US oil production at a 40 month high; gasoline supplies at a 8 month low; DUC backlog at 5.1 months

US oil production at a new post pandemic high; gasoline supplies at a new eight month low; natural gas rigs at an eighteen month low; DUC backlog at 5.1 months

US oil prices fell for the first ​week in eight week on weak economic data from China and fears of an extended period of higher US interest rates ...after inching up 0.4% to $83.19 a barrel last week after the EIA, OPEC, and the International Energy Agency (IEA) all forecast tighter supplies and growing demand for oil, the contract price for the benchmark US light sweet crude for September delivery slipped in Asian trading on Monday on a firmer US dollar and on a sluggish China recovery and continued to sputter during the New York trading session amid a summertime slump in liquidity, leaving the commodity at the mercy of volatile broader markets​, before settling 68 cents lower at $82.51 a barrel after China's largest real estate developer suspended payments on its bond obligations, with additional price pressure coming from the news that Nigerian Forcados crude exports had resumed...oil prices rose in Asia early on Tuesday on news of surprise rate cuts in China as the Chinese central bank attempted to stimulate the sluggish China recovery by easing borrowing costs for financial institutions, but then turned lower after China’s industrial output and retail sales data showed the economy slowed further in July, and slid further in New York on fears that China’s unexpected rate cut was not substantial enough to support the country’s post-pandemic recovery...oil prices slipped slightly in Asia trade Wednesday.as concerns over the sluggish China recovery and the disappointing economic data recently released overshadowed news of depleting US oil stockpiles, but were little changed at the open in New York, with both oil benchmarks halting the week's losses as traders balanced concerns over the health of China's economy against tight supplies from the OPEC+ coalition, but then extended the week's losses after the EIA reported that crude production was nearing its pre-Covid highs, and further extended its losses to a low of $79.28 following the release of the Fed minutes in which officials said inflation risks could require further tightening, and thus settled the session down $1.61 at $79.38 a barrel as a stronger U.S. dollar tied to prospects for tighter monetary policy further pressured the oil complex...oil prices edged up in Asian trading Thursday, after China's central bank said it would keep liquidity reasonably ample and maintain “precise and forceful” policy to support economic recovery to stem the rising tide of pessimism over the country's property market, then retraced most of the losses seen during the prior session in New York as tightening crude supplies took center stage, sidelining concerns about the Chinese economy and US monetary policy, as September oil settled $1.01 higher at $80.39 a barrel on bullish optimism following the vow by Beijing’s central bank to get its economy moving...oil prices crept higher in Asia on Friday as the focus turned to consolidation after the general level of risk appetite had “taken a knock from strengthening macroeconomic headwinds from China growth to rising rate concerns”, then continued to rally during New York trading, finding support from falling​ US crude oil inventories and signs of a tightening global market. and settled 86 cents or about 1.1% higher at $81.25 a barrel after industry data showed that the U.S. oil and natural gas rig count fell for the sixth week in a row, but still finished 2.3% lower on the week, ending the seven-week winning streak on worries about the Chinese economy and fears that interest rates would remain higher for longer...

US natural gas prices also finished lower, falling for a sixth time in eight weeks, on milder weather forecasts and an underwhelming demand for air conditioning... after rising 7.5% to $2.770 per mmBTU last week as a strike among LNG workers in Australia led European gas prices to spike 40%, the contract price of US natural gas for September delivery opened 2 cents higher on Monday on forecasts for above average temperatures for most of the country, but traded in a narrow range for the rest of the session before settling 2.5 cents higher at $2.795 per mmBTU as hotter-than-normal weather kept cooling demand high, with consumption forecast to rise further into next week...however, natural gas prices opened 7 cents lower on Tuesday in response to a bearish shift in short-term weather forecasts and traded below that level for the rest of the session before settling down 13.6 cents at $2.659 per mmBTU on forecasts for lower demand into next week along with relatively high output...natural gas prices were marked down another 3 cents by the opening bell on Wednesday​, as cooling demand was forecast to decline to close out the month and retreated from that level to settle 6.7 cents cents lower at ​$2.592 per mmBTU as easing weather-driven demand expectations cooled a market hoping for late-summer heat to whittle away at a healthy supply cushion...natural gas prices opened 4 cents higher Thursday and rose to an intraday high of $2.670 at 10:00AM ahead of the storage report, but retreated after the print to settle just 2.9 cents higher at $2.621 per mmBTU as the injection of gas into storage was largely in line with expectations of a smaller-than-normal storage build....with the storage report offering no bullish surprises, natural gas prices were ​again undercut by the lack of intimidating heat heading into late August on Friday, and settled down 7.0 cents at $2.551 per mmBTU, and thus ended 7.9% lower on the week...

The EIA's natural gas storage report for the week ending August 11th indicated that the amount of working natural gas held in underground storage in the US increased by 35 billion cubic feet to 3,065 billion cubic feet by the end of the week, which left our natural gas supplies 549 billion cubic feet, or 21.8% above the 2,516 billion cubic feet that were in storage on August 11th of last year, and 299 billion cubic feet, or 10.8% more than the five-year average of 2,766 billion cubic feet of natural gas that were in working storage as of the 11th of August over the most recent five years… however, natural gas supplies were still 8.7% below normal for this date in the EIA region defining the Pacific states, while 13.6% above normal in the South Central region of the country at the same time....the 35 billion cubic foot injection into US natural gas working storage for the cited week was largely in line with the 34 billion cubic feet addition to supplies that was expected by industry analysts surveyed by Reuters, but was more than the 21 billion cubic feet that were added to natural gas storage during the corresponding week of 2022, while less than the average 41 billion cubic feet addition to natural gas storage that has been typical for the same summer 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 August 11th indicated that after a big jump in our oil exports and an increase in refining, we had to pull oil out of our stored commercial crude supplies for the 13th time in twenty weeks, and for the 15th time in the past 34 weeks, as our production of oil also ticked up to a post pandemic high....Our imports of crude oil rose by an average of 476,000 barrels per day to 7,158,000 barrels per day, after rising by an average of 14,000 barrels per day the prior week, while our exports of crude oil rose by 2,239,000 barrels per day to average 4,599,000 barrels per day, which combined meant that the net of our trade in oil worked out to a net import average of 2,559,000 barrels of oil per day during the week ending August 11th, 1,763,000 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 12,700,000 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 15,259,000 barrels per day during the August 11th reporting week…

Meanwhile, US oil refineries reported they were processing an average of 16,746,000 barrels of crude per day during the week ending August 11th, an average of 166,000 more barrels per day than the amount of oil that our refineries were processing during the prior week, while over the same period the EIA’s surveys indicated that an average of 766,000 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 August 11th appear to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was 721,000 barrels per day less than what our oil refineries reported they used during the week. To account for that obvious disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a [ +721,000 ] 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 error of that magnitude in the week’s oil supply & demand figures that we have just transcribed.... However, since most oil traders respond to these weekly EIA reports as if they were 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 had hoped to do about it)

This week's 766,000 barrel per day decrease in our overall crude oil inventories came as an average of 851,000 barrels per day were being pulled out of our commercially available stocks of crude oil, while an average of 86,000 barrels per day were being added to the oil in our Strategic Petroleum Reserve, the second increase in the SPR since July 10th, 2020....however, outside of the July lows, the 348,354,000 barrels of oil that still remain in our Strategic Petroleum Reserve would still be the lowest since August 19th,1983, as repeated tapping of our emergency oil 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 withdrawals of last year. However, those Biden administration withdrawals 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 18 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 slipped to an average of 6,719,000 barrels per day last week, which was​ still 4.1% more than the 6,452,000 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 a forty month high of 12,700,000 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 12,300,000 barrels per day, while Alaska’s oil production was 7,000 barrels per day lower at 384,000 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 still 3.1% below that of our pre-pandemic production peak, but was 30.9% 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 94.7% of their capacity while using those 16,746,000 barrels of crude per day during the week ending August 11th, up from their 93.8% utilization rate during the prior week, ​b​ut a utilization rate that's ​still in the normal range for early August... The 16,746,000 barrels per day of oil that were refined this week were 2.0% more than the 16,423,000 barrels of crude that were being processed daily during week ending August 12th of 2022, but 3.2% less than the 17,302,000 barrels that were being refined during the prepandemic week ending August 9th, 2019, when our refinery utilization rate was at 94.8%, also in the normal range for this time of year...

Even with the increase in the amount of oil being refined this week, the gasoline output from our refineries was ​lower, decreasing by 336,000 barrels per day to 9,585,000 barrels per day during the week ending August 11th, after our refineries' gasoline output had increased by 92,000 barrels per day during the prior week. This week’s gasoline production was 3.8% less than the 9,965,000 barrels of gasoline that were being produced daily over the same week of last year, and 6.1% less than the gasoline production of 10,203,000 barrels per day during the prepandemic week ending August 9th, 2019.   At the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 182,000 barrels per day to 4,911,000 barrels per day, after our distillates output had increased by 50,000 barrels per day during the prior week.  With that decrease, our distillates output was 8.7% less than the 5,178,000 barrels of distillates that were being produced daily during the week ending August 12th of 2022, and 6.9% less than the 5,077,000 barrels of distillates that were being produced daily during the week ending August 9th, 2019...

With this week's decrease in our gasoline production, our supplies of gasoline in storage at the end of the week fell for the nineteenth time in twenty-six weeks, decreasing by 262,000 barrels to an eight month low​ of 216,158,000 barrels during the week ending August 11th, after our gasoline inventories had decreased by 2,661,000 barrels during the prior week. Our gasoline supplies fell by less this week because the amount of gasoline supplied to US users fell by 451,000 barrels per day to 9,302,000 barrels per day, and because our exports of gasoline fell by 60,000 barrels per day to 881,000 barrels per day, while our imports of gasoline fell by 98,000 barrels per day to 586,000 barrels per day.....And after nineteen gasoline inventory decreases over the past twenty-six weeks, our gasoline supplies were at another eight month low, just 0.2% above last August 12th’s gasoline inventories of 215,674,000 barrels, and about 6% 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 increased for the tenth time in twenty-three weeks, rising by 296,000 barrels to 115,447,000 barrels during the week ending August 11th, after our distillates supplies had decreased by 1,706,000 barrels during the prior week. Our distillates supplies rose this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 114,000 barrels per day to 3,648,000 barrels per day, and because our imports of distillates rose by 64,000 barrels per day to 129,000 barrels per day, and because our exports of distillates fell by 291,000 barrels per day to 1,167,000 barrels per day....With 35 inventory increases over the past sixty-five weeks, our distillates supplies at the end of the week were 3.1% above the 112,256,000 barrels of distillates that we had in storage on August 12th of 2022, but are still about 16% below the five year average of our distillates inventories for this time of the year...

Finally, with the ​n​ear doubling of our oil exports, our commercial supplies of crude oil in storage fell for the 15th time in 33 weeks and for the 25th time in the past year,​ decreasing by 5,960,000 barrels over the week, from 445,622,000 barrels on August 4th to 439,662,000 barrels on August 11th, after our commercial crude supplies had increased by 5,851,000 barrels over the prior week.  With this week's decrease, our commercial crude oil inventories were about 1% below the most recent five-year average of commercial oil supplies for this time of year, but were about 30% above the average of our available crude oil stocks as of the second weekend of August over the 5 years at the beginning of the past decade, with the difference 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, only to jump again following the Christmas 2022 refinery freeze offs, our commercial crude supplies as of this August 11th were 3.5% more than the 424,954,000 barrels of oil we had in commercial storage on August 12th of 2022, and were 0.9% more than the 435,544,000 barrels of oil that we still had in storage on August 13th of 2021, but were 14.2% less than the 512,452,000 barrels of oil we had in commercial storage on August 14th of 2020, after early pandemic precautions had left a lot of oil unused…

This Week's Rig Count

The number of drilling rigs active in the US decreased for the fifteenth time over the past sixteen weeks during the week ending August 18th, and is now 19.0% below the prepandemic rig count, despite increasing ninety-six times during the 123 weeks of the post pandemic recovery... Baker Hughes reported that the total count of rotary rigs drilling in the US fell by 12 rigs to 642 rigs over the past week, which was 120 fewer rigs than the 762 rigs that were in use as of the August 19th report of 2022, and was also 1,287 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, a week before OPEC began to flood the global market with oil in an attempt to put US shale out of business. .

The number of rigs drilling for oil was down by 5 to 520 oil rigs during the past week, after the number of rigs targeting oil was unchanged during the prior week, leaving 81 fewer oil rigs active now than were running a year ago, as they now amount to just 32.3% of the shale era high of 1,609 rigs that were drilling for oil on October 10th, 2014, while they are now down 23.9% from the prepandemic oil rig count of 683….at the same time, the number of drilling rigs targeting natural gas bearing formations fell by 6 to ​to an 18 month low of 117 natural gas rigs, which left natural gas rigs down by 42 from the 159 natural gas rigs that were drilling during the same week of 2022, as they now amount to less than 7.3% 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 reports that six rigs they've labeled as "miscellaneous" continued drilling this weekdown by one from a week ago...miscellaneous rigs still operating this week included a vertical rig drilling to between 5,000 and 10,000 feet in Beaver county Utah, a directional rig drilling to between 5,000 and 10,000 feet on the big island of Hawaii, a horizontal rig drilling to more than 15,000 feet into the Williston basin in Dunn county, North Dakota, 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 vertical rig drilling to more than 15,000 feet into a formation in Lincoln county Wyoming, also into a formation unnamed by Baker Hughes...the vertical rig targeting the Marcellus at between 10,000 and 15,000 feet in Monongalia county West Virginia was shut down this week,..in the past we've identified various "miscellaneous" rig activity as being for exploration rather than production, for geothermal energy, and for carbon dioxide storage...

The offshore rig count in the Gulf of Mexico was down by one to 16 rigs this week, and included 14 rigs drilling for oil in Louisiana's offshore waters, and two drilling for oil in Texas waters....the Gulf rig count now matches the 16 Gulf rigs running a year ago, when all 16 Gulf rigs were drilling for oil offshore from Louisiana…in addition to Gulf rigs, there is also a directional rig drilling for oil at a depth of between 10,000 and 15,000 feet, offshore from the Kenai Peninsula of Alaska, while there were two rigs drilling offshore from Alaska in that same area during the same week a year ago, hence, the national total of 17 rigs drilling offshore this week is down 1 from the national offshore count of 18 a year ago..

In addition to rigs drilling offshore, there are also four inland water based deployed this week, all in Louisiana, and down from five last week...they include a directional rig drilling for oil at a depth of between 10,000 and 15,000 feet in Lafourche Parish, a directional rig drilling for oil at a depth of between 10,000 and 15,000 feet through an inland body of water in Saint Mary Parish; a directional rig drilling for oil at a depth of less than 5,000 feet on inland waters in Lafourche Parish, and a directional rig drilling for oil at over 15,000 feet through an inland body of water in Terrebonne Parish Louisiana....a year ago, there were three such rigs drilling on inland waters...

The count of active horizontal drilling rigs was down by 7 to 572 horizontal rigs this week, which was also 122 fewer rigs than the 694 horizontal rigs that were in use in the US on August 19th of last year, and is now down 58.4% from the high of 1,374 horizontal rigs that were drilling on November 21st of 2014… meanwhile, the directional rig count was down by 1 to 52 directional rigs this week, but those were still up by 3 from the 39 directional rigs that were operating during the same week a year ago....at the same time, the vertical rig count was down by 4 to 18 vertical rigs this week, but those were down by11 from the 29 vertical rigs that were in use on August 12th 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 August 18th, the second column shows the change in the number of working rigs between last week’s count (August 4th) and this week’s (August 18th) count, the third column shows last week’s August 11th active rig count, the 11th 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 19th of August, 2022...

Louisiana's three rig drop included one that had been drilling offshore, and two in the northern parts of the state, one of which had been drilling for natural gas in the Haynesville shale...in the Appalachian natural gas ​b​asins, two gas rigs were pulled out of Ohio's Utica shale, two gas rigs and a miscellaneous rig were pulled out of West Virginia's Marcellus, while two gas rigs were added back in Pennsylvania's Marcellus.....elsewhere, North Dakota drillers pulled two oil rigs from the Bakken shale in the Williston basin, and in Oklahoma, they pulled three oil rigs out of the Cana Woodford and added one in the Granite Wash, while in Wyoming, a rig was pulled from one of the basins not tracked by Baker Hughes....

checking the Rigs by State file at Baker Hughes for the changes in Texas Permian, where oil rigs were up by one to 323, while natural gas rigs were down by one to four, we find that there was one rig added in Texas Oil District 7C, which overlies the southern Permian Midland, while rigs in all other Texas Permian districts were unchanged...hence, since the Texas Permian count is up by one while the national count was unchanged, we can conclude that the rig pulled out of New Mexico had been drilling for natural gas in the far western Permian Delaware, in the southeast corner of that state....elsewhere in Texas, there was a rig pulled out of Texas Oil District 1, while there was a rig added in Texas Oil District 3, and another rig added in Texas Oil District 4; all of which likely represent offsetting changes in the Eagle Ford shale, which was unchanged for the week...Texas also saw a rig pulled out of Texas Oil District 6, which was likely from a basin not tracked by Baker Hughes since the Haynesville​ shale change i​s already accounted for, as well as a rig pulled out of Texas Oil District 10, also likely from a basin not tracked by Baker Hughes, since the Granite Wash saw a rig increase.....on net, basins not tracked by Baker Hughes accounted for the loss of two natural gas rigs and​ of two oil rigs, over and above the basin changes we've noted above...

DUC well report for July

Monday of this ​past week saw the release of the EIA's Drilling Productivity Report for August, which included the EIA's July data on drilled but uncompleted (DUC) oil and gas wells in the 7 most productive shale regions (click tab 3)....that data showed a decrease in uncompleted wells nationally for the 3​4​th time out of the past 37 months, as drilling of new wells fell in July, while completions of drilled wells rose, but both remained well below the average pre-pandemic levels...for the 7 sedimentary regions covered by this report, the total count of DUC wells decreased by just 5 wells, falling from a revised 4,792 DUC wells in June to 4,787 DUC wells in July, which was also 9.1% fewer DUCs than the 5,241 wells that had been drilled but remained uncompleted as of the end of July of a year ago...this month's DUC decrease occurred as 957 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during July, down by just 3 from the 930 wells that were drilled in June, while 932 wells were completed and brought into production by fracking them, up from the 927 well completions seen in June, but down by 63 from the 995 completions seen in July of last year....at the July completion rate, the 4,787 drilled but uncompleted wells remaining at the end of the month represents a 5.1 month backlog of wells that have been drilled but are not yet fracked, up from the 5.0 month DUC well backlog of a month ago, and up from the 7 1/2 year low of 4.4 months of eight months ago, on a completion rate that is now roughly 20% below 2019's pre-pandemic average...

Oil basin DUCS fell in July while natural gas basin DUCs were higher, even as three out of the seven basins covered by this report saw no net DUC change....the number of uncompleted wells in the Bakken of North Dakota decreased by 10, from 510 DUC wells at the end of June to 500 DUCs at the end of July, as 70 new wells were drilled into the Bakken during July, while 80 already drilled wells in the region were being fracked....at the same time, DUC wells in the Niobrara chalk of the Rockies' front range decreased by 1, falling from 717 at the end of ​J​une to 716 DUC wells at the end of July, as 105 wells were drilled into the Niobrara chalk during July, while 106 Niobrara wells were completed...Meanwhile, the number of DUC wells in the in the Permian basin of west Texas and New Mexico was unchanged at 856 DUCs at the end of July, as 460 wells were drilled into the Permian during July, while 460 of the drilled wells in the Permian basin were being fracked.....at the same time, DUCs in the Eagle Ford shale of south Texas were also unchanged, with 480 Eagle Ford DUCs at the end of July, as 92 wells were drilled in the Eagle Ford during July, while 92 of the already drilled Eagle Ford wells were fracked....in addition, the number of uncompleted wells  remaining in Oklahoma's Anadarko basin remained at 739 DUC wells at the end of July, as 51 wells were drilled into the Anadarko basin during July, while 51 Anadarko wells were completed....

among the natural gas producing regions, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, decreased by six wells, from 716 DUCs at the end of June to 710 DUCs at the end of July, as 92 new wells were drilled into the Marcellus and Utica shales during the month, while 98 of the already drilled wells in the region were fracked....on the other hand, the uncompleted well inventory in the natural gas producing Haynesville shale of the northern Louisiana-Texas border region rose by 12, from 774 DUCs in June to 786 DUCs by the end of July, as 57 wells were drilled into the Haynesville during July, while just 45 of the already drilled Haynesville wells were fracked during the same period....thus, for the month of July, DUCs in the five major oil-producing basins tracked by this report (ie., the Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) decreased by 11 to 3,291  DUC wells, while the uncompleted well count in the major natural gas basins (the Marcellus, the Utica, and the Haynesville) increased by 6 to 1,496 DUC wells, although as this report notes, once into production, more than half the wells drilled nationally will produce both oil and gas...

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Ohio gas company wants to 'offset' its emissions. Environmentalists say it's 'greenwashing' – One of the largest distributors of fossil fuel-based natural gas to Ohio homes wants to give customers the option to “offset” the carbon emitted by the gas they buy. Under the proposal to state regulators, Dominion Energy, which serves 1.2 million customers throughout eastern and northeastern Ohio via its subsidiary East Ohio Gas Company, would task its gas suppliers with planting trees or investing in renewables to balance out the carbon emissions of gas used by customers. Instead of reducing carbon emissions by shifting to nuclear, wind or solar energy generation, the company says it can obtain “net zero” by compensating elsewhere for the planetary heat-trapping effect of the gas it delivers. Dominion, not the Public Utilities Commission of Ohio, would verify that “Decarbon Ohio” gas suppliers acquired enough offsets through “carbon registries” that certify them, according to a company spokeswoman. “By providing customers a supply option that offsets the carbon emissions related to their consumption of natural gas, the implementation of the program would allow [Dominion], its customers, and suppliers to make meaningful contributions to both the reduction of emissions and the support of sustainable investments,” the company said in a legal filing. Dominion pitched the idea as a voluntary means for customers to reduce their carbon footprints. Customers would be able to choose from a range of suppliers, including a set that would take steps to offset their carbon emissions and those that would not. So far, Dominion has said it won’t charge customers extra for choosing suppliers that offset carbon emissions, but a final decision will rest with PUCO. But economists and environmentalists say there’s widespread evidence that the purported offsets don’t reduce emissions in any meaningful way, and they don’t trust a major fossil fuel company to help mitigate climate change. Joe Romm, of the University of Pennsylvania Center for Science, Sustainability and the Media, published a 50-page whitepaper arguing that carbon credits are “unscalable, unjust and unfixable.” In an interview, he said even the “Decarbon Ohio” marketing points to “magical thinking” – investing in renewable energy somewhere else doesn’t remove any carbon from the atmosphere in Ohio. He said the proposal is just a form of “greenwashing” – feigning environmental interest for public-relations purposes without accomplishing much of substance. “The program that has been proposed by Dominion is basically one to deceive the public. I don’t know how else to put it,” he said. “The serious people about climate change are pretty rapidly moving away from using carbon offsets for making claims about carbon neutrality.” The PUCO will rule on Dominion’s request in the coming months. But other Ohio players are in the ballpark. NiSource, via its subsidiary Columbia Gas, also recently asked the PUCO to launch an offset program, but it later dropped the idea. Duke Energy allows customers to purchase a “GoGreen rider,” charging them $1 per month for the purchase of “renewable energy certificates”— buying renewable generation elsewhere to “match” the fossil fuel-derived energy used at home.

Aubrey McClendon's Dream of Oil in Ohio Utica Turns into Reality | Marcellus Drilling News - Folks new to the Marcellus/Utica may not know this, but Chesapeake Energy’s then-CEO Aubrey McClendon first “discovered” the Ohio Utica about 15 years ago. Under McClendon, Chesapeake spent over $2 billion acquiring rights to drill 1.3 million acres in Ohio–or roughly 5% of the state’s land area. McClendon pegged the value of the Utica for Ohio at half a trillion dollars. He famously said the Ohio Utica is “the biggest thing economically to hit Ohio, since maybe the plow.” McClendon was tossed out of the company he founded by corporate raider Carl Icahn, so he started a new company (to target the Ohio Utica) that eventually became Ascent Resources. Tragically, McClendon died in March 2016, so he never got to see his dream turn into reality (see Stunned: Former Chesapeake CEO Aubrey McClendon Dies in Car Crash). McClendon’s dream has now become reality. His original assets are now owned by several companies, including Ascent, Encino Energy, and EOG Resources. These companies are having major success with producing oil from the Ohio Utica in the northern part of the play.

Fitch Affirms Encino Acquisition Partners, LLC's IDR at 'B'; Outlook Stable - Fitch Ratings - - Toronto - 14 Aug 2023: Fitch Ratings has affirmed Encino Acquisition Partners Holdings, LLC's and Encino Acquisition Partners, LLC's (together, Encino) Long-Term Issuer Default Ratings (IDRs) at 'B'. The Rating Outlook is Stable. In addition, Fitch has affirmed Encino's senior unsecured note at 'B'/'RR4'.Encino's IDR reflects the company's sizable Utica basin position, competitive unit economics, the ability to effectively transport gas out of basin to advantaged price points, long-dated debt maturity with expected leverage to remain below 2.0x over Fitch's forecast, adequate liquidity, and strong hedge profile.These considerations are offset by the company's current inability to generate material positive free cash flow and relatively high firm transportation costs. Encino has reported negative FCF since 2018, which Fitch expects to continue in 2023. Encino is expected to be FCF positive in 2024 and 2025 under Fitch's price deck and production assumptions. In the near term, Encino will focus on oil production vs. natural gas and NGL's due to the relatively stronger economic returns. Fitch expects that capex over the rating cycle will be approximately $800 million in 2023, $750 million in 2024 and $700 million per annum thereafter and that FCF will be applied to debt reduction.Encino's firm transportation (FT) costs are among the highest of Fitch's monitored natural gas producers. Encino inherited these long-dated firm transportation agreements for natural gas takeaway which causes significant exposure at low pricing. However, these high FT contracts provide Encino with advantaged pricing versus in-basin sales and provides Encino has sufficient takeaway capacity at current volumes. In addition, management is attempting to mitigate these higher costs through higher liquids production going forward.Encino holds a large wet gas asset base in the Utica basin, with over 900,000 net acres, 300,000 of which the company considers to be core. The acreage is spread across the Utica shale basin, which provides optionality in drilling plans, allowing EAP to drill dry gas and wet gas wells depending on economics or pipeline commitments and constraints. Encino is the second largest producer in the Ohio Utica behind Ascent Resources, although its production is lower than most Fitch-rated natural gas peers. The company has focused on drilling where the condensate mix is greater to boost overall realized pricing and has a relatively high percentage of condensate and NGLs in its production base relative to peers.Encino has a two-to three-year rolling hedging program, ultimately hedging up to 80% of total production. Fitch estimates that Encino has approximately 70% of expected natural gas production for the remainder of 2023 hedged at $2.45 and approximately 65% of forecasted oil hedged at $55.63. The company also has hedges in place on condensate, ethane and propane. Fitch views the current plan of hedging favorably as it reduces cash flow volatility and locks in returns for the company.Sub-2.0x Mid-Cycle Leverage: Fitch's base case forecasts gross EBITDA leverage at 1.8x in 2023 and remains under this threshold at Fitch's $57 mid-cycle WTI price assumption. Fitch believes the high-quality asset profile combined with Encino's hedge position provides support for FCF generation and gross debt repayment toward management's long-term leverage target of 1.5x.Encino's rating reflects the company's size, relatively low leverage, and favorable netbacks. Encino is smaller than other gas-oriented peers at approximately 1,223 million cubic feet equivalent per day (mmcfepd) produced in 1Q2023, which is lower than the largest Utica basin producer, Ascent Resources (B/Positive) at 2,198 mmcfepd. Encino is slightly below Comstock Resources (B+/Stable) at 1,414 mmcfepd.Encino has strong netbacks given that 36% of its production are liquids, which is materially higher than other predominately natural gas producers. Although production expenses are relatively higher than its peer group, this is offset by a much higher realized unhedged commodity price. Encino had a Fitch calculated unhedged netback of $2.5 per thousand cubic feet equivalent per day (mcfepd) compared with Ascent ($1.8/mcfepd) and Comstock ($1.9/mcfepd).Encino's EBITDA leverage was 1.6x as of Dec. 31, 2023 and is expected to remain under 2.0x levered throughout the forecast period. This is within the range of other 'B' rated issuers, although Fitch anticipates the group to improve over the next two years.

A Pennsylvania study suggests links between natural gas drilling and asthma, lymphoma in children (AP) — Children who lived closer to natural gas wells in heavily drilled western Pennsylvania were more likely to develop a relatively rare form of cancer, and nearby residents of all ages had an increased chance of severe asthma reactions, researchers said in reports released Tuesday evening.The taxpayer-funded research by the University of Pittsburgh adds to a body of evidence suggesting links between the gas industry and certain health problems.In the reports, the researchers found what they called significant associations between gas industry activity and two ailments: asthma, and lymphoma in children, who are relatively rarely diagnosed with this type of cancer. The researchers were unable to say whether the drilling caused the health problems, because the studies weren’t designed to do that. Instead, the researchers combed health records to try to determine possible associations based on how close people lived to natural gas wells, while industry groups pointed to what they say are weaknesses of the studies’ assumptions and the limitations of its data. The reports were released at the start of a Tuesday evening public meeting to discuss the findings, hosted by University of Pittsburgh School of Public Health and the state Department of Health, on the campus of state-owned Pennsylvania Western University.At the meeting, community activists and distressed parents urged department officials and Pitt researchers to do more to protect public health as gas drilling continues to expand.Raina Rippel, former director of the Southwest Pennsylvania Environmental Health Project, called the findings the “tip of the toxic iceberg and we are only just beginning to understand what is out there.” There is, she warned, “a lot more cancer waiting in the wings.” In the cancer study, researchers found that children who lived within 1 mile (1.6 kilometers) of a well had five to seven times the chance of developing lymphoma compared with children who lived 5 miles (8 kilometers) or farther from a well. That equates to 60 to 84 lymphoma cases per million children living near wells, versus 12 per million among kids living farther away.For asthma, the researchers concluded that people with the breathing condition who lived near wells were more likely to have severe reactions while gas was being extracted compared with people who don’t live near wells. However, researchers said they found no consistent association for severe reactions during periods when crews were building, drilling and fracking the well. The four-year, $2.5 million project is wrapping up after the state’s former governor, Democrat Tom Wolf, in 2019 agreed to commission it under pressure from the families of pediatric cancer patients who live amid the nation’s most prolific natural gas reservoir in western Pennsylvania. An extremely rare form of bone cancer, Ewing sarcoma, had been diagnosed in dozens of children and young adults in a heavily drilled area outside Pittsburgh, and those families were instrumental in pushing Wolf to commission the study. Edward Ketyer, a retired pediatrician who sat on an advisory board for the study, called the asthma findings a “bombshell.” He said he expected that the studies would be consistent with previous research showing the “closer you live to fracking activity, the increased risk you have of being sick with a variety of illnesses.” “The biggest question is, why is anybody surprised about that?” said Ketyer, who is president of Physicians for Social Responsibility Pennsylvania.

10 New Shale Well Permits Issued for PA-OH-WV Aug 7 – 13 | Marcellus Drilling News --New shale permits issued for Aug 7 – 13 in the Marcellus/Utica crashed for a second week in a row. There were 10 new permits issued last week, down 14 issued the previous week (half of the 29 issued three weeks ago). Last week’s permit tally included 10 new permits in Pennsylvania, no new permits in Ohio, and no new permits in West Virginia (third week in a row for WV). The top permittee for the week was Chesapeake Energy, receiving 6 permits–4 in Bradford County and 2 in Susquehanna County. BRADFORD COUNTY | CHESAPEAKE ENERGY | ELK COUNTY | EQT CORP | GREENE COUNTY (PA) | SENECA RESOURCES |SUSQUEHANNA COUNTY | WASHINGTON COUNTY

Fidelis Launching Natural Gas-Fueled Hydrogen Project in West Virginia -Houston-based Fidelis New Energy LLC plans to build a carbon-neutral hydrogen facility in West Virginia using a combination of natural gas and renewable energy, in addition to carbon capture, utilization and storage (CCUS). The Mountaineer GigaSystem in Mason County would be completed in four phases, with the first phase expected to begin operations in 2028. Each phase could produce more than 500 metric tons/day of clean hydrogen. “I am beyond excited that West Virginia will be the home of the Mountaineer GigaSystem and Monarch Cloud Campus,” Gov. Jim Justice said. “West Virginia has a long history as an energy powerhouse for our nation…And now, we’re in a great position” to advance hydrogen. “There’s simply no doubt that Fidelis is going to help shape the... ©

US appeals court dismisses motion challenging permits for natural gas pipeline (AP) — A federal appeals court on Friday granted a motion to dismiss a challenge to construction permits for a controversial natural gas pipeline in Virginia and West Virginia after Congress mandated that the project move forward.The 4th U.S. Circuit Court of Appeals in Richmond, Virginia, sided with lawyers from Mountain Valley Pipeline in dismissing challenges to the project by environmental groups over concerns about the pipeline’s impact on endangered species, erosion and stream sedimentation.The U.S. Supreme Court last month allowed construction to resume. Work had been blocked by the 4th Circuit, even after Congress ordered the project’s approval as part of the bipartisan bill to increase the debt ceiling. President Joe Biden signed the bill into law in June. Lawyers for the company building the 300-mile (500-kilometer) pipeline argued before the appeals court two weeks ago that Congress was within its rights to strip the 4th Circuit from jurisdiction over the case. They also said that any debate over the law’s constitutionality should be heard not by the 4th Circuit but by an appellate court in Washington, because the law passed by Congress spells out that precise scenario.“Armed with this new legislation enacted specifically in their favor, Respondents — the federal agencies and the Mountain Valley Pipeline — moved in this Court for the dismissal of the petitions,” appeals judge James Wynn wrote. “Upon consideration of the matters before us, we must grant Respondents’ motions to dismiss.”Environmental groups have opposed the the $6.6 billion project, designed to meet growing energy demands in the South and Mid-Atlantic by transporting gas from the Marcellus and Utica fields in Pennsylvania and Ohio.“Mountain Valley Pipeline is a dangerous, destructive project that repeatedly failed in attempts to obtain federal authorizations that could withstand legal scrutiny until it convinced its friends in Congress to intervene," said Jessica Sims, the Virginia field coordinator for Appalachian Voices, an environmental organization. "We will not give up our efforts to protect the communities suffering the consequences of this unnecessary project.”

4th Circuit dismisses environmental cases against Mountain Valley Pipeline - A three-judge panel of the Richmond-based 4th U.S. Circuit Court of Appeals on Friday unanimously dismissed environmental groups’ legal challenges against the Mountain Valley Pipeline, saying Congress has eliminated the court’s jurisdiction over the cases.But two of the judges used their concurring opinions to raise questions about the precedent that is being set, with one wondering if the recent congressional action is “a harbinger of erosion not just to the environment, but to our republic,” and another saying that the 4th Circuit has “no clear guidance from the Supreme Court on where the line between legislative and judicial power lies.”Mountain Valley Pipeline had argued for the cases to be dismissed, citing the recently passed Fiscal Responsibility Act, which primarily suspended the nation’s debt ceiling so the federal government wouldn’t default on its obligations. The act also included language in its Section 324 that said timely completion of the $6.6 billion, 42-inch-diameter natural gas pipeline from West Virginia into southern Virginia is in the national interest.The act ordered the approval of all the pipeline’s remaining necessary permits, removed judicial review of those permits and said that only the D.C. Circuit Court of Appeals can hear any challenges to the pipeline provision’s constitutionality.Environmental groups including Appalachian Voices, the Sierra Club and the Wilderness Society were challenging the 303-mile pipeline’s right to cross through the federally protected Jefferson National Forest as well as a federal opinion that said the pipeline wouldn’t harm endangered species along its route.Pipeline opponents claimed that by removing the courts’ ability to review the pending cases against the pipeline, Congress effectively picked a winner — Mountain Valley — in those cases and therefore infringed upon the courts’ judicial power.In writing the opinion for the court, published Friday, Judge James Wynn Jr. said that Congress has the power to ratify federal agency approval, and while “Congress may not impermissibly tell this Court how to apply existing law,” it is constitutional for Congress to provide a new legal standard — in this case, Section 324 — and instruct the court to follow that standard. “Accordingly, because Congress has ratified the challenged agency actions, there is no longer a live controversy and the underlying petitions are moot. We therefore lack jurisdiction over them,” Wynn wrote. Wynn also noted that the Constitution grants Congress the power to create federal courts in the first place. “Provided it does not violate other constitutional provisions, Congress is widely seen to enjoy broad control over the jurisdiction of the federal courts,” Wynn wrote.Wynn noted that “the exact confines of Congress’s power over jurisdiction are still being debated, especially when it comes to jurisdiction-stripping efforts that appear to dictate the outcome of pending litigation.”But, he wrote, regardless of the merits of the environmental groups’ arguments, the 4th Circuit is not the court to consider them because Section 324 vests the D.C. Circuit, not the 4th Circuit, with jurisdiction over any claims of the act’s unconstitutionality.

Final Lawsuit Against MVP Holds on by a Thread in DC Circuit --- Marcellus Drilling News - In April, the U.S. Supreme Court breathed new life into a long-running lawsuit funded by Big Green groups using (abusing) a small group of uppity Virginia landowners who argue the Federal Energy Regulatory Commission (FERC) had no right to delegate authority to Mountain Valley Pipeline (MVP) to use eminent domain to cross land, including the land owned by the small group of uppity landowners in Virginia (see US Supreme Court Keeps MVP Eminent Domain Case Alive in Lower Court). The aim of the lawsuit is to prevent any private company from using eminent domain ever again to build public infrastructure. That lawsuit still hangs on by a thread in the U.S. Court of Appeals for the District of Columbia (D.C. Circuit). It is the last remaining lawsuit that could spell trouble for MVP and all pipelines.EIA Aug DPR: Shale Gas Production to Drop Second Month in Row - Marcellus Drilling News - The latest monthly U.S. Energy Information Administration (EIA) Drilling Productivity Report (DPR) for August issued yesterday (below) shows the EIA believes shale gas production across the seven major plays tracked in the monthly DPR for September will *decrease* production from the prior month of August. This is the second month in a row EIA predicts shale gas production will decrease for the combined seven plays. EIA says combined natgas production will slide by 147 MMcf/d (million cubic feet per day). The Marcellus/Utica, called “Appalachia” in the report, is predicted to slump by 22 MMcf/d in September compared with August.

Mountain Valley Pipeline needs more inspections, agency says - A Federal safety agency is calling for additional inspections of pipes that may have been compromised by exposure to the elements along the route of the Mountain Valley Pipeline. The U.S. Pipeline and Hazardous Materials Safety Administration may also require an independent, third-party review of a process to inspect the steel pipes and, where needed, reapply a protective coating designed to protect them from corrosion once they are buried. As legal challenges have delayed construction of the natural gas pipeline, prolonged exposure to sunlight — which can break down the fusion bonded epoxy coating applied to sections of the pipe — has taken its toll. PHMSA says a weakened pipe could be vulnerable to landslides or earth movement in the rugged mountain terrain and karst topography though which the 303-mile pipeline passes. Conditions may exist that “pose a pipeline integrity risk to public safety, property or the environment,” the agency said late Friday in its proposed safety order, which mentions explosions of other pipelines in similar landscapes. Mountain Valley, which says it has been doing “rigorous inspections” of the pipe since work resumed earlier this summer, welcomed additional oversight by state and federal agencies. “Safety has always been MVP’s top priority, and we are committed to meeting or exceeding all applicable regulations to ensure the safety of our employees, contractors, assets, and communities,” company spokeswoman Natalie Cox wrote in an email. Actions like the one taken by PHMSA are rare, said Richard Kuprewicz, an independent pipeline safety expert who is president of Accufacts Inc., a consulting firm in Redmond, Washington. “It’s a good thing what PHMSA has done,” Kuprewicz said Monday. ““In this case, they probably had a lot of good reasons.” In some places, including Bent Mountain in Roanoke County, pipes with coating that was applied in 2017 remain laid out along the project’s 125-foot-wide right of way. Industry standards call for such pipes to be above-ground for no longer than six months, unless additional coating is applied. Mountain Valley says more than 270 miles of pipe along the project’s 303-mile path through West Virginia and Southwest Virginia have already been buried, and that the coating met specifications at the time. The remaining pipe is inspected and, where necessary, scrubbed and sandblasted before an additional layer of coating is added. The company has declined to say how many times that has happened. Under PHMSA’s proposed order, Mountain Valley would be required to submit quarterly reports to the regulatory agency that include data and results of its testing and a description of the repairs. Already, inspections by PHMSA have identified questions about the project’s cathodic protection system — which entails sending low-voltage electricity to the buried pipe to limit corrosion — and several locations in West Virginia where the pipe was placed in rock-laden trenches without adequate support needed to prevent damage.

US Says Mountain Valley Pipe May Pose ‘Risk,’ Orders Testing (Bloomberg) -- A federal agency has ordered the owner of the controversial Mountain Valley Pipeline to undertake a series of safety inspections on the 300-mile project, arguing that segments of pipe left exposed or buried underground for years amid project delays could pose a safety risk. The review, issued by the Pipeline and Hazardous Materials Safety Administration, has the potential to result in cumbersome and expensive fixes for Equitrans Midstream Corp., which has already seen its project held up by legal challenges by environmental groups for years. “The commissioning and operation of the MVP pipeline without appropriate inspection and corresponding corrective measures first being undertaken would pose a pipeline integrity risk to public safety, property, and the environment,” the agency said in a Notice of Proposed Safety Order. The $6.6 billion pipeline project, which aims to provide drillers in the gas-rich Appalachian Basin with much-needed transport capacity, is backed by Senator Joe Manchin. The West Virginia Democrat succeeded in having language approving the beleaguered project woven into the legislation that was needed to lift the national debt limit. The must-pass debt ceiling legislation signed into law June 3 by President Joe Biden included a measure expediting the 300-mile line, which will cut through the Appalachian Mountains, a national forest and hundreds of stream crossings as it carries natural gas from Manchin’s home state of West Virginia to southern Virginia. A Manchin spokeswoman didn’t immediately respond to a request for comment on PHMSA’s order.

PHMSA Orders Safety Inspections of Buried & Unburied MVP Pipe - Marcellus Drilling News = Yesterday we told you the liars of the left are doing their best to sew disinformation and fear about Mountain Valley Pipeline (MVP) and the installation of the remaining 6% of the pipeline that’s not already in the ground (see MVP Antis Spread Lies About Pipes Sitting in the Sun Too Long). The fearmongering has had the desired effect. The Biden Pipeline and Hazardous Materials Safety Administration (PHMSA) issued orders to Equitrans Midstream, the builder of MVP, to undertake a series of safety inspections along the entire 303-mile project. The inspections include some segments already in the ground and pipeline segments stored aboveground.

Kentucky Utilities Looking to Retire, Replace Natural Gas Facilities, Add Renewables - Louisville Gas & Electric Co. (LG&E) and Kentucky Utilities Co. (KU) have filed a joint application requesting approval by the Kentucky Public Service Commission (PSC) to retire and replace three natural gas simple-cycle combustion turbines and four coal-fired electric generating units. Under the proposal, the utilities would replace the retired facilities with two natural gas combined-cycle facilities, as well as add two solar facilities, one battery storage facility and four solar power purchase agreements. If approved, the replacements could be online between 2026 and 2028, at a cost of almost $2.1 million, according to PSC’s William Coston, director of financial analysis. In testimony before the PSC regarding the application, the utilities’ President John Crockett..

Evacuation ordered after gas plant explosion; no injuries reported (AP) — An explosion Friday at a natural gas plant in Tennessee led to an evacuation order for people within a mile of the facility, but no injuries were reported, authorities said. The explosion happened at the Tennessee Gas Pipeline/Kinder Morgan facility located in Nunnelly, about 60 miles southwest of Nashville. A mandatory evacuation was ordered for residents within a 1-mile radius of the plant, the Hickman County Sheriff’s Office said. The Fairfield Church of Christ and the Nunnally Community Center were open for anyone needing shelter, officials said. An explosion and fire happened at a compressor station due to an equipment failure, Kinder Morgan said. The company said it plans to investigate what caused the equipment to fail. Local law enforcement and fire departments responded to the scene as well as hazmat crews with the Nashville Fire Department and Franklin Fire Department. Crews were still working to extinguish a small fire around noon, but there were no air quality concerns, said Amanda Siegel, Hickman County Emergency Management Agency director. It wasn’t clear when residents would be able to return to their homes, she said.

Hickman County gas plant explosion: Equipment failure named as cause, one person hospitalized - An equipment failure at the Tennessee Gas Pipeline/Kinder Morgan Facility in Hickman County caused an explosion forcing authorities to evacuate anyone in a one-mile radius. The explosion was first reported at the plant on Highway 48 in Nunnelly about 8:20 a.m., a spokesperson with Kinder Morgan said. "Kinder Morgan experienced an explosion and fire at one of the compressor buildings at a natural gas compressor station as a result of an equipment failure," the company said. Amanda Siegel, Hickman County Emergency Management Agency director, said shortly before noon Friday that one person was transported from the scene for a medical emergency that began after the explosion. Siegel said employees were evacuated after the explosion. Amy Baek, a spokesperson for Kinder Morgan, said six employees were on site during the explosion and were accounted for. The person transported to the hospital was released and is in good condition, Baek said. After seven hours, officials lifted the evacuation of the area shortly after 3 p.m. Friday, according to Hickman County Dispatch Center. Siegel said environmental agencies are on the scene and the plant has been shut down. Other buildings away from the explosion site will remain open and operational. All personnel were evacuated and accounted, the company said. Kinder Morgan plans to investigate what caused the equipment to fail, they said. Local law enforcement and fire departments as well as HAZMAT crews with the Nashville Fire Department and Franklin Fire Department responded to the scene and shut down Highway 48 to handle the situation. Siegel said there is a small fire that crews are still working to extinguish but there's no air quality concerns at this time. Two shelters are in place at the Fairfield Baptist Church and the Nunnelly Community Center for residents. Kinder Morgan is one of the largest energy infrastructure companies in the United States and operates 83,000 miles of pipeline transporting refined petroleum products, crude oil, ethanol and biodiesels. They also operate 72,000 miles of natural gas pipelines, the most in the country. The Tennessee Gas Pipeline runs natural gas from Texas and Louisiana through Arkansas, Mississippi, Alabama, Tennessee, Kentucky, Ohio and Pennsylvania in 11,900 miles of piping.

Tennessee natgas pipeline declares force majeure after fire (Reuters) - Kinder Morgan unit Tennessee Gas Pipeline on Friday declared force majeure following an explosion and fire caused by equipment failure at a compressor station near Centerville in Hickman County. "At this time, the fire remains extinguished," the company said in an email, adding that the evacuation order that was in place has been lifted, and Highway 48 has reopened. One employee was transported to the hospital with symptoms that were not directly related to the incident and has been discharged, the company said. "The six employees who were on site during the incident have been accounted for, and there are no additional injuries to report." Kinder Morgan said that a safety assessment is underway and it will conduct cleanup activities and develop a repair plan once it is safe to access the site. Tennessee Pipeline is an interstate natural gas pipeline system that gathers gas from basins between Texas and Alabama and delivers it to the Northeast, Midwest and Southeast.

Cheniere Outlines Plans for 5.2-Mile Natural Gas Pipeline for Sabine Pass LNG Expansion - A Cheniere Energy Inc. unit is seeking to add a 5.2 mile interstate pipeline to its pre-filing application with federal regulators for a massive expansion at Sabine Pass LNG in Louisiana.In February, Cheniere pre-filed plans with FERC to add up to 20 million metric tons/year (mmty) to its southwest Louisiana liquefaction facility.The Sabine Crossing pipeline outlined in Cheniere’s most recent filing would link the Sabine Pass export terminal with Jefferson County, TX, via a 48-inch diameter connection that would run under the Sabine-Neches Waterway. The new system would connect to “interstate and/or intrastate pipelines to be developed by others in the future,” according to the filing.

US natgas futures fall 5% on forecasts for lower demand (Reuters) - U.S. natural gas futures fell 5% on Tuesday on forecasts for lower demand into next week along with relatively high output. Front-month gas futures for September delivery on the New York Mercantile Exchange settled 13.6 cents, or 4.9% lower, at $2.659 per million British thermal units (mmBtu). The retreat in prices came despite expectations that a hotter-than-normal weather forecast until end-August, especially in Texas, would keep air conditioners humming, driving up power demand. "Gas is getting tugged lower by broad-based cut in risk appetite but extended hot weather forecasts are a downside limiter," . Data provider Refinitiv forecast U.S. gas demand, including exports, would rise from 103.1 billion cubic feet per day (bcfd) this week to 104.4 bcfd next week. But these numbers were lower from Monday's forecast. Refinitiv said average gas output in the Lower 48 states was 101.8 bcfd so far in August, nearly the same as the 101.8 bcfd in July, and not far from a monthly record of 102.2 bcfd in May. Gas flows to the seven big U.S. LNG export plants have fallen from an average of 12.7 bcfd in July to 12.4 bcfd so far in August, mainly due to reductions at Venture Global LNG's Calcasieu facility in Louisiana and Cheniere Energy's Corpus Christi, Texas facility. That compares with a monthly record of 14.0 bcfd in April. European gas prices rose, meanwhile, as concerns continued over possible strikes at Australian liquefied natural gas (LNG) facilities. The Woodside and Chevron facilities manage nearly 11% of global LNG exports and a reduction in shipments could compel "Asian buyers to outbid their EU counterparts, likely turning to the US to secure adequate LNG cargoes", The U.S. is on track to become the world's biggest LNG supplier in 2023 - ahead of recent leaders Australia and Qatar - as higher global prices feed demand for U.S. exports due to supply disruptions and sanctions linked to the war in Ukraine. In 2022, roughly 69%, or 7.2 bcfd, of U.S. LNG exports went to Europe as shippers diverted cargoes from Asia to get higher prices. In 2021, when prices in Asia were higher, just 35%, or about 3.3 bcfd, of U.S. LNG exports went to Europe. With the return of higher gas prices in Asia this year, analysts said they expect U.S. LNG exports to Asia will increase.

US natural gas futures pare gains after expected storage build (Reuters) - U.S. natural gas futures pared gains after a federal report was largely in line with expectations of a smaller-than-usual storage build last week as hot weather kept cooling demand high. Front-month gas futures for September delivery on the New York Mercantile Exchange settled 2.9 cents, or 1.1% lower, at $2.621 per million British thermal units (mmBtu). The U.S. Energy Information Administration (EIA) said utilities added 35 billion cubic feet (bcf) of gas into storage during the week ended Aug 11. That was largely in line with the expected 34-bcf build analysts had forecast in a Reuters poll and compares with an increase of 21 bcf in the same week last year and a five-year (2018-2022) average increase of 41 bcf. Despite some expected cooling across much of the northeast region and heat moderation across Texas and surrounding regions, "the temperature factor still appears conducive toward storage surplus contraction," Data provider Refinitiv forecast U.S. gas demand, including exports, would be little changed from 103.7 billion cubic feet per day (bcfd) this week to 103.8 bcfd next week. These numbers were significantly lower than Wednesday's forecast. Refinitiv said average gas output in the Lower 48 states was 101.7 bcfd so far in August, nearly the same as the 101.8 bcfd in July, and not far from a monthly record of 102.2 bcfd in May. Gas flows to the seven big U.S. LNG export plants have fallen from an average of 12.7 bcfd in July to 12.3 bcfd so far in August, mainly due to reductions at Venture Global LNG's Calcasieu facility in Louisiana. That compares with a monthly record of 14.0 bcfd in April. The U.S. is on track to become the world's biggest LNG supplier in 2023 - ahead of recent leaders Australia and Qatar - as higher global prices feed demand for U.S. exports due to supply disruptions and sanctions linked to the war in Ukraine.

Column: Hedge funds increasingly bullish about diesel – John Kemp - (Reuters) Chartbook: Oil and gas positions - Portfolio investors are on the brink of becoming very bullish about the price of diesel and other middle distillates, encouraged by low inventories and increasing expectations for a soft landing for the U.S. economy. Hedge funds and other money managers purchased the equivalent of 10 million barrels of futures and options on U.S. diesel and European gas oil over the seven days ending Aug. 8. Fund managers have bought middle distillates in 12 of the most recent 14 weeks, increasing their position by a total of 126 million barrels since May 2. Funds held a net long position of 99 million barrels (77th percentile for all weeks since 2013) on Aug. 8 up, from a net short of 27 million barrels (6th percentile) on May 2. Consumption of diesel and other distillate fuel oils is the most sensitive to the industrial cycle, given their widespread use in manufacturing, freight transport and construction. But inventories have failed to rebound significantly from their cyclical lows in the middle of 2022, and there is not enough spare refining capacity to boost them readily. As a result, traders increasingly expect that a soft landing for the U.S. economy and resurgence of manufacturing and freight activity will quickly lead to diesel shortages re-emerging. Elsewhere in the petroleum complex, the short-covering rally that had propelled Brent and especially WTI prices higher since the end of June ran out of momentum. Fund managers sold NYMEX and ICE WTI contracts (-2 million barrels) for the first time in six weeks since the end of June. The sales were small, but came after the fund community had purchased a total of 135 million barrels over the previous five weeks. In the premier NYMEX WTI contract, short positions had been reduced by 91 million barrels or two-thirds since June 27. With only 45 million barrels of short positions remaining, the potential for further short-covering to lift prices had been significantly reduced. Investors are still trying to become bullish about the outlook for U.S. natural gas prices despite a persisting legacy of above-average inventories inherited from the winter of 2022/23. Hedge funds and other money managers purchased the equivalent of 292 billion cubic feet in the two main gas contracts over the seven days ending Aug. 8. The purchases essentially reversed sales of 307 billion cubic feet the previous week and returned the net position close to where it had been in the last week of July. The total position has risen to a net long of 707 billion cubic feet (47th percentile for all weeks since 2010) up from a net short of 1,061 billion cubic feet (7th percentile) at the end of January. There have been signs of a small deficit between production and consumption since the end of June, which has fuelled expectations that the market balance will tighten over the course of winter 2023/24. Working gas inventories in underground storage were still 202 billion cubic feet (+7% or +0.63 standard deviations) above the prior ten-year seasonal average on Aug. 4. But the surplus had narrowed slowly but progressively from 299 billion cubic feet (+12% or +0.81 standard deviations) on June 30. The prospect of a sustained production-consumption deficit this coming winter has drawn fund managers into gas positions. So far, however, the deficit signal has not been strong enough to encourage an outright bullish stance.

Senators Ask DOI to Extend Public Comment Period for Proposed Offshore Rule - U.S. Senator Bill Cassidy is leading a group of U.S. senators in calling for the U.S. Department of the Interior (DOI) to extend the public comment period for the Outer Continental Shelf (OCS) financial assurance proposed rule to allow for a more detailed and robust public record on its impact on small businesses. Senators Bill Cassidy, Joe Manchin, Ted Cruz, and John Kennedy wrote a letter to DOI Secretary Debra Haaland to extend the comment period deadline for the Notice of Proposed Rulemaking, titled Risk Management and Financial Assurance for OCS Lease and Grant Obligations, to 120 days from 60 days, according to a news release from Sen. Cassidy’s office Thursday. The comment period for the rule ends on August 28. The letter stated that the proposed rule would make changes to the financial assurance regime to secure decommissioning obligations for the offshore oil and gas industry and would impose additional bonding requirements on small businesses, which produce 35 percent of the oil and gas from the Gulf of Mexico. The senators wrote that the DOI acknowledged that the proposed rule would “significantly impact smaller companies” and would create “a disincentive to additional exploration, development, and production”. For these reasons, the senators said more than 60 days would be required to evaluate the effects of the proposed rule. “Additionally, the proposed rule requires the offshore energy industry to determine whether the international surety market can support the significant amount of new bonding that would be required to be issued to the Bureau of Ocean Energy Management (BOEM) under the proposed rule”, the senators continued. “This effort requires analysis and discussion with the surety market that currently issues bonds to secure decommissioning obligations offshore. Simply put, a 60-day extension of the comment period for the proposed rule is reasonable. Doing so can help ensure proper due diligence is taken to supply BOEM with meaningful comments.” “There is no imminent need for BOEM to finalize the proposed rule. Recent bankruptcies in the offshore industry have not resulted in U.S. taxpayers paying for decommissioning of offshore wells and infrastructure”, the senators concluded, adding that the rule acknowledges taxpayer liability for decommissioning offshore infrastructure is “rare”. On June 29, the BOEM published the proposed changes to the financial assurance rule in the Federal Register, “in order to better protect American taxpayers from incurring the costs associated with the oil and gas industry’s responsibility to decommission offshore wells and infrastructure, once they are no longer in use”, according to an earlier news release from the agency. The proposed rule would establish two metrics by which BOEM would assess the risk any company poses for the American taxpayer, according to the release. “First, to accurately and consistently predict financial distress, BOEM would use credit ratings from a nationally recognized statistical rating organization, or a proxy credit rating generated through a statistical model. BOEM would require companies without an investment-grade credit rating to provide additional financial assurance. BOEM is seeking public feedback on whether it should rely on credit ratings to make these determinations and what credit rating threshold would best protect taxpayer interests without imposing undue burdens on industry”, the release stated. “Second, BOEM would consider the current value of the proved oil and gas resources on the lease itself when determining the overall financial risk of decommissioning, given that any lease with significant reserves still available would likely be acquired by another operator that would then assume the liabilities in the event of bankruptcy”, the release continued. “The proposed regulatory changes would provide additional clarity and reinforce that current grant holders and lessees bear the cost of ensuring compliance with lease obligations, rather than relying on prior owners to cover those costs”, the BOEM added. The BOEM said it would use decommissioning estimates based on industry-reported data collected by the Bureau of Safety and Environmental Enforcement “at a level that would adequately cover estimated decommissioning costs without being overly burdensome”. Further, the proposed rule would allow current lessees and grant holders to request phased-in payments over three years for new financial assurance amounts, the agency said.

USA Crude Oil Stocks Down 6MM Barrels Week on Week - U.S. commercial crude oil inventories, excluding those in the Strategic Petroleum Reserve (SPR), decreased by 6.0 million barrels from the week ending on August 4 to the week ending on August 11, the U.S. Energy Information Administration’s (EIA) latest weekly petroleum status report revealed. Crude oil stocks, excluding the SPR, totaled 439.7 million barrels on August 11, 445.6 million barrels on August 4, and 425.0 million barrels on August 12, 2022, the EIA report showed. Crude oil in the SPR stood at 348.4 million barrels on August 11, 347.8 million barrels on August 4, and 461.2 million barrels on August 12, 2022, according to the report. “At 439.7 million barrels, U.S. crude oil inventories are about one percent below the five year average for this time of year,” the EIA noted in the report, adding that total commercial petroleum inventories decreased by 7.4 million barrels last week. “Total motor gasoline inventories decreased by 0.3 million barrels from last week and are about six percent below the five year average for this time of year,” the EIA report stated. “Finished gasoline inventories decreased, while blending components inventories increased last week. Distillate fuel inventories increased by 0.3 million barrels last week and are about 16 percent below the five year average for this time of year,” it added. “Propane/propylene inventories increased 0.7 million barrels from last week and are 21 percent above the five year average for this time of year,” the report continued. U.S. crude oil refinery inputs averaged 16.7 million barrels per day during the week ending August 11, which was 166,000 barrels per day more than the previous week’s average, the report outlined. Refineries operated at 94.7 percent of their operable capacity last week, the report noted, adding that gasoline production decreased last week, averaging 9.6 million barrels per day. Distillate fuel production was down last week, averaging 4.7 million barrels per day, the report highlighted. According to the report, U.S. crude oil imports averaged 7.2 million barrels per day last week and increased by 476,000 barrels per day from the previous week. “Over the past four weeks, crude oil imports averaged about 6.7 million barrels per day, 4.1 percent more than the same four-week period last year,” the report stated. “Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 586,000 barrels per day, and distillate fuel imports averaged 129,000 barrels per day,” it added. Total products supplied over the last four-week period averaged 20.9 million barrels a day, up by 3.8 percent from the same period last year, the report noted. “Over the past four weeks, motor gasoline product supplied averaged 9.0 million barrels a day, down by 0.9 percent from the same period last year,” it stated. “Distillate fuel product supplied averaged 3.7 million barrels a day over the past four weeks, down by 2.1 percent from the same period last year. Jet fuel product supplied was up 4.6 percent compared with the same four-week period last year,” it added.

Brainwashed Kids Win Montana Case to Shut Down New O&G Drilling - Marcellus Drilling News - And so the end-game, the true insanity, begins. A group of brainwashed children (who are being mentally abused and used by adults, in our humble opinion) won a court case in Montana this week that says Montana state agencies are violating their constitutional right to a clean and healthful environment by allowing fossil fuel development. Yup. No more fossil fuel development in Big Sky Country unless you first obsequiously bow down and worship the GOD of Climate Change first, and pinky-swear promise you won’t emit any carbon dioxide or methane if you drill an oil or gas well. The decision came from an idiot judge who made his ruling while exhaling CO2 (violating his own edict). The judge finds that CO2 is evil. It’s burning up the earth. The new religion of Climate Change was just instituted by judicial fiat for all of Montana. (This would all be hilarious if not so tragic.)

SoCalGas Agrees to Settle Misleading ‘Renewable’ Natural Gas Claims with California AG - Sempra’s Southern California Gas Co. (SoCalGas) has reached a tentative settlement with California authorities in connection with claims made in 2019 that the utility’s natural gas was “renewable.” California Attorney General (AG) Rob Bonta announced the agreement Monday, in which he called the claims by SoCalGas misleading. “The vast majority of natural gas — including a vast majority of the gas distributed by SoCalGas — is not renewable, but rather is derived from fossil fuels,” Bonta noted. An investigation found that the utility “made the misleading statements in a wide range of mediums, such as print, electronic media, informative displays, backdrops and promotional swag,” the AG noted. The case, filed in Superior Court of California, Alameda..

Canadians "Avenge" Keystone XL Loss With Takeover Of Top US Crude Export Terminals. - Just a couple of years ago, TC Energy finally threw in the towel on its long-planned, long-delayed Keystone XL pipeline project, which would have substantially increased the flow of Western Canadian heavy crude to Gulf Coast refineries and export docks. It was a bitter loss. Since then, however, two other companies headquartered north of the 49th parallel have assumed leading roles in the U.S. crude oil market or, more specifically, crude exports. First, Enbridge acquired the U.S.’s #1 oil export terminal — now called the Enbridge Ingleside Energy Center (EIEC) — and related assets for US$3 billion and then, on August 1, Gibson Energy announced that it had closed on the US$1.1 billion purchase of the nearby South Texas Gateway (STG), which is #2 in crude export volumes. In today’s RBN blog, we discuss the increasing role of Canada-based midstream companies along the South Texas coast. The recent tug-of-war around Enbridge Line 5 in the Upper Midwest is ongoing, with a judge recently ordering the pipeline to be shut down within three years. But perhaps the most frustrating Canadian-American spat in recent memory was the Keystone XL battle between TC Energy (formerly known as TransCanada) and the U.S. government, which for many years made it essentially impossible for the 1,210-mile, 830-Mb/d pipeline project to advance to construction and operation. The fight to build the Alberta-to-Nebraska crude oil conduit was finally lost in January 2021, when newly inaugurated President Biden revoked the project’s Presidential Permit. TC Energy formally canceled it a few months later. Over the past couple of years, it has focused primarily on expanding the natural gas side of its pipeline business, including the construction of the 2.1-Bcf/d Coastal GasLink pipeline in British Columbia (in which TC Energy holds a 25% ownership interest) and development of the 1.3-Bcf/d Southeast Gateway pipeline in Mexico. And finally the last straw: The company in July announced plans to get out of the liquids pipeline business altogether and spin off those assets (with the existing Keystone and Marketlink pipelines) into a separate entity. Those assets may start to look attractive to companies looking to feed crude to Gulf Coast export markets.We’ll look at the long list of initiatives that TC Energy has been up to on the gas side of things in a future blog. Today, our focus is on how two other Canadian midstream companies have “avenged” compatriot TC Energy’s Keystone XL loss by taking over two Corpus Christi-area crude export terminals — EIEC and STG — that together accounted for an astonishing 40% of total U.S. crude exports in the first seven months of 2023, according to RBN’s weekly Crude Voyager report (green and yellow bar segments, respectively, in Figure 1).We took a deep-dive look at Enbridge’s October 2021 acquisition of what until then was known as the Moda Ingleside Energy Center in You Send Me. In that blog, we noted that the terminal (now called EIEC; circular blue icon in Figure 2) had 15.6 MMbbl of crude oil storage capacity (it’s currently building another ~2 MMbbl) as well as extraordinary pipeline interconnectivity, including direct links to Cactus II (yellow line), EPIC Crude (red line) and Gray Oak (green line), which charge some of the lowest rates of any Permian-to-Gulf Coast pipelines and allow for neat batches of crude to be sent straight from West Texas to dedicated tanks at the terminal, thereby maintaining crude quality. (Calgary, AB-based Enbridge holds a 68.5% ownership interest in Gray Oak and a 30% stake in Cactus II; it also operates Gray Oak.) EIEC also is connected via its own Viola Pipeline (acquired as part of the Moda deal; purple line) to Plains All American and Enterprise’s Eagle Ford JV Pipeline (orange line), which transports crude from the original Cactus I pipeline’s Gardendale terminus to Corpus Christi’s Inner Harbor area. Further, Harvest Midstream’s 600-Mb/d Harvest Ingleside pipeline (brown line) links Harvest’s Midway terminal (near Enbridge’s Taft terminal; white star) to EIEC. EIEC’s ability to send out an average of about 900 Mb/d in the first seven months of this year (and as much as ~1 MMb/d — the terminal’s send-out pace in April 2023) doesn’t just depend on those pipeline connections. Its success is also tied to the terminal’s ability to load up to 1.6 MMbbl onto a 2-MMbbl VLCC and to fully load a 1-MMbbl Suezmax — feats enabled by EIEC’s tankage, pumps and direct access to the newly deepened Corpus Christi Ship Channel. (VLCCs, Very Large Crude Carriers, are the transporters of choice for many shippers moving crude oil to Asia and Europe because of the lower per-barrel cost, and filling four-fifths of a VLCC at the dock provides additional savings by slashing the cost of reverse lightering.) STG (circular green icon in Figure 2 and photo below), which is located a stone’s throw from EIEC, is the only other onshore terminal along the Gulf Coast that can partially load VLCCs. It can also fully load Suezmaxes. (The Louisiana Offshore Oil Port, or LOOP, located in waters more than 100 feet deep, can fully load a VLCC, but it does not have direct access to Midland WTI crude and can only load a limited number of vessels per month due to logistical issues with its pipeline connections.) As we said, Gibson Energy — based in Calgary, like Enbridge — announced August 1 that it had closed on the US$1.1 billion purchase of STG from terminal co-owners Buckeye Partners (50%), Phillips 66 (25%) and Marathon Petroleum (25%). The acquisition gave Gibson a strong foothold in the U.S.; its other primary assets are a 13.5-MMbbl crude oil terminal in Hardisty, AB, which includes a diluent recovery unit (DRU) that Gibson co-developed with USD Group; a 1.7-MMbbl terminal in Edmonton, AB, where the company is building three new tanks with a combined capacity of 1.3 MMbbl; and the Moose Jaw refinery in Saskatchewan.

Mexico Nearshoring Limited by Insufficient Natural Gas Grid, Says IMCO - Nearshoring, which allows companies to move some manufacturing operations to other countries while keeping supply chains closer to home, is being billed as the next great economic opportunity for Mexico. The forecasts for the amount of investment that Mexico could generate as a result of nearshoring by North American companies vary, though the consensus is unanimous. Mexico’s gross domestic product and job market are poised to grow substantially. On Wednesday, for example, the president of the textile and manufacturing export chamber known as Index, Luis Manuel Hernández, forecast that nearshoring could bring as much as $100 billion in investments to Mexico from 2023 to 2028. Natural gas availability will be crucial for Mexico to seize and capitalize on the nearshoring...

Argentina Fixes Oil Price at $56 a Barrel to Put Inflation in Check Argentina has fixed the price of oil received by drillers at $56, far below international levels, as it scrambles to stop inflation getting further out of control after this week’s currency devaluation, according to two people familiar with the matter. Crude drillers in burgeoning shale patch Vaca Muerta will get $56 a barrel until Oct. 31. Argentine oil prices were already decoupled from global markets, but Thursday night’s decision means shale companies will receive 11% less than the $63 at which local light crude was trading in the second quarter. The new price is also a big deviation from Brent, which is hovering at $84. Producers of heavier Escalante crude from other regions will get a $5 discount on current prices, according to one of the people. State-run YPF SA, which has the single biggest share of Vaca Muerta output, slumped more than 3% in New York trading, before paring some of the losses. A spokesman for Economy Minister Sergio Massa declined to comment on the new barrel price, pointing only to the minister’s public remarks on Thursday freezing gasoline and diesel prices through October. Argentina has frozen fuel prices at the pump after refiners, including market leader YPF, hiked by 12.5% this week in the wake of a slump in the peso. Massa, the ruling party’s candidate in October’s presidential election, is trying to stop the full weight of the devaluation from immediately passing through to consumer prices across the board. Inflation in July was already running at 113%. Oil producers are being made, in part, to bear the cost of capping fuel prices. That could be bad news for activity in Vaca Muerta, which Argentina wants to develop as quickly as possible to spur exports and bring in much-needed export dollars. But interventions like this one have held back the region, whose crude production of roughly 300,000 barrels a day pales in comparison to rival shale formations in the US. Massa promised drillers some benefits in return — the deferral of export taxes, quicker access to hard currency and, potentially, relief from some import taxes, one person said. The decision recalls a controversial policy during the last presidential campaign in 2019, when the peso weakened and then-leader Mauricio Macri moved to control fuel prices. Javier Milei, the libertarian front-runner in this election race, promises to free up Argentine oil markets completely.

European Gas Price Spike Highlights Painful Exposure To Global Markets -- Earlier this month, the price of natural gas in Europe spiked by as much as 40% on the news that gas platform workers in Australia may launch industrial action. The strike could affect a tenth of global LNG, media reported last week, which would send prices higher. Indeed, the very threat of a strike sent prices higher, and once again highlighted Europe’s difficult energy security position.Last year, the EU celebrated the success of its efforts to reduce its dependence on pipeline Russian gas. Indeed, that dependence was greatly reduced, not without the help of Gazprom itself, which significantly reduced the flow of gas to Europe, prompting buyers there to look for alternatives.The celebrations did not take very long to turn into complaints. Accustomed to cheap pipeline gas, European buyers were finding out that the LNG spot market had very different rules, which ultimately resulted in higher—much higher—prices when a new buyer as big as the EU appeared on the stage.By the end of the year, politicians in Europe were complaining about having to pay through the nose for natural gas on that spot market, and some were already closing long-term deals with Qatar and the United States. Even Germany, a staunch opponent of continued reliance on gas, gave up and signed long-term deals and decided to build a permanent LNG import terminal.What this did was cement the continent’s now almost complete dependence on LNG. Bar some pipeline imports from Norway and Azerbaijan, most of the European Union’s gas in the years to come will be sourced from the international LNG market. And this means higher prices for longer. And even higher prices and the constant threat of a price shock in case of supply disruption, as evidenced by the Australian strikes news. “The potential for strike action at LNG export plants in Australia once again highlights the fact that we are now clearly in a globalised gas market,” ICIS analyst Tom Marzec-Manser told the Financial Times.“Europe has understandably backfilled Russian pipeline supply with versatile LNG. But that versatility leads to increased price volatility.”Currently, European gas stocks are at a record high for this time of the year. In fact, a week ago – days before the news broke that Australian LNG workers are considering a strike – Reuters’ John Kemp reported that this record-high level of gas stocks was keeping a lid on prices. All it took for the \\cover to blow off was the news of a potential strike in one of the world’s biggest LNG producers.There are already warnings that the energy crisis in Europe is not over. Indeed, these warnings began as early as last year amid the celebrations of switching from pipeline to liquefied gas and how independent that made Europe. At the time, few were in the mood to listen to warnings that the show was only beginning, not ending. Now, things are changing. Winter is once again on the way, asmj far as it may seem in August. This means there’s a spike in demand for LNG on the horizon. And a spike in demand means a spike in prices, inevitably.

Chevron LNG Workers To Vote On Strike Action -- Workers at the two LNG projects that Chevron operates offshore Australia today vote on whether they will go on strike after negotiations failed to produce an agreement that would have avoided the industrial action. "It's game on in pushing back against Chevron's sub-standard employment standards," the Offshore Alliance, the trade union that represents the workers, said, as quoted by Reuters.Woodside’s talks with its LNG workers have also failed toproduce an outcome that would avert a strike at the country’s largest LNG facility, the North West Shelf.There, 99% of workers voted in favor of industrial action. Now, the trade union needs to announce it, unless the continuing negotiations with the operator of the project do not produce results.Australia’s labor regulator gave the go-ahead to industrial action last week, in case the workers' votes are in favor of it. Then the union would have 30 days to either begin a strike or any variation of it, such as temporary work stoppages and bans on some activities.Gas prices spiked last week when the news of the potential strikes broke. They have since retreated but if actual strikes begin, they would affect a tenth of the world’s supply of liquefied natural gas and another spike would be a certainty.Woodside’s North West Shelf is the largest LNG production project in Australia, with a capacity of 16.9 million tons annually, followed by Chevron’s Gorgon, which has a capacity of 15.6 million tons. Wheatstone, also operated by Chevron, can produce 8.9 million tons of LNG annually. Together, the three produce about 40 million tons of LNG annually.Because of that substantial capacity, disruption at the three facilities would send ripples across the global gas market, sending prices higher and once again pricing poorer buyers out of the market.

Australia Labor Talks to Prevent LNG Terminal Strikes Seen Continuing for Days - Talks to avert strikes at three LNG export facilities in Western Australia are expected to stretch into next week after negotiations between the labor unions, Chevron Corp. and Woodside Energy Group Ltd. have made little headway. Discussions were scheduled to continue next Wednesday (Aug. 23) in order to give both sides time to consider what was discussed this week. If work stoppages go ahead, they could impact operations at the Gorgon, Wheatstone and North West Shelf (NWS) export facilities, which collectively represent about 10% of global liquefaction capacity. “We continue to engage actively and constructively in the bargaining process,” a Woodside spokesperson told NGI on Wednesday. “Positive progress is being made, and the parties have reached an in-principle agree..

India on Track to Boost LNG Imports If Prices Remain Steady - India’s natural gas consumption is expected to increase this year, driven partly by a projected jump in LNG arrivals that are seen as crucial to the government’s goal to more than double the share of natural gas in the country’s power generation mix by 2030. “We are expecting Indian liquified natural gas imports to climb in the second half of the year,” said Energy Aspects’ James Waddell, head of European gas and global LNG. “Although imports held broadly flat year-over-year in mid-summer/monsoon season, we anticipate LNG imports to again start rising.” India is the world’s fifth largest LNG buyer, according to the International Group of LNG Importers. But Waddell pointed out that it is also a price sensitive market. “If there are strikes at Australian LNG...

Another Blow To The Petrodollar: India & The UAE Complete First Oil Sale In Rupees --In another blow to dollar dominance, India and the United Arab Emirates settled an oil trade without converting local currencies to dollars for the first time on Monday, as India’s top refiner made a payment for oil in rupees. Indian Oil Corp. bought a million barrels of oil from Abu Dhabi National Oil Company in a dollar-free transaction.The oil sale was the first after the two countries entered a Memorandum of Understanding (MoU) in July. The deal established the Local Currency Settlement (LCS) system, facilitated by the Reserve Bank of India and the Central Bank of the United Arab Emirates. The system allows the two countries to engage in bilateral trade using the rupee and dirham. According to a statement by the Reserve Bank of India, the agreement will facilitate “seamless cross-border transactions and payments, and foster greater economic cooperation.” The first test of the LCS involved the sale of 25 kg of gold from a UAE gold exporter to a buyer in India at about 128.4 million rupees ($1.54 million). According to WIONews in India, the LCS system will reduce costs and speed up transactions between the two countries. Additionally, reliance on national currencies is anticipated to bolster economic resilience and strengthen bilateral relations. Moreover, any surplus balances in the local currencies can be invested in various local assets, including corporate bonds, government securities, and equity markets.”India has also purchased oil from Russia using non-dollar currencies. India ranks as the third-largest oil importer in the world. If the trend of dollarless transactions expands to other countries, the minimization of the dollar in the global oil trade would be bad news for the United States.As it stands, the majority of global oil sales are priced in dollars. This ensures a constant demand for the greenback since every country needs dollars to buy oil. This helps support the US government’s “borrow and spend” policies, along with its massive deficits. As long as the world needs dollars for oil, it guarantees demand for greenbacks. That means the Federal Reserve can keep printing dollars to monetize the debt.

China's July oil refinery runs rise to meet domestic, export demand (Reuters) - China's oil refinery throughput in July rose 17.4% from a year earlier, data showed on Tuesday, as refiners kept output elevated to meet demand for domestic summer travel and to cash in on high regional profit margins by exporting fuel. Total refinery throughput in the world's second-largest oil consumer was 63.13 million metric tons last month, data from the National Bureau of Statistics (NBS) showed. July's production was the equivalent of 14.87 million barrels per day (bpd), up from a low base of 12.5 million bpd a year earlier when refiners cut back runs as the country faced extensive COVID-19 lockdowns. The throughput rate was the third-highest ever, according to Reuters' records of the NBS data, only marginally below the record of 14.90 million bpd in March. Production was up slightly from the 14.83 million bpd of oil processed in June. State-owned refineries raised their processing rates in July to an average of 78%-82%, up 2-3 percentage points from June, according to data from consultancy Zhuochuang. Domestic fuel demand has picked up with the arrival of the summer travel season, notably in gasoline and jet fuel. Domestic gasoline inventories fell around 3% between mid-June and mid-July, according to data from China-based consultancy Longzhong. Chinese refiners have also capitalised on strong fuel profit margins in the region, with refined fuel product exports in July rising 55.8% from a year earlier, according to customs data released last week. China's crude oil imports in July pared back from close-to-record levels during the previous month, totalling 43.7 million metric tons, or 10.3 million bpd, according to the customs data. The NBS data on Tuesday also showed China's domestic crude oil production in July was 17.31 million metric tons, or 4.1 million bpd, versus 17.13 million metric tons in 2022. Natural gas production was up 7.6% from a year earlier to 18.4 billion cubic metres (bcm) from last year's 17.1 bcm.

1M barrels of oil removed from aging tanker - — The transfer of more than a million barrels of oil from an aging tanker moored off the coast of war-torn Yemen has been completed, avoiding an environmental disaster, the United Nations said Friday. In a statement, Farhan Haq, the deputy spokesman for U.N. Secretary-General Antonio Guterres, said the operation had prevented “monumental environmental and humanitarian catastrophe.” An international team began siphoning the oil from the dilapidated vessel known as SOF Safer on July 25. All of the oil is now aboard a replacement tanker called MOST Yemen. Before the transfer, the Safer carried four times as much oil as was spilled in the 1989 Exxon Valdez disaster off Alaska, one of the world’s worst ecological catastrophes, according to the U.N. International organizations and rights groups warned for years of the potential for a spill or an explosion involved the tanker, which has not been maintained and has seawater in its engine compartment and damaged pipes.

UN completes delicate operation to remove oil from stricken FSO off Yemen - On Friday evening, the United Nations successfully completed the transfer of oil from the FSO Safer off Yemen’s Red Sea coast, preventing the immediate threat of a massive spill. The Safer has been at risk of breaking up or exploding for years. A major spill from the vessel would have resulted in an environmental and humanitarian catastrophe. The cargo of oil aboard the FSO Safer has been pumped onto the replacement vessel MOST Yemen (formerly Nautica) in a ship-to-ship transfer that began on July 25, following preparations on site for the operation that began in May by salvage company SMIT. The UN Development Programme (UNDP), which contracted SMIT, is implementing the operation. As much of the 1.14m barrels has been extracted as possible. However, less than 2% of the original oil cargo remains mixed in with sediment that will be removed during the final cleaning of the Safer. UN secretary-general António Guterres said: “I welcome the news that the transfer of oil from the FSO Safer has been safely concluded today. The United Nations-led operation has prevented what could have been an environmental and humanitarian catastrophe on a colossal scale.” The UN resident and humanitarian coordinator for Yemen, David Gressly, who has led UN system-wide efforts on the Safer since September 2021, said: “Today is a great milestone. A remarkable global coalition came together under the UN umbrella to prevent the worst-case scenario of a catastrophic oil spill in the Red Sea. We need to finish the work the UN started. The installation of a CALM buoy to which the replacement vessel will be safely tethered is the next crucial step.”

Oil prices slip on firm US dollar, sluggish China recovery | Al Bawaba – The United States (US) Dollar ticked higher on Monday against other currencies in Asia and Europe as oil prices slip on a stronger US dollar and concerns over China’s faltering economic recovery, after weeks of gains on tightening supply. Brent crude futures fell $0.73, or 0.84%, to $86.08 a barrel by 0330 GMT while US West Texas Intermediate (WTI) crude slipped $0.71 to $82.48 a barrel, according to Reuters. Oil prices slipped as the US dollar index extended gains after a slightly bigger increase in US producer prices in July lifted Treasury yields, the Canada-based news agency reported. According to Bloomberg, oil prices slipped on declining demand expectations in light of the recent slump in China’s property sector. A stronger dollar weighs on demand, making the commodity more expensive for buyers holding other currencies, which is why oil prices slip when the US dollar rises. The US dollar has been rising for three days, Bloomberg underscored. Oil cuts have contributed to a market deficit of more than 2 million barrels a day this quarter, as reported by OPEC+. Rising risks to Russian crude oil flows through the Black Sea, given the war in Ukraine, also aided gains, until demand concerns over the economic situation in China overweighed optimistic outlooks. "Crude has been in overbought territory for some time now, defying expectations of a correction. It has been singularly focused on US economic optimism, to the exclusion of the increasingly stronger headwinds blowing in the Eurozone and China," Vandana Hari, founder of oil market analysis provider Vanda Insights, told Reuters. "A rebalancing is overdue but it may need a reality check in the markets stateside," Hari said. A snapshot of the economic situation in China will come in on Tuesday with industrial-production figures, including data on the refining industry. The country, the world’s largest crude buyer, has been opening new plants, buoying import demand, according to Bloomberg. Ongoing supply cuts are expected to erode oil inventories over the rest of this year, potentially driving prices even higher, the International Energy Agency said in its monthly report on Friday.

Oil Falls Amid Lower Summer Trading and China Concerns --Oil’s rally sputtered amid a slump in summertime liquidity, leaving the commodity at the mercy of volatile, broader markets. While signs of tightening physical supplies had in recent weeks pushed crude futures to the longest streak of gains in a year, West Texas Intermediate on Monday see-sawed in tandem with Wall Street on fresh concerns about China’s economy. Open interest in US crude is hovering near the lowest levels this year as investors travel during the summer. “Crude prices are softer as the dollar rallies and concerns percolate with China’s property sector, which will be a drag on global growth conditions,” “The market is a little illiquid here, which means if the bond market sell-off intensifies, we could see significant dollar strength that weighs on crude prices,” he added. Also dampening sentiment was the expectation that progress in Iran-US relations would lead to higher oil exports from the Middle Eastern country. Physical markets have been strong thanks to OPEC+ supply curbs and demand holding up better than expected, helping oil to rise by about 25% since its lows in June. The prompt spread in US crude, a reflection of supply and demand at the delivery point for benchmark futures at Cushing, Oklahoma, is near the strongest levels since November. A snapshot of conditions in China will come on Tuesday with industrial-production figures, including for the refining industry. The country, the world’s largest crude buyer, has been opening new plants, buoying import demand. Prices: WTI for September delivery settled 0.82% lower at $ 82.51 a barrel at 1:30 pm in New York. Brent for October settlement eased 0.6% to settle at $86.21 a barrel.

Oil dips further as China worries counter supply cuts (Reuters) - Oil prices finished down on Monday on worries about China's faltering economic recovery and a stronger dollar were taking the momentum out of seven weeks of gains on tight supply. U.S. West Texas Intermediate crude settled down 68 cents, or 0.82%, at $82.51 a barrel. Brent crude futures finished at $86.21 a barrel, down 60 cents, or 0.69%. With fading hope China's economy will return to pre-pandemic levels of demand, oil markets have little to pin their hopes to for future growth, "The problem is as China increasingly proves unable of getting out of its own way to the upside, much less leading the world economy, there's not much else to lead things higher." Market participants are torn, weighing a tight supply-demand balance against signs of weakening demand from China, "Crude has been in overbought territory for some time now, defying expectations of a correction," She added that the focus had been on U.S. economic optimism, to the exclusion of economic headwinds in the euro zone and China. Weighing on oil prices, the U.S. dollar index extended gains after a slightly bigger increase in U.S. producer prices in July. That lifted Treasury yields despite expectations the Federal Reserve is at the end of a campaign of hiking interest rates. A stronger dollar pressures oil demand by making the commodity more expensive for buyers holding other currencies. Separately on Monday, a Shell spokesperson said exports of Nigeria's Forcados crude oil resumed on Sunday, roughly a month after loadings of the medium sweet grade were suspended because of a potential leak at the export terminal. The suspension contributed to Nigeria becoming the second-biggest contributor to the drop in OPEC crude oil output in July, a Reuters survey showed. Supply cuts by Saudi Arabia and Russia, part of the OPEC+ group comprising the Organization of the Petroleum Exporting Countries and allies, are expected to erode oil inventories over the rest of the year, potentially driving prices higher, the International Energy Agency said in a monthly report on Friday. Around the Black Sea, merchant ships remained backed up in lanes on Monday as ports struggled to clear backlogs amid growing unease among insurers and shipping companies a day after a Russian warship fired warning shots at a cargo vessel.

Oil prices rise on surprise rate cuts in China – Oil prices rose on Tuesday on news of surprise rate cuts in China as the Chinese central bank attempts to stimulate sluggish China recovery by easing borrowing costs for financial institutions, news agencies reported. Brent crude futures rose $0.32, or 0.4 percent, to $86.53 per barrel by 0644 GMT and West Texas Intermediate (WTI) crude was up $0.26, or 0.3 percent, trading at $82.77 a barrel, according to Reuters. Oil prices rose after the People's Bank of China (PBOC) lowered the interest rate on $55.3 billion worth of one-year medium-term lending facility (MLF) loans to some financial institutions to 2.5 percent. This rate cut is intended to shore up banking system liquidity and lower borrowing costs to encourage spending domestically, according to a statement by the People’s Bank of China. "The market was expecting the PBOC to wait until September before easing again, “Today's cuts suggest that the authorities' concern about the state of the macroeconomy is mounting," he added, according to Reuters. Differentials for spot cargoes from the Middle East have surged in the past several days as buyers in China snap up supplies, Bloomberg reported. In the North Sea, a vital trading window has seen a spate of bidding, as Asian buyers buy millions of barrels of United States (US) WTI crude. Those are all signs that this latest cycle is off to a strong start, even as crude prices hit six-month highs last week, Bloomberg predicts. Despite the disappointing economic data from China, the country’s refinery throughput in July rose 17.4 percent from a year earlier. Refiners in China have had to keep output elevated to meet demand for domestic summer travel and to cash in on high regional profit margins by exporting fuel, according to Reuters. “The driver of the tightness is the Saudi production cut, with refineries looking for alternative barrels,” Giovanni Staunovo, an analyst at UBS Group AG, told Bloomberg. Saudi Arabia cut output by nearly 1.5 million barrels per day - Shutterstock “Demand is solid in large parts of Asia as well as the US, mostly mixed in Europe,” he noted. Chinese mega-refiner Rongsheng Petrochemical Co. secured millions of barrels from the spot market last week, according to the New York-based news agency. That’s in addition to the nation’s refiners having been given about 40 percent more crude from the Saudis on a month-on-month basis for September. Oil prices also rose in the Middle East, with the premium of Abu Dhabi’s Murban crude soaring against the Middle Eastern Dubai benchmark. Despite Asian buyers picking up comparable-quality West Texas Intermediate crude from the US earlier in the month, Bloomberg reported. The Abu Dhabi premium was near $3 a barrel on the ICE Futures Abu Dhabi exchange on Monday, about $0.30 higher than at the beginning of the month, according to PVM Oil Associates data compiled by Bloomberg. The more sulfurous and dense Upper Zakum also surged in early-cycle trading. Supply concerns are mounting as oil and natural gas output from top US shale-producing regions is set to fall in September for the second straight month to the lowest levels since May, Energy Information Administration data showed on Monday.

Oil Slide as China's Rate Cut Seen Short to Spur Growth - -- New York Mercantile Exchange oil futures and Brent crude traded on the Intercontinental Exchange softened again early Tuesday after China's central bank unexpectedly cut one of its key interest rates to the lowest level since 2020 in an effort to kick-start growth after a slew of macroeconomic data for July badly missed expectations, pressuring sensitive commodities like iron ore and crude oil. The People's Bank of China overnight slashed its one-year medium-term loans by 0.15% -- a larger-than-expected margin -- to 2.5%, while signaling that more stimulus measures likely to follow as authorities attempt to bolster the struggling economy. The rate cut follows another batch of bearish macroeconomic for July, showing its industrial production expanded by 3.7% from a year earlier, compared to 4.3% expected and retail sales gained 2.5%, also missing the consensus for a 4.2% increase. It increasingly looks like Chinese authorities are losing control of a narrative that domestic consumption, hammered by the lack of government stimulus and high youth unemployment, could be revived in the later part of the year. . Interestingly, the National Bureau of Statistics said it would suspend publishing data on the jobless rate for 16- 25-year-olds that skyrocketed to a record-high 21.3% in June. Economists widely forecast the jobless rate for that group to climb even higher through the end of the summer, as another batch of graduates enters the labor market. On Monday, China's largest real-estate developer Country Garden suspended payments on its bond obligations in an apparent cash crunch that has sent its shares to record lows. Just last week, the company missed an August 7 deadline for making $22.5 million in coupon payments on two U.S. dollar-denominated bonds. If the company fails to pay investors by the end of a 30-day grace period, it will be in official default on the securities, each with a face value of $500 million. Oil traders closely track the developments in China's property sector and the economy at large since Beijing is still one of the largest buyers of growth-sensitive commodities on the global market, including iron ore, coal and crude oil. The Organization of the Petroleum Exporting Countries estimated in its July Oil Market Report that China's oil consumption will average nearly 15.7 million bpd this year, an improvement from 14.85 million bpd seen over 2022 and second only to the United States with a 20.48 million bpd of demand growth. That being said, consistently poor macroeconomic data out of China is becoming an increasingly bearish headwind for the oil market that has been so far focused on supply-side constraints from the OPEC+ coalition. Near 7:30 a.m. ET, the U.S. dollar index retreated 0.15% from a two-month 103.058 against the basket of foreign currencies but failed to lend price support for the front-month West Texas Intermediate contract that declined $0.84 bbl in overnight trading. International crude benchmark Brent for October delivery slid $0.62 bbl to trade near $85.59 bbl. NYMEX RBOB September futures slipped $0.0006 to $2.9061 gallon, and front-month ULSD futures dropped back $0.0055 to $3.0826 gallon.

China's Industrial Output and Retail Sales Data Showed the Economy Slowed Further in July - The oil market remained on the defensive and sold off for the fourth consecutive session on Tuesday amid disappointing economic data out of China and fears that China’s unexpected cut in key policy rates was not substantial enough to support the country’s post-pandemic recovery. China’s industrial output and retail sales data showed the economy slowed further in July. The market was also pressured by a warning from Fitch Ratings that U.S. banks, including JPMorgan Chase could be downgraded if the agency further cuts its assessment of the operating environment for the industry. The oil market traded mostly sideways and posted a high of $82.91 in overnight trading before it began its sharp selloff. The September WTI contract extended its losses to $2.11 as it posted a low of $80.40. The market remained pressured as it settled in a sideways trading range during the remainder of the session. The September WTI contract settled down $1.52 at $80.99 and the October Brent contract settled down $1.32 at $84.89. The product markets also settled in negative territory, with the heating oil market settling down 6.03 cents at $3.0280 and the RB market settling down 5.86 cents at $2.8476. Bank of America Global Research said “Energy demand has to improve materially for a sustained rally above $100/barrel in Brent or above $20/MMBtu in TTF/JKM.” It said it kept its $90/barrel 2024 Brent forecast as higher prices would need larger supply cuts or disruptions or stronger demand. It sees 1.9 million bpd global oil demand growth in 2023 and 1.06 million bpd in 2024, led mostly by China.China's National Bureau of Statistics reported that China's domestic crude oil production in July was 17.31 million metric tons, or 4.1 million bpd, up from 17.13 million metric tons in 2022. It also reported that the country’s oil refinery throughput in July increased 17.4% on the year, as refiners kept output elevated to meet demand for domestic summer travel and to cash in on high regional profit margins by exporting fuel. Total refinery throughput in China was 63.13 million metric tons last month. July's production was the equivalent of 14.87 million bpd, up from a low base of 12.5 million bpd a year earlier when refiners cut back runs as the country faced extensive COVID-19 lockdowns. Production was up slightly from the 14.83 million bpd of oil processed in June. China's crude oil imports in July pared back from close-to-record levels during the previous month, totaling 43.7 million metric tons, or 10.3 million bpd.Iran’s oil minister said over the weekend that Iranian crude production currently is at 3.19 million b/d, up from 2.76 million b/d produced in July. He noted that production is expected to reach 3.3 million b/d later this month and further increase to 3.5 million b/d in September.Colonial Pipeline Co is allocating space for Cycle 48 on Line 1, its main gasoline line from Houston, Texas to Greensboro, North Carolina. The current allocation is for the pipeline segment north of Collins, Mississippi.

Oil Steadies as Chinese Woes Counter Tight OPEC+ Supplies -- New York Mercantile Exchange oil futures and Brent crude traded on the Intercontinental Exchange were little changed early morning Wednesday, with both benchmarks halting losses from the prior two sessions as investors balanced concerns over the health of China's economy against tight supplies from the OPEC+ coalition after Saudi Arabia and Russia extended steep production and exports curbs into September. The oil complex has recently been caught between the two narratives as signs of tightness in the physical market run against demand fundamentals in the world's second largest economy -- China. Overnight headlines out of Beijing once again point to building pressures in the country's financial and property sectors. Zhongshan International Trust -- a large-scale non-bank lender -- reportedly missed payments on its investment products to three separate companies in what could be a sign of contagion from the deepening property crisis. Missed payments reportedly sparked rare protests from at least dozens of investors who clashed with the police at the Zhongshan headquarters, according to the videos circulated on social media. Earlier this week, China's central bank slashed its key interest rate to the lowest since the early days of the pandemic in 2020 but investors remain skeptical that these measures would be enough to spur business confidence. Oil traders closely monitor the developments around China's property crisis and potential signs of a spillover into the broader economy with Beijing being one of the largest buyers of crude oil in the physical market. OPEC in its Monthly Oil Market Report estimated China's crude imports fell to a six-month low 10.3 million barrels per day (bpd) in July from a near record-high 12.7 million bpd seen in the prior month. China's oil consumption is still forecasted to average 15.7 million bpd this year, an improvement from 14.85 million bpd seen over 2022, and second only to the United States with a 20.48 million bpd of demand growth rate. Consistently poor macroeconomic data out of China is becoming an increasingly bearish headwind for the oil market that has so far been focused on supply-side constraints from the OPEC+ coalition. Domestically, the American Petroleum Institute reported Tuesday commercial crude inventories plunged by 6.195 million barrels (bbl) during the week ended Aug. 11, far exceeding expectations for a 1.7-million-bbl drawdown. U.S. crude oil inventories currently stand roughly in line with the seasonal five-year average. Stocks at the Cushing, Oklahoma, tank farm -- the inventory hub for the New York Mercantile Exchange delivery point for West Texas Intermediate futures -- declined 1 million bbl. Further details of the report revealed domestic gasoline stocks fell 760,000 bbl versus a prior set of data showing stocks rose 700,000 bbl. Consensus of analysts and traders surveyed by the Wall Street Journal suggested stocks would drop 1.2 million bbl last week. Distillate inventory added 660,000 bbl compared with prior data indicating a drop of 800,000 bbl and expectations for a 100,000-bbl decrease. Combined gasoline and distillate stockpiles fell by more than 4.4 million bbl in the previous week, pressing inventories well below the seasonal five-year average. Gasoline inventories currently sit 7% below the five-year average at 216.4 million bbl, and distillate stockpiles fell to 115.4 million bbl, some 17% below the five-year average. The U.S. Energy Information Administration will release its latest update on the stock levels with its weekly inventory report at 10:30 a.m. EDT. Near 7:30 a.m. EDT, West Texas Intermediate September futures on NYMEX were little changed near $81.02 bbl, and ICE Brent for October delivery traded near $84.94 bbl. NYMEX RBOB September futures slipped $0.0027 to $2.8449 gallon, and front-month ULSD futures edged higher to $3.0406 a gallon, up by $0.0126 gallon in overnight trading.

WTI Extends Losses As Crude Production Nears Pre-COVID Highs, SPR Build -- Oil prices are modestly lower this morning, having given up overnight gains amid weakish US data which followed dismal China data. "We continue to believe oil demand headwinds will outweigh supply cuts in the near term," warned Bloomberg's Joseph Richter API:

• Crude -6.195mm (-1.7mm exp)
• Cushing -1.00mm
• Gasoline +700k (-1.2mm exp)
• Distillates -800k (-100k exp)

DOE

• Crude -5.96mm (-1.7mm exp)
• Cushing -837k
• Gasoline -262k (-1.2mm exp)
• Distillates +296k (-100k exp)

The official DOE data confirmed API's reporting of a major Crude inventory draw last week (down around 6mm barrels - notably more than expected). Stocks at the Cushing hub fell for the 6th of the last 7 weeks... Graphs Source: Bloomberg US Crude inventories are at their lowest since January... For the second week in a row, the Biden administration 'refilled' the SPR (adding a mere 600k barrels)... US Crude production surged again last week - despite the decline in the rig count - up to near pre-COVID levels...WTI was hovering around $80.80 ahead of the official data and extended losses after the print... Finally, we note that retail gas (pump-prices) are at 10-month highs, and set to go further given where wholesale gasoline and crude prices are...

U.S. Crude Oil Production Increased to a Three-Year High - The crude oil market on Wednesday continued to trend lower despite a bullish draw in crude stocks of nearly 6 million barrels in the week ending August 11th. However, on the bearish side, U.S. crude oil production increased to a three-year high of 12.7 million bpd, just 300,000 bpd off a record high of 13 million bpd. The oil market traded mostly sideways in overnight trading and ahead of the release of the EIA report as it posted a high of $81.30 early in the session. However, the market retraced its gains and breached its previous low of $80.40 and sold off to $79.61 ahead of the release of the Fed minutes. The crude market extended its losses further to a low of $79.28 following the release of the minutes in which fed officials said inflation risks could require further tightening. The September WTI contract settled down $1.61 at $79.38 while the October Brent contract settled down $1.44 at $83.45. The product markets ended the session mixed, with the heating oil market settling down 71 points at $3.0209 and the RB market settling up 1.95 cents at $2.8671.The EIA reported that U.S. crude inventories fell by 5.96 million barrels in the week ending August 11th to 439.7 million barrels as oil refiners increased runs and exports increased. Meanwhile, production increased to its highest level since the COVID-19 pandemic cut fuel demand. Refinery runs increased by 167,000 bpd to 16.75 million bpd, the highest level since January 2020. U.S. crude exports increased by 2.2 million bpd, the largest weekly increase since August 2022, leading to a fall of 1.76 million bpd in net imports.According to data from the Joint Organizations Data Initiative, Saudi Arabia’s crude output in June was little changed from the previous month at 9.96 million bpd. Saudi Arabia's crude oil exports fell for a third consecutive month in June to their lowest since September 2021. Saudi Arabia’s crude exports totaled 6.8 million bpd in June, down about 1.8% from May's 6.93 million bpd.IIR Energy reported that U.S. oil refiners are expected to shut in about 180,000 bpd of capacity in the week ending August 18th, increasing available refining capacity by 32,000 bpd. Offline capacity is expected to increase to 184,000 bpd in the week ending August 25th.According to minutes of the Federal Reserve’s July 25th-26th meeting, Federal Reserve officials were divided over the need for more interest rate hikes, with “some participants” citing the risks to the economy of pushing rates too far even as “most” policymakers continued to prioritize the battle against inflation. It said “Most participants continued to see significant upside risks to inflation, which could require further tightening of monetary policy.” In general, the minutes said, Fed policymakers agreed that the level of uncertainty remained high, and that future rate decisions would depend on the “totality” of data arriving in “coming months” to “help clarify the extent to which the disinflation process was continuing.”

Oil Falls to Three Week Low in Thin Trading | Rigzone -- Oil hit a three-week low as light summer trading left the commodity at the mercy of broader markets. West Texas Intermediate Futures are down 4.6% this week, on pace to snap a seven-week streak of gains. Equities, rattled by China’s stock market woes, dragged oil lower, while signs that further interest rate hikes are likely didn’t boost confidence in demand. Even a steep decline in US crude stockpiles and signs of tightening supplies in the Middle East and North Sea failed to lift prices. “Crude prices are heavy as Wall Street grows nervous with the outlooks for the world’s two largest economies — the US and China,” said Ed Moya, senior market analyst at Oanda. “More traders are realizing that US soft-landing prospects might not be a good thing for conquering inflation.” Before this week’s retreat, oil had surged for more than a month on supply cuts from OPEC+ linchpins Saudi Arabia and Russia, as well as estimates that worldwide crude consumption is running at a record pace. While timespreads have narrowed in tandem with crude benchmarks, they remain backwardated, implying near-term supply tightness. Reflecting that underlying positivity, UBS Group AG raised its forecast for Brent prices at the end of the year by $5 to $95 a barrel. Prices: WTI for September delivery fell $1.61 to settle at $79.38 a barrel in New York. Brent for October settlement slid $1.44 to $83.45 a barrel.

The Oil Market on Thursday Remained in its Downward Trend Channel but Rebounded After Falling Nearly 5% -The oil market on Thursday remained in its downward trend channel but rebounded after falling nearly 5% over the previous three trading sessions this week in a sell-off that was mostly driven by weak Chinese economic data. In overnight trading, the crude market breached its previous low of $79.05 and posted a low of $78.95. However, the market bounced off that level and never looked back as the market retraced most of the losses seen during Wednesday’s session as China’s central bank attempted to ease concerns over the country’s property market and wider economy. China’s central bank said it would keep its policy “precise and forceful” to support the country’s economic recovery. The oil market was also well support by news that China made a rare draw on crude inventories in July, the first time in 33 months. The market extended its gains to $1.70 as it rallied to a high of $81.08 by mid-morning. However, the market later retraced some of its gains and traded back towards $80.15 ahead of the close. The September WTI contract settled up $1.01 at $80.39 and the October Brent contract settled up 67 cents at $84.12. The product markets settled in mixed territory, with the heating oil market settling up 7.29 cents at $3.0938 and the RB market settling down 4.54 cents at $2.8217. UBS sees Brent at $95/barrel and WTI crude at $91/barrel by the end of December, up from the current $90/barrel and $85/barrel, respectively. It sees global oil demand in August reaching 103 million bpd, a record high. It expects the global oil markets to be undersupplied by about 2 million bpd in August and by more than 1.5 million bpd in September. It does not expect recent price declines to persist, in light of the oil market’s firming fundamentals. Refinitiv Eikon data showed that northwestern European gasoline exports to the United States in August so far stood at around 752,000 metric tons, compared with about 1 million tons in July. Meanwhile, northwestern European gasoline exports to West Africa in August so far stood at around 1.13 million metric tons, compared with around 800,000 tons in July. Refinitiv Eikon data also showed that global diesel shipments for arrival in Europe in August are set to reach 4.2 million metric tons, well below the 7.23 million tons delivered in July. PJK/Insights Global reported that gasoline stocks held in the Amsterdam-Rotterdam-Antwerp terminal in the week ending August 17th increased by 9.92% on the week and by 5.3% on the year to 1.451 million tons, while its gasoil stocks fell by 0.19% on the week but increased by 36.02% on the year to 2.058 million tons and fuel oil stocks increased by 3.31% on the week and by 4.83% on the year to 1.28 million tons. Naphtha stocks increased by 9.92% on the week and by 5.3% on the year to 1.451 million tons and its jet kero stocks increased by 0.28% on the week but fell by 15.7% on the year to 714,000 tons. The number of Americans filing new claims for unemployment benefits fell last week. The U.S. Labor Department said initial claims for state unemployment benefits fell by 11,000 to a seasonally adjusted 239,000 in the week ended August 12th. It reported that the number of people receiving benefits after an initial week of aid increased by 32,000 to 1.716 million during the week ending August 5th. A gauge of future U.S. economic activity fell for the 16th consecutive month in July, though the pace of decline slowed from earlier in the year. The Conference Board said its Leading Economic Index fell 0.4% in July after declining 0.7% in June.

Oil adds $1 on China central bank talk; Weekly loss stays --- Has the great China recovery resumed? One might think so, looking at oil bulls’ optimism Thursday after the vow by Beijing’s central bank to get its economy moving. Crude prices rose for the first time in four days, tacking on more than $1 per barrel in the latest session, while remaining down on the week after the pledge by the PBOC, or People’s Bank of China, which now has to be matched by action. New York-traded West Texas Intermediate, or WTI, crude settled Thursday’s trade up $1.01, or 1.3%, at $80.39 a barrel. WTI lost 4.6% in three prior sessions, leaving it down more than 3% on the week. That was a breakaway from a previous seven-week rally triggered by a bull fervor over Saudi production cuts that lifted the U.S. crude benchmark by 20% in that period, resulting in a 9-month high of $84.89 for a barrel. London-based Brent crude finished the New York session up 67 cents, or 0.8%, at $84.12. Week-to-date, Brent was down around 3% after a seven-week rally that gave oil bulls an 18% return and a seven-month high of $88.10. The oil rally ran into trouble this week after one bad patch of economic data after another released by China, the world’s top crude importer. July was a particularly woeful month for what is also the world’s number two economy, with bank loans sliding to a 14-year low; consumer and producer prices declining and exports sliding their most since February 2020. The yuan also tumbled against the dollar, adding to the weight on commodities, particularly oil. The PBOC vows to change all that now, saying it would keep liquidity reasonably ample and keep its policy "precise and forceful" to support the country's economic recovery, amid rising headwinds. China’s central bank unexpectedly cut key benchmark interest rates for the second time in three months on Tuesday, in a bid to support a sputtering economic recovery. Markets widely expect the bank to loosen monetary policy further. On Thursday, the PBOC said it will "better leverage the dual functions of aggregate and structural monetary policy tools and firmly support the recovery and development of the real economy".

Oil Posts Weekly Loss as Economic Concerns Grow | Rigzone Oil posted its first weekly loss since June as low trading volumes left the market vulnerable to macroeconomic concerns, overshadowing signs of a tight physical environment. West Texas Intermediate settled just above $81 a barrel, down nearly $2 for the week, as poor economic data and a widening housing slump in China weighed on risk assets. The gloom has eclipsed signs of a tighter crude market, including US stockpiles that declined to the lowest level since January. Aggregate open interest for West Texas Intermediate fell to the lowest level since January on Thursday. In the US, Federal Reserve policymakers have signaled they may not be done hiking rates to tame inflation, helping to lift Treasury yields and boosting the dollar. Officials will gather next week in Jackson Hole in Wyoming, potentially providing more clues on Fed sentiment. The US currency notched a fifth weekly gain, the longest run in more than a year, which dulls the allure of commodities for overseas buyers. Crude remains markedly higher from its lows in June, driven largely by supply cuts by OPEC+ linchpins Saudi Arabia and Russia. That has led many observers, including the International Energy Agency, to forecast tighter balances and higher prices before the year is out. However, Citigroup Inc. and others have countered that oil will weaken as consumption disappoints and supply swells. “We expect that Brent will not break out of the yearly range,” Rabobank analyst Joe DeLaura said in a report, noting that Brent struggled to break through its 2023 highs in recent days. “We see the current macro overhang and worsening Chinese economic data to keep this ceiling intact.” Prices: WTI for September delivery rose 1.1% to settle at $81.25 a barrel in New York. For the week, futures are 2.3% lower. The September contract expires on Tuesday. Brent for October settlement was 0.8% higher at $84.80 a barrel.

Oil Posts First Weekly Losses in 2 Months on China, Fed Outlook -- Crude oil futures nearest delivery erased early morning losses to settle Friday's session modestly higher. The contracts booked their first weekly losses in nearly two months amid pressure from concerns over a derailed economic recovery in China and the potential for tighter monetary policy in the United States after several Federal Reserve officials signaled they are biased toward one more rate hike this year. At settlement, West Texas Intermediate September futures on NYMEX advanced $0.86 to $81.25 per barrel (bbl) after plunging to a $79.59-per-bbl intra-session low, and international crude benchmark Brent for October delivery finished at $84.80 per bbl, up $0.68 per bbl on the session. Both crude benchmarks posted their first weekly losses since late June. In the refined fuels, NYMEX ULSD September futures rallied $0.0659 to settle at $3.1597 per gallon, while nearby-month RBOB contract finished the session little changed at $2.8232 per gallon. The oil complex has been caught this week between two narratives as signs of tightness in the physical market run against demand fundamentals in the world's second-largest economy -- China. Macroeconomic data released this week showed another month of derailed growth for the Chinese economy, with consumer spending, factory production and fixed investment all having slowed further in July, according to data released from the National Bureau of Statistics. Financial markets have been further roiled by the news that China's troubled Evergrande Group filed for Chapter 15 bankruptcy days after another real-estate giant, Country Garden, missed payments on its corporate bonds, prompting rare protests from the investors. China's central bank attempted to calm the markets by slashing its key interest rate to the lowest since the early days of the pandemic in 2020, but investors remained skeptical that these measures would be enough to spur consumer and business confidence. Oil traders closely monitor the developments around China's property crisis and potential signs of a spillover into the broader economy with Beijing being one of the largest buyers of crude oil in the physical market. OPEC in its Monthly Oil Market Report estimated China's crude imports fell to a six-month low 10.3 million barrels per day (bpd) in July from a near-record-high 12.7 million bpd seen in the prior month. Consistently poor macroeconomic data out of China is becoming an increasingly bearish headwind for the oil market that has so far been focused on supply-side constraints from the OPEC+ coalition. Domestically, investors will shift focus to the next week's Economic Symposium in Jackson Hole, Wyoming, that will feature the headline speech from the Federal Reserve Chairman Jerome Powell. The theme of this year's event is "Structural Shifts in the Global Economy." While it's unlikely Chair Powell will offer any concrete guidance about near-term monetary policy, investors will be watching closely for hints of whether the July Fed rate hike was the last one of the current cycle. Minutes released from the July 25-26 meeting by the Federal Open Market Committee revealed most participants still saw a significant upside risk to the current inflationary cycle amid a tight labor market and resilient consumer spending. At that meeting, FOMC raised the benchmark borrowing rate for the 11th time in 17 months to a 5.25% by 5.5% range. Several Federal Reserve officials voiced their support for additional rate hikes since that decision, with Neel Kashkari, president of Minneapolis Federal Reserve, saying this week he is not ready to end the rate-hiking cycle at this point. "Participants stressed that inflation remained unacceptably high, and that further evidence would be required for them to be confident that inflation was clearly on a path toward the committee's 2% objective," cite minutes from the meeting, further noting that "consumer spending had exhibited considerable resilience, underpinned by, in aggregate, strong household balance sheets, robust job and income gains, a low unemployment rate, and rising consumer confidence."

Ships Warned Of Increased Iranian Threat Near Strait Of Hormuz --Vessels transiting the Strait of Hormuz in the Middle East are being warned by the U.S. and the UK to steer clear of Iranian waters to avoid possible seizures, the U.S. Navy said this weekend. “The International Maritime Security Construct is notifying regional mariners of appropriate precautions to minimize the risk of seizure based on current regional tensions, which we seek to de-escalate,” Commander Timothy Hawkins, spokesman for the Bahrain-based U.S. Fifth Fleet, said this weekend, as carried by Reuters. The UK also issued an advisory about ships in proximity to the Strait of Hormuz, the world’s most important oil transit chokepoint between Oman and Iran which connects the Persian Gulf with the Gulf of Oman.UK Maritime Trade Operations (UKMTO), part of the navy, said this weekend that it had been made aware of an increased threat within the vicinity of the Strait of Hormuz.“All vessels transiting are advised to exercise caution and report suspicious activity to UKMTO,” the UK said in its latest advisory.So far this year, Iran has seized oil tankers near the Strait of Hormuz, where daily oil flows are equivalent to about 21% of the daily petroleum liquids consumption worldwide.At the beginning of last month, Iran attempted to seizetwo oil tankers near the Strait of Hormuz, the U.S. Navy said.The previous two such incidents took place at the end of April and early May. A commercial oil tanker was seized by Iran on May 3 transiting the Strait of Hormuz.A previous incident occurred six days earlier when the Iranian Navy seized Marshall Islands-flagged oil tanker Advantage Sweet while it transited international waters in the Gulf of Oman. The oil tanker had departed the Mina Saud Port in Kuwait and was destined for Houston, Texas, after being commissioned by U.S. oil giant Chevron.

Senators Urge Biden to Unload Tanker Carrying Stolen Iranian Oil - A bipartisan group of senators is urging President Biden to facilitate the transfer of stolen Iranian oil that has been stuck on a tanker off the coast of Texas.The Greek tanker Suez Rajan was seized by the US government in April under the pretext of sanctions relief and was forced to sail to Texas instead of China. The tanker is carrying 800,000 barrels of Iranian oil, but US companies are hesitant to discharge the cargo over fears of Iranian reprisals in the Persian Gulf. It has been stuck near Galveston since May 30.According to Reuters, Senators Joni Ernst (R-IA), Richard Blumenthal (D-CT), and several other members of the Senate and House told President Biden in a letter that sanctions would become ineffective if American companies were worried about Iranian retaliation.“It is imperative that the Administration make clear that Iran and designated Foreign Terrorist Organizations cannot prevent our government from carrying out legitimate law enforcement operations,” the lawmakers said. They asked for a briefing from the administration on the progress of discharging the oil.The US seizure of the Suez Rajan provoked the Iranian seizure of two tankers in the Persian Gulf. The US responded by beefing up its military presence in the waters and is now considering placing armed troops on commercial vessels, a move that risks a direct clash with Iran.

China says transition in Afghanistan is 'historic achievement' - As the Taliban celebrate two years since their return to power in Afghanistan, China says the transition demonstrates “stability” and is a “historic achievement.” The Chinese Foreign Ministry's spokesperson, Wang Wenbin, also referred to the US's counter-terrorism and diplomacy efforts in the region as a complete failure. Wenbin drew attention to the interim administration in Afghanistan during the daily news conference in Beijing, hailing the Taliban's efforts to rebuild the economy, ensure security, and improve livelihood. “The world needs to view these efforts objectively and fairly,” he stressed. While hinting at the US, Wenbin said over the past two years, a certain country has cut off aid, frozen Afghanistan’s assets, and imposed sanctions, worsening the suffering of the Afghan people. According to UN data, the number of Afghans in dire need of humanitarian aid has more than doubled from 14.4 million to 29.2 million, he said, urging the "relevant country" to learn from what happened in Afghanistan, deliver on the promise of aid to the country, and ensure that all frozen assets of Afghanistan are used as soon as possible to address the urgent livelihood needs of its people. To achieve lasting security, Afghanistan must first address the worrying humanitarian situation, he said. “The world must boost cooperation against terrorism, aid Afghanistan in a multi-pronged approach to address challenges, and achieve lasting peace, stability, and development soon,” he stressed. After years of peace negotiations between the US and Taliban, the Doha agreement was signed in Feb. 2020, requiring all foreign forces to leave the war-torn country within 14 months. Tuesday marks two years since the return of the Taliban in August 2021, which they call the “conquest of Kabul.”