the person they killed. Since then, the command has refused to share any details of the operation or say why they could have targeted the wrong person.The US military is notorious for undercounting civilian casualties or lying about them. The Pentagon is also known for investigating itself and finding no wrongdoing, even in instances of significant civilian deaths, such as the August 2021 Kabul drone strike that killed 10 civilians, including seven children.
Netanyahu Government Says Doubled Airstrikes in Syria - Israel’s defense minister said Monday that the Israeli government of Prime Minister Benjamin Netanyahu doubled airstrikes in Syria since taking power in late December 2022.“Since I took office, the number of Israeli strikes against the Iranians in Syria have doubled,” Israeli Defense Yoav Gallant said.While Israel frames its airstrikes in Syria as operations against Iran, and they occasionally kill Iranians, the strikes often kill or woundSyrian soldiers and civilians. This year, Israel targeted Syria’s Aleppo airport several times following an earthquake that devastated the city.Israeli officials rarely comment on individual airstrikes in Syria, and Gallant would not offer a number on how many strikes have been launched by the Netanyahu government. He claimed the operations are weakening Iran’s capabilities in Syria.“As part of this campaign, we are working methodically to strike the Iranian intelligence capabilities in Syria,” he said. “These strikes inflict significant damage to the attempts by the Revolutionary Guard to establish a foothold a few kilometers from the Israeli border.”The uptick in Israeli airstrikes came as Netanyahu has been facing a political crisis over a planned judicial overhaul. There has also been a surge in violence against Palestinians, including a recent bombing campaign in Gaza.
Israeli Military Chief Says 'We Have the Ability to Hit Iran' - The head of the Israeli Defense Forces (IDF) threatened Tuesday that Israel could soon take action against Iran over its nuclear program and said the IDF has “the ability to hit Iran.”Iran is currently enriching some uranium at 60%, a step the country took in response to an Israeli sabotage attack on its Natanz nuclear facility in 2021. But Tehran has still shown no sign that it’s decided to develop a nuclear weapon, which requires uranium enriched at 90%.But IDF Chief of Staff Lt. Gen. Herzi Halevi claimed there are potential developments in Iran’s nuclear program that could spark Israeli military action. “Without going into details, there are possible negative developments on the horizon that could prompt action,” he said.“We have abilities and others have abilities. We have the ability to hit Iran. We are not indifferent to what Iran is trying to build around us, and it is difficult for Iran to be indifferent to the line we are taking,” Halevi added. Often missing from the conversation about Iran’s nuclear program is the fact that Israel has a secret nuclear arsenal. Israeli officials push a narrative that a nuclear-armed Iran would spark an arms race in the region while their own country already has nukes.Also on Tuesday, Israeli National Security Adviser Tzachi Hanegbi said the US and Israel agreed on what the “red line” would be for an attack on Iran related to its nuclear program but didn’t specify what the red line is. “We are sending the message — so is the US — that if you cross the red line, the price you will pay as a regime and as a country is one you wouldn’t want to pay, so be careful,” he said. Hanegbi’s comments came after Axios reported that the US had proposed to start conducting joint military planning with Israel on Iran. According to the report, Israeli officials are wary that the US proposal could be meant to tie their hands and are seeking clarification on what joint planning would entail.
Why The Middle East Will Be Vital In Any U.S.-China Conflict -If the United States and China ever enter into conflict, one of the key battlegrounds could be the Middle East. China has been busily trying to shore up its energy security and diversify its energy portfolio around the world, but the country remains heavily dependent on the Middle East for oil. Unfortunately for Beijing, the United States retains a significant amount of leverage and military might in the region which could be used as a powerful weapon in a war of wills between the two global superpowers. Maintaining a reliable and increasing energy supply is crucial to the well-being and continued growth of the Chinese economy. But as the country continues to develop, Beijing is having a hard time keeping up with demand. For several years in a row, China has suffered major rolling blackouts, with entire cities sometimes going dark for extended periods. And last year, China’s energy industry underwent an extreme stress test as drought crippled the domestic hydropower sector at the same time that the global energy market was in crisis due to a myriad of factors stemming from Russia’s invasion of Ukraine. Beijing has been hard at work increasing the size and breadth of its own energy empire, paying special attention to increasing its energy footprint in developing countries with large and mostly untapped energy production potential. Back in 2020, Barron’s proclaimed that China had already become “the center of gravity for global energy markets”, and its sphere of influence has only continued to grow since then. On top of Beijing’s heavy investing in other nation’s burgeoning energy markets, China has also blown everyone else away in terms of clean energy spending in recent years. But it’s still not enough to fill the country’s nearly insatiable hunger for additional energy supply.It’s clear that Beijing is extremely worried about the precariousness of China’s energy security as the country’s economy continues its upward trajectory and demand continues to skyrocket. The country remains hugely dependent on imports to meet its energy needs. It is the second biggest consumer of oil in the world, after the United States, and an incredible 72% of this is imported. The Middle East alone is responsible for about half of those imports. This renders the country extremely vulnerable to energy sanctions or other kinds of strategic energy blockading. Indeed, the Suez Canal, the Bab al-Mandab, and the Strait of Hormuz are all critical shipping routes that could be blocked with relative ease by Middle Eastern leaders.The United States is well aware of this Achilles heel, and U.S. Central Command (CENTCOM) has openly discussed the possibility of wielding its influence in the Middle East to ensure leverage over China if one of the many sources of tension between the oft-altercating superpowers were ever to come to a head.“God forbid there’s ever a conflict with China, but we could end up holding a lot of their economy at risk in the CENTCOM region,” General Erik Kurilla, the commander of U.S. Central Command, said in a congressional hearing in March of this year. The United States has built up a considerable and enduring military presence in the Middle East after decades of involvement in and waging wars in the region, including the wars in Iraq, Afghanistan, and against the Islamic State. Instability from these conflicts and power vacuums left by ousted regimes has led to considerable instability in the region, resulting in heavy reliance on U.S. aid and military presence in many countries. As such, many of these countries are tightly aligned with the U.S. and host tens of thousands of troops – a number that could increase many-fold at the drop of a hat thanks to established bases, relationships, and infrastructure on the ground. “U.S. posture in the Middle East remains significant,” Defense Department official Celeste Wallander wrote in a statement to Congress.“DoD is ready to rapidly flow significant forces into the region and to integrate those forces with partners based on decades of military cooperation to enhance interoperability and address any contingency,” Wallander noted.
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