Sunday, June 12, 2016

oil prices double from recent lows, cheaper gasoline hits refinery margins, global rigs ex-Americas up 24

oil prices rose to 8 month highs on Wednesday of this past week, nearly double the February lows, but dropped back to near where they started the week after unexpected and unseasonal increases in gasoline and distillate inventories, an incremental increase in our oil production and another increase in the oil rig count...US WTI crude prices, which had closed last Friday down 53 cents to $48.62 a barrel, opened higher and rose to close at $49.10 on Monday after news of three more attacks on Nigerian oil infrastructure over the weekend...oil prices continued rising on Tuesday on Nigerian worries, and closed the day at $50.36 a barrel after the American Petroleum Institute indicated a 3.56 million barrel drop in US oil supplies for the week...prices also rose Wednesday morning but turned chaotic with the afternoon release of the official EIA data, which confirmed the large drop in oil supplies, but also showed increases in oil production, gasoline supplies, and distillate supplies...oil fell from $51.17 a barrel to $50.82 a barrel in the first two minutes after the news release, then spiked to $51.34 a barrel three minutes later, before drifting lower and closing for the day at $51.23...oil then fell $1 a barrel early Thursday on profit taking and a half percent increase in the value of the US dollar (higher dollar value raises prices in foreign currency, lowers it in dollars) and then rose back to settle at $50.56 at the close...oil prices continued falling Friday after Baker Hughes showed the second consecutive increase in oil drilling rigs, and closed the week at $49.07 a barrel down nearly 3% for the day...we'll include a 2 year oil price graph here, since it's been a while since we've shown the long view of what price changes have transpired since OPEC production flooded the markets and drove oil prices down...

June 11 2016 WTI oil prices for July

the above graph shows the end of the week prices per barrel over the last 2 years for the July contract of the US benchmark oil, West Texas Intermediate (WTI), when it's stored at or contracted to be delivered to the oil depot in Cushing Oklahoma...since this graph only shows prices for July delivery, the record low prices near $26 a barrel of late February for March delivery would not be shown; but we can see that July oil had dipped below $30 a barrel at that time, while March oil was trading near $26...similarly, prices for this July contract have tended to be higher than the currently quoted price over this price history, just as all oil futures prices have been higher than currently quoted prices, setting up the contango trading we saw so much of last year, wherein traders would buy oil at current prices, enter into a contract to sell it at a higher price at some future date, and then pay for the storage costs until that date...the price differential is not so extreme now, but even today the contract for July 2017 oil is priced at $52.15 a barrel, more than 6% higher than the July 2016 price...with contract prices now generally over $50 a barrel, we're now seeing a modest increase in drilling, as well as the first nominal increase in oil production...Continental Resources said this week that they have now begun completing some of the drilled but uncompleted wells (DUCs) in the Bakken formation, now that oil prices are at $50 per barrel; we assume other oil frackers will do the same, sooner or later...

The Latest Oil Stats from the EIA

as we've already mentioned, this week's oil data from the US Energy Information Administration showed a seasonally significant drop in our oil inventories, offset by increases in our gasoline and distillate inventories, as refineries used more crude than they had in any week over the past two months, while our imports of crude were modestly lower....also as mentioned, our field production of crude oil rose by 10,000 barrels per day, from an average of 8,735,000 barrels per day during the week ending May 27th to an average of 8,745,000 barrels per day during the week ending June 3rd...though that was the largest increase in our production since the week ending January 1st, it was only the 2nd increase in the past 20 weeks, so our production is thus still 9.1% lower than the 9,610,000 barrel per day oil production that we saw during the week ending June 5th of last year, which as it turned out was the high for the year...that increase in oil output was not an indication of an increase in fracking, however, as the entirety of the increase came by way of an 18,000 barrel per day increase in Alaskan production...

at the same time, our imports of crude oil fell by 134,000 barrels per day to average 7,705,000 barrels per day during the week ending June 3rd, down from the average of 7,839,000 barrels per day we were importing during the week ending May 27th...while that was 16.3% more than the 6,623,000 barrels of oil per day we imported during the week ending June 5th a year ago, oil imports are typically volatile week to week, so the EIA's weekly Petroleum Status Report (62 pp pdf) reports imports as a 4 week moving average...that metric showed that the 4 week average of our imports was still at the 7.6 million barrel per day level, which was 9.5% above the same four-week period last year... 

meanwhile, U.S. refineries’ crude oil inputs averaged 16,417,000 barrels of per day barrels during the week ending June 3rd, which was 211,000 barrels per day more than the 16,206,000 barrels of crude per day they processed during the week ending May 27th, as the US refinery utilization rate rose to 90.9% during the week, from 89.8% of capacity the prior week...that crude usage was still 1.0% lower than the 16,576,000 barrels per day US refineries used during the week ending June 5th last year, when US refineries were operating at 94.6% of capacity...part of the reason for the current refining slowdown may be that gasoline profit margins have shrunk to their lowest since 2010, as gasoline prices have been falling over the past 4 weeks even as oil prices rose...with the global glut of refined products, some gasoline markets have even gone into "backwardation", which means that future contract prices are lower than those currently quoted, meaning losses for every barrel of gasoline stored...

still, with more oil being refined, our refinery production of gasoline rose by 206,000 barrels per day, as gasoline output averaged 10,122,000 barrels per day during the week ending June 3rd, up from the average of 9,916,000 barrels per day of gasoline produced during the week ending May 27th...that was 1.1% more than the 10,007,000 barrels of gasoline per day we were producing during the same week last year, and the most gasoline we've produced in any week since the middle of last the same time, our refinery output of distillate fuels (diesel fuel and heat oil) also increased, rising by 81,000 barrels per day to 4,838,000 barrels per day during the week ending June 3rd...however, that was still 4.8% below our distillates production of 5,083,000 barrels per day during the week ending June 5th of last year, as 2015 distillates inventories were somewhat tighter, promoting more production...      

however, in contrast to last week, when increased production of gasoline and distillates did not add to inventories, inventories of both products ended this week higher....our gasoline inventories rose by 1,010,000 barrels to 239,629,000 barrels as of June 3rd, the second large unseasonal increase in the past 3 weeks, leaving our gasoline inventories little changed since mid-April, at a time of year when they're usually being used up....that was despite a 94,000 barrels per day drop to 815,000 barrels per day in our gasoline imports, as the gasoline supplied to US markets fell by 148,000 barrels per day to 9,568,000 barrels per day, which was also down from the 9,600,000 barrel per day consumption during the week ending June 5th last a result, this week's gasoline inventories were 10.2% higher than the 217,354,000 barrels of gasoline that we had stored on June 5th last year, and 12.2% higher than the 213,482,000 barrels of gasoline we had stored on June 6th of it's no surprise that our gasoline supplies are still categorized by the EIA as "well above the upper limit of the average range" for this time of year.. 

at the same time, our distillate fuel inventories also rose by 1,754,000 barrels to end the week at 149,623,000 barrels, as distillates were added to storage on both the east and west coasts...with distillate inventories already above normal after our warm winter reduced heat oil consumption, our distillate inventories were thus 13.4% higher than the 133,477,000 barrels of distillates we had stored at the same time last year, and 27.3% higher than our distillates supplies as of June 6th 2014, and thus they're also characterized as "well above the upper limit of the average range" for this time of year...   

finally, with the drop in crude imports and the increase in refining, we needed to draw 3,226,000 barrels of oil from our stocks of crude oil in storage, which fell from 535,702.000 barrels on May 27th to 532,476,000 barrels as of June 3rd... the crude oil fudge factor included on the weekly U.S. Petroleum Balance Sheet (line 13) was a negligible minus 5,000 barrels per day, which means that 5,000 barrels of oil per day that we appeared to have produced or imported last week did not show up in the final figures...thus our oil inventory level on June 3rd was 13.1% higher than the 470,603,000 barrels of oil we had stored as of June 5th, 2015, and  37.6% higher than the 386,927,000 barrels of oil we had stored on June 6th of 2014...hence, since our oil inventories are still off the charts, it goes without saying that they too are "well above the upper limit of the average range" for this time of year..."

This Week's Rig Counts

as we mentioned in opening, drilling for oil and gas increased this week for the 2nd week in a row, after the overall rig count had not previously increased in any week since August 21st of last year.....Baker Hughes reported that the total count of active rotary rigs running in the US increased by 6 rigs to 414 rigs as of June 10th, which was still down from the 859 rigs that were deployed as of the June 12th report last year, and down from the recent high of 1929 rigs that were in use on November 21st of 2014...the count of rigs drilling for oil rose by 3 rigs to 328, which was still down from the 635 oil directed rigs that were in use a year earlier, and down from the recent high of 1609 working oil rigs that was reported on October 10, 2014, while the count of drilling rigs targeting natural gas formations also rose by 3 rigs from last week’s record low to 85 this week, which was down from the 221 natural gas rigs that were drilling a year ago, and down from the recent high of 1,606 rigs that were drilling for natural gas that was set on August 29th, 2008...there was also one rig running this week that was classified as miscellaneous, unchanged from last week but down from the 3 miscellaneous that were operating a year ago....

there were no changes in either offshore or inland lakes rig counts this week; the Gulf of Mexico active rig count remains at 20 rigs, which was down from 29 a year ago, while the total offshore count remains at 21, as there still is an offshore platform drilling off the Cook Inlet in Alaska...the number of working horizontal drilling rigs increased for the second week in a row, after never rising in prior weeks this year, as working horizontal rigs rose by 4 to 323 rigs, which still was down from the 663 horizontal rigs that were in use on June 12th of last year, and down from the record of 1372 horizontal rigs that were deployed on November 21st of the same time, a single vertical rig was also added, bringing the vertical rig count up to 46, which was down from the 101 vertical rigs that were in use at the end of the same week a year earlier...there was also a directional rig added this week, increasing the directional rig count to 45 rigs, which was still down from the 95 directional rigs that were drilling in the US during the same week a year earlier..    

for the details on which states and which shale basins saw changes in drilling activity this past week, we're again going to include a screenshot of that part of the rig count summary from Baker Hughes, which shows those changes...the first table below shows weekly and annual rig count changes by state, and the second table shows weekly and annual rig count changes for the major geological oil and gas both tables, the first column shows the active rig count for each state or basin as of June 10th, the second column shows the change in the number of working rigs from the prior week, the third column shows last weeks rig count, the 4th column shows the change in the number of rigs running from the same week a year ago, and the 5th column shows the number of rigs that were drilling at the end of that week a year ago, which in this case was June 12th of 2015: 

June 10 2016 rig count summary

as you can see, there were more basin variances over this past week than the week before, when only 3 shale fields saw rig count changes...that the largest increases in drilling were seen in Texas and North Dakota is no surprise, nor are the single rig increases in Alaska, Oklahoma, Ohio and Utah....there's obvious gas rig changes in the Haynesville, the Marcellus, and the Utica, where another rig has been added, while the Mississippian lime of the Kansas Oklahoma border, which had been pretty much been abandoned when prices fell, saw its drilling activity rise from 3 rigs to 5...note that to balance the final state rig count shown above at +6, a drilling rig not shown above was removed from Indiana, the one which had just been set up there during the week ending May 13th...a year ago, in fact over most of the past year, Indiana had no drilling activity...

Global Drilling Activity During May

the past week also saw the monthly release of the international rig count for May, which unlike the weekly count, is an average of the number of rigs running in each country for the month, rather than the total of those drilling at month end....Baker Hughes reported that an average of 1405 rigs were drilling for oil and natural gas around the globe in May, which was down from 1,424 rigs drilling globally in April and down from the 2,127 rigs that were deployed globally in May of last year...the ongoing pullback in US drilling accounted for the decrease, as the average US rig count fell from 437 in April to 408 in May, which was also down from 889 in May a year ago...the US drop caused the Northern America count to fall from 478 rigs in April to 450 in May, as the average Canadian deployment was 42 rigs over the month, up by 1 rig over April, but still down from the 80 rigs that were working in Canada in May a year ago...outside of Northern America, the International rig count rose by 9 rigs to 955 in May, which was still down from 1,158 rigs a year ago, as except for Latin America, all other areas of the globe saw an increase in drilling activity...

drilling increased in the Middle East for the 5th time in the past 10 months, as the region's activity was up by 7 rigs to a May average of 391, which was still down from the 398 rigs deployed in the Middle East a year earlier...the region did see a pullback of 3 rigs working offshore, however, lowering the offshore count to 51, which was still up from their offshore rig count of 41 rigs last May....Pakistan accounted for 4 of the net rigs added in the region, as they were up to 27 rigs in May from 23 in April, and up from the 20 rigs that were drilling in Pakistan a year earlier...Kuwait added 3 rigs, which brought their total to 43 active rigs, which was still down from 48 rigs a year earlier...Oman and Bahrain each added a single rig; that brought Oman up to 69 rigs, down from 70 a year earlier; for Bahrain, it was their first active rig since June a year ago, and also up from no rigs last the same time, Egypt saw 2 rigs idled, dropping their active rig count to 28, which was down from the 36 rigs they had deployed a year ago at this time...meanwhile, the Saudis kept 123 rigs working, the same as last month, and down from 124 rigs last May...the Saudis have been averaging a deployment of 125 rigs throughout 2015 and 2016, an increase from their average of 105 rigs in 2014, when oil prices averaged twice as high, so they’ve been adding rigs as prices fell...

meanwhile, the Latin American countries pulled out another 15 rigs, same as in April, and hence the region is now down by 82 rigs since the first of the year...Latin American countries averaged 188 rigs in May, including 30 offshore, down from the total of 327 rigs, which included 69 offshore rigs, that were active in Latin America in May of 2015, so you can see their pullback in drilling is similar in magnitude to that of our own....Venezuela saw the largest drop, as they were down by 9 rigs to 60, which was down from the 69 rigs that were in use in Venezuela a year ago...Brazil idled 4 more rigs, after shutting down 9 in April, and they were thus down to just 15 active rigs, from the 43 rigs deployed in Brazil in April last year...Argentina, which had added rigs in March and April, shut down 2 in May, leaving 71 still working; that was down from the 104 rigs working Argentina in May of last addition, Ecuador, Peru, and Mexico each cut a single rig in May, that left Ecuador with 2 working rigs, which was down from the 15 they were running a year earlier, left Peru with no rigs running, down from 2 a year earlier, and left Mexico with 22 rigs working, which was down from the 60 rigs working there a year ago....meanwhile, Columbia, which had cut their active rig count from 30 all the way down to 2 over the nine months ending April, added 3 rigs in May, which brought them back up to 5 rigs, which was also down from the 24 rigs they had deployed last May...

elsewhere, the Asia-Pacific region had 190 drilling rigs working in May, 11 more than the 179 rigs working the region in April, but still down from the 217 rigs working the region a year earlier...the largest drilling increase there was offshore of China, where 31 drilling platforms were working in May, up from 26 in April and up from 25 in May a year addition, Malaysia, Thailand and Indonesia each added 2 rigs, bringing Malaysia up to 6 rigs, but still down from 12 rigs in May of 2015, bringing Thailand up to 15 rigs, but still down from 19 rigs a year ago, and bringing up to Indonesia 19 rigs, also down from 28 rigs in May of the same time, Myanmar cut 2 rigs, leaving just 1 rig working there, same as they had a year ago...rigs working on the African continent, meanwhile, increased by 1 to 91 rigs in May, from 90 in April , which still was down from the 100 rigs working the African continent last year at this time...both the Ivory Coast and Morocco added a rig in May, the Ivory Coast now has 2 rigs drilling, up from 1 rig last May, while Morocco has just the new one, and also had none a year the same time, a single rig was taken down in the Congo, which now has just 1 rig running, down from 4 a year earlier...

lastly, Baker Hughes reports that the rig count in Europe rose by 5 rigs to 95 in May, which was down from the 118 rigs working in Europe a year ago at this time...trouble is, they include Sakhalin island, off the east coast of Russia, where four rigs were added, as part of Europe....Sakhalin now has 10 rigs working, up from 6 in both April and in May a year ago...elsewhere in Europe, additional rigs were set up in Iceland, Denmark, and offshore of the UK; the new rig was the only rig working Iceland, who also had no activity a year ago, the new rig in Denmark brings their total to 2, same as a year ago, while the UK offshore count rose to 9, which was still down from 16 a year the same time, France and the Netherlands both shut down 1 rig; that left France with no drilling activity, same as a year earlier, and left the Dutch with just 2 rigs, down from 5 a year earlier.....note that Iran, Russia, and China rig counts are not included in Baker Hughes international data, although you might have noticed that rigs drilling in China's offshore area are included in the Asian rig totals here...   


Ohio's Attempt at Power Plant Bailouts Should Alarm Conservatives  (with Ohio power station map) In a recent victory for consumers, federal regulators blocked bailout plans by two of the nation’s largest power companies, who hoped to subsidize their unprofitable power plants on the backs of Ohio ratepayers. The deals, brought forth by American Electric Power (AEP) and FirstEnergy Corp., would have resulted in higher bills, environmental damage, stifled innovation, diminished value for customer choice and less competitive markets for Ohio. Unfortunately, the rationale behind the Ohio decision still threatens to turn this kind of irresponsible, anti-competitive plan into a broader movement. This should outrage conservatives. Over the past decade, cheap natural gas drove some of AEP and FirstEnergy’s coal and nuclear power plants into the red. The companies sensed an opportunity to seek subsidies for these plants through mandatory ratepayer charges, chanting the motto of "rate stability" and appealing to keep in-state power plants online. The companies received their bailouts in an alarmingly unanimous vote by the Public Utilities Commission of Ohio. Safeguarding in-state jobs is undoubtedly a worthwhile concern, but mandating subsidies to do so is not the solution. It inhibits companies from creating the kinds of modern jobs that have a place in the efficient energy future. Allowing unprofitable enterprises to shut down creates room for new, profitable ones to innovate and thrive in competitive markets. Cheap natural gas is currently the primary catalyst of this transition in the electricity industry. But clean, renewable energy is also becoming highly competitive. Markets, if left to their own devices, will harness these forces to maximize economic growth. Market signals, not political favoritism, should drive investment decisions.

Cleveland Soon to Be Home to the Nation’s First Offshore Wind Farm in Fresh Water - North America’s first offshore freshwater wind project has received a $40 million boost from the U.S. Department of Energy (DOE). In somewhat of a surprise decision, the funding was awarded to Lake Erie Energy Development Co (LEEDCo) for its “Icebreaker” project, which consists of six 3.45-megawatt turbines located 8-10 miles off the coast of Cleveland.  The local wind power firm was chosen over Dominion Resources, which had proposed a two-turbine, 12-megawatt project off Virginia, and Principle Power, which had proposed a five-turbine, 30-megawatt project off Oregon. LEEDCo was previously considered one of the “alternate” projects. According to, “LEEDCo’s decision to adopt the European-designed ‘Mono Bucket’ foundation, which eliminates pile driving in the bedrock below the lake bed, may have been crucial to the DOE’s decision to fully fund the project.”  A DOE analysis stated that the “innovative Mono Bucket foundation will reduce installation time, costs, and environmental impacts compared to traditional foundations that require pile driving. The Mono Bucket not only is a solution for the Great Lakes, but also has broader national applicability for offshore wind installations off the Atlantic and Gulf Coasts.”

Watch group hosts tour - The Star Beacon  -- Two vans filled with people criss-crossed the county on Saturday afternoon stopping at spots that highlight present and past environmental dangers in Ashtabula County, according to organizers of the event sponsored by Ashtabula County Water Watch. The “Toxic but Terrific Tour” was organized by the ACWW to view Superfund sites, operating injection wells and earthquake epicenters they believe are connected to injection well operation, according to information the group shared during a lecture at Harbor-Topky Memorial Library in Ashtabula before the tour began. The group formed after the gas and oil drilling technique called fracking was rumored to be coming to Ashtabula County. The possibility of fracking in Ashtabula County still exists, but market conditions have slowed the rush to drill in the county. Organizers of the ACWW said they are also concerned about the growing number of injection wells in Ashtabula County that are used to bury the waste from fracking sites in southern Ohio and surrounding states. Gabrielle Kaplan, president of Life Watch Group based in Cleveland, said people need to know that injection wells increase the likelihood of earthquakes. “If we are going to do anything about these toxins we need to organize,” said John Wright who is one of ACWW’s leaders who lives in Sheffield Township. He said the group is interested in new members and meets again from 5:30 p.m. to 7 p.m. on June 16 at the Jefferson Recreation Center. Vanessa Pesec, president of the Network for Oil and Gas Accountability and Protection, gave an overview of concerns relating to the oil and gas industry. She said fracking can have negative effects on the environment because of the many stages of a well’s existence and the many chances for a problem to manifest itself over many years. Pesec also questioned legislation that she believes governs the oil and gas industry too loosely. She said oil and gas companies do not have to release all the chemicals used in the fracking process that are then buried in injection wells.

St. Cyprian's Church in Perry hosts anti-fracking event - Pope Francis spreads a universal message that everyone should be good stewards of the planet, and that wass at the forefront of discussion for a National Day of Action event.  The event was held at St. Cyprian’s Church in Perry on June 7 and was coordinated by Buckeye Forest Council, The Center for Health, Environment and Justice, Faith Communities Together for a Sustainable Future, Frackfree America National Coalition, Network for Oil & Gas Accountability & Protection and the Ohio Ecological Food and Farm Association. Frack-free Lake County Coordinator Dan Phillips said their goal is to raise awareness about environmental concerns specifically fracking. Fracking is a drilling technique that involves pumping millions of gallons of water, mixed with chemicals, into a well. Because of the high volume of fluid and pressure, the waste surfaces up from the ground. Fracking waste contains carcinogenic, radioactive and toxic materials, Phillips said in a previous interview.

Environmentalists hold Toxic Tea Party to protest fracking (WKBN) – Environmentalists made several stops Tuesday to protest natural gas fracking in Ohio. Frack-Free Mahoning Valley held an anti-fracking “Toxic Tea Party” in Vienna Township. Group leaders said their focus is getting the Ohio Department of Natural Resources (ODNR) to close down the injection well in Vienna. They also want to make sure a closed well in Niles never reopens. One of the protesters, Michele Garman, lives near a fracking well. She said she’s upset that property owners can’t stop wells from moving in next door. “ODNR came in and gave them all their permits, the state said there’s nothing you can do about it. It’s not their water that’s going to end up poisoned,” Garman said. Other stops on the protesting tour included downtown Youngstown and the site of an injection well in Weathersfield Township, the well that sparked earthquakes throughout the area.

Calls for Better Fracking Regulations on Day of Action - – While oil and gas drilling has slowed in Ohio in the past year, fracking opponents say the impacts continue to threaten the fabric of communities. The Frackfree America National Coalition, based in Youngstown, on Tuesday is sponsoring a National Day of Action on fracking with events scheduled in Ohio and other states to call attention to problems associated with fracking, including toxic waste, pipelines, spills and leaks, and earthquakes linked to injection wells. Amalie Lipstreu, policy program coordinator for the Ohio Ecological Food and Farm Association, says communities need more protection. "People who depend on our government to protect us from these harmful environmental impacts are concerned because we don't have those necessary regulations in place to protect communities from the harmful impacts of fracking," she states. Lipstreu notes that most gas drilling and extraction is exempt from the Safe Water Drinking Act, the Clean Air Act and the Clean Water Act. More than a dozen actions will be held Tuesday in Ohio, including an event at Bluebird Farm in Harrison County, an organic operation currently threatened by the proposed Utopia pipeline. Supporters argue fracking supports more than 2 million jobs nationally and boosts local economies. But Lipstreu counters that the short-term benefits do not outweigh the long-term costs to the water and land that communities rely on. "The land is our grocery store, the grocery store for our families and communities,” she stresses. “And for those communities to thrive and survive, we really depend on that healthy land. " Lipstreu adds organic farms, which must meet strict guidelines for certification, are particularly vulnerable to the impacts of fracking with 20 percent of all organic farms in the U.S. located within close proximity to a hydraulic fracturing operation.

Enviro-groups demand that feds halt new ‘fossil-fuel leasing’ - Environmental groups last Wednesday called on the federal Bureau of Land Management (BLM) to halt all new fossil-fuel leasing in Ohio’s Wayne National Forest over concerns about the harmful impact of fracking, according to a news release. The Sierra Club, the Center for Biological Diversity, Ohio Environmental Council and Friends of the Earth are also challenging BLM’s plans to lease up to 40,000 acres of the Marietta Unit of the Wayne’s Athens Ranger District. That would pave the way for oil and gas operations to apply for drilling permits on specific sites, which then would go through a individual approval process. The drilling presumably would employ horizontal hydraulic fracturing (fracking) into deep-shale layers. In its environmental assessment, the BLM proposed a “finding of no significant impact.” That finding, the environmental groups claim, failed to take into account the impacts that fracking would have on air quality, water quality, wildlife, and climate change. The Wayne National Forest is home to rare and endangered species including bobcats, Indiana bats, timber rattlesnakes and cerulean warblers, the release said. “It’s unconscionable that we could ever permit drilling in Ohio’s only national forest,” Jen Miller, director of Sierra Club Ohio, stated in the release. “This forest is owned by the people for their enjoyment – not for the oil and gas industry to destroy. Permitting fracking will disrupt wildlife, threaten clean water resources and reduce recreation and tourism. It should and must be preserved for this generation and those to come.”

Forest chief is failing to protect Wayne forest from fracking  - When Tony Scardina was the Bradford District Ranger on the Allegheny National Forest in Pennsylvania, he refused to consider the “reasonably foreseeable” impacts of extreme hydrocarbon shale oil and gas extraction (fracking) on water, air, soils, wildlife habitat and recreation. Even though fracking was occurring on lands surrounding the Allegheny National Forest, Scardina adopted the Forest Service’s head-in-the-sand approach to fracking. If a developer hadn’t submitted an actual fracking plan for the Allegheny, the threat to public resources didn’t exist. Under the National Environmental Policy Act (NEPA) Ranger Scardina was required to consider the impacts of present and “reasonably foreseeable” future impacts to the Public’s lands. He refused to do so on the Allegheny National Forest and is adopting the same head-in-the-sand approach to fracking on the Wayne National Forest. The before and after photos of the Allegheny show what the public can expect on the Wayne National Forest with Scardina’s poor judgment. The Allegheny Forest is industrialized with roads, well pads, pipelines, electric utilities, tank farms, stone pits for road construction, generators, compressor plants, gas processing plants, heavy truck traffic, and water impoundments that generate toxic air and water pollution. Water withdrawals from streams for fracking are unregulated with one shale gas well requiring more than seven million gallons of water for one fracking operation. Studies on the Allegheny National Forest show that increased oil and gas drilling increases stream sedimentation impacts. There is simply no reason for the BLM to be leasing federal ownership of minerals it holds in trust for the public on the Wayne. While Supervisor Scardina tells the public that it’s the responsibility of other agencies to protect the Wayne, he knows that the Forest Service abruptly halted its rule-making process to establish regulations for oil and gas drilling on the public’s national forests. So the Forest Service has no protections in place for the public’s land and resources on the Wayne or any other national forest.

Briefs -- EnLink Midstream, Ohio Lawsuit, Frack Ban, Chesapeake - Natural Gas Intelligence - Ohio Attorney General Mike DeWine has filed a lawsuit against Ben W. Lupo, who was sentenced to 28 months in federal prison in 2014 and ordered to pay a $25,000 fine for directing his employees to dump tens of thousands of gallons of oilfield waste down a storm drain in Youngstown, OH, that emptied into a major river. The lawsuit, filed in Mahoning County Common Pleas Court, seeks to recover financial penalties from Lupo along with two of his former companies and three of his former employees. Lupo's sentence brought an end to an investigation that began in February 2013 after inspectors at the Ohio Department of Natural Resources received an anonymous tip about the dumping, which took place at the headquarters of several companies owned by Lupo, including D&L Energy Inc. and Hardrock Excavating LLC (see Shale Daily, Aug. 6, 2014). Regulators discovered that Lupo had ordered his employees to dump the waste down the storm drain on dozens of occasions. A coalition of environmental advocacy groups has delivered more than 90,000 petitions to the Democratic National Committee demanding that a ban on "fracking" be included in the party platform. It's unclear exactly if the groups want all forms of well stimulation banned or the technology that generally applies to unconventional shale wells. The groups did not specify in a press release issued this week, but they alluded to a ban on high-volume hydraulic fracturing. Petitions were collected and delivered by staunch oil and gas industry opponents, such as Food & Water Watch, and, among several others. They said the Democratic party has been "complicit in the U.S. fracking boom which is poisoning communities and our climate." They also said "a massive anti-fracking protest" is planned for Philadelphia on July 24, a day before the Democratic National Convention begins. Vermont Sen. Bernie Sanders has called for a ban on horizontal hydraulic fracturing during his time in office and during his presidential campaign, but the party's presumptive presidential nominee, Hillary Clinton, has identified natural gas as a bridge fuel and has said she favors robust regulation of the extraction industry.

The Book the Fracking Industry Doesn’t Want You to Read  --Wenonah Hauter  (Director of Food & Water Watch) - My new book, Frackopoly: The Battle for the Future of Energy and the Environment will be released this week and I want to tell you why I wrote it.

Random Update Of The Marcellus - Utica -- June 10, 2016  This post is added to put the Piceance Basin in western Colorado in perspective. See this link to the Piceance, June 9, 2016.  Utica:

  • EIA produces new maps of the Utica shale, May 2, 2016. Some data points:
    • the Utica includes two formations: the Utica formation and the deeper Point Pleasant formation
    • 60,000 square miles: Ohio, West Virginia, Pennsylvania, New York
    • the deeper Point Pleasant is more often targeted right now, more productive
    • most of the most productive Point Pleasant in eastern Ohio, western Pennsylvania
    • Point Pleasant deepest in SW Pennsylvania; depths more than 13,000 feet
    • most productive wells in the Utica formation: 5,000 to 11,000 feet
    • Utica: as thick as 200 - 300 feet in northwest Pennsylvania
    • Point Pleasant: more than 200 feet thick in central Pennsylvania
  • 2012, USGS survey: 38 trillion cubic feet; 940 million bbls oil technically recoverable
  • From a July, 2015, West Virginia study
    • original gas-in-place (OGIP): 3,192 trillion cubic feet
    • original oil-in-place (OOIP): 82,903 million bbls (sic)
    • gas: 782 trillion cubic ft (vs USGS estimate of 38 trillion cubic feet)
    • oil: 1.96 billion bo (vs USGS 940 million bo)


Shell commits to western Pennsylvania ethane cracker plant — Shell Chemical Appalachia says it is building a petrochemical plant in northwestern Pennsylvania that will create up to 6,000 construction jobs and 600 permanent jobs once it begins production early next decade. The company has been buying various rights and property, including a former zinc smelting site in Potter Township, Beaver County, where the plant will be built. The plant will process ethane gas from Marcellus and Utica shale wells to create polyethylene, a plastic used in food packaging and auto parts. Shell says construction will begin in the next 18 months, with the goal of bringing the plant online early in the 2020s. Former Republican Gov. Tom Corbett in 2012 OK’d legislation to give Shell tax credits worth $1.7 billion to build the plant.

Evaluating the economics of a new gas pipeline. - We’ve spent a lot of time here in the RBN blogosphere discussing the trials and tribulations of natural gas producers in the Marcellus and Utica shales who are “trapped behind the pipe,” unable to get sufficient takeaway capacity to move supply to market (both within and outside the U.S. Northeast region) where they could get a higher price for their gas. Pipeline companies have ponied up billions of dollars to build lots of pipe to alleviate these constraints and much more investment is planned. Of course, those pipelines and their committed shippers hope that the investment will pay off long-term – that the economics for building the pipe will justify the cost.   The pipeline will have scores of engineers, lawyers and accountants to figure that out.  But what if you just want to make a quick-and-dirty estimate of the economics?  Well, there is a way. In today’s blog, we walk through the factors you need to consider when your boss runs in and asks, “Hey—what would it cost to move gas there in a new pipe?”

EIA: Constructing a natural gas plant is cheaper than other options -- The U.S. Energy Information Administration (EIA) recently began collecting data on the cost to construct electric power generators, showing gas capacity to be the cheapest widely-used generation and wind to be the least-expensive renewable resource. In 2013, the first year for which the agency collected data, natural gas generation on a capacity-weighted basis averaged $965/kW, compared with $1,895/kW for wind and $3,705/kW for solar. More than 7,400 MW of gas capacity was added that year, compared with 2,600 MW of solar and 860 MW of wind. EIA's data on construction costs does not paint a complete picture — utilization rates, subsidies and fuel costs are also a big part of plant operations — but the numbers help illustrate natural gas' recent dominance and the extent to which solar may still lag the cost of wind."Construction costs alone do not tell the full story of the relative economics of each electricity generation technology," EIA noted.  But even while natural gas enjoys an advantage today due to historically-low commodity prices, EIA's data shows the plants are also among the cheapest to construct. Only plants fueled by petroleum liquids are less expensive, and there was only 71 MW installed in 2013.

IEA sees slower global gas demand growth to 2021 | Reuters: Growth in natural gas demand will slow to an average 1.5 percent a year globally through 2021, as stagnation in Europe and uncertainty about Chinese consumption offsets robust growth in India, the International Energy Agency (IEA) said on Wednesday. After growth of 2.5 percent over the last six years, gas is facing competition from renewable energy and cheap coal, meaning the global gas market will remain over supplied. In Europe, Russian gas export monopoly Gazprom will be challenged by the prospect of a glut of liquefied natural gas (LNG) as export capacity rises 45 percent by 2021, even as demand drops in key markets in Japan and Korea. "Developments are pointing to a period of oversupply," IEA head Fatih Birol said in the agency's annual medium term gas outlook. "The next five years will witness a reshaping of global gas trade." Growth will be led by India, at an average of 6 percent per year, while Chinese demand is likely to recover, spurred by a switch from coal to gas-fired power generation, the IEA said. However, new supplies are also limited as production shrinks in Europe and U.S. gas production hovers around flat next year as lower gas prices cut into investment. Longer term, the U.S. shale industry is expect to help drive recovery in production to reach 100 billion cubic metres (bcm) by 2021, or one-third of the global supply rise over the period.

Natural Gas Futures Jump After Inventory Data - WSJ: Natural gas futures jumped Thursday after weekly U.S. data showed stored supplies rose less than expected. The U.S. Energy Department said natural gas stockpiles rose 65 billion cubic feet in the week ended June 3, well short of the 79 billion-cubic-foot increase projected in the consensus estimate of analysts surveyed by The Wall Street Journal. The lower-than-expected increase meant the surplus of stored gas, while large, is not as big as expected at 32.1% above average for this time of year. Still, supplies remain hefty, with nearly 3 trillion cubic feet of gas in U.S. storage. Natural gas futures had been toggling between gains and losses before the data’s release but rocketed higher afterward. The market recently traded up 4.3% at $2.5750 a million British thermal units on the New York Mercantile Exchange. Natural gas prices have surged about 15% since late May on expectations of strong summer weather-driven demand for gas-fired electricity generation to meet air conditioning needs. After a tepid winter of limited heating demand that left supplies bloated, there has been a spate of above-normal temperatures across the U.S. this spring. Meanwhile, lower production, the switching of power plants from coal to gas-fired generation and burgeoning exports are improving the demand side of the equation, combined with hotter temperatures so far this season. “The warmth we saw has triggered [air conditioning] loads,” said Gene McGillian, senior analyst at brokerage Tradition Energy. “The power sector is eating up the gas.”

Natural Gas Is Already Losing To Renewables - For years natural gas has been likened to a “bridge fuel,” a source of electricity generation that can tide us over until renewables are ready to carry the full load. When it is burned natural gas emits about half of the CO2 as coal, making it a preferred alternative to coal, which has long dominated U.S. power generation. Environmentalists have criticized natural gas because although it is cleaner than coal, it still is a fossil fuel that emits greenhouse gases. Methane is also released during production and transmission, a particularly potent greenhouse gas. Moreover, the idea of a “bridge fuel” is a not as neat as is often claimed, environmentalists argue, because investing billions of dollars into long-lived assets – pipelines, power plants, processing facilities – will leave us locked into that infrastructure for decades. Nevertheless, the coal-to-gas switch got underway, largely due to incredibly low natural gas prices after a boom in shale gas production. The switch allowed U.S. CO2 emissions to fall over the past decade or so. However, now a funny thing is starting to happen. The opportunity for natural gas is starting to run out. That conclusion comes from the IEA’s latest Medium-Term Gas Market Report, which projects the construction of natural gas-fired power plants to stall, upending conventional wisdom about the future of U.S. electricity markets. In a forecast for the period between 2015 and 2021, the IEA sees gas consumption almost unchanged over that time frame. “The projected stagnation in gas-fired power generation is the most striking difference relative to the trend of the previous six years, when gas consumption in the sector increased by 90 bcm.”

More Than 5 Gas Tankers a Week Seen Crossing Wider Panama Canal - -- Panama said it expects 20 million tons of liquefied natural gas to pass through its canal annually once the newly widened waterway is opened this month. That’s almost a tanker of gas a day traveling through, based on Bloomberg calculations. “The canal opens the possibility for that gas to reach Asian markets in a more competitive way because the Panama Canal route is the shortest,” said Manuel Benitez, deputy administrator of canal authority, in an interview in Panama City on Wednesday. “We’ve already seen that many very large gas carriers have already made reservations.” The $5.3 billion expansion to the canal is set to be inaugurated June 26, allowing it to handle the kind of massive tankers that transport liquefied natural gas. Its debut is fortuitous for U.S. gas producers as the shale boom has sent domestic supplies surging and drillers are looking to get their fuel to markets abroad. The expanded canal will help U.S. gas producers by cutting the shipping time to markets in Asia,  “It helps the shipping company if you can cut ten days rather than going around South America,” “It is more profitable for the shipper and that’s good for Cheniere.” The volume projected by the Panama Canal Authority represents about 8 percent of global LNG trade and is equivalent to nearly 300 ships a year, said Bloomberg New Energy Finance analyst Anastacia Dialynas. Next year the U.S. will export about 8 million tons, she said. Prices in the Pacific aren’t currently high enough to create a large arbitrage opportunity to send gas from the U.S. Gulf Coast to Asian markets, LNG prices in Asia and Europe have plunged in line with oil prices, the surge of new gas export capacity and weakening demand from China and other Asian markets.

After Keystone XL: TransCanada Building North American Fracked Gas Pipeline Empire -  Steve Horn - Though President Barack Obama and his State Department nixedthe northern leg of TransCanada’s Keystone XL tar sands pipeline in November, the Canadian pipeline company giant has continued the fight in a federal lawsuit in Houston, claiming the Obama Administration has violated the North American Free Trade Agreement (NAFTA). As the NAFTA lawsuit works its way through pre-trial hearings and motions — and as Keystone XL has become a campaign talking point for Republican Party presidential candidate Donald Trump — TransCanada has quietly consolidated an ambitious North America-wide fracked gas-carrying pipeline network over the past half year. North of the U.S. border, TransCanada landed the last permits it needed from the British Columbia Oil and Gas Commission on May 5 to build its proposed Coastal GasLink pipeline project. Coastal GasLink aims to carry gas obtained via fracking from the Montney Shale westward to LNG Canada’s proposed liquefied natural gas (LNG) export facility in Kitimat, B.C.  Coastal GasLink awaits a final investment decision from LNG Canada by the end of the year. If it gets the green light, pipeline construction of the 416-mile line will begin in early 2017. In the U.S., while TransCanada’s NAFTA lawsuit drags on, the corporation also announced a major $13 billion buy-out acquisition of pipeline behemoth Columbia Pipeline Group on March 17.  Columbia maintains a gargantuan 15,000-mile network of gas pipelines running across the U.S., with a crucial hub of crisscrossing pipelines based in the prolific Marcellus Shale basin, an epicenter for fracking in the northeast, particularly Pennsylvania. In a press statement announcing the deal, TransCanada's CEO Ross Girling pointed out just how big his company’s gas-carrying pipeline capacity has become in the U.S. and its nascent potential ability to carry that gas to U.S.-based LNG export terminals.

Massachusetts Senate Passes 10-Year Fracking Moratorium - The Massachusetts Senate approved a bill yesterday to place a ten-year moratorium on fracking and the disposal of fracking wastewater in the Commonwealth. “Across the country, fracking is polluting drinking water and making families sick,” said Ben Hellerstein, State Director for Environment Massachusetts. “We applaud Senate leaders for taking steps to ensure this dirty drilling and its toxic waste never come to Massachusetts.”  Fracking, or hydraulic fracturing, is a method of drilling that involves injecting millions of gallons of water, often laced with toxic chemicals, deep underground to fracture rock formations and release oil and gas. In a single year, fracking across the country produced at least 14 billion gallons of wastewater containing toxic and often radioactive elements — wastewater for which there is no known failsafe disposal or treatment method. Although fracking is not currently happening in Massachusetts, the Hartford Shale, a rock formation under the Connecticut River Valley, may contain deposits of gas suitable for drilling. A growing number of documented cases show individuals suffering acute and chronic health effects while living near fracking operations — including nausea, rashes, dizziness, headaches and nose bleeds. Additionally, methane leaks from fracking wells and associated infrastructure are a significant source of global warming pollution. More than 1,000 health professionals have called on state and federal officials to protect the public from the harms posed by fracking.

Maryland sets public meetings on gas drilling rules (AP) — The Maryland Department of the Environment says it will hold three public meetings this month to discuss proposed regulations for hydraulic fracturing for natural gas in the state. The agency said in a statement Thursday evening that the first meeting will be held June 22 in Cumberland. Subsequent meetings are scheduled June 27 in Baltimore and June 29 in McHenry. The agency is required by law to adopt regulations by Oct. 1, but no drilling would be permitted before Oct. 1, 2017. The department says it’s considering revisions to regulations it proposed in 2015. The proposed revisions will be described in documents the department says it will release before the June 22 meeting.

One woman's fight to save her land from a pipeline that tore a region apart - For this house, there have been two pivotal moments in recent memory. The first occurred in December 1977, when a 19-year-old Virginia native named Heidi Cochran first laid eyes on the home and its four acres. The view was so lovely she didn't even go inside before telling the real estate agent they'd take it. The second pivotal moment occurred 36 years, six months, two husbands (and two separations), four children, 29 horses, 19 dogs and seven cats later on a sunny afternoon in May 2014, when Cochran walked down the long gravel driveway to her mailbox. Cochran, 55, had become a self-employed electrical contractor. Her skin was now chapped from the sun, her hands calloused, but her braided hair still hung to her waist. She called herself "the old fat lady back in the hollow." Over the years she had purchased two adjoining plots, bringing her slice of paradise to 16 acres, enough to hope one of her four children might one day build a home next door. She didn't know it yet, but that fantasy was in great peril. In the mailbox she found a letter from Dominion Energy. She read something about a natural gas pipeline, then tossed it aside. What do I need with natural gas? she thought. She heated with a wood stove. But Cochran misunderstood: Dominion wasn't offering her anything. It wanted something from her. Dominion's proposed Atlantic Coast Pipeline -- 560 miles long from the hills of Harrison County, West Virginia, to the red clay of Robeson County, North Carolina - would carry natural gas to southeastern power plants that are phasing out coal. At 42 inches in diameter, the pipeline would be part of a new generation of American mega-pipelines built to transport our dizzying windfall of natural gas. At full pressure, it would move 1.5 billion cubic feet of natural gas per day. It would be almost as large as American pipelines come.

'No fracking way': Protesters demand landowner rights — Armed with signs and banners, a group of environmentalists lined a sidewalk along South Horner Boulevard on Tuesday, one wearing a gas mask, another dressed as a red bird from the "Angry Birds" video game. Cars would honk periodically as they sped by. Later the protesters began to chant. "No fracking way. No fracking way. No fracking way." Frackfree America National Coalition, based in Ohio, held a “Freedom from Toxic Fracking Waste and Earthquakes” national day of action Tuesday, and EnvironmentaLEE officials organized a local rally to show opposition against hydraulic fracturing, commonly known as fracking. "It's going to be a fight but we've won so far and we're going to keep fighting," said John Womble, one of the protesters, at the event. "Whoever [is elected U.S. president], we've got to keep these fights going because it isn't going to happen from the top it's going to happen from the bottom." The rally was held at MLK Memorial Park and it was the only protest held in North Carolina as part of the event. "It's been busy. We've had a lot of people honk and wave in support," said Terica Luxton with EnvironmentaLEE. A number of supporting organizations turned up for the event, Luxton said, including the Raging Grannies, Chatham Citizens against Coal Ash, and the Blue Ridge Environmental Defense League, which EnvironmentaLEE is a chapter of. The groups are involved in a number of local environmental issues, including the deposits of coal ash and the use of fracking, a process by which water forcefully is injected into the ground to facilitate oil and gas extraction. "What do we want?" Ed Harris, a Lee County land owner who has protested fracking since 2011, asked the protesters. "Clean water and clean air for all our children and grandchildren and every tree in front of us."

Whistleblower Says EPA Officials Covered Up Toxic Fracking Methane Emissions for Years -- Why has the U.S. Environmental Protection Agency (EPA) failed to take adequate action against disastrous, climate-warming methane emissions from the fracking industry? An environmental watchdog alleges that the answer may be a years-long, systematic cover-up of the true data surrounding these toxic emissions. That cover-up, the group says, was at the hands of at least one EPA researcher who accepted payments from the oil and gas industry. In an incendiary federal complaint filed on Wednesday with the EPA’s Inspector General, the 28-year-old North Carolina-based group NC WARN wrote that “there has been a persistent and deliberate cover-up that has prevented the agency from requiring the natural gas industry to make widespread, urgently needed and achievable reductions in methane venting and leakage (’emissions’) across the nation’s expanding natural gas infrastructure.” “Studies relied upon by EPA to develop policy and regulations were scientifically invalid,” the organization charged. Specifically, wrote NC WARN in a press statement, “Dr. David Allen, then-head of EPA’s Science Advisory Board, has led an ongoing, three-year effort to cover up underreporting of the primary device, the Bacharach Hi-Flow Sampler and a second device used to measure gas releases from equipment across the natural gas industry. Allen is also on the faculty of the University of Texas at Austin, where he has been funded by the oil and gas industries for years.” “The EPA’s failure to order feasible reductions of methane leaks and venting has robbed humanity of crucial years to slow the climate crisis,” said Jim Warren, director of NC WARN. “The cover-up by Allen’s team has allowed the industry to dig in for years of delay in cutting emissions—at the worst possible time.”

Bipartisan Congressional Group: If We’re Not Going To Drill, Why Are We Testing For Offshore Oil?  Environmentalists rejoiced when the Obama administration’s five-year plan for ocean management cut out the possibility of offshore drilling in the Atlantic — but the fight is not over.  Now, lawmakers are urging the president not to allow seismic testing in the region. Seismic testing is used to find oil and gas reserves by bouncing loud blasts of sound off the ocean floor. Airguns get towed behind ships, using dynamite-like blasts to produce sound waves 100,000 times louder than a jet engine underwater every ten seconds. It has been shown to damage populations of fish, mammals, mollusks, and other sea life.  South Carolina’s Rep. Mark Sanford, a Republican, cowrote the letter with Virginia’s Rep. Gerry Connolly, a Democrat.  “If one is not going to do something, it doesn’t strike me as reasonable to prepare to do that something. Accordingly, it makes little sense to conduct seismic testing off the Atlantic coast, when the Atlantic Ocean has been excluded as a possible site for offshore drilling by the Department of Interior,” Sanford said in a statement. “It should not move forward, if nothing else, because allowing seismic testing to proceed goes counter to the coastal communities I represent. They have spoken clearly that they do not want this blasting.” This spring, the Atlantic coastal communities banded together to oppose offshore drilling, which was being considered for the Bureau of Ocean Energy Management's five-year plan, released in March, as well as seismic drilling. While the Atlantic was cut out of the drilling plan, though, eight applications for seismic testing are currently awaiting federal approval.

Oil Drilling and Wetlands Don’t Mix—Especially in Big Cypress - With only 150 individuals left in the wild, the Florida panther is teetering on the brink of extinction. About a fifth of the big cats that do remain tread the damp soils of Big Cypress National Preserve in southwestern Florida. Unlike its neighboring Everglades, Big Cypress is still a relatively pristine wetland ecosystem, one that provides sanctuary for the critically endangered panther as well as the endangered red-cockaded woodpecker, the threatened wood stork, and the endangered snail kite. But beneath their paws and claws is a muddied front line between commercial and environmental interests. While everything above the soil is entrusted to the National Park Service, what lies below belongs to the Collier family, the descendants of Barron Collier, who bought more than a million acres of land in southwestern Florida early in the last century (Big Cypress is found within Collier County). When the Colliers imparted the land that became the preserve to the government in 1974, they kept the mineral rights. That means the NPS has a legal obligation to provide reasonable access to the minerals, even though the agency doesn’t receive any compensation in connection with the drilling. Last month, the NPS approved a plan by Burnett Oil, a Texas company, to undertake seismic testing on 110 square miles of the 1,126-square-mile preserve. The decision has many Floridians and conservationists questioning whether the Park Service gave its mandate to protect natural resources enough consideration. “This is going in a direction that we absolutely don’t want them to go in,” says Matthew Schwartz, executive director of South Florida Wildlands, an outspoken advocacy group for the preserve. “They [the NPS] are obligated to put resource protection above extractive activities. At the very least, they should have prepared a full-blown environmental impact statement.” The Park Service conducted a two-year environmental assessment and found that the seismic testing would have “no significant impact” on Big Cypress’s forests, wetlands, or wildlife.

LOOP June storage auction sees lower prices, interest as storage demand falls -  As summer driving season boosts refinery run rates and contributes to a regional drawdown in crude stocks, open interest in NYMEX LOOP storage futures fell from a record high seen during May's auction to 22,714 contracts Tuesday, CME data showed Wednesday. Total open interest for the 12 months on the board was down 910 lots from May 3, with open interest data being delayed by one day. The futures contract, launched in March 2015, is based on crude storage capacity at the Louisiana Offshore Oil Port's Clovelly Hub in Louisiana. The contract allows the buyer the right, but not the obligation, to store crude for a calendar month at LOOP. Coinciding with a lower level of open interest, Tuesday's auction also saw lower prices than a month ago. A total of 6.1 million barrels of storage space for July, August, September, the fourth-quarter 2016 strip, the first-quarter 2017 strip and the second-quarter 2017 strip were offered, according to auctioneer Matrix Markets. The level of space offered was down 100,000 barrels from the amount auctioned off during May. The June auction offered 3,100 physical forward agreements ranging between 17 cents/b and 25 cents/b, compared with the May auction, which offered 3,400 PFAs between 22 cents/b and 50 cents/b. Capacity auctioned during the June 7 event also included 3,000 block futures contracts ranging between 15 cents/b and 18 cents/b, compared with the May auction, which offered 2,800 block futures contracts between 18 cents/b and 25 cents/b.

Health effects of fracking -- The head of the Texas Oil & Gas Association thinks that any study pointing out the health effects and dangers of fracking and oil refining is “junk science.” Surprised? Neither are we. But we agree with Mr. Staples that decisions about oil and gas extraction and refining should be based on facts and sound science. So let’s review the facts on what scientists, the industry itself, and regulators policymakers say about the impact oil and gas has on health and the environment. Fracking uses an enormous amount of water and chemicals. According to data self-reported by industry, oil and gas companies have injected 10 billion pounds of chemicals, including hydrochloric acid, benzene, and methanol, underground and used 120 billion gallons of water to frack 54,958 oil and gas wells in Texas since 2011. Those chemicals are harmful. A recent analysis by researchers at the Yale School of Public Health identified 157 chemicals used in fracking that are toxic; the toxicity of 781 other fracking chemicals examined by the researchers is unknown. Toxic substances in fracking chemicals and wastewater have been linked to cancer, endocrine disruption and neurological and immune system problems. Oil and gas drilling has polluted our rivers, lakes, streams and groundwater. Pollution occurs from surface leaks and spills of fracking fluid, well blowouts, the escape of methane and other contaminants from the well itself into groundwater, and the long-term migration of contaminants underground. According to the Texas Commission on Environmental Quality’s Joint Groundwater Monitoring and Contamination Report, the state documented 557 instances of groundwater contamination due to oil and gas production in 2014. For example, according to the Railroad Commission (the state’s primary regulator of the oil and gas industry), fracking wastewater injected into a disposal well contaminated the Cenozoic Pecos Alluvium Aquifer near Midland.

Oklahoma City energy company files for bankruptcy protection -     (AP) — An Oklahoma City-based oil-field services company has filed for Chapter 11 bankruptcy protection as it aims to eliminate more than $1 billion in debt. Seventy Seven Energy Inc. announced Tuesday that it filed for bankruptcy protection in federal court in Delaware. The company, which was spun off in 2014 from Chesapeake Energy Corp., says it expects to complete the reorganization within 60 days. Seventy Seven Energy is the latest Oklahoma energy company to file for bankruptcy protection because of the downturn in oil and natural gas prices. Last month, both SandRidge Energy and Chaparral Energy filed for Chapter 11 bankruptcy protection.

Police: Not enough evidence to prove Chesapeake CEO’s death intentional - (AP) — Investigators did not find enough evidence to prove whether a vehicle crash that killed prominent businessman Aubrey McClendon the day after he was indicted by a grand jury was intentional or not, the Oklahoma City Police Department said Tuesday. Police spokesman Capt. Paco Balderrama told The Associated Press that investigators have ruled out homicide, but could not rule out the possibility that McClendon took his own life or had a medical emergency in the crash on March 2. The medical examiner’s report is still pending. “We don’t know if he meant to do it,” Balderrama said. “We could not rule out suicide with 100 percent certainty, but we just were not able to find any evidence which directly pointed to it.” Police previously said the former Chesapeake Energy CEO and part owner of the NBA’s Oklahoma City Thunder was driving 78 mph when his SUV hit a bridge support and burst into flames and that there was no evidence suggesting he tried to avoid the crash. The vehicle’s data recorder showed McClendon was driving 88 mph and then tapped his brakes before impact, police had said previously. McClendon had his gas pedal floored until 1 ½ seconds before impact, when he reduced it from 99 to 25 percent depressed, they said. Investigators found tire tracks but no skid marks. The state medical examiner’s office said previously that McClendon died from multiple blunt force trauma, but has yet to reveal the official manner of death or toxicology test results.

Iowa board votes to allow pipeline work to begin in state (AP) — A Texas company may begin construction on an oil pipeline in areas for which the company has approval but are not under federal jurisdiction, the Iowa Utilities Board said Monday despite opposition from environmental and citizen action organizations and landowners who are suing to stop the project. The three-member board voted 2-1 to approve an order allowing Dakota Access LLC, a subsidiary of Dallas-based Energy Transfer Partners, to begin laying pipe in areas that aren’t among 60 parcels of land for which the U.S. Army Corps of Engineers must issue. Those parcels include river crossings and a recently discovered Native American burial site in northwest Iowa. Board members Elizabeth Jacobs and Nick Wagner voted in favor of allowing the project to begin. Board chairwoman Geri Huser, who expressed concern last week that the board no longer has legal jurisdiction over the project since several lawsuits have been filed, said she would file a document later Monday explaining her opposition. Iowa law says once a utilities board decision is appealed to district court, the board can take no further action. To that end, environmental group Sierra Club Iowa Chapter filed a document with the board Monday agreeing with that assessment that alleges the board’s action is illegal. The group’s attorney, Wallace Taylor, said he may file a legal challenge. Construction on the 1,150-mile, $3.8-billion pipeline has already begun in Illinois, North Dakota and South Dakota. It will carry oil from northwest North Dakota to a tank storage facility in south-central Illinois. At least three lawsuits have been filed challenging the board’s authority to allow Dakota Access to use eminent domain for the project, including one by the Sierra Club and two separate landowner groups. About 160 landowners have refused to allow the pipeline to cross their land, and Dakota Access has begun condemnation proceedings which prompted several individual landowner lawsuits.

Work on Dakota Access begins in Iowa, protesters vow nonviolent acts (AP) — Work has begun in Iowa on an oil pipeline despite repeated attempts by landowners and environmental groups to stop it, a spokeswoman for the Texas company building the pipeline said Thursday. The Iowa Utilities Board signed a final order Wednesday allowing construction on the $3.8 billion, 1,150-mile pipeline that spans four states, and work began shortly after that, according to Lisa Dillinger with Texas-based Dakota Access. “We have provided the proper notifications in Iowa, allowing us to begin immediately,” she said. “Construction activities have begun along the route in all four states.” Iowa was the last state to approve construction on the pipeline, which will carry oil from the Bakken oil fields in North Dakota across South Dakota and Iowa before ending at a storage facility in Illinois. Work began last month in the other three states. Dakota Access has not received permits from the U.S. Army Corps of Engineers for river crossings and other federal land in Iowa, including a parcel that is under investigation as a possible Native American burial site. Plus, the project faces at least five lawsuits in Polk County District Court in Des Moines, and individual landowners along the route have said they plan to challenge in court the company’s use of eminent domain. The first condemnation hearings begin next week. Pipeline opposition group Bold Iowa said Thursday that 60 members have signed a pledge to risk arrest if necessary in nonviolent protests. “In the tradition of other great American struggles for freedom, from the Boston Tea Party to the March to Montgomery to the Farm Crisis, when farmers stood with their neighbors to block foreclosure auctions, we ask Americans passionate about defending our land and liberty to step forward to stop the Bakken Pipeline,” said Ed Fallon, the group’s director. Iowa Citizens for Community Improvement, a citizen activist group in Des Moines, will join Bold Iowa’s protest, political director Adam Mason said, adding that action could begin as early as July.

For-Profit Pipelines Are Growing And So Are Eminent Domain Battles - When an oil pipeline now poised to cut through four Midwestern states was first proposed in 2014, the project quickly got pushback from environmentalists and some landowners on the pipeline’s route.  For one group, this piece of fossil fuel infrastructure was a poor investment in a time of human-caused climate change and increasing pollution. For the other, it was a threat to their land and their property rights. Residents thought it was clear from the beginning that Dakota Access, the developer, intended to claim land by condemning it via eminent domain if allowed to, and build a line intended to transport oil from North Dakota’s Bakken Formation to a market hub near Patoka, Illinois. The project, known as the Bakken pipeline, is one of many fossil fuel lines across the nation that traditionally raise concerns about their environmental and safety risks. That’s because oil transportation largely relies on trains and pipelines and out of those two, pipelines spill moreoften than trains. Yet since the Bakken pipeline mostly avoids wildlife, it has become an example of how for-profit developers in need of private property ignite disputes when awarded the controversial use of eminent domain.  The government usually uses eminent domain to build bridges or freeways, though oil and gas companies have often benefited from this power in the past, particularly during the first pipeline development surge of the 1950s.  No governmental agency gathers data on eminent domain permits given to corporations, but experts said a new wave of pipeline investment is pitting landowners against corporations and regulators in growing numbers, and the trend will likely continue. “The conventional wisdom is that we are having more [eminent domain controversies] in recent years because of the oil and natural gas,”

US says Colorado has 40 times more natural gas than thought - DENVER (AP) - Western Colorado has 40 times more natural gas than previously thought, but an immediate boom is unlikely because of low gas prices, government and industry experts said Wednesday. The U.S. Geological Survey said the Mancos Shale formation in Colorado's Piceance (PEE'-yahns) Basin holds about 66.3 trillion cubic feet of gas, up from 1.6 trillion estimated in 2003. USGS cited data from commercial drilling companies and new research for the revision.A trillion cubic feet of natural gas is enough to heat 15 million homes for a year, the U.S. Energy Department says.David Ludlam, executive director of the West Slope Colorado Oil and Gas Association, said he doesn't expect a rush to drill in western Colorado because current natural gas prices are too low. If prices rise significantly, companies would likely begin drilling, he said.  The U.S. also needs more facilities to export natural gas to Pacific nations to help make the Colorado gas competitive, Ludlam said, citing the proposed Jordan Cove Liquid Natural Gas terminal at Coos Bay, Oregon. The Piceance Basin, which spans much of western and northwestern Colorado, already has multiple well sites, pipelines and processing plants in place from a previous round of drilling in a shallower formation, Ludlam said. Much of the basin is federal land managed by the Bureau of Land Management, and getting approval from the BLM to drill is often more difficult than getting private landowners to agree, said Kathleen Sgamma of the Western Energy Alliance, an industry group.

USGS Estimates 66 Trillion Cubic Feet Of Natural Gas In Colorado’s Mancos Shale Formation: The Mancos Shale in the Piceance Basin of Colorado contains an estimated mean of 66 trillion cubic feet of shale natural gas, 74 million barrels of shale oil and 45 million barrels of natural gas liquids, according to an updated assessment by the U.S. Geological Survey. This estimate is for undiscovered, technically recoverable resources. The previous USGS assessment of the Mancos Shale in the Piceance Basin was completed in 2003 as part of a comprehensive assessment of the greater Uinta-Piceance Province, and estimated 1.6 trillion cubic feet of shale natural gas. “We reassessed the Mancos Shale in the Piceance Basin as part of a broader effort to reassess priority onshore U.S. continuous oil and gas accumulations,” said USGS scientist Sarah Hawkins, lead author of the assessment. “In the last decade, new drilling in the Mancos Shale provided additional geologic data and required a revision of our previous assessment of technically recoverable, undiscovered oil and gas.”The Mancos Shale is a significant potential source of natural gas. For comparison, the assessed mean resources in the Mancos Shale of the Piceance Basin are the second-largest assessment of potential continuous gas resources that the USGS has ever conducted. Since the last USGS assessment, more than 2,000 wells were drilled and completed in one or more intervals within the Mancos Shale of the Piceance Basin. In addition, the USGS Energy Resources Program drilled a research well in the southern Piceance Basin that provided significant new geologic and geochemical data that were used to refine the 2003 assessment. The Mancos Shale is more than 4000 feet thick in the Piceance Basin, and contains intervals that act as the source rock for shale gas and oil, meaning that the petroleum was generated in the formation. Some of the oil and gas migrated out of the source rock and into tight (low permeability) reservoirs within the Mancos, as well as into conventional reservoirs both above and below the formation. Oil and gas also remained in continuous shale gas and shale oil reservoirs within the Mancos.

Bombshell -- Stick With Me -- Read This Closely -- The Piceance In Colorado May Rival The Marcellus In The Northeast -- USGS  -- This defies ... I don't know what it defies but it defies something.... maybe "my imagination." The story was posted 22 hours ago. I follow energy news pretty closely. I have a fair number of folks who send me notes on energy, and yet, this story seems to have been missed by almost everyone. The only reason I think it is not getting national attention is because the numbers are just too hard to believe. Maybe I'm missing something, or misreading something. Maybe I'm being inappropriately exuberant.  This is what makes these stories confusing:

  • the numbers are huge to begin with (trillions)
  • crude oil and natural gas are measured in different units (bbls vs cubic feet)
  • combining both crude oil and natural gas, there is still a different unit: bbls of equivalent oil (boe)
  • original oil in place (OOIP) vs technically recoverable oil (and same for natural gas)

But this seems incredible. Almost beyond one's imagination. To bring you up to speed, read about the Piceance Basin in western Colorado at this post.  Twenty-two hours ago, this USGS headline. USGS Estimates 66 Trillion Cubic Feet of Natural Gas in Colorado’s Mancos Shale Formation. The headline fails to note that the previous USGS assessment was less than 2 trillion cubic feet of natural gas. The report begins: This is the second-largest assessment of potential shale & tight gas resources that the USGS has ever conducted. [Natural gas: Marcellus was probably the largest?] Then this bombshell:The Mancos Shale in the Piceance Basin of Colorado contains an estimated mean of 66 trillion cubic feet of shale natural gas, 74 million barrels of shale oil and 45 million barrels of natural gas liquids, according to an updated assessment by the U.S. Geological Survey. This estimate is for undiscovered, technically recoverable resources. The primary target of gas development has been the Williams Fork Formation of the Mesaverde Group, of Cretaceous age. The Williams Fork is a several-thousand-foot thick section of shale, sandstone and coal deposited in a coastal plain environment.

Is Colorado Ground Zero For The Next Shale Gas Boom?  --A new estimate from the U.S. Geological Survey finds that Colorado could actually hold 40 times more natural gas than previously expected. The so-called Mancos Shale formation holds an estimated 66.3 trillion cubic feet (tcf) of natural gas, sharply up from the 1.6 tcf in the previous 2003 estimate. The Mancos formation is part of the greater Uinta-Piceance Province, and the large upward revision puts the Mancos basin second only to the Marcellus Shale in terms of the largest total gas reserves in the U.S. “We reassessed the Mancos Shale in the Piceance Basin as part of a broader effort to reassess priority onshore U.S. continuous oil and gas accumulations,” said USGS scientist Sarah Hawkins, lead author of the assessment. “In the last decade, new drilling in the Mancos Shale provided additional geologic data and required a revision of our previous assessment of technically recoverable, undiscovered oil and gas.” For now, prices are likely to be too low for companies to begin drilling to any large extent. According to David Ludlam of the West Slope Colorado Oil and Gas Association, drillers probably need natural gas prices near $3.50 per million Btu (MMBtu). That is much higher than Henry Hub spot prices, which have traded near $2/MMBtu for the last several months, although they have surgedlately as storage levels are climbing much slower than expected for this time of year. Natural gas prices jumped to $2.60 on Thursday after the latest data from the EIA showed another smaller-than-expected inventory build. But even if prices did rise to those levels needed for Colorado’s Mancos Shale, producers would have trouble finding a way to get that gas to market. The best bet would be for LNG export terminals on the West Coast, but previous proposals for such projects have gone nowhere. The Jordan Cove LNG export terminal in Oregon recently was denied a federal permit and is stuck on the drawing board.

Friends of Earth USA : 139-square-mile fracking plan in Wyoming prompts legal protest - Conservation groups filed a formal administrative protest on Thursday challenging a massive Bureau of Land Management plan to auction off 139 square miles of publicly owned fossil fuels in Wyoming on Aug. 2. Most of the area, about 100 square miles, is located in habitat for imperiled greater sage grouse. The protest calls for canceling the auction entirely. 'New fossil fuel leases lock in more climate disruption, more air and water pollution, and further declines for the iconic sage grouse,' said My-Linh Le of the Center for Biological Diversity. 'Plans that worsen the climate crisis and sage grouse declines aren't in the public interest. Climate leadership means keeping untapped fossil fuels in the ground, and our public lands are where Obama should start.' The protest, filed by the Center for Biological Diversity, Friends of the Earth, Great Old Broads for Wilderness and the Sierra Club, calls on the BLM to halt the auction and all new federal fossil fuel leasing to preserve any chance of averting catastrophic climate disruption. It challenges the Bureau's failure to adequately analyze the environmental impacts relating to water, sensitive wildlife and greenhouse gas pollution that would result from its decision to auction the fossil fuels. 'We think it's time for public lands to be part of the solutions to climate change, not part of the problem,' said Shelley Silbert, executive director of Great Old Broads for Wilderness. 'Not only has the BLM failed to analyze impacts of new oil and gas extraction on Wyoming's water, wildlife and public safety, but new leasing commits us to dangerous climate impacts for decades to come.' In addition to causing greenhouse gas pollution, the auction and subsequent drilling, fracking and industrialization will fragment and destroy wildlife habitat and threaten imperiled species. Fracking and wastewater injection could pollute air, surface and groundwater and cause harmful earthquakes. The Bureau's failure to analyze those impacts is raised in the protest.

The Epicenter of America’s Oil Bust Is Drawing Buyers - WSJ: The vultures are descending on North Dakota. Investors hoping for a bargain are buying up oil and gas wells from cash-strapped operators in the state’s Bakken Shale, a bet they will eventually be able to profit off one of the country’s hardest-hit oil plays. Hundreds of wells have changed hands or are in the process of being sold, state figures show, to a grab bag of fortune seekers ranging from industry experts to first-time wildcatters. They are picking up properties as more established producers scale back or shed assets to pay creditors. Houston-based Lime Rock Resources, founded by a former Goldman Sachs Group Inc. banker and an oil-industry veteran, bought more than 340 North Dakota wells from Occidental Petroleum Corp. in November. The firm says it has at least $1.6 billion in private-equity money to invest, a portion of which it has spent on the Bakken. In another pairing of Wall Street and oil-patch veterans, NP Resources LLC bought 53 wells from Whiting Petroleum in December and is looking for more Bakken acreage. “In this slump there’s definitely opportunities to acquire second-tier unconventional reservoirs,” said Eddie Rhea, chief executive of another buyer, Foundation Energy Management LLC, which operates more than 3,000 wells nationwide on behalf of endowments and pension funds. “We buy the ‘strip mall,’ pretty it up and sell it. We leave it to other companies to build from scratch.”

Oil slump brings bargains, buyers to Bakken assets -- As the oil price slump continues, investors are hunting for bargains on the hope they will eventually profit from the nation’s second largest oil play, reports the Wall Street Journal (WSJ).  According to state data, hundreds of wells have been bought and sold in recent months. Those placing bets on long term profitability in the Bakken range from major O&G players to first time buyers. In November last year Anadarko Petroleum CEO Al Walker told Reuters, “We’ve not really seen good distressed assets make their way into the market.” In the time since, however, there have been various assets changing hands across the nation. In one of the largest exchanges to happen in North Dakota, Occidental Petroleum Corp. sold all its Bakken assets to private equity firm Lime Rock Resources for $600 million. Also late last year, Whiting sold a collection of wells to NP Resources LLC, according to the WSJ.Amidst the asset sales there have also been several companies filing for bankruptcy protection, illustrating the continued high costs of operations in the remote North Dakota oil patch. The state’s largest oil producer, Whiting Petroleum, is among the ranks of operators waiting for prices to reach the $60 to $70 per barrel range before activity continues. But as oil prices settled around the $50 mark yesterday, activity remains in a lull. As of Wednesday June 8, North Dakota had only 26 active drilling rigs. Four years earlier there were 214.

After 350,000 Layoffs Oil Companies Now Face Worker Shortages -- There could be a growing shortage of skilled workers in the oil industry. That may seem counterintuitive in an industry that has been rapidly shedding workers, with more than 350,000 people laid off in the oil and gas industry worldwide. Texas is one place feeling the pain. Around 99,000 direct and indirect jobs in the Lone Star state have been eliminated since prices collapsed two years ago, or about one third of the entire industry. In April alone there were about 6,300 people in oil and gas and supporting services that were handed pink slips. Employment in Texas’ oil sector is close to levels not seen since the aftermath of the financial crisis in 2009. "We're still losing big chunks of jobs with each passing month," Karr Ingham, an Amarillo-based economist, told The Houston Chronicle. But the damage to the oil industry’s workforce could be exactly why companies could face a skills shortage in the months and years ahead. North Dakota had nearly 1,000 drilled but uncompleted wells as of March, and more companies are showing some signs that they might step up completions now that oil prices are above $50 per barrel. But they might find it difficult to ramp up the rate of completions if they cannot field enough workers. There are only about eight fracking crews left in the state, down from 45 two years ago, according to Reuters. Fracking crews are brought in to frack and complete wells for oil producers. A recent survey of oil companies in the Bakken revealed concerns from the industry about the dismantling of fracking crews. “Even if prices went to $100 per barrel of oil, you don’t have any frack crews available to complete all the wells that need fracking,” one survey respondent told Hart Energy Market Intelligence.

Oil Sheen Seen on River After Oregon Crude-Train Derailment - Environmental officials worked to contain a small sheen of oil on the Columbia River on Saturday after a Union Pacific Corp. train carrying a load of Bakken crude derailed near Mosier, Oregon, according to the company. Access to the site remains limited as the train continues to cool off following a fire that broke out after Friday’s accident, the Federal Railroad Administration said Saturday in aTwitter post. No injuries were reported after 16 of the 96 cars on the train came off the tracks near the river, which forms most of the border between Washington state and Oregon. The Washington state Ecology Department conducted a flyover to assess the extent of the sheen on the river, the Associated Press reported. The FRA had said earlier Saturday that there were no reports of oil on the river from the train, which originated in Eastport, Idaho, and was carrying crude from North Dakota to Tacoma, Washington, south of Seattle. Officials are also taking water samples, Justin Jacobs, a spokesman for Union Pacific, said by phone Saturday. It’s unclear what caused the derailment. An inspection four days ago turned up nothing unusual in the segment of track where the derailment occurred and the section has been inspected six times since March 21, Jacobs said. Friday’s derailment renewed the scrutiny of oil-by-rail shipments following a series of incidents including the 2013 Lac Megantic accident and fire in Quebec, which killed 47 people and leveled much of a small town. Most of the U.S. crude shipped by train comes from North Dakota’s Bakken shale region, which lacks enough pipelines to handle all the local output.

Critics: River route no place for oil trains after crash (AP) — A fiery oil train derailment in Oregon’s scenic Columbia River Gorge drew immediate reaction from environmentalists who said oil should not be transported by rail, particularly along a river that is a hub of recreation and commerce. At least eleven cars derailed Friday in the 96-car Union Pacific train and the company said several caught fire. The crash released oil alongside tracks that parallel the Columbia River and sent a plume of black smoke high into the sky that spurred evacuations and road closures No injuries were reported. All the cars were carrying Bakken oil, a type of oil that is more flammable than other varieties because it has a higher gas content and vapor pressure and lower flash point. “Moving oil by rail constantly puts our communities and environment at risk,” said Jared Margolis, an attorney at the Center for Biological Diversity in Eugene, Oregon. It wasn’t immediately clear if oil had seeped into the river or what had caused the derailment. Aaron Hunt, a spokesman for the railroad, did not know how fast the train was traveling at the time, but witnesses said it was going slowly as it passed the town of Mosier, Oregon, about 70 miles east of Portland. Response teams were using a drone to assess the damage, said Katherine Santini, a spokeswoman with the U.S. Forest Service. Crews were continuing to suppress the fire, which they expected to do overnight. Gov. Kate Brown activated additional state resources including water tenders and the coordination efforts of the Oregon State Fire Marshal to assist firefighters at the scene.

Track failure likely cause of oil train derailment (AP) — Track failure was likely the cause of the oil train derailment in Oregon, an official with Union Pacific Railroad said Sunday. A failure of the fastener between the railroad tie and the line was likely the problem, but more investigation will be required before railroad officials know for sure, Raquel Espinoza said Sunday. Union Pacific inspects the tracks that run through Mosier, Oregon, twice a week, and the most recent inspection took place on May 31, Espinoza said. Union Pacific had completed a more detailed and technical inspection of this section of track at the end of April and found no problems. The railroad is focused on removing the crude oil from the damaged cars as safely and quickly as possible, Espinoza said. Its priority is to bring people home safe to Mosier, where 16 of 96 tank cars train derailed Friday and started a fire in four of the cars. “We’re doing everything we can to get you back home, but we’re not going to risk your safety,” Espinoza said at a news conference. When asked if she knew how much the cleanup was going to cost the company, Espinoza said, “I don’t know and it doesn’t matter.” “Our priority here is bringing people home. Nothing else matters,” she added. Repairs to a water treatment system, which runs under the tracks, would need to be completed before people could return to their homes, the railroad said. About a hundred people — a quarter of the town’s population — have been evacuated from their homes since Friday in an area about a quarter mile around the train.

Mosier oil train derailment: 65 truckloads of crude oil cleared, 25 more to go -- Crews have so far removed hundreds of thousands of gallons of crude oil from the Union Pacific train that derailed last week in Mosier, authorities said Tuesday. More than 65 trucks have ferried the oil to The Dalles, where it's being loaded back onto train cars that will eventually travel to the original destination in Tacoma, said officials with Union Pacific and the Environmental Protection Agency. Workers still have at least another 25 truckloads of oil to remove until the 13 derailed cars still at the site are empty, said Judy Smith, an EPA spokeswoman. That could happen by the end of Tuesday, she said. Each truck can hold a capacity of up to 5,000 gallons of oil. The derailed cars are sitting on the side of the tracks, allowing freight trains to resume service. Sixteen cars on the 96-car train derailed Friday shortly after noon near the Columbia River Gorge town of 430. Four cars caught on fire and the same amount of cars leaked 42,000 gallons of Bakken crude from North Dakota. Workers recovered 10,000 gallons from the town's wastewater system near the site, but there may be more oil in the sewer lines, authorities said. The rest vaporized, was captured by oil booms in the Columbia or seeped into the soil. After workers remove the remaining cars, the soil will be cleaned up and crews will look at the town's wastewater lines to permanently fix sewer service, authorities said.It's not clear when that will all happen. Mosier's wastewater is temporarily being collected and trucked about 7 miles to Hood River for disposal. Bans on showering, using toilets and a boil water advisory in Mosier were all lifted by Monday night. The derailment caused the two-day evacuation of a nearby 76-unit mobile home with nearly 300 people, but no one was hurt. A preliminary investigation shows a failure with a bolt that fastens the rail to the railroad ties caused the crash.

Northwest tribal leaders highlight risks of oil trains (AP) — Leaders of several Pacific Northwest tribes gathered Thursday near the site of last week’s fiery oil train wreck in Oregon to condemn the shipping of fossil fuels through the Columbia River Gorge, a scenic homeland and sacred fishing ground for the Yakama Nation and others over the millennia. “We do not want fossil fuels at all coming through the Columbia River Gorge — at all,” said Yakama Nation Chairman JoDe Goudy. “We truly see what is at hand. … We are sacrificing and putting at risk the long-term benefit and well-being of future generations, our children, our grandchildren, those yet to come.” A 96-car train carrying volatile crude oil from the Northern Plains’ Bakken region to Tacoma, Washington, derailed June 3 along the Columbia River, which forms most of the boundary between Washington and Oregon. No one was hurt, but four cars caught fire, prompting the evacuation of a nearby school, forcing the closure of an interstate, and enraging local officials and residents. Some of the oil made it to the river, where it was captured by absorbent booms, officials said. The Yakama and other tribes have opposed the movement of oil and other fossil fuels through the Columbia Gorge, a canyon carved out of the region’s volcanic rock by the river and by violent Ice Age floods. Oil trains pose grave threats to public safety, the environment and their treaty-reserved fishing rights, the tribes say. Union Pacific Railroad spokesman Justin Jacobs said the company takes the concerns seriously, but the railroad is federally obligated to transport crude oil and other commodities for its customers. Davis Yellowash Washines, chairman of the Yakama Nation general council, rang a bell before leading the group in what he called a “messenger song,” which the tribe used to honor a small bird whose arrival signified the return of the spring salmon run in the Columbia River each year. “This is his song that we use,” Washines said. “It’s a messenger song and I hope that from this day the message gets stronger. This is for the land, the water, the children.”

A timeline of recent oil train crashes in the US and Canada - The derailment of an oil train in Oregon’s Columbia River Gorge follows a string of fiery accidents in the U.S. and Canada as shipments of crude by rail have increased with more domestic oil production:

  • — July 5, 2013: A runaway Montreal, Maine & Atlantic Railway train that had been left unattended derailed, spilling oil and catching fire inside the town of Lac-Megantic in Quebec. Forty-seven people were killed and 30 buildings burned in the town’s center. About 1.6 million gallons of oil was spilled. The oil was being transported from the Bakken region of North Dakota, the heart of an oil fracking boom, to a refinery in Canada.
  • — Nov. 8, 2013: An oil train from North Dakota derailed and exploded near Aliceville, Alabama. There were no deaths, but an estimated 749,000 gallons of oil spilled from 26 tanker cars.
  • — Dec. 30, 2013: A fire engulfed tank cars loaded with oil on a Burlington Northern Santa Fe train after a collision about a mile from Casselton, North Dakota. No one was injured, but more than 2,000 residents were evacuated as emergency responders struggled with the intense fire.
  • — Jan. 7, 2014: A 122-car Canadian National Railway train derailed in New Brunswick, Canada. Three cars containing propane and one car transporting crude oil from western Canada exploded after the derailment, creating intense fires that burned for days. About 150 residents were evacuated.
  • — Jan. 20, 2014: Seven CSX train cars, six of them containing oil from the Bakken region, derailed on a bridge over the Schuylkill River in Philadelphia. The bridge is near the University of Pennsylvania, a highway and three hospitals. No oil was spilled and no one was injured. The train from Chicago was more than 100 cars long.
  • — April 30, 2014: Fifteen cars of a crude oil train derailed in Lynchburg, Virginia, near a railside eatery and a pedestrian waterfront, sending flames and black smoke into the air. Nearly 30,000 gallons of oil were spilled into the James River.
  • — Feb. 14, 2015: A 100-car Canadian National Railway train hauling crude oil and petroleum distillates derailed in a remote part of Ontario, Canada. The blaze it ignited burned for days.
  • — Feb. 16, 2015: A 109-car CSX oil train derailed and caught fire near Mount Carbon, West Virginia, leaking oil into a Kanawha River tributary and burning a house to its foundation. The blaze burned for most of week.
  • — March 10, 2015: Twenty-one cars of a 105-car Burlington Northern Santa Fe train hauling oil from the Bakken region of North Dakota derailed about 3 miles outside Galena, Illinois, a town of about 3,000 in the state’s northwest corner.
  • — March 7, 2015: A 94-car Canadian National Railway crude oil train derailed about 3 miles outside the northern Ontario town of Gogama. The resulting fire destroyed a bridge. The accident was 23 miles from the Feb. 14 derailment.
  • — May 6, 2015: A 109-car Burlington Northern Santa Fe crude oil train derails near Heimdal, North Dakota. Six cars exploded into flames and an estimated 60,000 gallons of oil spilled.
  • — July 16, 2015: More than 20 cars from a 108-car Burlington Northern Santa Fe oil train derailed east of Culbertson, Montana, spilling an estimated 35,000 gallons of oil.
  • __ Nov. 7, 2015: More than a dozen cars loaded with crude oil derail from a Canadian Pacific Railway train prompting the evacuation of dozens of homes near Watertown, Wisconsin.
  • — June 3, 2016: A Union Pacific train hauling crude oil derails in Oregon’s Columbia River Gorge, sparking a large fire.

Refinery issues push Los Angeles jet differential to highest level since April -  Refinery issues pushed the Los Angeles jet fuel differential to its highest level in a month and a half Monday. S&P Global Platts assessed Los Angeles jet fuel up 1.25 cents/gal to the NYMEX July ULSD futures contract minus 25 points/gal, or $1.5044/gal outright. That is the highest level that differential has reached since April 26, when it was also minus 25 points/gal. Trades at NYMEX minus 2.50 cents/gal and minus 2.25 cents/gal were reported early Monday morning, around Friday's levels when news of Chevron's 269,000 b/d refinery near Los Angeles losing power broke. However, by mid-day the differential had come back up to trade flat to the front-month NYMEX ULSD contract. By the close of trading it was being offered flat, prompting the Platts assessment. West Coast jet fuel sources disagreed on the cause of Monday's volatile market. "Not sure [why]," said one source. "Heard there may have been some problems still at Chevron el Segundo." A second source said: "Nope, the opposite. I heard the FCC started back up." A third source said, "I guess issues at Tesoro refinery." An unspecified unit experienced a breakdown at Tesoro's 265,000 b/d Carson, California, refinery Monday morning and caused unexpected flaring, a filing with the South Coast Air Quality Management District said.

Obama's Proposed Drilling Expansion May Cost Us More Than The Oil Is Worth - The Obama administration's proposed expansion of oil and gas drilling in the Arctic Ocean and Gulf of Mexico would result in hefty climate-related social costs, a new report found. In fact, those costs, estimated at $58.6 billion to $179.2 billion, may outweigh the economic benefits of selling the energy, according to Tim Donaghy, lead author of the report.  The proposed oil and gas program for 2017 to 2022 includes 13 potential lease sales -- 10 in the Gulf and one each in Alaska’s Cook Inlet, Beaufort Sea and Chukchi Sea. In March, the White House abandoned plans to include the Atlantic Coast in the upcoming sale.  With emissions from existing oil reserves already capable of pushing the planet beyond the 2 degrees Celsius threshold climatologists say would result in drastic impacts, searching of more oil would be a step backward, Donaghy, a senior research specialist at Greenpeace USA, told The Huffington Post. "Climate change isn't just this abstract thing," Donaghy said. "It's going to actually affect our daily lives."The Cook Inlet basin contains large oil and gas deposits including several offshore fields.  The 16-page report, released Thursday by Greenpeace USA and Oil Change International, finds that consumption of the oil produced under the five-year program would increase global carbon emissions by roughly 850 million metric tons of CO2 -- equivalent to that of 3.6 million cars over a 50-year period. "These carbon emissions will impose high costs to society in coming decades related to human health, flood damages, agricultural productivity and other impacts," the report says.

Sempra’s Ienova Rallies on Likelihood of $2 Billion Pipeline Win -  The prospect of building an underwater pipeline from Texas to Mexico is making Sempra Energy’s Ienova one of the top-performing stocks south of the border. Infraestructura Energetica Nova SAB, as the unit is formally called, had the second-biggest gain on the Mexican Stock Exchange since announcing plans on May 19 to bid to develop the $2.1 billion project in a joint venture with TransCanada Corp. The venture was the sole bidder to qualify for a June 13 auction of the project, boosting optimism that Ienova, the country’s only publicly traded energy company, will sustain the rally throughout the year. "It’s very likely that the Ienova and TransCanada bid will have a favorable outcome in the auction for the pipeline,” Jean-Baptiste Bruny, BBVA Research analyst, said in a telephone interview from Mexico City. "The company’s shares are likely to have a positive impact if they win rights to the project." The 800-kilometer (497-mile) pipeline will run from the U.S.-Mexico border to the Tuxpan port, a shipping hub for tankers supplying petroleum products to state-run Petroleos Mexicanos, or Pemex. The line will transport natural gas to power plants in northern and central Mexico and is forecast to be completed in 28 months. Last year, TransCanada won a bid for a gas pipeline connecting Tula, where Pemex’s second-largest refinery is located, to Tuxpan.

Last Oil Company Pulls Out Of Arctic Offshore Drilling Efforts In Chukchi Sea -  It’s often hard to find good news when it comes to the world’s oceans. Overfishing, coral bleaching, dead zones, acidification, pollution, oil spills, melting sea ice, sea level rise, the odd Cold War-era Russian rocket crashing into Baffin Bay with some leftover toxic fuel in the tank.  So on World Oceans Day a bit of positive news is a breath of fresh air. Repsol, a Spanish oil company which owned a significant portion of the drilling leases for Alaska’s Chukchi Sea, abandoned 55 of them last week and plans to drop the remaining 38 next year. “Repsol is in the process of relinquishing its Chukchi Sea acreage position offshore Alaska,” Repsol spokeswoman Jan Sieving said in a statement.After eight years, billions of dollars, and significant controversy, we’re back to a clean slate in the Chukchi sea. The Spanish company joins the rush of oil drillers — Shell, ConocoPhillips, Eni, and Iona Energy — departing the Arctic region after concluding that offshore drilling is not worth the expense or the risk. After Shell spent over $4 billion attempting to develop offshore Arctic oil and completing just one exploratory well, it said it was done in the Chukchi “for the foreseeable future.”  Apart from one token Shell lease block that the company is retaining to keep the information it gained from its failed 2015 exploratory well, Repsol’s leases were the last blocks remaining in the Chukchi.  “Last month we figured out that Shell and a bunch of other companies had given up their leases,” said Mike Levine, Oceana’s Pacific senior counsel, told ThinkProgress. “After eight years, billions of dollars, and significant controversy, we’re back to a clean slate in the Chukchi sea.”

Shell to cut more costs as a result of merger with BG Group. (AP) — Energy company Royal Dutch Shell will cut more costs, more quickly than previously planned, as a result of its merger with BG Group Plc this year. The Anglo Dutch company made the announcement Tuesday as it tried to assure investors that it could handle the debt that came with its $54 billion takeover. Critics have questioned the deal following a drop in oil prices. “Integration is gathering pace, and today we expect to deliver more synergies, and at a faster rate,” Shell CEO Ben van Beurden said. Shell argues the deal, which increased the company’s proven reserves of oil and natural gas by 25 percent, provided opportunities to cut costs by eliminating duplication. Thousands of jobs have been cut and investments have been postponed. Van Beurden said Tuesday that synergies in absorbing BG would result in $4.5 billion in savings by 2018, up from $3.5 billion estimated earlier. The deal has caused concerns because it came as the price of oil was dropping. Brent Crude, the benchmark for international oil, hit a 12-year low of $27.10 a barrel in January after trading above $100 as recently as September 2014. It traded at $50.97 on Tuesday. Prices are down because production has remained high despite slower economic growth, particularly in China. Van Beurden set out priorities intended to improve returns and cash flow, which has been hit by low oil prices. Investment for 2016 is expected to be $29 billion, excluding the purchase price for BG — or 35 percent lower than what Shell and BG combined had spent in 2014. He described deep water drilling and chemicals as being growth priorities. The company announced a final investment decision in a new plant in Pennsylvania.

Royal Dutch Shell Plan To Exit Up To 10 Countries Signals Deeper Anxiety About Oil Market Recovery:  Close Royal Dutch Shell’s new plan to exit oil and gas operations in up to 10 countries signals a deepening uncertainty about how and when the crude oil market will break from its persistent slump. The Anglo-Dutch energy giant said Tuesday it plans to sell 10 percent of its oil and gas production assets, worth about $30 billion, by around 2018. Shell, which is active in more than 70 countries, said it also hopes to focus on operations in 13 countries where it is reaping good returns, including the United States, Brazil and Australia.“Our portfolio is probably more diverse and spread around the world, and in some parts more mature than we would like it to be,” Simon Henry, Shell’s chief financial officer, said in a Tuesday press conference cited by Reuters.  In the coming years, Shell said it will target shale oil and gas production in North America and Argentina, and develop clean energy technologies such as biofuels, hydrogen, and solar and wind power in a separate unit. Shell will also slow new investment in its integrated gas business, including in liquefied natural gas, which the company said has reached “critical mass” following its $54 billion merger with British gas giant BG Group.

Activists Deliver 90,000+ Petitions Calling on DNC to Add Fracking Ban to Party Platform – A coalition of climate and environmental justice groups delivered over 90,000 petitions to the Democratic National Committee demanding that a ban on fracking be included in the party platform. The DNC platform committee is holding a public forum to receive input on this year’s platform today in Washington D.C. Petitions were collected and delivered by Food & Water Watch, Climate Hawks Vote, Environmental Action, Honor the Earth,, and“The Democratic Party has been complicit in the U.S. fracking boom which is poisoning communities and our climate,” said Emily Wurth, Water Program Director for Food & Water Watch. “Any serious plan to combat climate change must include a ban on fracking, and as the committee develops the platform, they should heed the calls of the growing movement to ban fracking and keep fossil fuels in the ground.”In addition to the petitions delivered Wednesday, a massive anti-fracking protest is planned for Philadelphia on July 24, the day before the Democratic National Convention begins. The March for a Clean Energy Revolution is expected to draw thousands, and is demanding a ban on fracking, keeping fossil fuels in the ground, and a just transition to 100% renewable energy. The march and its demands have been endorsed by over 400 organizations.“The climate crisis and the need for more urgent action are accelerating. The science is in: fracked natural gas, like other extreme energy, is a climate killer. The Obama-era ‘all of the above’ energy policy needs to end, beginning with the party platform,” said RL Miller, cofounder of Climate Hawks Vote. More than 137,000 fracking wells have been drilled in the U.S. since 2005, putting over 15 million Americans within a mile of an oil or gas well. This boom was in part a result of President Obama’s “all of the above” energy policy, which promoted the increased use of natural gas.

Fires near Fort McMurray are reducing Canada’s oil sands production - Today in Energy - U.S. (EIA): While evacuees from the ongoing fires in Fort McMurray have begun to return to the city, a state of emergency remains in place throughout Alberta, Canada, and the temporary shutdown of the area's oil sands production sites continues. EIA estimates that disruptions to oil production averaged about 0.8 million barrels per day (b/d) in May, with a daily peak of more than 1.1 million b/d. Although projects are slowly restarting as fires subside, it may take weeks for production to return to previous levels. EIA expects disruptions to average 400,000 b/d in June.  The oil sands facilities are located mostly to the north of the fires and initially were not physically threatened by the fires. However, as winds pushed the fires northward, oil sands facilities and work camps had to be evacuated. Oil sands production companies operating near Fort McMurray either shut down completely or operated at reduced rates. Although the fires have not been contained, they have moved away from Fort McMurray, but dangerous air quality conditions at facilities and surrounding towns have slowed the return of workers. As conditions improve, facilities located farther north of Fort McMurray have begun to restart production, although not at full capacity.  Local pipeline capacity was also shut down in response to the fire, reducing crude oil takeaway capacity. Oil sands production yields very thick crude oil that often requires liquid diluent such as natural gas condensates to reduce viscosity so that the crude oil can flow in pipelines. Because this diluent is delivered to the production area by pipeline, the pipeline shutdowns also affected this diluent supply. So far, the Fort McMurray fires have not significantly affected the regional crude oil price, Western Canadian Select (WCS). The price difference between WCS and the global crude oil benchmark Brent has narrowed slightly since the fires began, but WCS still remains at least $10 U.S. dollars per barrel less than Brent. The effect of the fire was most likely moderated by high inventories of crude oil in both the United States and Canada. Crude oil imports from Canada have fallen, but to a lesser extent compared with the oil sands production outage.

BP: Oil gained global market share in 2015 for first time in 16 years - Although crude oil prices in 2015 recorded their largest annual decline on record in dollar terms and their largest percentage decline since 1986, oil gained market share for the first time since 1999, according to the 65th edition of BP PLC's Statistical Review of World Energy. The multinational firm’s comprehensive review of energy markets notes that prices for all fossil fuels declined last year, prompting adjustments in the energy markets. In some markets, demand was lifted while curtailing supply and shifting the fuel mix in others. Oil remained the world’s leading fuel, accounting for 32.9% of global energy consumption. Global oil consumption grew 1.9 million b/d, or 1.9%, nearly double the recent historical average of 1% and significantly stronger than the increase of 1.1 million b/d seen in 2014. The relative strength of consumption was driven by countries in the Organization for Economic Cooperation and Development, where consumption increased 1.1%, compared with an average decline of 1.1% over the past decade. Growth was well above recent historical averages in the US at 1.6% and the European Union at 1.5%. Down 3.9%, Japan recorded the largest decline in oil consumption. Outside of the OECD, net oil importing countries recorded significant increases. Up 6.3%, China once again accounted for the largest increment to demand, while India, rising 8.1%, surpassed Japan as the world’s third-largest oil consumer. But this was offset by slower growth in oil producers such that oil demand growth in the non-OECD as a whole, up 2.6%, was below its recent historical average.

On US Petroleum Exports -- Al Troner's Article In Oil & Gas Journal On Light Ends -- From Al Troner's June 6, 2016, article in Oil & Gas Journal: Almost unheralded, the US has emerged as the largest exporter of oil products, based on Gulf Coast refiners' use of relatively inexpensive, domestically produced tight oil. The product-export flood has been paralleled by large-volume NGL sales, with LPG (liquid petroleum gas) leading the way, in particular propane. US sales have not only saturated the Atlantic Basin market but also become important to Asia Pacific supply. At mid-2015 China was the biggest single customer for US propane. And the opening of a revamped and enlarged Panama Canal by yearend will likely increase westbound LPG exports from the Gulf Coast even further. By 2018 US exports of LPG exports will likely equal or exceed those of the United Arab Emirates and Qatar combined.  Canada remains the top condensate US export market. APEC expects US supply to dominate Canadian diluent use until at least end-decade. Yet domestic condensate output has been growing rapidly in Canada, based on tight oil and shale gas development, in a trend APEC expects will gradually back out US sales in the coming decade. A steadier though smaller market emerged for slightly refined condensate in Europe, where refiners use the material regularly to fill out crude slates. By 2018 US condensate exports will exceed overseas sales by Saudi Arabia, and possibly by the kingdom and Qatar combined.  Ethane exports have begun as US sellers pioneered waterborne ethane shipments to buyers in the UK, Norway (Ineos and Sabic), and Sweden (Borealis). This has been followed by sales to India (Reliance) and China (Orient Energy). The emergence of the light-ends space has not been solely a western market phenomenon. It has had East of Suez impacts as well, much of it centered on the Persian Gulf.

Backhaul Economics Encourage U.S. Crude Shipments on VLCCs to Asia -  Back in December 2015, the U.S. crude oil export ban was lifted to a warm welcome from producers and free market enthusiasts. Lifting the ban fulfilled the wishes of many in the oil industry who argued that unfettered markets were the most efficient.  But there were a couple of unintended consequences.  First, with the U.S still importing millions of barrels of crude per day, for every barrel exported a replacement barrel would have to be imported.  And second, for exports to make sense, the price for crude oil in the U.S. would have to be cheaper than the price of competing grades in global markets.  In other words, domestic grades would have to be cheap enough to justify putting that oil on ships, paying the cost of moving those ships a considerable distance, and arriving at their destination at a final, delivered cost below that of competitors that traditionally served those markets. Partly as a consequence of lifting the export ban, exporters found pricing differentials were moving against them just as they were getting ready to start selling abroad.  Now that U.S. Gulf Coast crude could be exported to higher value markets, it helped bump the price up slightly, even though volumes actually exported didn’t increase substantially.  That is, just the act of releasing domestic grades from the confinement of the U.S. market brought their prices more into line with the international market.  The Brent – West Texas Intermediate (WTI) differential - a measure of the competitiveness of U.S. grades with West African and North Sea crudes - flipped from a premium in favor of Brent to a discount of Brent to WTI.   The fact that it takes two months to sail around South Africa's Cape of Good Hope and on to China, in itself, is not an impediment. After all, it takes five weeks to get from the Middle East Gulf to the Gulf of Mexico, and there is about one Very Large Crude Carrier (VLCC)--a ship that can carry 2,000,000 barrels (2 MMbbl)-- completing that journey every 18 hours or so.  The problem is that such long journeys make economic sense only when the shipper is using a VLCC or the even larger Ultra Large Crude Carrier (ULCC).  The larger the ship, the lower the cost per barrel.  VLCCs are around 1,500 feet long.

Chile environmental watchdog probes GeoPark for illegal fracking | Reuters: Chile's SMA environmental regulator said on Friday it was investigating Latin America-focused oil and gas explorer GeoPark Ltd for alleged violations, including fracking activities without having the necessary permits. Inspections in 2014 and 2015 of GeoPark's hydrocarbon project in the Fell block, located in the southern Magallanes region, detected "hydraulic fracturing activities in different wells, without the environmental permits required by law for this type of activity," the regulator said. GeoPark is also accused of having faulty systems in place for avoiding soil erosion and managing spills of hazardous materials, and of damaging archaeological findings. "We will fully cooperate with Chile's SMA environmental regulator and are confident that all of our drilling activities in the region are fully compliant with the relevant laws and regulations," GeoPark said in an emailed statement. "We look forward to presenting our compliance plan to the SMA in the coming days and quickly resolving this matter," the company added. GeoPark has 10 days to present a compliance plan to the SMA or 15 days to present a legal defense.

North Sea crude oil to remain pressured as French strikes continue -  North Sea spot differentials for Brent blend, Forties and Ekofisk -- together with Brent CFDs -- are expected to continue their recent slide as French strikes that have brought several French refineries to a standstill continued into their third week. Despite signs that more French refining capacity would be operational this week, spot differentials for BFOE grades would likely fall further as large North Sea crude buyer Total remained out of the market, traders said. "There's still a long way [down] to go [for spot differentials] for Brent, Forties and Ekofisk," a trader said. Brent Blend, Forties and Ekofisk spot differentials slid 2 cents/b, 0.5 cents/b and 5 cents/b respectively Monday on the back of offers from BP and Vitol. "The French strike is not helping the overall picture, light sweet [crude] is under pressure," a second trader said. The restart Sunday of operations at the 274,000 b/d Grandpuits refinery -- together with a preliminary restart at some units at Gonfreville and Feyzin -- are not expected to see differentials rebound in the immediate future. "The effect of the French [strikes] is still feeding through, they're going to have oil that they bought but didn't run for the last three weeks... it's unplanned so they hadn't under-bought, they bought oil to run and now its backing up on boats still looking to discharge... July buying will be very slow," the first trader said.

How Corruption And Oil Crime Are Tearing Nigeria Apart | Political risk has always been a part of oil business, and today’s situation in Nigeria is no exception. Over the past several months the insurgency in the Niger River delta has devastated the Nigerian oil industry, with the country’s production being halved from 2.2 to 1.4 million barrels per day. The severity of attacks not only affected Nigeria’s oil production, but also the global markets. Accordingly, Angola has surpassed Nigeria as Africa’s largest oil producer while global oil prices have hiked to $49 per barrel.  The on-going armed insurgency is a direct result of the government’s decision to cut subsidies for former rebel soldiers who were involved in a similar conflict that ended in 2009. But the root of the current rebellion against the government of President Muhammadu Buhari and the Nigerian federal state is a combination of long-standing social and economic grievances that have beset the region ever since oil production began in the late 1950s.  The Nigerian oil industry is plagued with endemic corruption. In the latest scandal involving the Nigerian National Petroleum Corporation (NNPC), the country’s official audit revealed that around $19 billion of oil revenues went missing through corruption and oil theft in 2014 alone. According to some estimates, around $400 billion has vanished in a similar fashion since the country gained independence in 1960, making oil industry crime the second largest industry in the country, right after the oil industry itself. It is estimated that around 200,000 barrels a day are stolen by a sophisticated network of former warlords, local businessmen, and corrupt officials.

The petrodollar drawdown quantified -- Izabella Kaminska - To what degree is the collapse in oil prices responsible for the contraction in cross-border financial activity and over-the-counter derivatives?  According to the BIS’ latest quarterly review, the slowdown — which began in earnest in early 2015, coinciding with the oil drop — broadened in the last quarter of 2015 to a $651bn contraction. Of that, the biggest drop in cross-border claims was on euro area countries, at $276bn, whilst the overall advanced economy contraction was $361bn. China, meanwhile, experienced its second quarterly drop in inbound cross-border lending as it dropped $114bn, pushing its annual growth rate down to –25 per cent. With respect to deposits placed with BIS reporting banks by residents of oil-exporting countries, however, these fell by a much more modest $79bn during the Q4 2015, with US dollar-denominated deposits accounting for about two thirds of this decline. As the BIS noted: The quarterly contraction was concentrated among some oil-exporting countries. Depositors from Russia (–$27 billion) and Norway (–$26 billion) withdrew the highest absolute amounts. Internationally active banks also reported considerable declines in cross-border deposits held by residents of Saudi Arabia (– $17 billion), the United Arab Emirates (–$7 billion) and Mexico (–$7 billion). But the BIS stresses that even after this latest quarterly decline, the cross-border deposits of oil exporting countries still stood at some $966bn at the end of 2015 and that more than half of that amount was accounted for by the residents of four countries: Saudi Arabia ($214bn), the United Arab Emirates ($129bn), Russia ($109bn) and Mexico ($107bn). If that sounds smaller than you’d expect, the BIS agrees. The figures are likely understated because some of those drawdowns will have been offset by loans to oil exporters, which rose by $15bn in the period. Accounting for those, the total reduction is closer to $94bn.Meanwhile, $7tn ($1tn x 7) is becoming an increasingly familiar number for those tracking international balances.

EIA continues to raise oil-price forecasts for 2016-17 - North Sea Brent crude oil prices averaged $47/bbl in May, a $5/bbl increase from April and the fourth consecutive monthly increase since reaching a 12-year low of $31/bbl in January. Growing global oil supply disruptions, rising oil demand, and falling US crude oil production have contributed to the price increase. In the June Short-Term Energy Outlook, the US Energy Information Administration forecasts Brent crude oil prices to average $43/bbl in 2016 and $52/bbl in 2017, $3/bbl and $1/bbl higher than forecasts in last month’s STEO, respectively. West Texas Intermediate crude oil prices are forecast to average slightly less than Brent in 2016 and to be the same as Brent in 2017. EIA estimates that global petroleum and other liquid fuels inventory builds will average 1 million b/d in 2016 and 300,000 b/d in 2017, compared with an average of 1 million b/d in 2016 and 200,000 b/d in 2017 forecast in last month’s STEO.  Global consumption of petroleum and other liquid fuels is now estimated to have risen 1.4 million b/d in 2015, 100,000 b/d higher than previously estimated and reflecting upward revisions to 2015 growth in both China and India. EIA now expects global oil consumption to rise 1.5 million b/d in both 2016 and 2017. Overall consumption of petroleum and other liquid fuels in countries outside of the Organization for Economic Cooperation and Development increased by an estimated 900,000 b/d in 2015, and it is expected to be 1.3 million b/d in 2016 and 1.4 million b/d in 2017. China’s consumption of petroleum and other liquid fuels is forecast to increase 400,000 b/d in both 2016 and 2017, driven by demand for hydrocarbon gas liquids as additional propane dehydrogenation (PDH) plants come online. Consumption growth in India is expected to be between 300,000 b/d and 400,000 b/d in both 2016 and 2017. OECD petroleum and other liquid fuels consumption rose 500,000 b/d in 2015. OECD consumption is expected to increase 200,000 b/d in 2016 and less than 100,000 b/d in 2017. Consumption growth in the US and South Korea more than offsets decreases in consumption in OECD Europe and Japan in 2016 and 2017.

Oil hits 2016 high on U.S. draw forecasts, Nigeria worry | Reuters: Oil prices continued their climb on Tuesday, hitting eight-month highs, as expectations of U.S. crude draws underpinned a market already worried about potential supply shortages from attacks on Nigeria's oil industry. U.S. crude stockpiles likely fell by 3.5 million barrels last week to mark a third straight week of declines, a preliminary Reuters poll showed.[EIA/S] Trade group American Petroleum Institute is expected to cite a drawdown as well in its inventory report due at 4:30 p.m. (2030 GMT), before official stockpiles data slated for Wednesday from the U.S. government. Crude oil rallied in the past two sessions after rebels in Nigeria's Niger Delta vowed to halt output in the country, which until last year was Africa's biggest producer turning out about 2 million barrels per day (bpd). The Nigerian government said on Tuesday it was initiating talks with the rebels. "The market remains concerned about unscheduled supply interruptions with the latest coming from additional shut-ins in Nigeria," Dominick Chirichella, senior partner at the Energy Management Institute in New York, said. "With the industry projecting a decline in total U.S. crude oil stocks in this week's reports, the market bears are remaining on the sidelines."

Crude Slides After Unexpected Inventory Build In Gasoline, Distillates -- For the 3rd week in a row, crude inventories saw a drawdown (API reports -3.56mm vs -3mm expectations) and so did Cushing (-1.3mm vs -900k exp) but crude is slipping as both Distillates and Gasoline saw unexpected builds. This is the first build in Distillates in 8 weeks.  API:

  • Crude -3.56mm (-3mm exp)
  • Cushing -1.3mm (-900k exp)
  • Gasoline +760k (-100k exp)
  • Distillates +270k

First build in distillates in 8 weeks...Charts: Bloomberg

Oil Doubles From February Lows - Between Doha hopes (and nopes), Nigerian supply 'disruptions' which apparently cannot be stopped (conveniently for many oil producers, equity bulls, and central bank inflation watchers), and non-transitory Chinese 'demand', WTI crude has topped $51 this morning - almost doubling off the February lows. While still down YoY, oil prices have recovered to 11-month highs, soothing credit-driven anxiety in markets (even though bankruptcies continue) and enabling hedgers to pile in (crushing the crude curve). With rig counts rising once more (and global GDP being slashed), one questions how sustainable this frothy bounce will be... A larger than expected inventory draw from API last night sparked the latest impulse...As Reuters reports, Supply disruptions caused by a string of attacks by the Niger Delta Avengers militant group in Nigeria have brought the oil exporter's production to its lowest level in 20 years.The group said on Wednesday it had attacked another oil well owned by U.S. oil group Chevron, adding to assaults on oil infrastructure owned by Shell and ENI.Nigerian Oil Minister Emmanuel Ibe Kachikwu said output had dropped to 1.5-1.6 million barrels per day (bpd), down from 2.2 million at the start of the year.At the same time, May trade data on Wednesday showed the biggest jump in China's crude oil imports in more than six years, adding to hopes that the economy of the world's second-largest oil consumer may be stabilising. "China's economic activity is not slowing down as much as expected, which is a support to the market," said Kaname Gokon at brokerage Okato Shoji.

Crude Chaotic After Inventories Drop But Production Rises By Most In 2016 -- When the machines saw that US crude production rose by the most since Jan 1st, prices plunged back below $51... but the machines didn't like that, and following last night's API-reported draw, DOE confirmed the 3rd weekly drop in inventories for overall crude and Cushing (the latter more than expected) which juioed oil prices back higher. However, DOE also showed considerably larger than expected builds in Gasoline and Distillates(biggest in 2 months). DOE:

  • Crude -3.23mm (-3mm exp)
  • Cushing -1.36mm (-900k exp)
  • Gasoline +1.01mm (-100k exp)
  • Distillates +1.75mm

Third weekly draw in a row for overall crude inventories and Cushing but Distillates and Gasoline surprised with a large build... In aggregate though, it is noteworthy that total crude and product stocks rose +3.2 million bbl last week reversing the prior week -2.7 million bbl decline  But production rose for the first time in 18 weeks and by the most since Jan 1st...

Oil rises, hits 2016 highs; U.S. gasoline build worries some | Reuters: Crude futures rose on Wednesday, hitting 2016 highs above $50 a barrel and settling up for a third straight day on worries about sabotage of oil facilities in Nigeria, although a build in U.S. gasoline stocks amid peak summer demand could pressure prices. U.S. crude stocks fell for the third consecutive week, sliding by 3.2 million barrels versus analysts' expectations for a 2.7 million-barrel drawdown, government data showed. [EIA/S] But gasoline inventories grew by 1 million barrels and distillates, which include diesel and heating oil, rose by 1.8 million barrels, versus forecasts of drawdowns. This indicates a sentiment that gasoline demand will weaken more than expected or that the crude glut will be reflected by a gasoline glut, said Troy Vincent, crude oil analyst for New York-headquartered energy data provider ClipperData. Brent crude settled up $1.07 at $52.51 a barrel. It extended gains in post-settlement trade, reaching $52.60 a barrel by 3:55 p.m. EDT (1955 GMT), the highest since October. U.S. crude futures rose 87 cents, or 1.7 percent, to settle at $51.23 a barrel. The session high was $51.34, a peak since July. "The gasoline build was a big surprise, specially since the driving season is underway,"

Oil down after three-day rally; dollar rise sparks profit-taking | Reuters: Oil prices settled down on Thursday, snapping a three-day rally after notching another 2016 high, as a strong dollar sparked profit-taking in crude futures by investors. Continuous threats by militants against Nigeria's oil industry and fear of more security incidents that could hit supplies worldwide, however, limited losses in crude. Brent crude oil futures LCOc1 settled down 56 cents at $51.95 a barrel, after falling nearly $1 earlier. It hit a 2016 high of $52.86 during the session. U.S. crude's West Texas Intermediate (WTI) futures CLc1 fell 67 cents to settle at $50.56, after dropping $1 at the session low. WTI's intraday peak was $51.67, the highest for this year. Profit-taking emerged in crude as the dollar index .DXY rose nearly half a percent, the most in three weeks, from jittery global financial markets that sent investors toward safe haven currencies. A stronger dollar makes greenback-denominated oil less attractive to holders of the euro and other currencies. "So far this looks like a modest technical correction following three days of gains, rather than a major reversal," said Tim Evans, energy futures specialist at Citi Futures in New York. Crude futures have almost doubled since the 13-year lows of $27 for Brent and $26 for WTI in the first quarter. Some analysts anticipate headwinds for oil in coming weeks as Canadian supplies return after last month's wildfires in Alberta's oil sands region and other oil imports grow to slow use in U.S. crude stockpiles.

OilPrice Intelligence Report: The Rally Could Continue Beyond $50: Oil prices closed and opened above $50 per barrel this week, the first time that has happened in 2016. The highest supply outages in years have rapidly shrunk the global surplus, providing bullish momentum to WTI and Brent. Prices fell back on Friday due to a stronger dollar, however, and speculators also appeared willing to pocket some profits and take a breather on the rally. Some Canadian oil production is coming back online but the fundamentals continue to firm up. The EIA reported inventory drawdowns for the third week in a row, providing some clearer direction on which way the markets are heading. Demand is strong. Oil demand looks bright, with record gasoline consumption taking place in the United States. Also, global refining demand is nearing record highs as the world takes advantage of cheap fuel. In August, Reuters projects that global refining demand could hit 101.8 million barrels per day, which would be a new all-time high. Record demand combined with falling supply offers clear signs that there is strong bullish momentum behind crude oil.  Not everyone agrees that the rally will continue. Top analysts from Argus media and S&P Global, among others, among others, are not convinced that oil prices will move higher, arguing that the rally could be running out of room. Supply outages in Canada are starting to be resolved. Also higher oil prices could restart some drilling in the shale patch. The dollar could strengthen, putting downward pressure on prices. And oil inventories are still at record highs.

US Rig Count Rises 6 This Week to 414, 2nd Week of Gains - ABC News: The number of rigs exploring for oil and natural gas in the U.S. rose by six this week to 414, the second consecutive week the count has increased after a slide that lasted months and pushed the count to record-low levels amid collapsed energy prices. A year ago, 859 rigs were active. Houston oilfield services company Baker Hughes Inc. said Friday 328 rigs sought oil and 85 explored for natural gas. One was listed as miscellaneous. Among major oil- and gas-producing states, North Dakota and Texas each gained two rigs and Alaska, Ohio, Oklahoma and Utah each gained one. Pennsylvania declined by one rig. Arkansas, California, Colorado, Kansas, Louisiana, New Mexico, West Virginia and Wyoming were unchanged. The U.S. rig count peaked at 4,530 in 1981.

Oil Down Over 2% As U.S. Rigs Increase - The U.S. rig count continued to increase this week, according to information from Baker Hughes Inc. The total number of active rigs in the United States reached 414, up six from last week. Increases were in both oil and gas rigs this week, with BHI reporting three more of each active in the week ended June 10, 2016. Oil rigs reached 328 while gas rigs are now at 85 total in the country. Slowly recovering oil prices had many concerned that U.S. oil and gas operators might start bringing more production back to the market. The higher oil price appears to have encouraged a few more active rigs, but has also pushed oil prices back down today. U.S. crude oil benchmark WTI is down over 2% today at $49.31 after both WTI and Brent crude oils broke their three-day streak of gains Thursday. Supply disruptions continue to help balance the market, but concerns over renewed drilling activity in North America may continue to exert downward pressure on prices. Most of the added rigs this week were in the Haynesville, Mississippian and Williston, each of which reported two new active rigs. The Eagle Ford, Granite Wash and the Utica all reported one additional rig this week as well. The Arkoma Woodford, Cana Woodford, DJ and Marcellus all reported fewer rigs this week than last. The Permian, the most active basin in the U.S., reported no change in its rig count at 142 this week.The Canadian rig count increased by more than 50% week over week, according to BHI. The total rig count in Canada now stands at 65, up 24 from last week.  Total North American drill rigs now number 479, down 507 from this time last year.

Oil Gives Up Post-Payrolls Gains As Rig Count Rises For 2nd Straight Week --Following last week's unexpected rise in US oil rigs - and the biggest increase in US Crude production since the first week of January - the lagged price of oil suggested that rig counts would continue to rise this week, and it did - up 3 to 328. Oil prices had dropped from over $51.50 to almost $49 - erasing the post-payrolls gains- ahead of the rig count data and were relatively unimpressed by the print. Production rose last week for the first time in 18 weeks and by the most since Jan 1st: As rig counts increased by the most since December and for the 2nd week in a row... leaving oil unchanged since payrolls... Charts: Bloomberg

US oil plunges 2.9 percent after rig count rises for 2nd straight week: U.S. oil prices fell about 3 percent on Friday as the U.S. rig count rose for the second straight week and as a strong dollar again weighed on demand for crude futures. A slide in equity prices on Wall Street also pressured futures of Brent and U.S. crude's West Texas Intermediate (WTI). The number of rigs operating in U.S. fields rose by 3 to 328 in the previous week, oilfield services firm Baker Hughes reported. At this time last year, drillers had 635 rigs online.  More sabotage of Nigeria's oil industry by rebels had limited losses in Brent and WTI earlier in the session. The Niger Delta Avengers group blew up the Obi Obi Brass trunk line for oil run by ENI, adding to the woes of Africa's largest oil economy.  International Brent crude oil futures fell $1.43, or 2.8 percent, to $50.52 per barrel. U.S. West Texas Intermediate (WTI) futures settled 2.9 percent lower, or $1.49, at $49.07. Baker Hughes said last week U.S. oil drillers added 9 rigs in the week to June 3, bringing the count up to 325, as oil prices traded above or near $50. Prior to that, drillers cut on average 10 oil rigs per week this year, after reducing on average 18 rigs per week last year, on worries of oversupply.

Militants claim blast of another Nigeria oil pipeline(AP) — Nigerian militants say they have blown up another crude pipeline owned by Italian oil company Agip. The Niger Delta Avengers announced the early-morning blast in Bayelsa state in a tweet Friday. The latest blast comes a few days after the militants rejected the government’s offer of peace talks. Nigeria’s government had ordered the military to halt attacks in the oil-producing south and urged the militants to halt the bombings to allow a dialogue. But the militants say they will not negotiate. They also have blown up installations of Dutch-British Shell and U.S.-based oil company Chevron, halving Nigeria’s production to about 1.2 million barrels a day. The assaults have ended years of relative peace in the delta and have lost Nigeria its place as Africa’s biggest oil producer to Angola.

Second Militant Group Threatens Niger Delta Oil -- The Ultimate Warriors of the Niger Delta, a new militant group operating from its namesake river delta, is demanding that the Nigerian government give 60 percent of oil and gas revenues to the people native to the Niger Delta region, according to a Wednesday report by The group presented the order as a condition for a possible ceasefire after attacks it has committed, along with those perpetrated by the Niger Delta Avengers, have caused a 50 percent fall in national oil production.‘Gen’ Sibiri Taiowoh, the group’s spokesperson, said on Wednesday that attacks on oil facilities would continue until the $16 billion Export Processing Zone and the Federal Maritime University projects that former President Goodluck Jonathan began had been fast-tracked for completion. The next targets would be Chevron BOP, Okan Platform, MEREN Gas Gathering Compression Platform and the Chevron Tank Farm if the government did not meet the group’s demands within two weeks, according to the statement.“We are also behind the recent pipeline bombing in the Niger Delta region and I can assure you we will not stop until the Export Processing Zone (EPZ) project and the Maritime University are totally completed and start operations,” the document read. "We would resist any attempt to give surveillance contracts of pipeline in our backyard to foreigners. We want the pipeline jobs to be given to our indigenous people.” The group, which, like the Niger Delta Avengers, vows not to kill innocents and cause only property damage, also spoke out against what they consider to be the misdistribution of oil profits, as 80 percent of the money has been given to regions in non-oil producing areas. Since the people of the Niger Delta suffer “the brunt of oil pollution and degradation in the region,” the group insists that residents should receive at least half of the oil profits.

Oil Exporters Learn to Live with Cheaper Oil -- iMFdirect The significant and prolonged drop in oil prices since mid-2014 has changed the fortunes of many energy-exporting nations around the world. This applies particularly to countries of the Middle East and Central Asia, because these regions are home to 11 of the world’s top 20 energy exporters. Budgets have generally turned from surpluses to large deficits (Chart 1), growth has slowed, and financial stability risks have increased. In such a challenging environment, a policy of “business as usual” will not suffice—policymakers will need to adopt significant measures to put public budgets on a sounder footing, address risks to liquidity and the quality of assets in the financial sector, and improve growth prospects. This will be a difficult long-term process, but the good news is that many countries have made a strong start, especially in terms of budget policies.  In the early stages of the oil price decline, most countries appropriately used their savings to cope with the shortfall in oil revenues. As it became clear that the oil price decline would persist, oil exporters made significant spending cuts, an obvious area to target since public expenditures had ballooned during the oil-price boom. The budget plans for 2016 indicate that deficit-reduction efforts will deepen further, with sizable adjustment measures planned especially in Oman, Qatar, and Saudi Arabia. Countries have generally aimed for savings in both current and investment expenditures. Cross-country evidence suggests that reviewing both spending categories is sensible—for instance, the Gulf countries, Algeria, and Central Asian oil exporters all have higher capital expenditure levels than their emerging market counterparts (Chart 2).

Saudi Oil Chief Khalid al-Falih Tells OPEC Changes Are Coming - — The new oil minister in Saudi Arabia, the de facto leader of the OPEC countries, had a message for the global market: Don’t expect us to influence the price of crude oil by adjusting supplies.“I think managing in the traditional way that we tried in the past may never come again,” the minister, Khalid al-Falih, said on Thursday. “Certainly we will not go with certain price targets.”The message — which came after the decision on Thursday by the 13-nation Organization of the Petroleum Exporting Countries to maintain high levels of oil production — is central to the changing strategy of the Saudi crude-oil complex. And it could foreshadow a period of volatility for oil prices because OPEC’s policies and the Saudis’ sway have long helped guide the markets.In a sweeping directive in April, Saudi Arabia set forth plans to diversify its economy, reduce its dependence on oil and pull back on its government handouts. And what Mr. Falih does with Saudi Arabia’s oil — how much the kingdom decides to pump and where the money goes — is the biggest piece of the puzzle. The global markets received a sneak peak at Thursday’s OPEC meeting, Mr. Falih’s first since his appointment last month as the head of an expanded energy, industry and mining ministry. While other OPEC members have been urging the freezing or lowering of oil production, Mr. Falih is pushing to keep it high and plow the money into other industries that might prove profitable for Saudi Arabia. He wants the cartel to rethink its longstanding approach and assumptions that it can manage global oil supplies and prices. It runs counter to the longtime stance of his predecessor, Ali al-Naimi, who presided over an era when OPEC was largely content to restrain production to try to drive prices up.

Saudi Aramco, a race to the bottom? - It’s a theory at least, courtesy of a new Bernstein long read on the reported listing of 5 per cent of the state owned oil and gas giant by 2018. The final highlighted bit being the point, with the question being “why now?”: Often the simplest explanation is the most likely to be correct. With Saudi running a significant budget deficit, the listing of Aramco is one way to plug a gap in government finances. More broadly the listing of Aramco could be an example to other state owned firms, as Saudi reaches its ‘Thatcher’ moment in seeking to privatize state owned companies to increase efficiency as part of their plan to move beyond oil. The problem for oil markets is that privatized state companies tend to grow more quickly following privatization. Perhaps Aramco’s growth will be focused on refining and natural gas, but it is possible that Saudi have also realized that demand is likely to run out before supply and it makes more sense to deplete their own reserves ahead of others. While this is pure conjecture at this point, it could have bearish implications for oil markets. In the near term however, Saudi will not want to list Aramco at a low oil price. In the run up to 2018, we expect that Saudi will do everything in its power to ensure oil markets remain balanced and prices stable. This could be positive near term for oil equities. If that last theory is correct, it’s a solid end of the oil age gambit that is based in part on an eventual race to produce kicking in.

Saudi Authorities Panic - Ban Speculation On Riyal Devaluation Amid Banking Crisis -- With Saudi Riyal forwards plunging back above 3.81, dramatically weaker than the current peg, Bloomberg reports that Saudi authorities are cracking down on currency traders as speculation mounts that the world’s biggest oil exporter won’t be able to maintain the riyal’s peg to the dollar as revenue plunges. Saudi Arabia ordered banks in the kingdom to stop selling some products that allow speculators to bet against its currency peg just days after demanding information from lenders on the offerings, according to people with knowledge of the matter. The Saudi Arabia Monetary Agency sent a circular to banks this week saying that dollar-riyal forward structured contracts are banned with immediate effect, said the people, asking not to be identified because they are not authorized to comment publicly. Forward foreign-currency transactions backed by actual goods and services will still be allowed, the people said.The regulator, also known as SAMA, has asked lenders for details on derivative deals dating to January, saying they hadn’t informed the central bank about some products. An e-mailed request for comment to the agency outside of normal office hours on Friday wasn’t immediately returned. "The directive shows the continuing disconnect between the Saudi foreign-exchange policy and market expectations," Raza Agha, VTB Capital’s chief economist for the Middle East and Africa, said by e-mail. "SAMA appears committed to the exchange-rate peg despite the cost to foreign-exchange reserves, large fiscal deficits and consensus forecasts that see only a very gradual rise in oil prices."

Saudi Arabia to Cut Public-Sector Wage Bill in Post-Oil Plan - Saudi Arabia plans to reduce the public-sector wage bill as well as subsidies by 2020, scaling back the state largesse that helped ensure political loyalty in the largest Arab economy. The reductions are a pillar of the National Transformation Program the Saudi cabinet approved on Monday. A major component of the Vision 2030 plan unveiled by Deputy Crown Prince Mohammed bin Salman in April, its targets include reducing public-sector wages to 40 percent of spending by 2020, from 45 percent today. Public debt is seen climbing to 30 percent of economic output from 7.7 percent currently. The slump in oil revenue prompted Prince Mohammed to lead the biggest economic shakeup in the kingdom’s history by seeking to reduce the reliance on hydrocarbons. He proposed measures eschewed by previous rulers, who used some of the windfall from oil exports over the past decade to create government jobs. “The plan provides targets, but generally does not tell us how they will be met,” said Mohammed Abu Basha, a Cairo-based economist at regional investment bank EFG-Hermes Holding Co. “The drop in the wage bill is a surprise, that there will be a nominal cut by 5 percent in the coming five years, especially when taking into consideration the expected elevated inflation.” A higher debt-to-GDP ratio “means that they are targeting to raise an additional $200 billion in debt in the coming five years,” Abu Basha said. Encouraging Saudis to seek private-sector jobs has been a long-term challenge in the kingdom, where even after decades of attempts to diversify, more than 70 percent of government revenue came from oil in 2015. The state still employs two-thirds of Saudi workers.

Saudi Arabia To Tax Millions Of Foreign Residents To Raise Cash -- The troubles that Saudi Arabia has been facing due to the plunge in oil prices have been discussed many times, most recently when Saudi authorities ordered banks to stop allowing speculators to bet against the Riyal. Liquidity worries have also surfaced, as late last month Saudi Arabia indicated that it was considering paying contractors with government issued bonds - read: IOUs. GDP growth has slowed significantly...While debt to GDP has soared relative to prior years And Riyal forwards have plunged as bets on devaluation soar (despite government bans) Against that backdrop, although oil has rebounded off the recent lows, budgets are still light and in an attempt to help raise revenues in the short term (and transition away from dependency on oil in the longer term), the government is weighing an income tax on expat workers. As Bloomberg reports, in a proposal released this week for the country's National Transformation Plan, the kingdom is seeking to tax millions of foreign residents. The tax is only "an initiative that will be discussed" Finance Minister Ibrahim al-Assaf said. However as Bloomberg notes, the fact that the tax was included in the proposal means that Deputy Crown Prince Mohammed bin Salman is considering the idea. Prince Mohammed has already taken steps to reduce spending, recently cutting fuel and utility subsidies and has proposed reducing the public sector wage bill. The kingdom is also joining other members of the six-nation Gulf Cooperation Council in imposing value-added taxation starting from 2018.

Minister: Saudi Aramco Could Import Gas To Boost Use In Energy Mix  (Reuters) - Saudi Aramco could invest in importing gas into the kingdom, but the priority would be on finding new sources of gas domestically through exploration, Saudi Arabia's energy minister said on Tuesday. Even though it is the world's largest oil exporter, Saudi Arabia has struggled to keep pace with domestic gas demand in recent years as increased use from industry and power generation put pressure on supplies. "Gas makes up 50 percent of our energy mix now and we aspire to raise this to 70 percent from all sources, be it local or, if it is possible, from a source to import from at a competitive price," Khalid al-Falih told a news conference announcing the kingdom's National Transformation Plan. Falih, who is also Aramco's chairman, indicated earlier this month that the energy giant would be interested in investing in international upstream opportunities, particularly in gas. While Aramco has several overseas joint ventures in the refining and petrochemical sectors with foreign oil companies, it has not pursued similar deals in upstream initiatives.

Iran Oil Exports Soar As Offshore Tanker Armada Comes To Tehran's Rescue --Back in mid-April, when Iran was desperate to start exporting the millions of barrels it was pumping each day out of the ground, it found it has an unexpected problem: not only did it not have enough spare tankers, but few if any shipping companies were willing to move the cargo. There were two key reasons for this.

  • The first hurdle was residual U.S. restrictions on Tehran which are still in place and prohibit any trade in dollars or the involvement of U.S. firms including banks - a major hurdle for the oil and tanker trades, which are priced in dollars. As a result, by mid-April only eight foreign tankers, carrying a total of around 8 million barrels of oil, had shipped Iranian crude to European destinations since sanctions were lifted in January. That equates to only around 10 days' worth of sales at the levels of pre-2012, when European buyers were purchasing as much as 800,000 barrels per day (bpd) from the OPEC producer. 
  • The second and far bigger problem, were implicit Saudi Arabian threats for shippers not to transact with Iran or risk losing Saudi business. "It’s seen as an unknown risk,” said one shipbroker. “No one wants to disrupt their relationship with the Saudis." Iran admitted as much.

As Reuters said at the time, Iran's problems may not be resolved any time soon, adding that two other sources with other leading oil tanker operators echoed the above concerns and said they were not doing Iran deals at the moment. Fast forward a little over a month later, and somehow all the issues have been resolved.  According to an update from Reuters, more than 25 European and Asian-owned supertankers are shipping Iranian oil, allowing Tehran to ramp up exports much faster than analysts had expected following the lifting of sanctions in January. As noted above, "Iran was struggling as recently as April to find partners to ship its oil, but after an agreement on a temporary insurance fix more than a third of Iran's crude shipments are now being handled by foreign vessels." It appears that, whether with or without outside pressure, Saudi Arabia relented. "Charterers are buying cargo from Iran and the rest of the world is OK with that,”

Does Iran Have The Upper Hand In OPEC Oil War | Traditional rivals, Saudi Arabia and Iran, continue to fight to prove their supremacy in OPEC. Neither gives up an opportunity to hurt the other, whenever and wherever they can, and oil seems to be their favourite playground. With Saudi Arabia scuttling any chances of a production freeze in Doha in April, Iran has followed suit by thwarting attempts by Saudi Arabia to introduce a production ceiling on OPEC production in Thursday’s meeting held in Vienna. Iran, which is close to its pre-sanction levels of production, had earlier agreed to discuss being part of any production freeze after it reached its desired output. However, in yesterday’s meeting, Iran refused to adhere to any production ceiling, which led to OPEC abandoning the idea. Iran has been a dark horse since the lifting of sanctions, increasing its market share quickly to the surprise of many investors. Iran has resorted to offering large discounts to its Asian customers, undercutting the Saudi and Iraqi prices to levels not seen since 2007-2008 in order to regain their market share, reports Reuters.  Iran shipped 2.3 million b/d in April 2016, the highest level since 2012. These figures are 15 percent higher than the International Energy Agency (IEA) forecast. Iran has been successful in its strategy until now, but increasing its market share further might prove difficult..

Saudis Threaten To Leave U.N. Over Human Rights Criticism In Yemen - Saudi Arabia threatened this week to break relations with the United Nations and cut hundreds of millions of dollars in assistance to its humanitarian relief and counterterrorism programs to strong-arm the U.N. into removing Riyadh and its allies from a blacklist of groups that are accused of harming children in armed conflict. The threat — which has not been previously reported — worked, and the U.N. subsequently dropped the Saudis from a rogues’ gallery of the world’s worst violators of children’s rights in conflict zones. In their Monday warning, senior Saudi diplomats told top U.N. officials Riyadh would use its influence to convince other Arab governments and the Organization of Islamic Cooperation tosever ties with the United Nations, the officials said. The threats were issued in a series of exchanges between top Saudi officials in Riyadh, including Saudi Foreign Minister Adel al-Jubeir, according to U.N.-based officials. The Saudi mission to the United Nations did not respond to a request for comment Tuesday afternoon. Riyadh was enraged after U.N. Secretary-General Ban Ki-moon included the Saudi-led military coalition in Yemen on a list of countries, rebel movements, and terrorist organizations that killed, maimed, or otherwise abused children in conflict. The 40-page report — which was issued last week and primarily written by Leila Zerrougui, the U.N. chief’s special representative for children and armed conflict — claimed the coalition was responsible for about 60 percent of 1,953 child deaths and injuries in Yemen since last year.Hoping to mollify the Saudis, Ban issued a statement Monday saying he would remove the Saudi-led coalition from the list, pending a review of the matter by a joint U.N. and Saudi panel. The reversal triggered a wave of criticism of the U.N. from human rights groups, who accused Ban of caving to Saudi intimidation.

The Latest Attempt to Whitewash the Saudi-Led Coalition’s Crimes in Yemen -- The U.N. has made a humiliating, disgraceful reversal in its reporting on the Saudi-led coalition’s crimes in Yemen: The United Nations said on Monday it had removed the Saudi Arabia-led coalition fighting in Yemen from a child rights blacklist pending a joint review by the world body and the coalition of the cases of child deaths and injuries. The U.N. report on children and armed conflict – released last Thursday – said the coalition was responsible for 60 percent of child deaths and injuries in Yemen last year, killing 510 and wounding 667, and half the attacks on schools and hospitals. Following a complaint by Saudi Arabia, however, U.N. Secretary-General Ban Ki-moon agreed to a joint review by the world body and the coalition of the cases cited in the annual report of states and armed groups that violate children’s rights in war. The Saudis and their allies have been very effective in getting their way at the U.N. on Yemen, and they have been helped in this by the reliable diplomatic support that the U.S., Britain, and others have provided to them. When the Netherlands pushed for an independent inquiry into war crimes and abuses in Yemen by all sides last year, the Saudis were able to scuttle the Dutch resolution with tacit U.S. backing and propose instead that the Saudi-backed Yemeni government-in-exile would be responsible for investigating the coalition’s wrongdoing.  Last week, the U.N. added the Saudi-led coalition to a blacklist that includes states and groups (including the Houthis) that violate the rights of children in conflicts around the world. The listing of the coalition was based on the fact that it has been responsible for more than half of child deaths and injuries in the conflict since last March. The Saudis have carried out an indiscriminate bombing campaign and used cluster bombs in civilian areas, and the campaign has included strikes on schools and hospitals.   It should also be added that the Saudi-led blockade of the country has had an enormously destructive effect on the well-being of Yemen’s children by causing a huge increase in malnutrition and the creation of near-famine conditions in the country. Millions of children are being starved because of the Saudi-led blockade. This is the story of one such child.

Why the U.N.’s Decision to Cave Under Saudi Pressure Matters - The U.N. Secretary-General addressed the decision to remove the Saudi-led coalition from the U.N. blacklist of violators of children’s rights in conflicts: Ban said his decision to temporarily remove the coalition from the list was “one of the most painful and difficult decisions I have had to make,” and that the threats to pull funding raised “the very real prospect that millions of other children would suffer grievously.” “Children already at risk in Palestine, South Sudan, Syria, Yemen and so many other places would fall further into despair,” he told reporters. “It is unacceptable for member states to exert undue pressure,” he added. “Scrutiny is a natural and necessary part of the work of the United Nations.” The Saudis and their allies put the U.N. in a difficult position in truly despicable fashion, but yielding to what Ban calls “unacceptable” pressure rewards these governments for exerting it. While the U.N. says that it stands by the content of the original report, conceding the Saudis’ demand to be removed lets them and their allies off the hook for documented violations in Yemen, it allows them to claim that they have been cleared of wrongdoing when the opposite is true, and it encourages other states to use the same pressure tactics when they are called to account for abuses. If scrutiny is a “natural and necessary” part of what the U.N. does, it shouldn’t be caving in to threats from the very abusive governments whose violations it is reporting on.

ISIS Taxes Sockless Women & Beardless Men In Desperate Attempt To Raise Cash - As we have detailed in the past, the dramatic reduction in cash flow from oil sales has taken a tremendous toll on ISIS. A shortage of oil revenues has led to ISIS becoming so desperate for cash that it has even killed its own fighters in order to sell their organs. Now, it appears that another method is being tried to raise funds, this time by taking a page out of the standard government playbook: when you run out of cash, simply find ways to raise taxes on everyone. RT is reporting that ISIS has now enacted new taxes on those that live in territories under the group's control (which has dropped from 9 million to 6 million people over the past year), and each tax is more bizarre than the next.  For leaving a door open, $100. If one were to fail a random Sharia test, $20 per wrong answer.For women, $30 for not wearing socks, and $25 if a cloak is too tight - for men, a quick trimming of the beard will get you hit with a $50 tax. And if someone is a non-sunni muslim or used to work for the government, then there is a special "repentance" certificate that needs to be paid for, and that will cost anywhere from $200 to $2,500. "There are fewer people and business activities to tax, the same applies to properties and land to confiscate." Said Columb Strack, senior analyst at IHS. "This is a big indicator of the group's financial difficulties. Taxation makes up about 50 percent of the Islamic State's monthly revenue sources and encompasses almost every aspect of the population's life" added Ludovico Carlino, also of the IHS.Speaking of every aspect of the population's life, there are even taxes related to livestock. For example, if a bell is found around a sheep's neck, that's a $10 fine for the owner, and the animal will be confiscated.  As ISIS is under pressure in both Iraq and Syria, it may lose even more territory. If and when that happens, who knows what kind of outlandish scheme the group will come up with at that point.

The US is Raiding its Global Bomb Stockpiles to Fight ISIS - Defense One: The U.S. military is raiding its smart-bomb stockpiles around the world to continue its nearly two-year-old airstrike campaign against the Islamic State in Iraq and Syria, Pentagon officials said. Defense Department officials are trying to figure out “how we balance the weapons we have,” U.S. Air Force Lt. Gen. Charles Brown, the man overseeing the airstrikes, said Thursday. “We have to do some analysis of where we take risk,” Brown said in a video conference with reporters from Al Udeid Air Base in Qatar, home to the American-run combined air and space operations center. “What I mean by that is: where do we pull some weapons from that we were saving for other contingencies,” he said. “And do we use them now or do we save them for later?” The coalition has conducted 12,453 airstrikes in Iraq and Syria since August 2014, according to Operation Inherent Resolve, the task force overseeing the counter-ISIS campaign. More than 8,500 of the strikes have occurred in Iraq and nearly 4,000 in Syria. American warplanes and drones alone have conducted 9,495 of the strikes, with allies accounting for the remaining 2,958. More than 41,697 bombs have been dropped in those strikes. And the U.S. has loaned bombs to allies participating in the strikes.

U.S. Deploys Two Aircraft Carriers To Mediterranean To "Send A Clear Message To Russia" - Over the weekend we noted that US aircraft carrier, the USS Harry Truman, which has served as a launching point for a near-constant barrage of airstrikes on Islamic State targets in Iraq and Syria and which since November has accounted for a little more than half of the total sorties flown over those two countries by the U.S. military, recently crossed the Suez Canal in an unplanned trip to the Mediterranean, had begun striking at various Islamic State targets from the Mediterranean Sea. This marked the first time a carrier group has launched airstrikes from the area since the 2003 invasion in Iraq.But it turns out the carrier strike group had another, far more important mission when it entered the Mediterranean. According to the WSJ, this 20-story-tall aircraft carrier with a crew of 5,000 made an unplanned diversion from the Gulf to the eastern Mediterranean last week: a quick pivot intended to send a clear message to Russia. A military official in Washington said the Truman’s shift was a signal to Moscow and a demonstration of the Navy’s operational flexibility and reach.

Destroyers will break down if sent to Middle East, admits Royal Navy -- The Royal Navy’s fleet of six £1bn destroyers is breaking down because the ships’ engines cannot cope with the warm waters of the Gulf, defence chiefs have admitted. They also told the Commons defence committee on Tuesday that the Type 45 destroyers’ Rolls-Royce WR-21 gas turbines are unable to operate in extreme temperatures and will be fitted with diesel generators. Rolls-Royce executives said engines installed in the Type 45 destroyers had been built as specified – but that the conditions in the Middle East were not “in line with these specs”. Earlier a Whitehall source told Scotland’s Daily Record: “We can’t have warships that cannot operate if the water is warmer than it is in Portsmouth harbour.” The problem with the engines, which the Ministry of Defence initially dismissed as “teething problems”, first became clear when HMS Daring lost power in the mid-Atlantic in 2010 and had to be repaired in Canada. The ship, built by BAE Systems, needed repairing again in Bahrain in 2012 after another engine failure. The first warning signs emerged in 2009 when the Commons defence committee warned that “persistent overoptimism and underestimation of the technical challenges combined with inappropriate commercial arrangements” would lead to rising costs.

Erdoğan lifts Turkish MPs' immunity in bid to kick out Kurdish parties -- The Turkish president, Recep Tayyip Erdoğan, has signed a bill lifting lawmakers’ immunity from prosecution – a constitutional change likely to remove a pro-Kurdish opposition party from parliament. Erdoğan has accused the pro-Kurdish HDP, parliament’s third-biggest party, of being the political wing of militants who have waged a three-decade insurgency in Turkey’s largely Kurdish south-east. Kurdish militant groups have been blamed for bombings in Turkish cities. The HDP denies links with militants of the outlawed Kurdistan Workers Party (PKK). It fears an overwhelming majority of its 59 deputies could be jailed under the new law, mostly for views they have expressed.   Lawmakers have until now enjoyed immunity from prosecution. The new law allows prosecutors to pursue any of the 138 members of parliament who are currently under investigation. Of those, 101 are from the HDP or Turkey’s main opposition party CHP. Erdoğan’s opponents say the lifting of immunity is part of a strategy to push the HDP out of parliament, strengthen the ruling AK Party – which he co-founded more than a decade ago – and consolidate support in the assembly for an executive presidential system he has long sought. The legislation has increased concerns in the European Union about Turkey’s record on democracy and human rights at a time when the EU is also trying to implement a controversial deal with Ankara aimed at stemming illegal migration to Europe from Turkish shores.

The world lost more than $13 trillion last year because of war - Violence and worsening conflict cost the world more than $13.6 trillion last year, according to an annual study of the toll of violence worldwide. That figure amounts to some 13 percent of global GDP.  The analysis can be found within the Global Peace Index 2016 report, which is put out each year by the Institute of Economics and Peace, an Australia-based think-tank. It ranked 163 countries on the degree of peace within their borders. The results since the initiative began are not encouraging: "The last decade has seen a historic decline in world peace, interrupting the long term improvements since WWII," a press release indicates.  Moreover, peace and safety, like the incomes of the rich and poor, are growing more unequal, with prosperous, relatively harmonious countries improving, according to the index, and countries already wracked by conflict and violence getting worse. An image from the report's precis charts this trend:  The five most precipitous declines don't even include Syria, which is in the grips of a brutal five-year civil war that has killed more than 250,000 people and triggered an unprecedented regional refugee and security crisis.  “The historic 10-year deterioration in peace has largely been driven by the intensifying conflicts in the [Middle East and North Africa],” says the report. “Terrorism is also at an all-time high, battle deaths from conflict are at a 25-year high, and the number of refugees and displaced people are at a level not seen in 60 years."

India Overtakes Japan as World's Third Largest Oil User After US, China -- India, Asia's second biggest energy consumer since 2008, has overtaken Japan as the world's third largest oil consuming country in 2015, supported by an 8.1 percent year-on-year increase in daily consumption to 4.159 million barrels, data released Wednesday by BP Statistical Review of World Energy 2016 showed.The South Asian nation, now Asia's second largest oil consumer, accounted for 4.5 percent of daily global oil demand last year, marginally higher than Japan's 4.4 percent, which was equivalent to 4.15 million barrels.The region's economic powerhouse China retained its position as Asia's top oil consumer last year, registering 6.3 percent growth to 11.968 million barrels per day and accounting for 12.9 percent of global demand despite a slowing economy as well as a shift from an industrial to a service-driven economy."Chinese consumption slowed further, but still recorded the world’s largest increment in primary energy consumption for the fifteenth consecutive year ... China once again accounted for the largest increment to (oil) demand, while India surpassed Japan as the world’s third-largest oil consumer," the Review said.In 2008, India surpassed Japan as Asia's second largest energy user after China, consuming 515.2 million tons of oil equivalent (MMtoe) compared to 469.0 MMtoe for the region's second largest economy. The growth in Indian energy use has been impressive. The gap in energy use between India and Japan widened further last year, with the former consuming 700.5 MMtoe compared to 448.5 MMtoe for the East Asian nation.Elsewhere, the Review said the U.S. remained the world's top oil consumer with a daily demand of 19.396 million barrels in 2015, up 1.6 percent from a year ago. The U.S. consumption made up 19.7 percent of global demand of 95.008 million barrels per day in 2015, up 1.9 percent from 93.109 million barrels in 2014.

China Oil Imports Drop To Four Month Low As Demand Is Expected To "Moderate Significantly" In 2016 - One of the bright spot of demand for oil in recent months has been China, where teapot refineries have been firing on all fours following the recent loosening of import restrictions, and buying up every last barrel of oil they could find abroad (courtesy of the recent massive credit injection by the PBOC) resulting in an unprecedented glut of gasoline.  That is no longer the case. According to Bloomberg, oil imports by China, the world’s biggest consumer after the U.S., fell to a four-month low in part due to congestion at one of its biggest ports curbed purchases from independent refiners. Inbound shipments in May totaled 32.24 million metric tons, data from the Beijing-based General Administration of Customs showed on Wednesday. That’s equivalent to 7.62 million barrels a day , down 4.3 percent from the previous month, and the lowest since January. Net oil-product exports fell by almost one-third from April to 810,000 tons. This validates what we noted two months ago when we looked at the unprecedented glut of full tankers lying in wait in places like the Persian Gulf and the Straits of Malacca, waiting for higher prices to make landfall. As we noted then, "It's not just the Persian Gulf though: shocking sights can be seen in in Asia, where many ports have not been upgraded in time to deal with ravenous demand as consumers take advantage of cheap fuel. "It's the worst I've seen at Qingdao," said a tanker captain waiting to offload at the world's seventh busiest port, adding that his crew was killing time doing maintenance work. " This has now been confirmed. According to Bloomberg,  "Qingdao port in Shandong province, where most teapots are based, has been congested this year from “unprecedented” tanker traffic, according to Liu Jin, general manager of Qingdao Shihua Crude Oil Terminal Co., which operates oil berths at the port." “The congestion at the Qingdao port is highlighting the need to slow the pace of buying,” Michal Meidan, an Asia energy analyst at Energy Aspects Ltd., said by e-mail. “Prices have gone up, so teapots will use this to take stock of their buying patterns thus far.”

No comments:

Post a Comment