Sunday, May 14, 2017

OPEC cuts still not reducing global glut; US sees the largest crude oil inventory draw this year

both oil and natural gas prices moved higher this week, as both commodities saw larger than expected withdrawals of supplies from storage, while oil prices were also underpinned by expectations that OPEC would extend their production cuts when they meet in Vienna later this month....an expression of confidence in that extension from Saudi energy minister Khalid al-Falih on Monday buttressed the rebound from last week's crash, as oil rose 21 cents to close at $46.43 a barrel...prices then moved lower on Tuesday, closing at $45.88 a barrel, after the EIA raised its forecast on domestic crude output for this year and next, and cut its 2017 price outlook...however, when the weekly EIA report showed the largest crude oil inventory draw since December, oil prices surged as much as 4% before settling at $47.33 a barrel, a gain of 3% on the day...momentum from that rally carried into Thursday, as oil added 50 cents more to close at $47.83 a barrel, on news that top OPEC officials were pondering even deeper cuts...oil prices then slipped on Friday, after Baker Hughes reported the US oil rig count rose for the 17th straight week, but stabilized by the end of the day, with June crude closing at $47.84 a barrel, up a penny for the session and up 3.5% for the week..

OPEC's May oil report

since the OPEC production cuts are the main factor underpinning oil prices, and hence the ongoing increases in US drilling, we'll start by taking a quick look at OPEC May Oil Market Report (covering April OPEC & global data), which was released on Thursday of this week...we're going to look at how much oil OPEC produced in April vis a vis global production, and then determine if they are yet meeting their intended outcome of reducing the global glut of oil that's been building up over the past three years, as most OPEC countries were producing flat out over that period....the first table from the May report that we'll include here is from page 60 of that OPEC pdf, and it shows oil production in thousands of barrels per day for each of the current OPEC members over the recent years, quarters and months as the column headings are labeled...for all their official production measurements, OPEC uses data from these "secondary sources", such as analyst's reports from satellites and shipping data, as an impartial adjudicator as to whether their output quotas and production cuts are being met, to resolve any potential disputes that could arise if each member reported their own figures...  

April 2017 OPEC cude output via secondary sources

from this table of official production data, we can see that OPEC oil output was down by a statistically insignificant 18,200 barrels per day in April, to 31,732,000 barrels per day, from a March oil production total of 31,750,000 barrels per day, a figure that was revised 178,000 barrels per day lower than what was reported last month...(for your reference, here is the table of the official March figures before these revisions)...recall that OPEC committed to reducing their production by 1.2 million barrels per day from their October levels (shown here, with Indonesia, who is no longer a member), so these figures show that the total production of the remaining 13 members is within a half percent of the level they agreed to cut back to....but note that over 60 thousand barrels of this month's reduction came from Libya, a country that was exempt from the cuts, because their production had been disrupted by domestic unrest....news over the past few weeks indicates they've restored over 180,000 barrels per day of production from two oil fields in the western part of the country, and a report just a few days ago indicated that Libya’s oil production is now running above 800,000 barrels per day (bpd) for the first time since 2014, so we can thus expect that May OPEC production will be that much higher...

that expected output bounce in the May report notwithstanding, there were also interesting divergent April production figures that the OPEC members reported to the OPEC Secretariat, which are shown in the next table... 

April 2017 OPEC members crude output as reported to OPEC

the above table, also from page 60 of the OPEC pdf, shows the oil production in thousands of barrels per day that each of the members reported to OPEC (for those that did report)...although this data is considered suspect because of the many incentives OPEC members have to fudge their reporta, we noticed that almost all the OPEC members reported higher production than was attributed to them by the official secondary sources...note especially that Iraq, who has been a laggard on the production cuts, reported they produced 4,531,000 barrels per day in April, vs their official figure of 4,373,000 barrels per day...likewise, Venezuela reported that they produced 2194,000 barrels per day in April, whereas the official data indicates they produced 1,956,000 barrels per day...if the reported numbers were lower than the official tallies, they might be suspect, but OPEC members have no reason to report that they produced more than they did, because higher oil output numbers would indicate that they're not in compliance with the cuts they agreed to...so if anything, these self reported number indicate that the official output production figures may be an understatement of the oil supply that was actually available in April...

this next graphic we'll include shows us both OPEC and world oil production monthly on the same graph, over the period from May 2015 to April 2017, and it comes from page 61 of the May OPEC Monthly Oil Market Report....the light blue bars represent OPEC oil production in millions of barrels per day as shown on the left scale, while the purple graph represents global oil production in millions of barrels per day, with the metrics for global output shown on the right scale...

April 2017 OPEC report, global supply

preliminary data graphed above indicates that global oil production slipped to 95.81 million barrels per day in April, down by 0.41 million barrels per day from a March total of 96.22 million barrels per day, which was revised .040 million barrels per day higher from the 95.81 million barrels per day global oil output that was reported a month ago...that figure was also 0.83 million barrels per day higher than what was being produced globally a year ago, and more than .90 million barrels per day greater than the global oil supply of two years ago...OPEC's production of 31,732,000 barrels per day thus represented 33.1% of what was produced globally, an increase from the 33.0% OPEC share in March, which was originally reported as 33.3%, because global supply had been underestimated last month...OPEC's April 2016 production, excluding Indonesia, was at 31,709,000 barrels per day, so even after the production cuts, they are still producing a bit more than they were producing a year ago, and roughly 0.20 million more barrels per day than what they were producing in May of 2015, when they were supposedly producing flat out...

however, even with the four recent months of production cuts we can obviously see on the above graph, there is still a surplus of oil supply being produced globally, as the next table that we'll include will show us..    

April 2017 global oil demand estimate via OPEC

the table above comes from page 37 of the May OPEC Monthly Oil Market Report, and it shows oil demand in millions of barrels per day for 2016 in the first column, and OPEC's forecast for oil demand by region and globally over 2017 over the rest of the table...on the "Total world" line of the third column, we've circled in blue the figure we're interested in, which is their estimate for global oil demand for the current second quarter of 2017... 

OPEC's estimate is that during the 2nd quarter of this year, all oil consuming areas of the globe will be using 95.33 million barrels of oil per day, down from the 95.44 millions of barrels of oil per day they were using in the first quarter but up from the 95.12 millions of barrels of oil per day they were using in 2016...but as OPEC showed us in the oil supply section of this report and the summary supply graph above, even with their production cuts, the world's oil producers were still producing 95.81 million barrels per day during April...that means that even after all the production cuts have taken place, there continued to be a surplus of around 480,000 barrels per day in global oil production in April...in addition, global production for March was revised higher, to 96.22 million barrels per day, so that means the global oil surplus during March was therefore around 780,000 barrels per day, based on the revised first quarter global demand figure of 95.44 million barrels per day shown above...furthermore, February's oil production was 0.23 million barrels per day higher than that of March, so the global oil surplus in February now looks to have been over a million barrels per day, as was January's, which we showed when we reviewed that report three months ago...so despite 4 months of OPEC production cuts, nearly a hundred million barrels of oil have been added to the global oil glut since the 1st of the year...

The Latest US Oil Data from the EIA

this week's US oil data for the week ending May 5th from the US Energy Information Administration indicated a large drop in our refining of crude oil from the record levels of the past two weeks, but an even larger drop in our oil imports, which when combined with an increase in our oil exports, meant that refiners withdrew the most oil out of storage in any week so far this year...our imports of crude oil fell by an average of 644,000 barrels per day to an average of 7,620,000 barrels per day during the week, while at the same time our exports of crude oil rose by 155,000 barrels per day to an average of 693,000 barrels per day, which meant that our effective imports netted out to 6,927,000 barrels per day during the week, 799,000 barrels per day less than during the prior week...at the same time, our field production of crude oil rose by 21,000 barrels per day to an average of 9,314,000 barrels per day, which means that our daily supply of oil, from net imports and from wells, totaled an average of 16,241,000 barrels per day during the cited week...

during the same period, refineries reportedly used 16,759,000 barrels of crude per day, 418,000 barrels per day less than they used during the prior week, while 821,000 barrels of oil per day were being pulled out of oil storage facilities in the US....thus, this week's EIA oil figures seem to indicate that our total supply of oil from net imports, production and from storage was 310,000 more barrels per day than what refineries used...to account for that discrepancy, the EIA inserted a (-310,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the supply of oil and the consumption data balance out, which they label in their footnotes as "unaccounted for crude oil"

details from the weekly Petroleum Status Report show that the 4 week average of our oil imports fell to an average of 8,152,000 barrels per day, still 5.0% above the imports of the same four-week period last year...the 828,000 barrel per day decrease in our total crude inventories came about on a 750,000 barrel per day withdrawal from our commercial stocks of crude oil and a 79,000 barrel per day sale of oil from our Strategic Petroleum Reserve, part of an ongoing sale of 5 million barrels annually that was planned 19 months ago...this week's 21,000 barrel per day crude oil production increase resulted from a 16,000 barrel per day increase in oil output from wells in the lower 48 states and a 5,000 barrels per day increase in oil output from Alaska...the 9,293,000 barrels of crude per day that we produced during the week ending April 28th topped last week's 20 month high and means our oil output is up by 6.2% from the 8,770,000 barrels per day we were producing at the end of 2016, and up by 5.8% from the 8,802,000 barrel per day output during the during week ending May 6th a year ago, while it's now only 3.1% below the June 5th 2015 record oil production of 9,610,000 barrels per day...

US oil refineries were operating at 91.5% of their capacity in using those 16,759,000 barrels of crude per day, which was down from 93.3% of capacity the prior week, and down from the year’s high of 94.1% the week before that...however, the 16,759,000 barrels of crude per day that refineries used during the week ending May 5th was still 3.6% more than the 16,179,000 barrels of crude per day.that were being processed during week ending May 6th, 2016, when refineries were operating at 89.1% of capacity, and 10.7% above the 10 year average for the 1st week in May of 1,625,000 barrels of crude per day....

even with the week's big refining pullback, gasoline production from our refineries increased by 269,000 barrels per day to 10,052,000 barrels per day during the week ending May 5th, possibly making up for thw lower than logical gasoline production we’d seen during the prior two weeks...gasoline production for the week was virtually the same as the 10,521,000 barrels of gasoline that were being produced daily during the comparable week a year ago....on the other hand, refineries' production of distillate fuels (diesel fuel and heat oil) decreased by 145,000 barrels per day to 4,956,000 barrels per day, which was still 7.5% more than the 4,610,000 barrels per day of distillates that were being produced during the week ending May 6th last year.....

even with the big increase in gasoline production, our gasoline inventories decreased by a nominal 150,000 barrels to 241,232,000 barrels as of May 5th, after they had increased by more than 5 million barrels over the prior three weeks....gasoline supplies were reduced this week because our domestic consumption of gasoline rose by 252,000 barrels per day to 9,408,000 barrels per day, even as our imports of gasoline rose by 260,000 barrels per day to 953,000 barrels per day, while our gasoline exports fell by 15,000 barrels per day to 717,000 barrels per day....even with the increase in our gasoline supplies, however, they are still fractionally higher than the 240,564,000 barrels that we had stored on the equivalent day a year ago, 6.3% higher than the 226,710,000 barrels of gasoline we had stored on May 8th of 2015, and 13.5% more than the 212,408,000 barrels of gasoline we had stored on May 9th of 2014…

with the decrease in distillates production, our supplies of distillate fuels fell by 1,587,000 barrels to 148,768,000 barrels during the week ending May 5th; contributing to the decrease was a 112,000 barrel per day increase to 1,159,000 barrels per day in our exports of distillates, while our imports of distillates rose by just 3,000 barrels per day to 115,000 barrels per day....at the same time, the amount of distillates supplied to US markets, a proxy for our consumption, decreased by 117,000 barrels per day to 4,139,000 barrels per day....while our distillate supplies are still 4.2% below the 155,332,000 barrels that we had stored on May 6th, 2016, after the glut of heat oil that followed last year's warm El Nino winter, they remain 16.0% higher than the distillate inventories of 128,270,000 barrels that we had stored on May 8th of 2015, following a more normal winter…  

finally, the large drop in oil imports, combined with a jump in oil exports, meant that our commercial inventories of crude oil fell for the 5th week in a row, as they decreased by 5,247,000 barrels to 522,525,000 barrels as of May 5th, in the largest decrease of 2017....nonetheless, we still finished the week with 9.1% more crude oil in storage than the 479,012,000 barrels we had stored on December 30th, and 2.8% more crude oil in storage than the 508,487,000 barrels of oil in storage on May 6th of 2016...compared equivalent dates in prior years, we ended the week with 15.6% more crude than the 451,888,000 barrels in storage on May 8th of 2015, and 42,4% more crude than the 366,951,000 barrels of oil we had in storage on May 9th of 2014...

This Week's Rig Counts

US drilling activity increased for the 27th time in the past 28 weeks during the week ending May 12th, while drilling for oil increased for the 17th week in a row....Baker Hughes reported that the total count of active rotary rigs running in the US increased by 8 rigs to 885 rigs in the week ending Friday, which was 479 more rigs than the 406 rigs that were deployed as of the May 13th report in 2016, and the most drilling rigs we've had running since August 21st, 2015, while it was still far from the recent high of 1929 drilling rigs that were in use on November 21st of 2014....

the number of rigs drilling for oil increased by 9 rigs to 712 rigs this week, which was more than double the 318 oil directed rigs that were in use a year ago, and the most oil rigs that were in use since April 17th 2015, while it was still down by more than half from the recent high of 1609 rigs that were drilling for oil on October 10, 2014...at the same time, the count of drilling rigs targeting natural gas formations fell by one rig to 172 rigs this week, which was still almost double the 87 natural gas rigs that were drilling a year ago, but down from the recent natural gas rig high of 1,606 rigs that were deployed on August 29th, 2008...since we don't often see a good graph that shows both oil and gas rig counts, we'll include this one here:

May 12 2017 rig count

the above graph was posted on Friday on the twitter account of John Kemp, senior energy analyst with Reuters, and it show the US oil rig count from 1990 to this current week in red, and the natural gas rig count over the same period in yellow...here we can see that the expansion of fracking in the US really started as a boom in exploitation of the natural gas basins, as the count of horizontal drilling rigs rose from under 200 in 2005 to over 600 through the summer of 2008, before the onset of recession cut natural gas prices and hence drilling for it...when we came out of the recession, horizontal drilling picked up again, but this time it was for oil, as the horizontal rig count rose from under 400 to over 1,000 by 2011...while all drilling collapsed with the price war initialed by OPEC in November of 2014, it was natural gas rigs that fell to their lowest level in history at 81 rigs, from whence they've barely recovered...as we've pointed out, at this level of drilling for natural gas, old wells are being depleted faster than new wells are brought into production, and if US natural gas exports continue to expand as planned, we'll facing a natural gas shortage in the US as soon a we see a normal winter...

returning to the rig count, two more of the idled offshore drilling platforms in the Gulf of Mexico offshore from Louisiana started back up this week, which bought the the Gulf of Mexico count back up to 20 rigs, still down from the 21 working in the Gulf of Mexico a year earlier....including the single rig drilling offshore from Alaska, our total offshore count is now up to 21 rigs, but also still down from a total of 22 offshore a year ago...on the other hand, one of the drilling platforms that was drilling through an inland lake in southern Louisiana was shut down this week, which cut the inland waters rig count back to 4 rigs, still up from the 2 rigs working on inland lakes a year ago...

rigs that were drilling horizontally increased by 8 to 742 horizontal rigs this week, which was the most horizontal rigs in use since April 10th of 2015 and up from the the 315 horizontal rigs that were in use in the US on May 13th of last year, but still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...at the same time, a net of 1 vertical rig was added this week, bringing the vertical rig count up to 77, which was also up from the 53 vertical rigs that were deployed during the same week last year....however, 1 directional rig was pulled out this week, reducing the directional rig count down to 66 rigs, which was still up from the 38 directional rigs that were deployed during the same week a year ago...

the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of May 12th, the second column shows the change in the number of working rigs between last week's count (May 5th) and this week's (May 12th) count, the third column shows last week's May 5th active rig count, the 4th column shows the change between the number of rigs running on Friday and the equivalent Friday a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the 13th of May, 2016...        

May 12 2017 rig count summary

as we've seen many times this year, the increase in drilling was all about the Permian in western Texas; except for those 8 new horizontal rigs drilling for oil there, we have almost no net changes....Louisiana's count was unchanged, as the two rig increase offshore in the Gulf and another rig added in the northern half of the state was offset by 3 rigs shut down in the south, including the one on an inland lake...Oklahoma managed to cut two rigs despite the 2 rig increase in the Cana Woodford, as at least one that offset those was a gas rig that was shut down in the Mississippian Lime, which straddles the Kansas border...also note that Ohio added a rig, with another gas directed rig in the Utica; the Utica rig count is now at 24 rig, up from 10 rigs in Ohio's Utica a year ago...there was no change in drilling activity this week in the states not shown above, while 2 oil rigs and one gas rig were pulled out of basins other than those listed...

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>>>>>  notice that i've included two of the screeds originating from "Energy in Depth" in the links below: Wayne National Forest Fracking Lawsuit a Prime Example of Activists’ “Litigious Battles to Drive Regulation” and Doc Shows How Greens Trick The Media Into Attacking Fracking | The Daily Caller ...."Energy in Depth" has long been running industry funded pro-fracking articles in the media, with Jackie Stewart appearing weekly either in an op-ed in a regional newspaper, or quoted as an "expert" on fracking topics...their tactics, and that of other pro fracking organizations, have been changing; no longer do they argue for jobs and the need for more energy, but they're now engaged in a disinformation campaign against those opposed to fracking, casting the opposition in a false light, and impugning the character of those opposed to fracking....some pieces come pretty close to defamation, which you all ought to know about, since it is your integrity, as a fracking opponent, that is being impugned.... 

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Google Asked To Label Anti-Fracking Sites As 'Fake News' -  An oil and gas drilling advocacy group published an open letter to Google asking the search engine giant to consider “purging or demoting” websites spreading misinformation about hydraulic fracturing. Google rewrote its search engine algorithm to bury “fake news” websites in the wake of the 2016 presidential election. The industry-funded Texans for Natural Gas wants Google to include anti-fracking websites. “We believe many of the most prominent anti-fracking websites have content that is misleading, false, or offensive – if not all three,” the group wrote in an open letter to Google published Monday. “As a result, we urge you to consider purging or demoting these websites from your algorithm, which in turn will encourage a more honest public discussion about hydraulic fracturing, and oil and natural gas development in general,” the group wrote.

Will Anti-Fracking Websites Be Labeled 'Fake News?' - Conservative outlets are highlighting a pro- fracking group's attempt to convince Google, which recently promised to alter its search algorithm to demote fake news, to also tweak it to purge or demote websites critical of fracking.  On May 8, Texans for Natural Gas, an industry group funded by Texas energy companies, published an open letter addressed to Google titled "ANTI-FRACKING ACTIVISM IS FAKE NEWS." The letter, which was highlighted in the industry - fundedoutlets The Daily Caller and The Daily Signal , referred to Google's recent move to alter its search algorithm to "demote misleading, false, and offensive articles online" before claiming, "We believe many of the most prominent anti-fracking websites have content that is misleading, false, or offensive—if not all three. As a result, we urge you to consider purging or demoting these websites from your algorithm, which in turn will encourage a more honest public discussion about hydraulic fracturing, and oil and natural gas development in general."  The pro-fracking group claimed that environmental groups such as the Sierra Club , Earthworks and others were "peddling fake news" about the link between fracking and drinking water contamination. The letter cited a U.S. Environmental Protection Agency ( EPA ) study to support its claims, saying that the EPA study "found no evidence of widespread water contamination." The group subsequently urged Google to examine other sites that contradict the findings of the EPA report, stating, "There are certainly other environmental groups that have made similarly false claims about fracking and groundwater risks, despite the conclusions of the EPA and other scientific experts."  Yet for all the grandstanding the letter makes about rooting out "misleading" information online, it is full of misleading statements. Though the group claimed that the EPA study "found no evidence of widespread water contamination" from fracking, it neglected to mention that the EPA subsequently removed that sentence from the report on the advice of its Science Advisory Board because the findings of the report did not support that conclusion. Additionally, according to Cleveland.com , a study conducted by Stanford researchers in 2016 "found that common practices in the industry may have widespread impacts on drinking water."

Proposed wells for fracking waste stir up Brookfield residents - Sharonherald  – Teresa Mills advised Brookfield residents who oppose fracking in their town to buy rubber chickens.  This wasn't a culinary suggestion. Rather, she said residents might need them at the next township meeting.  "You need to ask them questions and voice your concerns on fracking,'' Mills said. "If some of them don't show up, put the rubber chicken on their chair and raise it up every time you ask a question.'' It was one of the lighter moments when she spoke to 30 listeners Friday evening at Wyngate Manor, a manufactured home community in Brookfield. The Columbus environmental advocate gave a brief overview on fracking, then listened to audience members' worries and answered questions. Mills works with the Center for Health, Environment & Justice, a nonprofit advocacy organization. She also is focused on what she sees as fracking industry abuses by working with the Buckeye Environmental Network, a non-profit environmental advocacy group. A number of Brookfield residents oppose two disposal wells proposed for the township by Highland Field Services. Waste liquid from from hydraulic fracturing in the drilling process for oil and gas would be pumped into the wells. The residents' biggest fear is the wells might contaminate drinking water. There are other concerns about these well, Mills said. "These wells have a large volume of extremely salty brine and chemicals,'' she said. "Companies often inject this waste water down a shaft into a deep layer of porous rock for permanent disposal – which can trigger an earthquake.'' For the past several years small earthquakes in Trumbull and Mahoning counties in Ohio have been blamed on these injection wells. "The industry is denying that there is a connection with drilling and the earthquakes,'' Mills said. Dr. Ray Beiersdorfer, a Youngstown State Universitty geology professor, was among those in the audience. There has been an effort to keep these earthquakes under wraps from state and industry officials, he said. "Madison County (Ohio) had 400 earthquakes that was kept secret for a year,'' Beiersdorfer said. "Your concerns about earthquakes are accurate.'' In the political arena, the fracking industry is outspending those supporting the environment by 50 to 1, he added.  To have an impact in the political arena, Mills said residents must be unrelenting and loud in their demands.

Ohio EPA orders Rover pipeline builder to pay $431,000 for violations -The Columbus Dispatch --- The Ohio Environmental Protection Agency has ordered Energy Transfer, the company building the Rover natural gas distribution pipeline, to pay $431,000 for water and air pollution violations at various locations across the state.In its order issued Friday, OEPA also instructed Energy Transfer to submit plans to address potential future releases and restore impacted wetlands along the $4.2 billion underground pipeline route, which stretches from Washington County in southeastern Ohio to Defiance County in the northwest.Work on the pipeline began in mid-February, and state officials say a total of 18 incidents involving mud spills from drilling, stormwater pollution and open burning at Rover pipeline construction sites have been reported between late March and Monday to the agency.That includes a 200-gallon release of mud Monday in Harrison County. Other Rover pipeline incidents include a spill that impacted one village’s public water system and another that smothered a protected wetland with several million gallons of bentonite mud, a natural clay which is used as a drilling lubricant.“All told, our frustration is really high. We don’t think they’re taking Ohio seriously,” said OEPA Director Craig Butler. “Normally when we have ... a series of events like this, companies respond with a whole lot of contrition and whole lot of commitment. We haven’t seen that. It’s pretty shocking.” Alexis Daniel, an Energy Transfer spokeswoman, said Monday in an email statement that the “small number of inadvertent releases of ‘drilling mud’ during horizontal drilling in Ohio ... is not an unusual occurrence when executing directional drilling operations and is all permitted activity by (the Federal Energy Regulatory Commission).“We do not believe that there will be any impact to the environment,” Daniel said, adding that the company — the same one behind the controversial Dakota Access pipeline — is managing the Rover pipeline situation in accordance with its federal- and state-approved contingency plan. After a pair of wetlands spills in April, Energy Transfer still planned to finish the Rover project and begin operating the pipeline this year.

Pipeline spill by Dakota Access company could have a ‘deadly effect’ -- The director of the Ohio Environmental Protection Agency on Monday blasted the pipeline company Energy Transfer Partners for a “pattern” of 18 spills of drilling materials and said that the size of the biggest spill could reach 5 million gallons, more than double original estimates. Craig Butler, the Ohio EPA director, said that his agency has imposed about $400,000 in fines on Energy Transfer Partners, the same company that was recently embroiled in controversy over its Dakota Access crude oil pipeline. Butler said the company had brushed off his complaints, claiming the state EPA lacked the authority to interfere with its plans for the construction of a natural gas pipeline called Rover. Butler, a 27-year veteran of the Ohio EPA, said that the company’s response was “dismissive,” “exceptionally disappointing” and unlike any other response he has seen from a company. While drilling mud used to cool and lubricate drilling equipment is not toxic, the biggest spill has poured fluid the consistency of a milkshake a couple of feet deep in a previously pristine wetland and would “kill just about everything in that wetland,” Butler said. The company is trying to remove the material by vacuum and even by hand, Butler said. Energy Transfer Partners, whose Dakota Access pipeline ignited weeks of protests by Native Americans and environmentalists, is now building a $4.2 billion natural gas pipeline that would link the shale gas-rich regions of Appalachia to Michigan and Ontario, Canada. The company received a permit from the Federal Energy Regulatory Commission (FERC) on Feb. 2 and has told investors that the first stage of the pipeline will be complete by July.

Ohio officials: it will take decades for wetlands to recover after major pipeline fluid spill -  The Ohio Environmental Protection Agency has told Energy Transfer Partners — the same company building the Dakota Access Pipeline — that it owes the state $430,000 for “inadvertent” damage to pristine state wetlands. Last month, construction on the 800-mile Rover pipeline discharged more than two million gallons of a clay-like substance used for drilling into wetlands in a rural area about an hour south of Cleveland.“It’s a tragedy in that we would anticipate this wetland won’t recover to its original condition for decades,” Ohio EPA spokesman James Lee told ThinkProgress. “And had [ETP] more carefully followed best practices and been prepared to respond to the bentonite release, this likely would not have occurred on the scale that we are dealing with now.”Last week, the state sent a proposed order, requiring a contingency plan to prevent future spills and outlining penalties. ETP denied any wrongdoing in a statement emailed to ThinkProgress. “We have placed a great deal of focus and importance on our construction and mitigation efforts,” a spokesperson said. “We are not out of compliance with any of our permits. It is unfortunate that the Ohio EPA has misrepresented the situation and misstated facts in its recent comments.”ETP said the discharge “is a mixture of naturally occurring bentonite clay and water and is safe for the environment… Bentonite is commonly used in a variety of household products that we use every day such as beer and wine, sugar, honey, creams and lotions, baby powders, laundry detergents and hand soaps.”The company also said that clean up was nearly complete. “We do not believe that there will be any long-term impact to the environment,” the spokesperson said. The company also contends, according to a letter from the Ohio EPA to federal regulators, that the state lacks the “authority to enforce violations of its federally delegated state water pollution control statutes.” It does not deny that the spill occurred. Ohio EPA director Craig Butler has sent a letter to FERC asking for the agency’s support in holding ETP accountable. Butler also pointed out that, in addition to spilling bentonite, the company has engaged in “impermissible open burning,” and air pollution violation. He told the Washington Post that ETP’s response to the violations was “dismissive” and “exceptionally disappointing.”

Energy Transfer Partners Fined $431,000 for Rover Pipeline Spills -- Construction of Energy Transfer Partners ' new Rover Pipeline only began mid-February but the project has already resulted in 18 incidents involving mud spills from drilling, stormwater pollution and open burning that violated the Clean Air Act. The Dallas-based company—which is also the operator of the controversial Dakota Access Pipeline —has been fined $431,000 by the Ohio Environmental Protection Agency (EPA) for water and air pollution violations across various sites in Ohio. As The Columbus Dispatch reported, the incidents occurred from late March up to Monday's 200-gallon release of mud in Harrison County. The largest discharge leaked millions of gallons of bentonite mud, a drilling lubricant, into a protected wetland in April. Notably, Craig Butler, the Ohio EPA director, told The Washington Post that the largest spill could reach 5 million gallons, much higher than the original 2 million gallon estimate. An Energy Transfer Partners spokesman responded, "We have no idea where they came up with those figures."  Butler told The Post that two of the spills affected drinking water supplies and that two municipalities needed to adjust their filtration systems to protect drinking water.  As far as Energy Transfer's response, Butler said the company has been "dismissive," "exceptionally disappointing" and unlike any other response he has seen. According to Butler, the company claimed that the state EPA lacks the authority to interfere with the Rover project.  Butler said he arranged a meeting with Energy Transfer Partners executives to say "how upset Ohio was" and to arrange new response plans. However, the company said it would continue to operate and has not yet paid any of its fines.  An Energy Transfer spokeswoman told The Columbus Dispatch that the "small number of inadvertent releases of 'drilling mud' during horizontal drilling in Ohio ... is not an unusual occurrence when executing directional drilling operations and is all permitted activity by (the Federal Energy Regulatory Commission)."

Feds shut down new drilling along Rover pipeline project – Columbus Dispatch - Federal officials have ordered a halt to new drilling activity along the troubled Rover pipeline project.  I n a letter sent Wednesday, the Federal Energy Regulatory Commission prohibited Texas-based Rover Pipeline from any new drilling activities until the company complies with new measures and receives authorization. The federal order came as the Ohio Environmental Protection Agency and Rover Pipeline officials continue to square off over a series of environmental violations that have piled up since construction on the natural gas distribution project began in February. “The federal action taken today is a step in the right direction,” Ohio EPA spokesman James Lee said.In all, 18 incidents have been reported in 11 Ohio counties over the past eight weeks, including mud spills from drilling, stormwater pollution and open burning. The Ohio EPA says at least eight incidents violated state law, and many of the rest are under review.The $4.2 billion underground pipeline route stretches from Washington County in southeastern Ohio to Defiance County in the northwest.Rover Pipeline uses horizontal drilling to install pipelines below waterways, wetlands, culturally sensitive areas, congested neighborhoods and roads to minimize surface disturbance, a spokeswoman said Tuesday in an emailed statement. The federal commission will allow some non-drilling activity to advance. To avoid boreholes from collapsing and prolonging environmental impacts, drilling projects already underway also can continue.

US FERC orders ETP to halt Rover gas pipeline drilling in some areas after spills - Days after the Ohio Environmental Protection Agency fined Energy Transfer Partners over alleged water and air pollution violations along the route of its Rover natural gas pipeline, the US Federal Energy Regulatory Commission ordered the company not to conduct any more horizontal directional drilling activities in some areas where it has not commenced work. The roughly 500-mile, 3.25 Bcf/d greenfield Rover Pipeline is designed to move Marcellus and Utica shale gas to markets in the Midwest, Gulf Coast and Canada. Backed almost entirely by Marcellus- and Utica-focused gas producers, the project is expected to impact numerous upstream and downstream markets.  FERC's actions follow two separate and sizable leaks of drilling fluid into Ohio wetlands in April.The spills, discovered April 13 and 14, both resulted from horizontal directional drilling, or HDD operations, typically performed when traversing beneath a river or other large body of water.The stoppage enforced by FERC affects HDD in eight out of 30 drilling areas associated with the project, according to a table included in the FERC letter.It would affect roughly half of the 23 miles of HDD work needed, according to data from Rover's February implementation plan.Also as a result, no activity associated with HDD crossing may occur on Mainline B of the project, which comprises one of the two parallel, 42-inch diameter pipelines that traverse north-northwest across Ohio.FERC also required Rover to immediately obtain independent third-party contractor proposals to study drilling activity at the Tuscarawas River further.The release of drilling fluid during HDD of the Tuscarawas River resulted in about 2 million gallons of bentonite-based drilling fluid spilling into a state-designated category 3 wetland, covering an area of about 6.5 acres and coating wetland soils and vegetation with bentonite clay and bore-hole cuttings, according to a Wednesday letter from Terry Turpin, director of FERC's Office of Energy Projects, to the developer. Turpin said that, based on drilling logs, returns of drilling mud were absent or intermittent during work in the areas at issue for nearly three weeks.  FERC staff has "serious concerns" about the magnitude of the incident, its environmental impacts, and the "lack of clarity regarding the underlying reasons for its occurrence, and the possibility of future problems," he said.

Ohio EPA is at Odds with Company Building the Rover Pipeline Across the State | WKSU -- Today, the Federal Energy Regulatory Commission ordered Energy Tranfer Partners to temporarily stop any new pipeline construction that involves drilling underneath rivers. The Ohio EPA believes this is a step in the right direction but does not resolve the overall dispute with the pipeline company. And the company is refusing to pay a $430,000 fine for multiple spills of millions of gallons of drilling fluid.. What was once a protected wetland has been turned into one giant mud pit.  “See all you have is mud, no drilling bits,”as Ohio EPA Director Craig Butler explains.  He says this is just one in a series of mistakes made by the Rover Pipeline project. “We have just seen a pattern of non-compliance and where we think they’re rushing and they’re not paying attention to even the best management practices.” has racked up a big list of violations for Energy Transfer Partners, or ET  That pattern includes EPA citations for more than a dozen violations so far, on a pipeline that just began construction three months ago.  The violations include:

  • Polluting reservoirs, streams and creeks;
  • More drilling mud spills in other wetlands found in Belmont County and Tuscarawas County;
  • Open-burning brush near a home in Jefferson County without permission.

Butler says  "They’re not taking Ohio seriously, the requirements that we have for environmental protection and protection of public health.”  Here’s where things take an odd turn.  Butler says usually, with other companies, the EPA will send a notice of a violation, issue a fine and that company complies:  End of story.  But that’s not the case with ETP. According to Butler, the pipeline company has been defiant while disregarding Ohio’s authority as a regulatory agency.  And the $430,000 fine? Butler says, so far, Energy Transfer Partners won't pay it.

Ohio pipeline spill raises broader questions about oversight - Midwest Energy News - Releases of more than two million gallons of drilling mud triggered federal and state agency actions against the developer of Ohio’s Rover Pipeline this month, and advocates suggest those incidents may be part of a bigger problem in the rush to develop Ohio’s shale oil and gas. “I suspect this is just the tip of the iceberg,” said Ted Auch at FracTracker Alliance, with many other problems, he and others suspect, going undetected. “How many little spills are there?” In April, construction activities for the Rover Pipeline led to “inadvertent” releases of a total of more than two million gallons of drilling fluid at and near Ohio rivers and wetlands. Now a May 5 enforcement letter from the Ohio Environmental Protection Agency seeks $431,000 and other actions from Texas-based Energy Transfer Partners for alleged violations of Ohio laws. “We are significant proponents of shale oil and gas development in Ohio… but the governor would say you have to do it right,” said Ohio Environmental Protection Agency Director Craig Butler. Enforcing the state’s environmental laws in this case is “important to Ohio. It’s important for water quality, drinking water quality, and just the quality of life for Ohio.” On May 10, the Federal Energy Regulatory Commission told Energy Transfer Partners to add more environmental review and delay construction at several spots where work has not yet begun. Horizontal directional drilling uses water, clay and other materials to help push metal pipe through the earth.  Usually drilling mud comes back up and the driller logs its return. For nearly three weeks, however, Rover Pipeline logs showed some returns were absent or intermittent, according to FERC’s May 10 letter. In April drilling mud leaked into wetlands in six counties, Ohio EPA’s proposed order said. Last Friday Ohio EPA issued a proposed administrative order, seeking $431,000 for penalties, plus additional actions, including a restoration plan. Although inadvertent releases and other violations happen with other projects from time to time, “we don’t see patterns like this,” Butler said. “This is a significant pattern of violations of various water quality issues.” On Wednesday, FERC followed up with its own action. Until certain requirements are met, the company should delay construction at eight spots where horizontal directional drilling work has not yet begun, FERC’s letter said. Those locations are near the Ohio River, Portage River, Captina Creek and Middle Island Creek.

Ohio now ranks ninth among oil and gas producing states -- Norwalk Reflector - As a result of the recent boom in horizontal hydraulic fracturing or "fracking," Ohio now ranks ninth among oil and gas producing states.Ohio still hasn't caught up with its peers when it comes to taxing the drilling industry — costing the state hundreds of millions of dollars in the midst of a revenue crunch, according to a new Budget Bite from Policy Matters Ohio. Ohio taxes oil extracted here by the barrel and gas per thousand cubic feet (MCF). That's a dime per barrel of oil and 2.5 cents per MCF of natural gas — doubled with regulatory costs assessments, but still very low. Between 2001 and 2010, the state's severance tax rate amounted to about 0.2 percent on the value of oil and 0.37 percent on natural gas. By comparison, the base rate of the severance tax on natural gas in Texas is 7.5 percent (4.6 percent for condensate). It's 6 percent in Wyoming, 7 percent in Oklahoma and 5 percent in Arkansas and West Virginia. In his 2018-2019 budget, Governor Kasich proposes increasing the tax to 6.5 percent for the value of oil, unprocessed natural gas and condensate; and 4.5 percent on processed natural gas and natural gas liquids. He estimates the state would collect $310 million in 2019 at this rate.In past budgets, Republican legislators killed proposals to increase the severance tax. But as lawmakers cite dwindling revenue and look to cut $400 million a year from the budget, Ohio can't afford to leave potential revenue on the table, said senior project director Wendy Patton. "It's time for Ohio to implement a real severance tax on fracking, like other states do,"

Wayne National Forest Fracking Lawsuit a Prime Example of Activists’ “Litigious Battles to Drive Regulation” – Jackie Stewart - EID recently highlighted that national fringe environmental groups have promised “litigious battles, to drive regulation” as part of their goal to ban fracking. That effort is playing out in Ohio, where the Center for Biological Diversity, Ohio Environmental Council, Heartwood and the Sierra Club have an axe to grind with the Bureau of Land Management (BLM) and the U.S. Forest Service (USFS) after their numerous protests against leasing in the Wayne National Forest failed to derail the administrative process within those agencies. With deep pockets and national support, these environmental groups have now decided to sue the BLM and USFS in federal court in hopes of a de facto moratorium on fracking in the Wayne National Forest from the bench.  First, it’s important to note that the author of this lawsuit— Center for Biological Diversity (CBD) — is an extremist “multimillion dollar litigation factory” that brags about ignoring science and the law in pursuit of its agenda. CBD doesn’t particularly care about the outcome of any particular case it files and is the ultimate practitioner of a “throw it against the wall to see if it sticks” legal philosophy. The numerous press releases CBD authors clearly indicate the organization’s core strategy is to pour sugar into the gas tank of the regulatory process in order to disrupt the process as much as possible. At CBD, wasting the time and energy of industry, regulatory agencies and the court system – not to mention taxpayer dollars – is a way of life.  CBD’s Ohio lawsuit is a perfect example.  A close look at CBD’s Ohio lawsuit against the BLM reveals that it is simply a hodgepodge of complaints the groups have litigated in the past, such as the claim USFS should have conducted more environmental reviews when it established its Forest Plan and supplemental review. The suit also takes aim at the BLM’s most recent extensive Wayne National Forest environmental review process, alleging the agency did not go far enough nor include enough public comment opportunities. Lastly, the lawsuit targets a litany of accusations made over alleged violations of the Endangered Species Act. In short, this new suit essentially calls into question a comprehensive environmental impact review process that’s taken place since 2006 and entirely discounts all of the due diligence both agencies have made to fully vet leasing in the Wayne from an environmental perspective. The BLM Environmental Assessment is 209 pages, after all, and the response to the December protest adds another 38 pages of rebuttal.

Fracking Pennsylvania to Make Plastics in Scotland? -  A new report from Food & Water Watch documents how a Scottish energy billionaire's dangerous plan to ship gas liquids across the Atlantic is linked to a controversial pipeline currently under construction across Pennsylvania.  The report, The Trans-Atlantic Plastics Pipeline, tracks how the fracking boom in the U.S. has spawned a resurgence in petrochemical and plastics manufacturing. A British company called Ineos has contracted with U.S.-based drilling companies to supply it with ethane, a gas liquid used to make plastics. And in order to deliver these liquids, Sunoco is building the 350-mile Mariner East 2 pipeline across the state. The pipeline ends at the Marcus Hook facility south of Philadelphia, where massive "dragon ships" owned by Ineos carry gas liquids to Norway and Scotland.  "Fracking is creating a public health and climate disaster while propping the highly polluting plastics industry," said Wenonah Hauter , executive director of Food & Water Watch.  "People on both sides of the Atlantic are suffering the costs, with extremely detrimental effects to our global environment—everything from air pollution and climate altering emissions to the proliferation of plastic waste can be tied to the companies benefiting from this poisonous process."  Shipping gas liquids to Europe will drive more fracking in Pennsylvania, with all the accompanying water and air pollution that has been well-documented over the last several years of drilling in the state. That drilling is the rationale behind the Mariner East 2. Though the project has been approved by state regulators, communities along the 350-mile route are fighting against the pipeline's construction through a mix of municipally-oriented strategies and nonviolent direct action tactics.  "Sunoco Logistics, aka Energy Transfer Partners, continues to insist that it is providing a 'public benefit,' while in fact it is simply lining its pockets at the expense of the environment,"

New Allegheny County map illustrates hazards of old abandoned wells - Pittsburgh Post-Gazette --Zoom in on Leetsdale on the state Department of Environmental Protection’s new map of legacy oil and gas sites in Allegheny County and you will see a cluster of yellow diamonds, representing long-forgotten oil wells, under what is now an industrial park on the eastern bank of the Ohio River. These wells are not in any official state database and their locations have not been verified in the field. They were plotted from paper mine maps drawn in the 1930s and they offer a best guess for the thicket of hazards left over from earlier eras of drilling that have been paved over, in some cases literally, on the outskirts of the modern city. “If I lived in the suburbs, I would be very interested to know what might be in my backyard,” said Stewart Beattie, a DEP information specialist, who created the map. DEP this week released a host of information about Pennsylvania’sabandoned oil and gas wells, including the results of a year-long study that helped clarify how hard the wells are to find based on old records in a changing landscape; how often they might be leaking; and how much it might cost to plug them to modern standards.Estimates put the number of unaccounted for wells in the state somewhere between 100,000 to 560,000. DEP predicts it would cost as much as $8 billion to plug 200,000 of them.Since the 1980s, DEP has plugged 3,066 legacy wells that don’t have current owners. But what the agency calls “gross underfunding” of its well plugging program has caused a steady decline in the number of wells decommissioned during the past decade — from a peak of about 350 wells in 2007 to 2016, when no routine plugging contracts were issued.The wells are remnants of a century of oil and gas drilling before wells needed to be registered or permitted. They were often left unplugged or stoppered with items like pieces of wood. Solutions to the state’s legacy well problem “will not be possible without finding new sources of revenue for the plugging program,” which now relies almost exclusively on surcharges attached to drilling permits, the study says.

Natural gas has displaced coal in the Northeast’s generation mix over the past 10 years -- The generation fuel mix of electricity in the Northeast Census division of the United States has shifted dramatically over the past 10 years. In the nine Northeast states, natural gas nearly doubled its share of the region’s total generation to 41% in 2016, up from 23% in 2006. Coal-fired generation fell from 31% to 11% of generation over the same period. Nuclear-powered generation as a share of total generation remained relatively constant near 34%. Despite more than doubling over the same period, the share of nonhydro renewables remains relatively small. Overall, total generation in the region declined by 3% between 2006 and 2016.  Increased access to low-cost natural gas from the Marcellus Shale and other regional shale plays has driven the switch away from coal in the Northeast United States. Environmental policies at the federal and regional level, such as production tax credits, the Regional Greenhouse Gas Initiative, and renewable portfolio standards, have also contributed to the decline in coal generation. Pennsylvania continues to be a leading coal generator nationally, despite falling by 31%, or 68 million kilowatthours (kWh), between 2006 and 2016. Coal-fired generation in both New York and Connecticut fell by 90% between 2006 and 2016, or by 19 million kWh and 4.1 million kWh, respectively.  Nuclear generators accounted for 33.9% of Northeast generation in 2006 and 34.98% in 2016. Although no new nuclear plants were constructed in the Northeast during this period, one plant, Vermont Yankee, ceased operations in December 2014. Vermont Yankee alone accounted for 72% of total generation in Vermont in 2006. In addition, several nuclear plants in the Northeast region received approvals for uprates that increased their capacities—some increasing by as much as 15%. Other differences in nuclear output in 2006 and 2016 are likely attributable to the timing of maintenance and refueling cycles.

Another update on the Marcellus / Utica gas pipeline takeaway projects. -  For years now, limited natural gas pipeline takeaway capacity has constrained gas production growth in the Marcellus/Utica natural gas shale plays in the Northeast. To fix that, a slew of pipeline projects were planned to relieve the constraints as regional supply began outstripping demand starting in 2014. Now, the region is on the verge of being unconstrained for the first time since the Shale Revolution hit Appalachia. Many of those projects have come online since then, and another 19 expansions totaling 15.5 Bcf/d are planned for completion by late 2019. If all goes as expected, this next round of projects should turn the Northeast market on its head again, as the capacity additions should start to outpace production growth. The problem, though, is that several projects have faced significant challenges in recent months, resulting in either cancellation or major delays. At the same time, Marcellus/Utica production growth has slowed dramatically in the past 18 months or so. In today’s blog, “In a Northeast Minute…Everything Can Change — An Update of Marcellus/Utica Takeaway Projects,” Sheetal Nasta begins a series looking at the status of regional takeaway capacity expansions. When we published our review of Northeast pipeline takeaway projects in late 2014 in the RBN Drill-Down report “50 Ways to Leave the Marcellus,” natural gas production in Appalachia had just broached 18 Bcf/d and showed no sign of slowing down. The oil price collapse was already under way, but production economics in the Marcellus/Utica remained favorable thanks to uplift in prices from the sale of natural gas liquids and condensates in the gas stream. At the time, regional gas production was beginning to exceed demand in most months of the year, and so the only real limit to production gains seemed to be the capacity of the pipeline network — originally designed to flow gas to the Northeast — to move gas to demand markets outside the region. Midstream companies were scrambling to rework their pipeline systems to handle the increasing volumes of gas needing to flow out of the Northeast. More than 50 pipeline projects were under development in and around the Marcellus/Utica, 41 of them specifically to increase takeaway capacity by 28 Bcf/d.

Trump Finally Nominates Two of Three Open FERC Seats - President Trump has finally announced his intent to nominate candidates for two of the three open seats on the Federal Energy Regulatory Commission (FERC) and send their names to the U.S. Senate for approval. Assuming they are confirmed, the two new commissioners will help shape America's energy future. We encourage them to continue FERC's bipartisan tradition of clean energy progress for the electricity grid amid today's rapidly evolving energy landscape. FERC—the independent federal agency that oversees the high power electric grid, natural gas pipelines and hydroelectric dam licensing—has been without a quorum since Feb. 3, when then-Chairman Norman Bay resigned, leaving the remaining Democratic commissioners (Acting Chairman Cheryl LaFleur and Colette Honorable) in two of the five seats. The two new nominees are Neil Chatterjee (Senate Majority Leader Mitch McConnell's energy advisor) and Robert Powelson (commissioner on the Pennsylvania Public Utility Commission and current president of the National Association of Regulatory Utility Commissioners). There also are rumors that Kevin McIntyre , an energy attorney at the large international law firm Jones Day, also will be nominated in the near future. (More about all three of them here ). As long as there are only four members of FERC, the possibility exists for a 2-2 deadlock. Adding more uncertainty is that Commissioner Honorable's term expires June 30. She's announced her decision not to seek another term, although she could agree to stay on until her replacement is named. Meanwhile, the White House has not announced who it wants to chair the commission.  Our simple message to the nominees: FERC needs to keep up with the fast-changing electric grid and avoid creating new barriers through inaction or new limitations. FERC has a strong bipartisan tradition of removing electricity market and planning barriers to new energy resources. With wind and solar hitting new output peaks daily, and energy storage coming on strong, FERC-regulated energy markets and planning must continue to evolve to reflect the new reality of a more efficient, cleaner, and affordable grid.

Doc Shows How Greens Trick The Media Into Attacking Fracking | The Daily Caller: A newly uncovered environmentalist memo from 2012 shows how green groups conspired to link hydraulic fracturing to health issues, despite a lack of scientific evidence.   The 2012 memo discussed how environmentalists lack evidence that fracking causes health issues. It suggests using the media to misrepresent the scientific community’s research to shut down fracking by linking it to health concerns, according to an investigation published Tuesday by the pro-industry group Energy In Depth (EID), which uncovered the memo.  The memo was prepared for the 11th Hour Project, which donates money to anti-fracking groups such as Earthworks, Food & Water Watch, Friends of the Earth, New Yorkers Against Fracking, and the Post Carbon Institute. “For years, we have seen an onslaught of inflammatory headlines and wild accusations about fracking and its supposed impacts on public health,” Steve Everley, a senior adviser for Energy In Depth, told The Daily Caller News Foundation. “This memo helps explain why: it was part of a strategy developed for a wealthy donor network that funds anti-fracking groups across the country. They wanted to prime the pump for lawsuits against the oil and gas industry, and the ultimate goal was to secure bans or other regulatory restrictions.” The memo instructs environmentalists to focus on attacking any scientific papers that disagree with their conclusions while getting any anti-fracking research “popularized in the media.” It also suggests focusing on emotional and relatable issues, such as mandating fracking be located far away from schools.  Environmental groups took the advice to heart in tip sheets for anti-fracking activists, advising them to appeal to people’s emotions, not their rationality, as well as using babies as props.

Huge Victory: Natural Gas Storage Plan Halted at Seneca Lake --  Sandra Steingraber - The news broke Wednesday in the most banal of venues: the biweekly environmental compliance report submitted by Arlington Storage Company to the Federal Energy Regulatory Commission (FERC). Deep in the third paragraph of section B, this wholly owned subsidiary of the Houston-based gas storage and transportation giant, Crestwood Midstream, announced that it was walking away from its FERC-approved plan to increase its storage of methane (natural gas) in unlined, abandoned salt caverns along the shoreline of Seneca Lake .  In its own words, "Arlington has discontinued efforts to complete the Gallery 2 Expansion Project."  It was a blandly expressed ending to a dramatic conflict that has roiled New York's Finger Lakes region for more than six years. Together with a separate—and still unresolved—plan for lakeside storage of propane (LPG) in adjacent salt caverns, Crestwood's Arlington operation has been the focus of massive, unrelenting citizen opposition that has taken many forms.  The Gas Free Seneca Business Coalition has, at last count, 398 members. Together with the more than 100 members of the Finger Lakes Wine Business Coalition , this group has been a powerful voice in promoting wine and agri-tourism—a $4.8 billion industry in New York State—as the centerpiece of the Finger Lakes economy, deploying renewable energy systems for wineries and providing an alternative vision to Crestwood's plan to turn the region into "the gas storage and transportation hub" for entire Northeast. In letters, petitions, press conferences, interviews and editorials, these business leaders have made clear that industrialized gas storage on Seneca Lake—with all the attendant pipelines , compressor stations, flare stacks and air pollution—is incompatible with the pristine environment on which wine and tourism depend.  Meanwhile, 32 municipalities—representing 1.2 million residents—have passed resolutions against gas storage on Seneca Lake. These efforts have played an important role in generating political pressure, capturing media attention , and raising awareness among community members about the public health threats created by storing highly pressurized, explosive gases in abandoned salt caverns situated below a lakeshore in an area crossed by geological fault lines.

Natural Gas Exports Can Solve U.S. Energy Glut -- The slogan “Made in the U.S.A.” resonates with Americans, except when there’s too much of a given product being made, which forces down prices along with the industry. One example is natural gas, where U.S. inventories have been largely above average for the last two years. The salvation lies in Liquefied Natural Gas, the clear, odorless liquid formed when natural gas is cooled to about minus 260 Fahrenheit. And that’s just what President Donald Trump is pushing for. His administration is moving to make the U.S. the world’s leading exporter of natural gas, and LNG would be is a central component of both energy and trade policy. This makes a lot of sense.  In recent years, there was strong domestic opposition to energy exports, particularly for reasons of national security. But after years of depressed prices resulting from improved technologies that reduced extraction costs, that opposition has eased. Proponents argue that natural gas exports can provide enhanced security to allies such as Japan; reduce European energy dependence on Russia, which has used gas exports as a political weapon; and address global climate change by replacing coal.  Trump’s policies to support oil and gas drilling by removing regulatory barriers to production, will support prices in the medium-term. Nonetheless, both domestic end-user demand and power generation demand are highly weather-sensitive, meaning a particularly cool summer or warm winter could result in severe regional surpluses, if not a national glut. LNG has been and will continue to be a growing source of offtake from future production. The U.S. has slowly come to realize that developing a nationwide infrastructure to substitute gasoline with LNG was a pipe dream. Today’s investments are steering toward electric and self-driving vehicles as well as renewable energies. That means the best bet is on the export market, where demand for LNG is growing rapidly.

US EIA says gas prices could see modest boost from exports, demand -- US Energy Information Administration projections for natural gas prices are headed up year on year, the agency said Tuesday in its monthly outlook. The 12-month moving average domestic gas consumption, coupled with exports at the end of last year, began to outpace the average supply of US gas from production and imports, a trend EIA expects to continue through 2017. That trend, EIA said, will put "modest upward pressure on prices." The agency, in its May Short-Term Energy Outlook, raised its forecast for second-quarter Henry Hub natural gas spot prices 12 cents to $3.16/MMBtu. The Q3 forecast also edged up to $3.21/MMBtu, 15 cents above EIA's April estimate. The agency put prices for full-year 2017 at an average $3.17/MMBtu, up 7 cents from the prior-month's estimate. Prices averaged $2.51/MMBtu in 2016.   Gas prices are expected to average $3.43/MMBtu in 2018, EIA said, lowering by 2 cents its estimate from April 2. Higher gas prices are generally positive for the coal industry. "US coal production is expected to rise 5% this year and about 1% in 2018 on higher coal-fired electricity generation, which would be the first back-to-back annual increase in coal output since 2010-11," EIA Deputy Administrator Howard Gruenspecht said Tuesday in a statement. EIA added in its report that "after declining by 1.7% in 2016, energy-related carbon dioxide emissions are projected to decrease by 0.7% in 2017 and then increase by 2.3% in 2018."

Bet You'd Be Shocked by How Much of Our Natural Gas Comes From Fracking  - While crude oil dominates the energy news, natural gas is one of the most important -- yet often overlooked -- sources of energy in the United States. According to the U.S. Energy Information Administration, more than one-third of America's electricity comes from natural gas; half of American homes use it for cooking, heating water and drying clothes; tens of billions of dollars' worth of goods are made from it, and hundreds of thousands of vehicles use it as a fuel. A whopping two-thirds of the natural gas produced in the U.S. is produced with hydraulic fracturing. And while there is some controversy around the risks of fracking, it has driven a huge increase in natural gas production and lowered the cost of the goods and energy produced from it. This table shows how hydraulic fracturing has increased significantly over the past nearly 20 years: But it's not just fracking alone that's increased; it was the pairing of horizontal drilling with hydraulic fracturing that's driven the increase in the use of fracking. Around a decade ago, there were serious concerns that America's supply of accessible natural gas was running out. Traditional vertical drilling methods had nearly exhausted the majority of North America's conventional reserves. In 2002, U.S. natural gas production peaked and would fall for the next four years. This situation caused natural gas prices to more than triple from 2000 to 2006: The pairing of fracking with horizontal drilling changed things. Since 2006, natural gas production in the U.S. has increased 40%, and natural gas prices have fallen by more than half:

A Sobering Look At The Future Of Oil ---- The current discussion about the future of oil is how soon will it be before petroleum becomes a sunset industry. If it isn’t already. Flat or falling demand. Carbon taxes. Electric cars. Renewable energy. Oil has no future. It is only a matter of time, although how much time remains is subject to considerable discussion and debate. Various prognosticators put forth differing view about when world oil demand will peak. Some say as early as 2030, others much later. Nobody says never. As for actually running out of oil, that issue has run its course. At least for now. How long the world stays in the oil business is of critical importance. This is illustrated by a Financial Post article April 28 titled, “Next battleground; Enbridge’s aging Great Lakes pipeline stirs new protest in Michigan”. Until recently, the battle against pipelines has been opposing new construction. Now it is existing pipelines. This opens yet another can of worms the industry and regulators have never really grappled with. Enbridge Line 5 crosses from Wisconsin to Michigan under the Mackinac Straits between Lake Michigan and Lake Huron, a distance of about 4.5 miles. Built in 1953 to the most demanding standards of the day, the Enbridge website says Line 5 transports about 540,000 b/d of Canadian light and synthetic crude and natural gas liquids to markets in Michigan and beyond. What has emerged is concern among campaigning Michigan politicians about the potential for a major spill into the Great Lakes, an event being politically branded as inevitable. Replacing this submerged section of the line is reported to cost $2.4 billion. Where it would go and who would pay is not mentioned. Enbridge routinely inspects the line and claims it is in good shape. Unfortunately, the failure of Enbridge Line 6B in 2010 which leaked 20,000 barrels of oil into Michigan’s Kalamazoo River in 2010 is still fresh in peoples’ memories. The ongoing maintenance of producing, processing and transportation assets is the responsibility of the owner, the same as changing the oil, tires and brakes on a car. It is assumed operators will maintain their sets in good working order, and the vast majority do. Maintenance capital budgets are part of every company. But what happens when cash gets tight? More importantly, what happens if and when the industry starts going out of business as so many hope?

Former Obama EPA Official Now Lobbying for Atlantic Coast Pipeline --  A new disclosure by Dominion shows that a long-time employee for the Environmental Protection Agency (EPA) is now lobbying for the controversial Atlantic Coast Pipeline (ACP).  Laura Vaught is Dominion’s Federal Affairs Policy Advisor, a position she began in March 2017. According to a Dominion lobbying report filed on April 20, 2017, she lobbied the Senate, House, and key regulatory agencies on issues that included “Permit for Atlantic Coast Pipeline” and “project development and advocacy” for the ACP.  Importantly, Vaught lobbied the National Park Service, U.S. Fish & Wildlife Service, and the U.S. Forest Service — all federal agencies that must approve the ACP for it to proceed.  However, immediately prior to joining Dominion, Vaught served for nearly six years in the EPA during the Obama administration in a number of positions that involved close contact with elected officials and regulatory agencies. These positions included Senior Advisor, Deputy Associate Administrator for Congressional Affairs, and Associate Administrator for the Office of Congressional and Intergovernmental Relations. Her last EPA position was as Associate Administrator in the Office of Policy — a position she left in January 2017, just weeks before she joined Dominion as a lobbyist. Vaught also served as Chief of Staff to Representative Rick Boucher, the longtime Democratic Congressman from Virginia’s 9th District. Vaught worked for Boucher from 1996 to 2011. Virginia is a crucial battleground state for the ACP. The revelation that Vaught, a former Obama EPA employee and congressional chief of staff, is lobbying for Dominion’s Atlantic Coast Pipeline is a stark example of the revolving door between environmental regulators and the fossil fuel companies that they oversee. Vaught is now working to smooth the path to regulatory approval for a pipeline that has generated enormous controversy and opposition, and is also in the middle of moving through a crucial stage of regulatory approval, with an eye on beginning construction in the fall of 2017.

Trump to consider new testing for offshore Atlantic oil and gas | TheHill: The Trump administration is considering letting six companies test for oil and natural gas off the Atlantic coast. The Wednesday decision by the Interior Department is an early step toward potential drilling in the Atlantic Ocean, reversing an Obama administration policy to reject such applications. “Seismic surveying helps a variety of federal and state partners better understand our nation’s offshore areas, including locating offshore hazards, siting of wind turbines, as well as offshore energy development,” Interior Secretary Ryan Zinke said in a statement.“Allowing this scientific pursuit enables us to safely identify and evaluate resources that belong to the American people.” The Wednesday announcement does not necessarily mean that any permits will be issued, since they still need to go through an approval process. The six companies had previously sought seismic testing approvals, but the Obama administration rejected them in January, leading the companies to appeal to an Interior board. Interior is now asking that board of administrative judges to allow the Bureau of Ocean Energy Management another chance to consider the requests. Zinke is presenting the policy change as fulfilling President Trump’s executive order signed last month to expand offshore oil and natural gas drilling. Seismic testing would allow the oil industry to research for the first time in three decades what resources could be under the ocean floor. 

Seismic Testing to Begin in Atlantic Ocean in Push for Offshore Drilling - The Interior Department announced it is moving forward with seismic surveys in the Atlantic Ocean, following President Donald Trump 's executive order last month to aggressively expand offshore drilling in protected areas off the Arctic and Atlantic oceans.  Six permit applications by energy companies—ones that were rejected by the Obama administration—are being reviewed by the department. The oil and gas industry has long pushed for seismic surveys used to search for oil and gas deposits deep below the ocean's surface.  However, environmental groups warn that the surveys are an extremely loud and dangerous process. "Seismic airguns create one of the loudest manmade sounds in the ocean, firing intense blasts of compressed air every 10 seconds, 24 hours a day, for weeks to months on end," Dustin Cranor, Oceana 's senior director of U.S. communications, told EcoWatch. "The noise from these blasts is so loud that it can be heard up to 2,500 miles from the source, which is approximately the distance from Washington, DC to Las Vegas."  “These blasts are of special concern to marine life, including fish, turtles and whales, which depend on sound for communication and survival," Cranor said. He noted that the government's own estimates show that seismic airgun blasting in the Atlantic could injure as many as 138,000 marine mammals like dolphins and whales, while disturbing the vital activities of millions more. Furthermore, Greenpeace said "pursuing this development stands at cross-purposes with the nation's necessary and rapidly accelerating move away from fossil fuels, and with previous commitments to address global climate change ."   Sea Shepherd Conservation Society's Capt. Paul Watson explained, "One of the major threats to the survival of cetaceans, is noise pollution. More seismic testing and military LFS testing will result in more strandings . This decision equates to a death sentence for thousands of whales and dolphins."

First Urals crude imported to US East Coast since 2013: data - Russian Urals crude was recently imported into the US East Coast for the first time since 2013, according to US Customs data. More shipments of the medium-to-light sour grade may be making the rare trip across the Atlantic as lower differentials, coupled with affordable freight rates, opened the opportunity, according to market sources.Two Urals cargoes aboard the same vessel were unloaded along the US East Coast within the past two weeks. The first, a 580,000-barrel shipment, arrived on the Elias Tsakos in Wilmington, Delaware, on April 30. Another 140,000 barrel shipment, also on the Elias Tsakos, arrived in Philadelphia on May 6. The cargoes were shipped by Statoil from storage in the Bahamas.

US distillate exports from gulf coast to Latin America on the rise -- U.S. exports of diesel and other distillates averaged 1.2 million barrels/day (MMb/d) in 2016, more than eight times their 2005 level and up slightly from 2015, another in a series of record-busting years for distillate exports. So far, 2017 looks like another winner. This year, though, a lot more distillate is being shipped south from Gulf Coast marine terminals to nearby Central America and South America, and less is being floated across the Atlantic to Western Europe. Today we consider recent trends in U.S. distillate exports and the significance of the export market to U.S. refiners. Way back in the 1970s—literally a lifetime ago for many RBN blog readers—U.S. exports of diesel and other distillates averaged less than 3 Mb/d. That’s no typo; daily distillate exports on a typical day back in the Disco Era were less than 3,000 barrels. Today, in the Shale Era, that many barrels of distillate are being exported from U.S. marine terminals every three and a half minutes or so. (We did the math—2016 distillate exports averaged 1.2 MMb/d; divide that by 24 (hours in a day), then by 60 (minutes in an hour) and you get 826 barrels/minute.) It goes without saying, then, that distillate exports play a key role in the profitability of U.S. refineries, especially (as we’ll get to) those along the Gulf Coast, the send-off point for the vast majority of U.S. refined products shipped overseas. The same is true for gasoline exports.

All Washed Up? Shale Oil and Gas Drowns Out US Gulf of Mexico Shallows - Short-term contracts, dismantled infrastructure and lagging dayrates have long challenged shallow water drilling on the U.S. side of the Gulf of Mexico – but it’s the natural gas-belching shale plays that may finally turn the tide away from the shelf. In January 2007, there were 82 jackup rigs drilling in the shallow water of the U.S. Gulf (GOM). By January this year, that figure had dwindled down to 12. At the end of March, 11 jackups remained on the shelf, according to Rigzone Data Services. McDermott International Inc. began its exit from the U.S. shallows six years ago, said Scott Munro, McDermott’s vice president for the Americas, Europe and Africa. “There’s not much of the (U.S. GOM) shallow water that hasn’t been explored or attempted. Most of the low-hanging fruit has been taken; most of the big oil opportunities have been taken,” he said. “What was left really was gas opportunities … But then what happens? Mr. Shale shows up and the onshore shale plays just spit out gas as a by-product of oil production and so no one is spending a lot of money to develop offshore gas. It’s only if you can get out a nice oil find that people are really spending.”  A jackup requires up to 150 personnel on board (POB), according to Rigzone Data Services and Platts RigData. At a drop from 82 jackups to 11, that’s up to 10,659 jobs that won’t be coming back.  “I’m no economist, I’m no soothsayer, but I would say the chances of shallow water coming back in the USA coming back in any meaningful way is slim,” Munro said.

New pipeline infrastructure should accommodate expected rise in Permian oil production – EIA - As crude oil production in the Permian Basin of western Texas and eastern New Mexico has increased, pipeline infrastructure has also increased to deliver this crude oil to demand centers on the U.S. Gulf Coast. One indicator of a potential shortfall in available takeaway capacity in the Permian is a negative spread between the price of West Texas Intermediate (WTI) crude oil at Midland, Texas, and the price of WTI at Cushing, Oklahoma. Going forward, the Midland versus Cushing discount, which recently widened to more than $1 per barrel (b), is unlikely to be either as large or as persistent as it was following the rapid increase in Permian production from 2010 to 2014. At points in both late 2012 and mid-2014, WTI-Midland was priced at least $15/b lower than WTI-Cushing. Pipeline capacity expansions and other market changes are now underway to deliver more Permian crude oil to demand centers. Compared with other oil producing regions, the Permian has a large number of productive geological formations stacked in the same area. The Permian’s in-region refining capacity, close proximity to large refining centers on the Gulf Coast, and existing pipeline infrastructure also make the Permian attractive to oil producers. Crude oil production in the Permian grew from 886,430 barrels per day (b/d) in January 2010 to nearly 1.5 million b/d in January 2014, and this production level was more than could be accommodated by in-region refining capacity and pipeline capacity. This situation resulted in large price discounts at the crude oil gathering and transportation hub in Midland, Texas, compared with Cushing, Oklahoma, indicating that pipeline capacity was becoming constrained and crude oil was likely moving out of the region by more expensive methods, such as rail or truck. In 2014, WTI-Midland averaged a $6.94/b discount to WTI-Cushing, compared with a $1.68/b average discount during 2013. However, as new and expanded pipeline capacity was added, WTI-Midland’s discount to WTI-Cushing narrowed, falling to an average of $0.18/b in 2015 and $0.07/b in 2016. With the rise in oil prices from their low point in early 2016, EIA’s April Short-Term Energy Outlook (STEO) expects crude oil production growth in the Permian to accelerate. EIA’s April Drilling Productivity Report (DPR) indicates a total of 310 oil-directed rigs active in the Permian, 158 more than at the same time last year. The DPR also estimates crude oil production in the Permian at 2.3 million b/d as of April 2017, or almost 300,000 b/d higher than the same month in 2016.

Midstream Companies Struggle to Keep Pace with Permian Growth - Permian crude oil production and pipeline takeaway capacity out of the region are in a horse race —it’s a close one too, and the stakes are high. Twice in the past few years, Permian production growth has outpaced the midstream sector’s ability to transport crude to market, resulting in negative price differentials that cost many producers big-time. Now, thanks to increased drilling activity and producers’ heightened ability to wring more out of the play’s multistack formations, Permian production is expected to rise by at least another 1.5 million barrels/day (MMb/d) by 2022 —a 60%-plus gain over five years —raising the threat of another round of major price hits, maybe as soon as later this year. Today we continue a blog series on the challenges posed by rapid production gains in the hottest U.S. shale play. In Part 1 of this series, which is based on our new Drill Down Report, “With a Permian Well, They Cried More, More, More,” we discussed the fact that the Permian for the past two years has been the engine propelling U.S. crude oil production upward. The Permian’s Midland, Delaware and Central basins now produce 2.2 MMb/d, more than double the region’s 1.0 MMb/d output in 2010 and up 200 Mb/d in the past six months alone. Because the Permian has been a major production area for decades —producing as much as 2.0 MMb/d back in the mid-1970s before the play entered a 30-year-plus, pre-Shale-Era decline —there was substantial pipeline infrastructure in place when the ongoing resurgence in Permian production started seven years ago.

Oklahoma Governor Mary Fallin Signs Law Imposing Hefty Fines and Lengthy Jail Terms for Anti-Pipeline Protests -- Last Wednesday, Oklahoma governor Mary Fallin approved HB 1123, a bill aimed at stifling protests against oil and gas pipelines. The measure took effect immediately. The new Oklahoma statute declares an “emergency” exists and creates a new category of misdemeanor, as well as two additional felony counts. The statute imposes draconian penalties on protestors convicted of trespassing at a critical infrastructure facility— including chemical plants, liquid natural gas terminals, pipelines, ports and other transportation facilities, power plants, railways, and refineries (section 1 D 1 a-p). As summarized in Oklahoma Trespassing Laws Beefed Up Against Protesters by Okenergytoday.com, the specified penalties are serious:The misdemeanor level allows for a fine of $1,000 and up to six months in county jail for willfully trespassing onto property containing critical infrastructure (Jerri-Lynn here: See section 1 A of HB 1123).The first felony level allows for a fine of no less than $10,000 and a prison sentence for up to 10 years for individuals that willfully trespass with the intention to damage, destroy, vandalize, deface, tamper with equipment, impede or inhibit operations of the facility. The final felony level is for a fine not less than $100,000 and a prison sentence for up to 10 years for successfully damaging, destroying, vandalizing, defacing or tampering with equipment in a critical infrastructure facility (Jerri-Lynn here: See sections 1 A and B of HB 1123). The statute targets not only protestors on-the-ground, but organizations– such as environmental groups– that “conspire” with them to trespass. The Intercept has teased out two of the more serious implications of targeting organizations as “conspirators” in Oklahoma Governor Signs Anti-Protest Law Imposing Huge Fines On “Conspirator” Organizations. First is the breadth of activities targeted: And second is the formidable level of penalties that may be imposed on these “conspiring” organizations,  with a maximum fine of 1 million dollars for the top felony category.

Fracking's Dark Secret - We've long known extracting oil and gas comes with negative consequences, and rapid expansion of hydraulic fracturing, or fracking, increases the problems and adds new ones—excessive water use and contamination, earthquakes , destruction of habitat and agricultural lands and methane emissions among them. As fossil fuel reserves become depleted, thanks to our voracious and wasteful habits, extraction becomes more extreme and difficult. Oil sands mining, deep sea drilling and fracking are employed because easily accessible supplies are becoming increasingly scarce. The costs and consequences are even higher than with conventional sources and methods. Of the many problems with the industry, methane emissions from fracked and conventional operations are among the most serious. Methane is at least 84 times more potent than carbon dioxide as a heat-trapping gas over the short term. Researchers estimate it's responsible for 25 percent of already observed climatic changes. One difference between methane and CO2: Methane remains in the atmosphere for a shorter time—around a decade, compared to many decades or centuries for CO2. Methane's relatively short lifespan means reducing the amount entering the atmosphere will have major and rapid results. Cutting methane emissions from the oil and gas sector is one of the cheapest, most effective ways to address climate change . The technology to do so already exists. It's absurd that the industry is leaking the very resource it wants to sell.  Methane comes from a number of sources, including animal agriculture and natural emissions. Global warming itself means methane once trapped in frozen ground or ice is escaping into the air.

Methane rule repeal expected to surface in Senate -  The Senate will try to beat the clock during the week of May 8 in a potential Congressional Review Act vote to repeal an Obama-era rule regulating methane emissions on public lands. Lawmakers are under pressure to hold a vote on methane ahead of a looming deadline for rolling back so-called “midnight regulations” issued in the waning months of President Barack Obama’s term. The CRA resolution of disapproval cannot be subject to a filibuster and requires only a simple majority. The Senate can only use the CRA to disapprove of Obama-era rules during the first 60 legislative days of this session, a deadline the Senate is scheduled to hit later in the week. Congress has already used the CRA to nullify a number of Obama-era regulations, including a stream buffer zone regulation that limited the placement of mining waste in streams. The Interior Department rule forces energy companies to curb emissions of methane escaping from wells and pipelines on public land. Most Republicans, joined by the Competitive Enterprise Institute, Americans for Tax Reform and other opponents, argue it will decrease energy production on federal lands and lead to fewer revenues from royalties and higher energy costs, as well as lost jobs. Environmental groups and other supporters of the rule contend the CRA resolution would impair—if not eliminate—the Bureau of Land Management’s ability to promote the recapture of wasted gas. The House easily passed the repeal in February. But the Senate vote is close because Republicans only control the Senate 52-48 and at least two GOP lawmakers—Sens. Lindsey Graham (R-S.C.) and Susan Collins (R-Maine)—are opposed to the measure. The vote has been delayed by unrelated objections from Sen. Charles Grassley (R-Iowa) and other senators seeking to trade a vote on a bill to eliminate a restriction on selling higher blends of gasoline and ethanol in the summer in exchange for a vote on the methane resolution. But Senate Majority Whip John Cornyn (R-Texas) said the Environment and Public Works Committee is considering a hearing and markup on the ethanol issue, a move Cornyn predicted would let the CRA vote proceed. 

GOP under pressure as Senate weighs vote on drilling rule - (AP) — Republicans from energy-producing states are under pressure as the Senate weighs whether to overturn an Obama-era regulation to restrict harmful methane emissions escaping from oil and gas wells on public land. A coalition of groups with ties to the fossil-fuel industry and the conservative Koch Brothers have waged a public campaign to overturn the Interior Department rule but have so far fallen short. Senate Republican leaders say they are close to getting the 51 votes needed to overturn the rule under the Congressional Review Act, but as a Thursday deadline approaches, no vote has been scheduled and key GOP senators remain publicly undecided. Two Republican senators — South Carolina's Lindsey Graham and Susan Collins of Maine — have said they will oppose the repeal effort, while Republican Sens. Cory Gardner of Colorado and Dean Heller of Nevada have not declared how they will vote. Sen. Rob Portman, R-Ohio, said late Monday he will support the repeal effort after weeks of public silence, saying he got assurances from Interior Secretary Ryan Zinke that he will take steps to reduce methane waste. Despite Portman's announcement, some environmental groups are optimistic they can score an unlikely victory by preserving the Obama-era rule under a Republican-controlled Congress and White House. "This was a longshot," said Mark Brownstein, vice president of the Environmental Defense Fund. "Is there any bigger or badder opponent than the oil and gas industry?" The methane issue "has captured the attention of local communities, and the reason is they are seeing the impact on their houses, their water and in some cases they are literally smelling it," Brownstein said. "When you have local groups getting engaged and speaking out ... it's incredibly hard for any elected representative to ignore that."

Dem senator: Possible methane vote would be ‘a huge step backward’ -- A top Senate Democrat on Monday said members will be forced to choose between “pollution or people” if Republicans bring to the floor a bill undoing an Obama administration methane rule. “It would be a huge step backward if the Senate repealed the [Bureau of Land Management’s] methane rule,” said Maria Cantwell(D-Wash.), the top Democrat on the Energy and Natural Resources Committee. “We can preserve and protect our valuable natural resources and we can protect the health of our citizens, or we can go back to more pollution and more waste.” ADVERTISEMENTCantwell said she thinks it's “likely” Republicans will vote this week on a Congressional Review Act (CRA) resolution undoing the BLM rule, which limits venting and flaring of methane at natural gas sites on federal land. Under the terms of the CRA, the Senate needs to pass the resolution by Thursday if it wants to quickly strip the regulation off the books. Sen. John Cornyn(R-Texas) told reporters last week that the bill will come to the floor before then, though leadership has yet to schedule a vote on the resolution. Cantwell, on a call with reporters Monday, previewed Democrats’ arguments in favor of keeping the methane rule in place. Supporters say cutting methane is good for both environmental and economic reasons: Methane is a potent greenhouse gas and contributes to climate change, but it’s also the main component of natural gas, and producers are able to sell off methane they capture that might otherwise have been released into the atmosphere. 

Bid to revoke Obama methane rule fails in surprise U.S. Senate vote | Reuters: The U.S. Senate on Wednesday rejected a resolution to revoke an Obama-era rule to limit methane emissions from oil and gas production on federal lands, dealing a blow to President Donald Trump's efforts to free the drilling industry from what he sees as excessive environmental regulation. The Congressional Review Act resolution received just 49 votes after Republican leaders scrambled for weeks to secure the 51 needed to pass it. The resolution would have revoked the rule and prevented similar regulations from being introduced. Getting the Trump administration to repeal the BLM rule had been a top priority of the oil and gas industry. Companies said it was unnecessary, would could cost them tens of thousands of dollars per well and hinder production. But not all Republicans supported the measure, in part because it would have made regulating methane waste more difficult in the future. Republican Senator John McCain of Arizona made a surprise vote against the resolution, joining fellow Republicans Lindsey Graham of South Carolina and Susan Collins of Maine in opposition to torpedo it. "While I am concerned that the BLM rule may be onerous, passage of the resolution would have prevented the federal government, under any administration, from issuing a rule that is ‘similar’," McCain said in a statement. He said the Interior Department should issue a new rule on to replace the existing one on methane leaks, which he called a public health and air quality issue.

Senate unexpectedly rejects bid to repeal a key Obama-era environmental regulation - The Senate on Wednesday narrowly blocked a resolution to repeal an Obama-era rule restricting methane emissions from drilling operations on public lands — with three Republicans joining every Democrat to preserve the rule. The 51-to-49 vote on a procedural motion marked the first time since Trump’s election that Republicans have failed in their attempt to use the Congressional Review Act to overturn Obama-era rules. Thirteen other resolutions, based on the 1996 law that allows Congress to overturn rules within 60 legislative workdays of their adoption, have succeeded. Thursday is the deadline for using the Congressional Review Act this way. The methane emissions rule, issued by the Interior Department’s Bureau of Land Management in November, addresses a potent greenhouse gas that is accelerating climate change. The rule would force oil and gas companies to capture methane that had been previously burned off or “flared” at drilling sites. According to federal estimates, the rule would prevent roughly 180,000 tons a year of methane from escaping into the atmosphere and would boost federal revenue between $3 million and $13 million a year because firms only pay royalties on the oil and gas they capture and contain. Sen. John McCain (R-Ariz.) unexpectedly voted no against a motion to proceed with consideration of the resolution, along with GOP Sens. Susan Collins (Maine) and Lindsey O. Graham (S.C.). Two Democrats who had considered backing the rule’s elimination — Heidi Heitkamp of North Dakota and Joe Manchin III of West Virginia — voted against the motion, and sent a letter asking Interior Secretary Ryan Zinke to make it less burdensome. In a floor speech after the vote, Sen. Tom Udall (D-N.M.), said “the very first victory” lawmakers have had in beating back a Congressional Review Act bill this year came from a combination of Democratic unity and a few Republicans’ willingness to buck their leadership. “Thank you so much for coming forward and seeing the common-sense nature of this issue,” Udall said, referring to Collins, Graham and McCain. 

Huge Win in Senate: Oil and Gas Industry's Attempt to Gut Methane Rules Fails - In a win Wednesday for oil and gas-patch communities and taxpayers, a procedural vote failed in the Senate, preventing a Congressional Review Act resolution from nullifying the Bureau of Land Management's (BLM) Methane Waste Rule. The vote to proceed to debate on the resolution failed, 49–51. This rule is a common sense standard to limit wasteful methane pollution from oil and gas operations on public lands . The Congressional Review Act is a controversial and anti-democratic tactic that anti-environmental extremists in Congress attempted to use to push this pro-polluter agenda item forward. "Just when we thought all hope was lost, common sense prevailed today in the United States Congress," Jessica Ennis, Earthjustice senior legislative representative, said. "By preserving this win-win rule that protects public health and saves taxpayers money at the same time, Congress is managing to slowly rebuild its credibility as an institution that can serve as a check against powerful corporate interests." Each year, oil and gas companies leak or deliberately vent millions of tons of methane , a potent climate pollutant, into the atmosphere during oil and gas operations. Methane pollution from these operations not only speeds-up global warming, but is often accompanied by toxic air pollutants like benzene, formaldehyde and ethylbenzene, threatening the health of residents who live nearby. To address this problem, the Bureau of Land Management (BLM) recently finalized a waste prevention rule, which reduces methane pollution and enjoys wide public support; in a poll out earlier this year, 81 percent of Western voters surveyed said they supported leaving the BLM methane rule in place.  Fifty-one senators voted in accordance with their constituents wishes.

Halliburton In Colorado: Board Member’s Donation Shows Power Of Oil And Gas Industry - A top fossil fuel industry official poured $40,000 into the Colorado Republican Party’s super PAC on the same day the state’s legislature began considering a bill to limit the oil and gas industry’s fracking and drilling near schools, according to state documents reviewed by International Business Times. Soon after the contribution from Halliburton board member J. Landis Martin, Republican lawmakers lined up against the legislation. They eventually killed it — days before a deadly blast at a home near an oil well in Northeastern Colorado.Halliburton has a large presence in Colorado. The company says it employs 1,900 people in operations across the state; it bankrolled a 2012 effort to defeat municipal fracking regulations in the state; and it has a top executive on the executive board of the Colorado Oil and Gas Association —  an industry lobbying group that fought the setback legislation, according to state records. (Halliburton is a member of the COGA and has touted its links to the group in the past.) Martin not only serves on Halliburton’s board, he is also chairman of a private equity firm that invests in a Colorado-based company that provides fracking materials to fossil fuel operations in the state and elsewhere. Martin’s March 14th donation was one of the single largest individual contributions in the Colorado Republican Party’s modern history, and the second largest ever given to the party’s super PAC, according to data from the National Institute on Money In State Politics.

What the commissioners can (and can’t) do about fracking -- Last Sunday’s Daily Camera contained an op-ed piece signed by all three Boulder County Commissioners explaining to their constituents, yet again, why they can’t impose a moratorium or an outright ban on oil and gas production in Boulder County — as the local anti-fracking cult continues to demand.The brief answer, in case you’ve been in a persistent vegetative state for the past year, is the rule of law.OK, one more time:Last year, the Colorado Supreme Court declared protracted and serial moratoriums on oil and gas drilling, like Boulder County’s, were both unconstitutional and a violation of state law.The commissioners’ justification for their endless moratoriums — their re-writings of their oil and gas regulations — was so transparently bogus that Colorado Attorney General Cynthia Coffman sued the commissioners to force them to start accepting applications for drilling permits. Had they continued to stall, they very likely would be looking at a court order and maybe contempt of court proceedings after that, not to mention damage suits from oil companies and property owners.This prodded the commissioners to finally adopt new regulations on March 23. They are so deliberately Kafkaesque and over-reaching that they will likely get sued by the oil and gas industry for exceeding their authority. None of which has kept the county’s green-washed rads from calling the commissioners sell-outs to Big Oil and demanding they ban drilling anyway instead of adopting regulations that attempt to strangle it in red tape.

Study: Fracking, north-south drilling open up Wyoming oil -  AP) — Certain approaches to hydraulic fracturing — the more of it, the better — and directional drilling appear the secret to successfully tapping a previously unprofitable oil deposit, according to a Wyoming State Geological Survey report released Monday. For decades, geologists thought the Codell Sandstone of southeast Wyoming was too dense to make drilling worthwhile. Then came the two techniques that have opened access to such deposits nationwide: Fracking, or pumping pressurized water mixed with fine sand and chemicals into wells to break open deposits, and directional drilling. The Codell Sandstone has received far less attention than the overlying Niobrara Shale in Colorado, Wyoming and Nebraska but the same techniques have revolutionized drilling in both. Six companies have produced oil from 119 wells targeting the Codell Sandstone east of Cheyenne over the past five years. The Wyoming State Geological Survey looked at what the most productive Codell wells have in common. Some of the wells, besides tapping the almost 9,000-foot-deep layer of oil-bearing sandstone, were drilled up to two miles to the side of the well pad. Wells drilled into the Codell toward the north or south tended to produce more than those drilled toward the east or west, geologists Rachel Toner and Erin Campbell wrote. Such wells might intersect with more oil-bearing fractures in the formation, they speculated. The top-producing Codell wells also have undergone the most fracking. Each had at least 40 frack stages, or individual fracking zones, along their course. They also used at least 200,000 barrels of water-chemical mix and between 10 million and 12.5 million pounds of proppant, or the fine sand used to prevent the cracks that are opened by fracking from closing back up again. 

U.S. lawmakers seek looser energy development rules for tribal lands | Reuters: A bill to ease restrictions on energy development on U.S. tribal lands has a good chance of passing the Republican-controlled Congress this year, after several failed attempts since 2013, the chair of the Senate Indian affairs committee said. Many Republican lawmakers, along with President Donald Trump, have expressed support for more oil drilling, coal mining and other energy projects on Native American reservations, which are overseen by the federal government. Several additional layers of regulatory bureaucracy have slowed those efforts. "I think we will be able to get the bill through the House this go around," Republican Senator John Hoeven of North Dakota, who authored the bill with seven other Republican Senators, said in a recent interview with Reuters. He said he believed the bill also had the support of "a broad spectrum of tribes across the country" and would "empower" Native Americans. The bill, dubbed the Tribal Energy Development and Self Determination Act, would authorize tribes to conduct their own energy resource appraisals. It would streamline the permitting process for drilling and mining and provide incentives for tribes to enter into joint-venture agreements with private companies. Former President Barack Obama had opposed a previous House version of the bill in 2015 because it would have exempted tribes from some federal environmental regulations. Other versions were blocked after being rolled into broader bills that were defeated. Tribal lands cover just 2 percent of the nation's surface but by some estimates contain as much as a fifth of all remaining U.S. oil and gas reserves.But clearing regulatory hurdles for a single project on tribal lands can take as many as 50 steps, compared to a half dozen on private property, according to Reuters interviews conducted in January with tribal leaders, lawyers, oil company executives and federal regulators.

Dakota Access Pipeline protest movement now focuses on the money -  It’s been a tough few months for opponents of the Dakota Access Pipeline (DAPL). First Donald Trump officially approved the $3.8 billion project. Then indigenous people were forced to clear out of the Oceti Sakowin and Sacred Stone protest camps. And with construction done, oil has now begun flowing from North Dakota to Illinois. But the opposition has not faded away. In fact, it's entering a new phase by moving from the plains of North Dakota into city councils and corporate boardrooms. And its indigenous leaders are scoring big victories. They’ve convinced cities to divest billions of dollars in their portfolios from Wells Fargo, which is financing about 5 percent of Dakota Access. Several major European banks have also dropped investments in the project. The protest camps at the Standing Rock Indian Reservation “planted seeds in thousands upon thousands of people’s moral sensibilities,” said Jackie Fielder, a 22-year-old indigenous activist. She’s now fighting to get San Francisco to divest: “I don’t think [the DAPL opposition] is nearly over. It’s multiplying.”The DAPL divestment movement may foreshadow similar protests to come against the Keystone XL Pipeline project, which President Trump also green-lit, and other infrastructure that would increase planet-warming greenhouse gas emissions.Fielder was born and raised in Long Beach, California. But she has deep ancestral ties to the land and water Standing Rock protesters are fighting to protect. She’s an enrolled member of North Dakota’s Three Affiliated Tribes – and is also descended from the Cheyenne River Sioux Tribe, a key leader in the Dakota Access opposition.

Dakota Access Pipeline Divestiture and Climate Change Politics  --The Financial Times reports today on last-ditch efforts to thwart the Dakota Access Pipeline (DAPL) in Dakota pipe lenders under pressure to withdraw: A number of banks funding the controversial $3.7bn Dakota Access Pipeline have pulled out of the project, following environmental and human rights concerns from the public and big investors that it would contaminate drinking water and damage sacred burial sites of the Standing Rock Sioux tribe. Efforts to force divestiture focus on two prongs: those banks funding the project, and on states and cities– such as Seattle, Washington; Eugene, Oregon; and Providence, Rhode Island– that invest in lenders, such a Wells Fargo Bank– that have financed the project, as discussed in this recent opinion piece in The Guardian, We can resist the Dakota pipeline through a powerful tool: divestment.  The impact of these moves is unlikely to thwart DAPL — especially as Trump has provided a full-speed ahead for construction of both the DAPL and Keystone XL pipelines, as I discussed more thoroughly in this post, Trump Approves Keystone XL Pipeline, Making Good on Campaign Promise. I shouldn’t neglect to note that the way for Trump ’s DAPL policy was cleared by his predecessor, who as usual, while virtue-signalling his support for the #noDAPL cause, failed to stop construction of the pipeline during his presidency, as I discussed in this previous post, Obamamometer Whispers DAPL Sweet Nothings to Lure Progressives. Now, with huge amounts of money at stake, contracts in place, and most of the pipeline built, it would take a massive intervention by a severely avenging Jehovah to prevent DAPL’s completion. But I am intrigued by the success that #noDAPL advocates have had in pressing various European lenders to pull the plug in DAPL. Allow me to quote at length from the FT’s account:

Dakota Access pipeline has first leak before pipeline is fully operational - The Dakota Access pipeline has suffered its first leak, outraging indigenous groups who have long warned that the project poses a threat to the environment.The $3.8bn oil pipeline, which sparked international protests last year and is not yet fully operational, spilled 84 gallons of crude oil at a South Dakota pump station, according to government regulators.  Although state officials said the 6 April leak was contained and quickly cleaned, critics of the project said the spill, which occurred as the pipeline is in the final stages of preparing to transport oil, raises fresh concerns about the potential hazards to waterways and Native American sites. “They keep telling everybody that it is state of the art, that leaks won’t happen, that nothing can go wrong,” said Jan Hasselman, a lawyer for the Standing Rock Sioux tribe, which has been fighting the project for years. “It’s always been false. They haven’t even turned the thing on and it’s shown to be false.” The pipeline, scheduled to transport oil from North Dakota to Illinois, inspired massive demonstrations in 2016 and was dealt a major blow when the Obama administration denied a key permit for the project toward the end of his presidency. But shortly after Donald Trump’s inauguration, the new administration ordered the revival of the pipeline and worked to expedite the final stage of construction.  The Standing Rock tribe, which has fought the pipeline corporation Energy Transfer Partners and the US government in court, has argued that the project requires a full environmental study to assess the risks of the pipeline. But under Trump, who has close financial ties to the oil company, the project recently completed construction by the Standing Rock tribe’s reservation in North Dakota and has been loading oil in preparation for a full launch.

The Dakota Access Pipeline Leaked 84 Gallons in April and It's Not Even Fully Operational: The Dakota Access pipeline, which was at the center of protests by the Standing Rock and Cheyenne River Sioux tribes as well as environmentalists, leaked 84 gallons of oil in April, according to a report from the Associated Press.The pipeline, which is not yet fully operational, was filled with oil in preparation to begin service at the end of March of this year after duplicitous, ill-tempered toddler President Donald Trump signed an executive order for its advancement, just two days after the collective national nightmare that was the inauguration. News of the leak was published in a searchable database on South Dakota’s Department of Environment and Natural Resources website. But there was no public announcement about it because the state doesn’t issue news releases about leaks unless they prove to be a threat against public health, drinking water reserves or fisheries, according to Brian Walsh, an environmental scientist with the agency. The leak took place on April 6 and was quickly contained.  Jan Hasselman, an attorney representing the Standing Rock Sioux Tribe, who, according to the Guardian, has been fighting against this pipeline for years, expressed disappointment and again, stressed the need for a closer environmental assessment. “It doesn’t give us any pleasure to say, ‘I told you so.’ But we have said from the beginning that it’s not a matter of if, but when,” Hasselman told the Guardian. “Pipelines leak and they spill. It’s just what happens.”

Trump Resurrects Controversial Fracking Project - Proving once again that elections have consequences, the Trump Administration has resurrected a controversial fracking proposal in California’s Los Padres National Forest that had been on hold for nearly three years. The news came just days before Donald Trump reversed another Obama-era policy, signing an executive order to open up California’s coastal waters for oil drilling. When Texas-based oil company, Seneca Resources Corporation, applied in 2014 to frack eight new oil and gas wells and build 5,000 feet of new pipeline in and around the Sespe Wilderness, environmental organizations sprang to action. One group, Save the Sespe, gathered over 3,000 signatures from concerned citizens who opposed the project, expressing concern about air and water contamination, threats to wildlife, greenhouse gas emissions, increased seismic activity, and water depletion. In January 2015, a report from California’s Department of Oil, Gas & Geothermal Resources confirmed those fears, concluding that fracking in the Sespe posed “significant and unavoidable” environmental impacts to air quality, biological resources, climate change, recreation, and worker safety. After DOGGR released that report, the U.S. Forest Service placed the fracking proposal “on hold,” a status that remained unchanged until last month. Trump’s Forest Service has now put the project back on track and is conducting an environmental assessment - the lowest level of federal review – for the drilling proposal. Local groups will organize opposition to the project once the public comment period opens.  

Legal Settlement Halts Effort to Open 1 Million Acres in California to Oil Drilling, Fracking -- Conservationists have forced the Trump administration to halt plans to open more than 1 million acres of public land and mineral estate in California to oil drilling and fracking. The victory preserves a four-year-old moratorium on leasing federally owned land in the state for oil and gas development. The legal settlement, approved Wednesday, resolves a lawsuit brought by the Center for Biological Diversity and Los Padres ForestWatch, represented by Earthjustice. The agreement requires the Bureau of Land Management to rework a resource-management plan that would have auctioned off drilling rights on vast stretches of public land in California’s Central Valley, the southern Sierra Nevada, and Santa Barbara, San Luis Obispo and Ventura counties. “This is a big victory for California and a major blow to Trump’s plan to turn our public lands over to oil companies,” said Brendan Cummings, the Center’s conservation director. “Despite the petroleum industry’s stranglehold on the White House, these beautiful wild places are still off limits to drilling and fracking. That protects our water, wildlife and climate from fracking pollution.” The BLM has not held a single lease sale in California since 2013, when a federal judge first ruled that the agency had violated the National Environmental Policy Act by issuing oil leases in Monterey County without considering the environmental dangers of fracking. The new settlement will continue that de facto leasing moratorium. “This agreement ensures that public lands along California’s central coast — and the communities that depend on them — are protected from the harmful effects of oil drilling and fracking,” said ForestWatch Executive Director Jeff Kuyper. “Our region’s wildlife, clean water and scenic landscapes are too valuable to sacrifice to development.” 

690,000 Contiguous Acres in Alaska May Soon Be Open to Fracking -- Steve Horn  -- Hydraulic fracturing's horizontal drilling technique has enabled industry to tap otherwise difficult-to-access oil and gas in shale basins throughout the U.S. and increasingly throughout the world. And now fracking , as it's known, could soon arrive at a new frontier: Alaska.  As Bloomberg reported in March, Paul Basinski , a pioneer of fracking in Texas' prolific Eagle Ford Shale , has led the push to explore fracking's potential there, in what's been dubbed " Project Icewine ." His company, Burgundy Xploration, is working on fracking in Alaska's North Slope territory alongside the Australia-based company 88 Energy (formerly Tangiers Petroleum ). "The land sits over three underground bands of shale, from 3,000 to 20,000 feet below ground, that are the source rocks for the huge conventional oilfields to the north," wrote Bloomberg. "The companies' first well, Icewine 1, confirmed the presence of petroleum in the shale and found a geology that should be conducive to fracking." According to an Australian Securities Exchange filing , in April of this year, 88 Energy and Burgundy Xploration began pre-drilling procedures for Icewine 2, a second fracking test well. In the filing, which also noted receipt of a Permit to Drill from the Alaska Oil and Gas Conservation Commission, 88 Energy said it expects to begin "stimulation and production testing" in June or July.  When all is said and done, the two companies may soon have a plot of land 690,000 contiguous acres in size, according to the Securities Exchange filing. A May 3 Securities Exchange filing noted that 88 Energy is still on schedule for Icewine 2.

Secretly Approved in Alaska, Will LNG Trains Soon Appear in Rest of US?  - Steve Horn - In 2015, a federal rail agency authorized the Alaska Railroad Corporation to ship its first batch of liquefied natural gas (LNG) by rail in Alaska, but granted this permission behind closed doors, according to documents obtained by the Center for Biological Diversity (CBD) and provided to DeSmog.The documents, a series of letters and legal memoranda obtained through the Freedom of Information Act (FOIA), show that the Federal Railroad Administration (FRA) may have violated the National Environmental Policy Act (NEPA) by permitting the shipping of LNG, a highly combustible and flammable material, via rail without any public notification or comment period. The agency granted the Alaska Railroad Corporation a legal exemption under 49 C.F.R. § 174.63(a).That federal statute mandates that a “carrier may not transport a bulk packaging … containing a hazardous material in container-on-flatcar (COFC) or trailer-on-flatcar (TOFC) service … unless approved for transportation by” the FRA.The Association of American Railroads (AAR), a rail industry lobbying group, has since petitioned the FRA for the ability to ship LNG tankers by rail (as opposed to containers or trailers on flatcars), filing the request on January 17, according to documents on file at Regulations.gov.“AAR petitions for rulemaking to authorize the transportation of methane, refrigerated liquid (“LNG”), by rail in … tank cars,” reads the AAR petition. “LNG should be authorized for rail transportation because it is a safe method of transporting this commodity, LNG shippers have indicated a desire to use rail to transport it, and because railroads potentially will need to transport LNG for their own use as a locomotive fuel.”In its petition, AAR — whose members include nearly all of the major rail companies — says that natural gas companies want to explore transporting LNG by rail in various regions around North America. “Notwithstanding the requirement for a special approval, customers have expressed interest in shipping LNG by rail from Pennsylvania to New England, and between the U.S. and Mexico,” wrote AAR. “Authorizing transportation of LNGby rail likely would stimulate more interest.”

Canada's Suncor prepares oil sands growth as global majors exit | Reuters: Even as the world's largest energy companies exit Canada's high-cost oil sands the country's top producer Suncor Energy is lining up its next phase of growth in the world's third largest crude reserves. The preliminary plans for new projects in remote northern Alberta follow a stream of multi-billion dollar deals in which international oil majors sold off oil sands assets to Canadian producers, who are betting technology and economies of scale will make the region competitive with other plays globally. Suncor said on Monday it will file a regulatory application for its 160,000 barrel-per-day Lewis project later this year, and in March received approval for the 80,000 bpd Meadow Creek East plant. It also plans to file an application for the 40,000 bpd Meadow Creek West project later this year. The company has not yet taken a final investment decision on any of the projects but if sanctioned they would boost the company's current output of 680,000-720,000 bpd by more than a third. In total, Canada produces around 4 million bpd. Calgary-based Suncor cemented its position as the largest oil sands operator last year when it bought Canadian Oil Sands Ltd and Murphy Oil's stake in the giant Syncrude mining and upgrading project in two deals worth over C$5 billion ($3.66 billion). Its strategy for future growth relies on building identical smaller thermal plants to help cut costs. This is how future development across the industry is expected to look, as the exit of the majors has drawn a line for now under the megaprojects that drove the industry's rapid expansion over the past 15 years. Suncor will add new plants able to produce between 30,000-40,000 barrels per day every 12-18 months, chief executive Steve Williams said on a quarterly earnings call last month.

Canada govt, industry to spend $51 mln on oil sands clean tech projects | Reuters: The Canadian and Alberta governments and three energy companies said on Thursday they will spend C$70 million ($51.14 million) to develop three new clean technology projects, aimed at cutting costs and carbon emissions in the country's oil sands. Northern Alberta's vast oil sands hold the world's third-largest crude reserves but are costly to operate and require carbon-intensive production methods, factors that have prompted a number of international oil majors to pull back from the patch in recent months. The sector is now concentrated in the hands of a smaller pool of domestic players, who have repeatedly said technology will be the key to remaining competitive. Canada's Ministry of Natural Resources is contributing C$26.2 million in funding under its previously announced Energy Innovation Program, which has C$50 million over two years to support the development of clean oil and gas technologies. Provincial government-funded agency Alberta Innovates will invest C$5.2 million, while the three companies involved - Cenovus Energy Inc, MEG Energy Corp and privately held Field Upgrading - will provide the additional C$43.3 million. "Innovation like this is critical because while the transition to a low carbon future is well underway the world will continue to rely on fossil fuels for years to come. Our responsibility is to make them cleaner," said Canada's Minister for Natural Resources Jim Carr. The funding will help take all three technology projects towards the commercial demonstrations stage.

EIA's Short Term Energy Outlook For May, 2017, Has Been Released

  • Increased drilling rig activity is expected to boost to U.S. crude oil production this year and next, with forecast production in 2018 averaging 10 million barrels per day.
  • Higher oil production from the United States, along with rising oil output from Canada and Brazil, is expected to curb upward pressure on global oil prices through the end of 2018.
  • The recent decline in crude oil prices and rising gasoline inventories are cutting into pump prices, lowering the average price U.S. drivers are expected to pay for gasoline this summer.
  • U.S. gasoline inventories rose in April, a month when they normally fall.
  • Because of higher overall pump prices this year, the average U.S. household is expected to spend about $150 more for gasoline during 2017 than last year. However, gasoline expenditures are still expected to be lower than the average for the previous five years.
  • U.S. industrial production growth, rising rail traffic, and higher drilling rig activity are pushing up distillate fuel use.
  • U.S. marketed natural gas production is expected to increase almost 5% next year.U.S. electricity generation is expected to be flat this year and then increase in 2018, with natural gas-fired generating facilities accounting for the biggest share of electricity supplies during both years.:
  • U.S. coal production is expected to rise 5% this year and about 1% in 2018 on higher coal-fired electricity generation, which would be the first back-to-back annual increase in coal output since 2010-11.
  • The amount of U.S. wind power generation capacity is expected to top 100 gigawatts by the end of next year, when it would account for 9% of the electric power sector’s total generation capacity, and provide more than 6% of total electricity supplies.

NYMEX June gas rises after smaller-than-expected storage injection - The NYMEX June natural gas futures contract rose 8.4 cents Thursday to settle at $3.376/MMBtu after the US Energy Information Administration reported a smaller-than-expected build in gas storage inventories in the week that ended May 5. EIA estimated a net injection of 45 Bcf for last week, 9 Bcf below the 54 Bcf build expected by a consensus of analysts surveyed by S&P Global Platts. Inventories totaled 2.301 Tcf as of May 5, down 13.9% from where stocks were at the same time last year. The largest injection by region was seen in the East at 25 Bcf, which boosted regional stocks to 350 Bcf. However, that total is nearly 25% lower than the 466 Bcf reported for the same time in 2016, according to EIA data. A decrease in dry gas production is seen as a key reason why the storage total is lagging the year-ago level. According to data from Platts Analytics' Bentek Energy unit, US dry gas production is down 1.8 Bcf/d so far in 2017. Concurrently, there has been an increase in both exports to Mexico and in demand for LNG terminal feedgas of a combined 2.1 Bcf/d year to date, which has decreased the supply of gas to the domestic market. US demand on Thursday is expected to tick 900 MMcf higher compared with Wednesday, with residential and commercial consumption responsible for 800 MMcf of the increase, according to Platts Analytics data. Power burn is expected to be unchanged. In the most recent six- to 10-day outlook from the National Weather Service, temperatures are expected to be below average in the West, while the Southeast region is forecast to see above-average temperatures, which could boost power burn next week.

US and China agree closer cooperation on LNG trade -  The US and China have agreed to advance their economic cooperation in the energy sector, in a move aimed at improving access of US-based LNG exporters to the world's third largest consumer of the fuel. The agreement on LNG is one of 10 initial actions, released by the White House Wednesday under the framework of the US-China Comprehensive Economic Dialogue, aimed at promoting economic engagement and cooperation between the two world powers in a range of issues including energy, agriculture, investment and finance. "The United States welcomes China, as well as any of our trading partners, to receive imports of LNG from the United States," the release said. "Companies from China may proceed at any time to negotiate all types of contractual arrangement with US LNG exporters, including long-term contracts, subject to the commercial considerations of the parties."It continued to say the US treats China no less favorably than other non-free trade agreement trade partners with regard to LNG export authorizations, but details on how cooperation was to move forward were scarce. China is already an importer of US-sourced LNG, having received 212,000 mt in 2016 and 420,000 mt so far in 2017, according to Platts Analytics, through a combination of spot deals and long-term contracts with portfolio suppliers. It imported its first LNG from the US in late August 2016, when state-owned CNOOC received a cargo from the Sabine Pass export facility in the US Gulf of Mexico aboard the LNG carrier Maran Gas Apollonia, cFlow, S&P Global Platts trade flow software, showed. It was the first cargo from the Lower 48 States to reach Northeast Asia since Sabine Pass commenced operations in February 2016, and the first LNG tanker to transit the newly expanded Panama canal.  

Shale Drillers Are Outspending the World With $84 Billion Spree | Rigzone-- U.S. shale explorers are boosting drilling budgets 10 times faster than the rest of the world to harvest fields that register fat profits even with the recent drop in oil prices. Flush with cash from a short-lived OPEC-led crude rally, North American drillers plan to lift their 2017 outlays by 32 percent to $84 billion, compared with just 3 percent for international projects, according to analysts at Barclays Plc. Much of the increase in spending is flowing into the Permian Basin, a sprawling, mile-thick accumulation of crude beneath Texas and New Mexico, where producers have been reaping double-digit returns even with oil commanding less than half what it did in 2014. That’s bad news for OPEC and its partners in a global campaign to crimp supplies and elevate prices. Wood Mackenzie Ltd. estimates that new spending will add 800,000 barrels of North American crude this year, equivalent to 44 percent of the reductions announced by the Saudi- and Russia-led group. “The specter of American supply is real,” Roy Martin, a Wood Mackenzie research analyst in Houston, said in a telephone interview. “The level of capital budget increases really surprised us.” Drilling budgets around the world collapsed in 2016 as the worst crude market collapse in a generation erased cash flows, forcing explorers to cancel expansion projects, cut jobs and sell oil and natural gas fields to raise cash. The pain also swept across the Organization of Petroleum Exporting Countries, which in November relented by agreeing with several non-OPEC nations to curb output by 1.8 million barrels a day. Oil prices that initially popped above $55 in the weeks after the cut was announced have since dipped to around $46, reflecting pessimism that the OPEC-led deal can withstand the onslaught of U.S. shale. So far, independent American explorers such as EOG Resources Inc. and Pioneer Natural Resources Co. are holding fast to their ambitious growth plans. Some recently finished wells in the Permian region yielded 70 percent returns at first-quarter prices, EOG Chief Executive Officer Bill Thomas told investors and analysts during a conference call on Tuesday. EOG, the second-largest U.S. explorer that doesn’t own refineries, plans to boost spending by 44 percent this year to between $3.7 billion and $4.1 billion. Pioneer is eyeing a 33 percent increase to $2.8 billion. The sub-group that includes North American shale drillers like EOG and Pioneer is collectively targeting $53 billion in spending this year, up from $35 billion in 2016,

US producers boost oil hedges to backstop accelerated capital investment - After reducing capital expenditures by 70% in 2014-16, U.S. exploration and production companies (E&Ps) have collectively taken their foot off the brake and stomped on the gas, boosting 2017 capital outlays by an impressive 42% to kick-start production growth. At first glance, the move may seem somewhat reckless. After all, E&Ps just weathered a crisis caused by plunging oil prices partially through impressive capital discipline, and the price for benchmark West Texas Intermediate (WTI) crude oil has once again drifted below $50/bbl over concern that U.S. output may be rising too fast. But as we’ve learned from a new report by our friends at Bloomberg Intelligence, most major U.S. oil producers paired their increased investment with significant oil-price protection, aggressively snapping up hedges in late 2016 as oil prices were buoyed by the announcement of planned OPEC output cuts. Today we review BI’s examination of the efforts by many E&Ps to lock in $50/bbl-plus prices for much of their 2017 production. The surge in hedging activity by U.S. E&Ps is another indicator of an ongoing transformation of the E&P sector that we analyzed in depth in Piranha!, a new market study of 43 representative U.S. E&Ps. Of that universe of companies, 21 focus on oil (60%+ liquids reserves), nine are gas-weighted producers (60%+ natural gas reserves) and 13 are diversified producers. All major U.S. shale/unconventional plays are represented in the combined portfolios of these firms. In Very Particular Places to Go, we discussed the purpose and organization of our analysis, which included an examination of the strategies that E&Ps are adopting to thrive in a $50/bbl world; a look at merger and acquisition (M&A) activity by basin; and a review of each company’s financial condition, capex plans, geographic focus, M&A strategies and a general assessment of the company’s position in today’s U.S. E&P industry.

Statoil Q1 results handily beat estimates – Norway's Statoil posted significantly better-than-expected quarterly results on Thursday, helped by a rise in output and higher crude prices year-on-year. The results are in line with the industry's broader upward trend as oil majors BP, ExxonMobil, Chevron and Total also have reported better than expected earnings. "Our solid financial result and strong cash flow across all segments was driven by higher prices, good operational performance and an organic production growth of 5 percent," the company said in a statement. The oil and gas company reported adjusted operating profit of $3.3 billion in the quarter, against expectations of $2.67 billion. A year ago, adjusted operating profit stood at $857 million. Cash flows from operating activities more than doubled to $5.97 billion in the first quarter from $2.2 billion in the year-ago period with its international operations also delivering positive results. Statoil’s quarterly petroleum production stood at 2,146 million barrels of oil equivalents per day (boed), with production from the Norwegian continental shelf hitting the highest level in five years.

Exxon, Petrobras Said to Hold Talks on Wide-Ranging Partnership | Rigzone -- Exxon Mobil Corp. and Petrobras have held talks on a strategic partnership that could involve multiple assets in Brazil and overseas in different segments of the industry, similar to the $2.2 billion deal signed with Total SA in December, said people familiar with the conversations. Such a deal could give Exxon access to oil fields and infrastructure in Brazil while state-controlled Petroleo Brasileiro SA could gain from Exxon’s expertise in production, refining and distribution, the people said. Carla Lacerda, Exxon’s country chief, said earlier this month that the U.S.-based oil giant sees great opportunities in Brazil. International oil companies are taking a closer look after Brazil eased nationalist regulations and opened the market to more competition. Last week, Petrobras Chief Executive Officer Pedro Parente met in Houston with both Lacerda and BP Plc’s head of Latin America, Felipe Arbelaez, the people said, asking not to be named because the discussions were private. Arbelaez confirmed that he and Parente had talked in “a number of meetings.” He said that with the policy changes being undertaken by Brazil’s government, “all companies are reviewing their Brazil strategy.” Lauren Kerr, an Exxon spokeswoman, declined to comment. “As a matter of practice we don’t comment on rumors or speculation,” she said. Petrobras didn’t immediately respond to a request for comment. In December, France-based Total agreed to buy stakes in Brazilian oil fields and energy infrastructure in a $2.2 billion deal that is expanding its presence in Latin America’s largest economy.

When It Comes to Fracking, Argentina Dreams Big | Inter Press Service: (IPS) - Since a US Energy Information Administration (EIA) report announced in 2011 that Argentina had some of the world’s biggest shale oil and gas reserves, the dream of prosperity has been on the minds of many people in this South American nation where nearly a third of the population lives in poverty. The question that hangs in the air is whether it is really possible for Argentina to become South America’s Saudi Arabia, or if it is just a fantasy. Six years after the release of the report, although Argentina is still, like then, a net importer of oil and natural gas, the hope would appear to remain intact for centre-right President Mauricio Macri. When Macri visited the United States on Apr. 25-27 he stopped over in Houston, Texas, described as the “Oil Capital of the World”. There, he urged the executives of the world’s top energy companies to make the huge investments that Argentina needs to exploit its reserves. “Argentina is among the countries with the greatest potential in the world. We want the best companies to come and partner with us,” Macri told oil executives at lunch in Houston on Apr. 26, before flying to Washington, where he met with his US counterpart Donald Trump at the White House.“The delays in exploiting non-conventional fossil fuels in Argentina are inherent to the process, from a technical standpoint. The oil and gas industry operates in the long term,” said Martín Kaindl, head of the Argentine Oil and Gas Institute (IAPG), a think tank supported by oil companies in the country.“We have to do things well for this opportunity to become a source of wealth for Argentina,” he told IPS. So far, however, what seems to have grown more than the investments are the social movements opposed to hydraulic fracturing or fracking, in which rock is fractured by the high-pressure injection of ‘fracking fluid’ (primarily water, as well as sand and chemicals,) to release natural gas and oil from shale deposits.. This process has environmental and socioeconomic effects, according to experts quoted by environmentalists.

Oil company Santos admits business plan is based on 4C temperature rise -  The oil and gas company Santos has admitted its business plans are based on a climate change scenario of a 4C rise n global temperatures, at odds with internationally agreed efforts. Its chairman, Peter Coates, made the comments at an AGM in Adelaide on Thursday, telling shareholders it was “sensible” and “consistent with good value”.  Earlier this week, the Australian National University, which previously divested from Santos citing a commitment to its renewables research, appeared to have reinvested in the company.  There has been a shareholder push for a resolution that Santos disclose its climate risk assessments and scenario analyses. Asked whether the analyses were conducted on a 2C pathway, Coates replied that the company had adopted a 4C pathway.“It’s in comparison to the [International Energy Agency] business-as-usual forecast on carbon emissions,” Coates said.“There’s been no nationally determined commitment to the 2C scenario, and even the 4C scenario is not funded. So I think what we’re doing is very sensible, and consistent with good value.”Will Steffen, councillor with the Climate Council, and an emeritus professor at ANU, said Coates’s revelation was “absolutely appalling”.“[A 4C pathway] really is a worst-case scenario,” he told Guardian Australia. “This is not some minor climatic blip we need to deal with. It’s a completely different climate system.”Steffen said the difference between the ice age and the Holocene age, which Earth has been in for about 12,000 years, was 4C. “You’d be locking in tens of metres of sea-level rise, and you can forget about the world cities,” he said.In 2015 Shell was accused of pursuing a business strategy based on 4C warming, which experts have said would lead to catastrophic climate change, including a devastating impact on world food production and the finance market.  The Paris climate agreement, which came into effect late last year, sets a target of carbon emissions that would mean a global temperatures rise of no more than 2C above pre-industrial levels.

Can southeast infrastructure handle southeast demand growth? - Only a few years ago, pretty much all the natural gas flowing through pipelines in the southeastern U.S. was headed north to serve demand in the Northeast and the Midwest. But that’s all been changing — and fast. Gas production in the Marcellus/Utica has soared and now meets the needs of the Northeast and more. And, as LNG exports from the Gulf Coast ramp up and Southeast gas demand for power generation rises, more and more Marcellus/Utica gas is flowing south, raising the question of whether pipes in the Southeast can handle it all over the long term. Today, we discuss the findings of a study RBN prepared for the American Petroleum Institute (API) on the adequacy of regional gas pipeline infrastructure. Back in 2014, we posted (South)Eastbound and Down – The Southeast, Emerging Demand Epicenter of U.S. Gas Industry, in which we recounted the findings of a study of the southeastern U.S. and how it would be supplied, performed for America’s Natural Gas Alliance (ANGA). At the time, we suggested it might be the first installment in a series, but then never got around to doing another installment. Oops.  Now ANGA is a part of the American Petroleum Institute (API). So, believing that even three years isn’t too late to flesh out and update such an important subject, here we are with a new study looking at many of the same issues for API — updated for the rapid evolution of the facts during those three years, as flows have reversed from the traditional south-north, to north-south. Basically, how are we doing?

China, India plans for electric cars threaten to cut gasoline demand | Reuters: Demand for gasoline in Asia may peak much earlier than expected as millions of people in China and India buy electric vehicles over the next decade, threatening wrenching change for the oil industry, oil and auto company executives warned. They said refiners should prepare for a future in which gasoline, their biggest source of revenue, will be much less of a cash cow. Change is being prompted by policy moves in India and China, where governments are trying to rein in rampant pollution, cut oil imports, and compete for a slice of the fast-growing green car market. In its "road map", released in April, China said it wants alternative fuel vehicles to account for at least one-fifth of the 35 million annual vehicle sales projected by 2025. India is considering even more radical action, with an influential government think-tank drafting plans in support of electrifying all vehicles in the country by 2032, according to government and industry sources interviewed by Reuters late last week. "We will see a clear shift to electric cars. It's driven by legislation so electric cars are coming, it's not a niche anymore," Wilco Stark, vice president for strategy and product planning at German car maker Daimler (DAIGn.DE), told Reuters. Stark and other executives were interviewed during the Asia Oil & Gas Conference in Kuala Lumpur this week. Daimler sees electric vehicles contributing 15-20 percent of its overall sales by 2025 and at least an additional 10 percent of sales coming from hybrids, he said. Electric cars currently make up less than 2 percent of the global car fleet, and any faster-than-expected growth in that percentage will materially impact oil demand and the refining business

India's gasoline boom stalls: Kemp (Reuters) - India's gasoline consumption has flattened out in recent months after tremendous growth between 2014 and 2016. India's motorists consumed 581,000 barrels of gasoline per day between February and April, according to the Petroleum Planning and Analysis Cell at the Ministry of Petroleum and Natural Gas.Gasoline consumption rose by 4 percent compared with the same period a year earlier, a sharp slowdown from the 14 percent increase between 2015 and 2016 (http://tmsnrt.rs/2pF4Bso).  Gasoline consumption growth has been slowing since the middle of 2016 after surging for the previous two years (http://tmsnrt.rs/2pFeqqf). Consumption growth for most other fuels used for cooking and transportation has also been slowing for the last nine months.Demand for liquefied petroleum gas and kerosene used for cooking, heating and lighting as well as diesel used for transport all show signs of levelling off or actually falling in the first four months of 2017.  The slowdown may have been compounded by the demonetisation of large-denomination bank notes announced at the start of November as part of the government's anti-corruption campaign. Demonetization resulted in a sharp slowdown in sales of the cheaper motorcycles favoured by first-time buyers in rural areas. Rapid expansion in motorcycle ownership has been one of the major factors driving increases in gasoline demand ("India's new motorcycle owners drive gasoline boom", Reuters, Sept. 2016).  Rising crude oil and refined fuel prices over the last year are also likely to have constrained the growth in consumption and other fuels.

Despite Sanctions, Russia's Oil Industry Powers On | Fox Business: The sanctions, put in place by the U.S. and European Union in 2014 after Russia's annexation of the Crimea region of Ukraine, were meant to limit Russia's pursuit of new technology for extracting more crude oil and natural gas.The measures specifically targeted deepwater drilling planned in the Black Sea, Arctic operations and the use of fracking technology in Siberia. The terms were a blow to Exxon because drilling in those areas was at the heart of a landmark deal the company struck a few years before to partner with state oil firm PAO Rosneft. The company sought a waiver from U.S. sanctions to drill in the Black Sea, but was rejected last month by the Trump administration. At the same time, some of the company's European rivals are moving ahead with projects in Russia, many under partnerships begun before the sanctions. BP PLC (BP) was allowed to keep its nearly 20% stake in Rosneft, which contributed $590 million to its net earnings in 2016. Italy's Eni SpA (E) is preparing to drill a Black Sea well later this year as part of a partnership with Rosneft, and also plans to explore the Arctic waters of Russia's Barents Sea. The company has proceeded because the EU allowed partnerships in place at the time of sanctions to continue, Eni has said. The U.S. didn't grant exemptions for existing partnerships, as Exxon's experience showed. An EU spokeswoman said that while some differences exist between how sanctions have been applied by different countries, these have been limited and don't undermine the overall impact of the restrictions.

Shell proposes adding Russian oil to Brent benchmark | Reuters: Royal Dutch Shell on Wednesday urged oil pricing agency S&P Global Platts to protect the dated Brent crude benchmark from declining North Sea supply by including other grades, such as Russian Urals, in its price-setting process. The suggestion marks a shift from two years ago when Shell said adding Urals would not be "worth the trouble". The benchmark, based on light North Sea crude grades, is used to price about two-thirds of the world's oil but a decline in North Sea output has led to concerns that physical volumes could become too thin and prone to large price swings. Platts announced it would add a fifth grade, Troll, to the benchmark slate from January 2018 but Shell says more must be added in the next two to three years and considers Russian medium sour Urals as a top candidate. The benchmark is now made up of Brent, Forties, Oseberg, and Ekofisk, known as BFOE. "A good benchmark need not only be representative of what the region produces ... If you had to pick one grade of crude, Urals is the one which northwest European refineries should be designed to run optimally," Mike Muller, vice president of crude trading and supply at Shell, told the Platts Crude Summit in London.

New major Senegal natural gas find raises prospect of second LNG hub: BP, Kosmos - BP and partners Kosmos Energy announced Monday a new major gas discovery off Senegal able to feed a potential further LNG hub in the gas-rich West African basin. The Yakaar-1 exploration well drilling in the Cayar Offshore Profond block discovered 15 Tcf of gross gas resources, in line with pre-drill expectations, Kosmos said in a statement. The find's condensate-to-gas ratio is also on par with previous discoveries in the area, Tortue and Teranga, at 15-30 barrels per million cubic feet, it said. "This discovery marks an important further step in building BP's new business in Mauritania and Senegal," BP's upstream head Bernard Looney said in a separate statement. "The Yakaar discovery, coupled with the Teranga discovery, creates the foundation for a further LNG hub in the basin." Formerly known as Teranga West, Yakaar-1 lies in the Cayar Offshore Profond block roughly 95 km northwest of Dakar. Kosmos and BP each currently hold an effective 30% participating interest in the Cayar Offshore Profond license.

Difference between output and exports bedevils OPEC oil goals: Russell | Reuters: ne of the factors behind the recent slump in crude oil prices may be the realization among market participants that there is a difference between production cuts and export flows. While OPEC and its allies appear to have been relatively successful in implementing their planned output cuts of 1.8 million barrels per day (bpd), this has yet to show up in a meaningful way in the amount of crude oil being transported by ships. The seeming easy availability of crude despite the output cuts helped drive crude prices lower, with Brent dropping as low as $46.64 a barrel on May 5, just above the close of $46.38 on Nov. 29, the day before OPEC and its allies announced the deal to trim production and down about 20 percent since its recent peak in early January. The 11 members of the Organization of the Petroleum Exporting Countries that agreed last November to restrict output by 1.2 million bpd for the first six months of 2017 achieved 90 percent compliance in April, according to a Reuters survey. Output by the 11 countries was 29.92 million bpd in April, up fractionally from 29.9 million in March and only about 116,000 bpd above the agreed target. The non-OPEC countries that agreed to curb their output by a combined 600,000 bpd also largely claim to be compliant, with major producer Russia saying it has exceeded the 300,000 bpd it agreed to cut as part of the deal aimed at boosting oil prices. While ship data doesn't capture oil moved by pipeline, it still represents more than half of the global market and is therefore a useful indicator. The broadest measure of the data captures all movement by tankers, including domestic voyages and ship-to-ship transfers, and provides a universal picture of the amount of crude moving around the world. In April this totalled 45.23 million bpd, down from March's 46.4 million bpd and February's 46.2 million bpd, but up from January's 44.3 million bpd, according to Thomson Reuters' Eikon vessel-tracking and port data.

Saudi Arabia says will 'do whatever it takes' to balance oil market | Reuters: Saudi Energy Minister Khalid al-Falih said on Monday that oil producers would "do whatever it takes" to rebalance the market and that he expected a global deal on cutting crude output to be extended through all of 2017. The Organization of the Petroleum Exporting Countries, of which Saudi Arabia is the de-facto leader, and other producers including Russia pledged to cut output by 1.8 million barrels per day (bpd) in the first half of the year to boost the market. But global inventories remain high, pulling crude oil prices back below $50 per barrel and putting pressure on OPEC to extend the cuts to the rest of the year. "Based on consultations that I've had with participating members, I am confident the agreement will be extended into the second half of the year and possibly beyond," Falih said at an industry event in Kuala Lumpur. "The producer coalition is determined to do whatever it takes to achieve our target of bringing stock levels back to the five-year average," he said. Falih said recent price falls had been caused by seasonal low demand and refinery maintenance, as well as by non-OPEC production growth, especially in the United States. U.S. oil production has gained more than 10 percent since mid-2016 to 9.3 million bpd, close to the levels of top producers Russia and Saudi Arabia. Despite this, Falih said markets had improved from last year's lows, when crude prices fell below $30 per barrel.

OPEC Runs Out of Options as Bid to Boost Oil Price Fizzles -- OPEC’s plan to boost oil prices by cutting production has fizzled, yet it has little choice but to stick with it. Crude has surrendered all of its gains since the Organization of Petroleum Exporting Countries first agreed production cuts in November. While the group has implemented the curbs, a rebound in U.S. shale output and stubbornly-high stockpiles show the world’s three-year crude glut isn’t shifting. Even signals from Saudi Arabia and Russia that they’ll prolong the supply reductions haven’t staunched the rout. Yet OPEC has limited room for maneuver when it meets on May 25 in Vienna to discuss the deal, and is almost certain to persevere because the alternatives look even worse. If it were to deepen the cutbacks, even more shale supplies might come along to fill the gap, according to UBS Group AG. Abandoning the policy and restoring output would inflict the economic pain of crude below $40, Citigroup Inc. predicts. “The risk of a higher cut is that it could trigger too strong an increase in prices and support U.S. shale,”  You can’t say you want lower inventories, and after a few months give up.” Oil slumped to a five-month low of $43.76 a barrel in New York on Friday and traded at $46.18 at 10:27 a.m. local time. The selloff came even after a statement from Russian Energy Minister Alexander Novak that his country was “inclined toward” an extension of production cuts into the second half. He was echoing his Saudi counterpart Khalid al-Falih, who said on April 26 that there’s a preliminary consensus to prolong the agreement with backing from other OPEC nations such as Kuwait and Iraq. With OPEC already showing near-perfect compliance in delivering its pledged 1.2 million barrel-a-day production cut and an extension looking likely, the group has little ammunition left in its battle to raise prices. “The OPEC deal was doomed to failure from the very beginning,” “If they deepen the cut, the effect will be short-lived. OPEC will find itself in the same position again in six months time, but non-OPEC would get more market share by then.” ‘

Why OPEC Lost The War Against Shale, In Four Charts --Undeterred by earlier failure to jawbone the price of oil higher, moments ago a new barrage of headlines hit courtesy of Reuters reiterating more of the same, and adding a new spin, namely that this time around the oil considered oil production cut extension will be nine not six months, thus lasting at least through March 2018. As Reuters adds, OPEC and non-member oil producers are considering extending a global supply cut for nine months or more to avoid a price-sapping output increase in the first quarter of next year, when demand is expected to be weak. OPEC countries including core Gulf members are discussing internally whether an extension of nine months or longer is needed to give the market more time to rebalance, the sources said. One industry source familiar with the talks said there had been discussions about extending curbs until the end of the first quarter of 2018, when crude demand should be seasonally weak. In other words, it's desperation time for OPEC which is now throwing out every possible trial balloon to see what sticks with headline scanning algos and pushes the price of oil higher, if only temporarily.  There is just one problem, or rather four, as shown in the following four charts. First, it is no longer a question merely of supply as demand has in recent weeks gone through a "soft patch", confirmed overnight when China recorded a decline in oil imports in April.  Second, the current rig count recovery in the US is now the strongest in 30 years. Overnight, Goldman revised its forecast for US production and now sees annual oil output in the US increasing 285k b/d y/y on average in 2017. As a result, oil output is expeted to rise 765k b/d between 4Q 2016 and 4Q 2017 across Permian, Eagle Ford, Bakken and Niobrara shale plays, and may approach an all time high production level of 10mmpb. As a result, US producers are increasingly taking market share from OPEC as shown in the next chart.  Finally, as Morgan Stanley shows, all this has impacted the oil strip, and as a result without prospects for a tight 2018, the forward curve has moved to full contango.

Hedge Funds Just Liquidated The Most Oil Longs Ever --When one of the world's largest oil hedge funds announced it had liquidated its entire long position, we suggested he would not be alone... and according to the latest CFTC data, he was not. The last two weeks have seen hedge funds liquidate over 120,000 WTI crude futures contracts (120 million barrels worth or approximately $6 billion notional). That drop is the largest ever recorded by CFTC and drops the managed money net speculative positioning to its least bullish since November's OPEC production cut deal was agreed.. So the question is - how many more times will the levered speculative 'smart money' pile in balls-deep long on the slightest uptick in price?

Hedge funds turn bearish on oil and refined fuels: Kemp (Reuters) - Hedge funds and other money managers were turning increasingly bearish towards oil even before prices plunged on Thursday.Hedge funds cut their net long position in the three main futures and options contracts linked to Brent and WTI by 97 million barrels in the week to May 2 (http://tmsnrt.rs/2pqzvW4).Bullish long positions were trimmed by 31 million barrels while bearish short positions increased by 65 million barrels according to data published by regulators and exchanges.Hedge funds reduced their net long position by a combined 236 million barrels over the two weeks between April 18 and May 2 (http://tmsnrt.rs/2pT4DAe).Fund managers now have the smallest net long position in crude futures and options since OPEC announced its production-cutting deal on Nov. 30.Fund managers hold just three long positions for every one short position, down from a ratio of almost 6:1 on April 18 and a recent high of 10:1 on Feb. 21 (http://tmsnrt.rs/2pcpU93).The ratio was also the lowest since the OPEC deal was announced and illustrates the loss of confidence in the deal’s effectiveness in draining global inventories.Bearishness is not confined to crude. Fund managers have also turned increasingly negative on the outlook for the price of refined fuels given the high level of stockpiles in the United States.Hedge funds cut their net long position in NYMEX gasoline by 24 million barrels in the week to May 2 and are now running a small net short position of 3 million barrels for the first time since August 2016 (http://tmsnrt.rs/2qSg88G). Hedge funds also cut their net long position in NYMEX heating oil by 26 million barrels and are now net short by almost 1 million barrels, the first short position since November 2016 (http://tmsnrt.rs/2qStiCs).

Oil Prices Plunge To Where They Should Be - Art Berman:  WTI oil prices plunged to almost $45 per barrel yesterday (Figure 1). That was a downward adjustment to where prices should be based supply, demand and inventory fundamentals.  Analysts invent narratives to explain why things happen after we already know the answer. In this case, oil prices fell supposedly because of falling confidence that the OPEC production cuts are working, fears of increasing U.S. shale output, and weakening demand from China. None of those factors is new nor did they seem to affect the market a few weeks ago when prices were above $53 per barrel. The real reason that oil prices have fallen is that they were too high and needed to adjust downward. Comparative inventory analysis (Bodell,2009) suggests that the correct price for WTI right now is about $45 per barrel (Figure 2). Prices rose from that level in November 2016 to almost $55 (black arrows in Figure 2) following announcement of OPEC production cuts. Approximately $10 of “OPEC expectation premium” was included in those higher prices.In February and March, prices fell from more than $54 to $47 per barrel in the first deflation event shown in Figure 3. Prices then increased to more than $53 in the first half of April before falling to almost $45 per barrel this week during the April-May deflation. There is little doubt that the OPEC cuts are real and are working to reduce global inventories. Unrealistic expectations about how quickly markets might re-balance created an expectation premium that is now being deflated as prices adjust to where they should have been all along.

Why We Should Be Concerned About Low Oil Prices -- Gail Tverberg - Most people assume that oil prices, and for that matter other energy prices, will rise as we reach limits. This isn’t really the way the system works; oil prices can be expected to fall too low, as we reach limits. Thus, we should not be surprised if the OPEC/Russia agreement to limit oil extraction falls apart, and oil prices fall further. This is the way the “end” is reached, not through high prices. I recently tried to explain how the energy-economy system works, including the strange way prices fall, rather than rise, as we reach limits, at a recent workshop in Brussels called “New Narratives of Energy and Sustainability.” The talk was part of an “Inspirational Workshop Series” sponsored by the Joint Research Centre of the European Commission.  My talk was titled, Elephants in the Room Regarding Energy and the Economy.” (PDF) In this post, I show my slides and give a bit of commentary.

Is The Market Ignoring OPEC? -- Oil prices stabilized on Monday after a week of sharp declines on the news that OPEC might be open to extending its production cuts into 2018.. Fearing further losses, Saudi energy minister Khalid al-Falih stated very firmly that the six-month extension is all but a done deal and he even suggested that the group is looking at extending the cuts “beyond” the end of 2017. In fact, an OPEC source told Reuters that the group is considering an extension until the end of the first quarter of 2018, a move that would provide a much stronger jolt to the oil market if implemented.  OPEC seems to have backed itself into a corner regarding its production cuts. The initial agreement was supposed to end in June, but the inability to bring down inventories have forced them into (likely) agreeing to a six-month extension. Now, analysts are billing the extension through the end of 2017 as insufficient, so OPEC might push the cuts to the end of the first quarter of 2018. All the while oil prices have not appreciably moved in months and U.S. shale is taking market share. The ultimate fear for OPEC is that non-OPEC countries continue to be successful at bringing new supply online even with oil prices at $50 per barrel. In the meantime, the rhetorical power of OPEC is diminishing, judging by the relatively muted price response after hinting at a 9-month extension.  The latest trading data shows that hedge funds and other money managers have sold off their bullish bets, taking their net-long positions to the narrowest point since the OPEC deal was announced last year. That has led to a stampede of negative sentiment, which threatens to drag oil lower. But the counterargument is that the newfound bearishness opens up buying possibilities that could spark a price rebound.

Market Mocks OPEC Crude Jawboning; Morgan Stanley Warns Of Risks To 2018 Oil Price -- In the clearest indication yet that OPEC jawboning no longer has an effect on markets, and especially headline scanning algos, following numerous headlines from Saudi energy minister Khlaid Al-Falih overnight warning that the oil rebalancing is imminent, and in case it isn't, it will come in 2018 when OPEC and Non-OPEC producers may extend their production cuts, this morning oil is firmly hugging the flatline after a failed attempt to push higher earlier in the session.  As Bloomberg reports, Saudi Arabia and Russia signaled they may extend production cuts into 2018, doubling down on an effort to eliminate a supply surplus as oil prices continue to drop.  In separate statements just hours apart on Monday, the world’s largest crude producers said publicly for the first time they would consider prolonging their output reductions for longer than the six-month extension widely expected to be agreed at the OPEC meeting on May 25. "We are discussing a number of scenarios and believe extension for a longer period will help speed up market rebalancing” the Russian Energy Minister Alexander Novak said in a statement. Speaking in Kuala Lumpur earlier Monday, Saudi energy minister Khalid Al-Falih said he was “rather confident the agreement will be extended into the second half of the year and possibly beyond” after talks with other nations participating in the accord. “The producer coalition is determined to do whatever it takes to achieve our target of bringing stock levels back to the five-year average,” Al-Falih said. While U.S. shale output growth and the shutdown of refineries for maintenance have slowed the impact of cuts by OPEC and its partners, the Saudi minister said he’s confident the global oil market will soon rebalance and return to a “healthy state.” The response was less than enthusiastic however, with Brent and WTI giving up earlier, while a drop in Chinese crude imports suggested that the demand side of the equation is becoming a growing concern.  A major hurdle for the oil bulls, as discussed here often, is that s OPEC and its allies curbed supply, U.S. production has risen to the highest level since August 2015 as drillers pump more from shale fields. “Given the extent of the over-hang I think they always knew the market was not going to rebalance in six months which is why our base case was always for a deal lasting at least one year, and if not longer,”

Morgan Stanley To Revise 2018 Forecast After Oil Price Rout -- Morgan Stanley may have to revise its 2018 oil market outlook after last week benchmarks recorded the lowest price levels since last November, before OPEC and non-OPEC producers agreed to reduce their combined output. Equity researcher Martijn Rats said in a note that contrary to the investment bank’s base scenario for 2018, in which it forecast a stable price environment, U.S. drillers have been adding rigs at a rate that suggests in a year, output would be much higher than it is now. Last Friday, Baker Hughes reported the number of active rigs had climbed for the 16th week in a row. At 877, active rigs are now 462 more than a year ago. The output increase will be gradual and will not be immediately evident, but it will become evident next year, as it may be as large as a million additional barrels per day, Rats warned. Even at current production levels, OPEC is losing market share to U.S. producers, according to Rats, as its output is declining while U.S. output is growing. According to Rats, “We doubt OPEC will allow this to go on for long.” In fact, the analyst believes that OPEC will not extend its production cut agreement beyond this year, despite comments to the contrary from Saudi Arabia’s and Russia’s energy ministers. In separate statements yesterday, Khalid al-Falih and Alexander Novak said their governments were willing to extend the cuts for more than six months after the initial June 30 deadline to stabilize prices.

OPEC signals cuts extension, oil traders ponder response: Kemp (Reuters) - Saudi Arabia’s energy minister has indicated OPEC will extend its current production cuts for at least another six months to the end of 2017 and maybe further.“Based on consultations that I’ve had with participating members, I am confident the agreement will be extended into the second half of the year and possibly beyond,” Khalid al-Falih said on Monday. “I believe the worst is now behind us with multiple leading indicators showing that supply-demand balances are in deficit and the market is moving towards rebalancing,” Falih told an audience in Kuala Lumpur. “We should expect healthier markets going forward,” he said (“Saudi energy minister says may extend oil output cuts beyond 2017,” Reuters, May 8).  From the beginning, oil producers envisaged the agreement on production cuts might need to be extended to rebalance the oil market fully. OPEC’s original agreement on revised production levels was reached on Nov. 30 last year and always subject to review in the normal way at the organisation’s next scheduled ministerial conference on May 25.OPEC’s subsequent agreement with non-OPEC producers made this explicit by stating output would be cut from Jan. 1 for six months with the option to extend the curbs for a further six months.Earlier this year, Saudi officials cast doubt on whether an extension would be necessary given high levels of compliance with the agreement.Falih told reporters in January an extension would probably not be needed ("Saudi energy minister: unlikely to extend producers' agreement," Reuters, Jan. 16). "My expectations (are) that the rebalancing that started slowly in 2016 will have its full impact by the first half," he said. But as global crude stocks remain high and prices come under renewed pressure, Riyadh seems to have concluded an extension is inevitable to drain excess inventories and restore confidence.

Saudi oil minister Falih confident output cut deal will be extended by 6 months - Saudi energy minister Khalid al-Falih said Monday at an industry conference in Kuala Lumpur that he was confident that the crude oil output cut deal will be extended by six months or more as the market was moving towards rebalancing. "Based on the consultation I have had with participating members, I am rather confident that the agreement will be extended into the second half of the year and possibly beyond and that includes consultations I have had this morning with the Malaysian prime minister," Falih said during the opening address at the 19th ASIA Oil and Gas Conference in Kuala Lumpur. The producer coalition is determined to do "whatever it takes to achieve our targets and bringing stock levels back to the five-year average." Falih said he was pleased that OPEC and non-OPEC partners that agreed to the supply cuts are so far exhibiting discipline and adherence to the commitments that were made last December. Falih's comments come ahead of the meeting of OPEC and non-OPEC deal participants scheduled to be held in Vienna on May 25 to review the agreement and negotiate any extension. Falih also said that leading indicators showed crude supply-demand was in deficit as the market was moving towards rebalancing. "I do believe however that the worst is behind us with multiple leading indicators showing that supply-demand balance are clearly in deficit and the market is moving towards rebalancing. We should therefore expect healthier markets going forward," he said.

Let's make a deal: Can OPEC's oil output cuts continue as they are? – Platts podcast - When OPEC reached its historic supply cut deal last year, Brent oil was trading for about $49/b ... and it still is. So has the deal been a failure, and what should the market expect from OPEC now?Senior oil editor Brian Scheid is in London, talking with the Platts OPEC team ahead of the Vienna meeting this month. Eklavya Gupte, Paul Hickin and Herman Wangshare thoughts on whether OPEC will agree to extend the cuts, how production could shift within OPEC, and views from Saudi Arabia. Further, what impact will an extension — or lack of one — have on ongoing US shale oil growth?

Oil rebounds, as OPEC talks up cutting supply into 2018 (Reuters) - Oil prices rose on Monday in volatile trading, bolstered by statements from major oil-producing countries suggesting that OPEC and non-OPEC supply cuts could be extended into 2018. Benchmark Brent crude settled up 24 cents, or 0.5 percent, at $49.34 a barrel. U.S. light crude gained 21 cents to $46.43 a barrel. Oil prices have been under pressure of late, amid investor concerns the global supply glut is not receding as fast as expected. The Organization of the Petroleum Exporting Countries and non-OPEC producers, such as Russia, decided late last year on an output cut of 1.8 million barrels per day (bpd) to reduce global oil inventories. News that the curbs might last into 2018 fueled a modest rally in the market. The lengthy period of rebalancing has prompted a reassessment in the market of whether OPEC's cuts are working. Saudi Energy Minister Khalid al-Falih on Monday issued more forceful comments about OPEC's plans, saying the cartel would "do whatever it takes" to rebalance the market. He said a deal on cutting output could extend early into next year. Kuwait's oil minister Essam al-Marzouq echoed those concerns, saying Monday that there is "almost consensus about the importance of extending the agreement for at least six months." OPEC and other top producers will meet in Vienna on May 25 to discuss the possibility of cuts. Russia also said it was discussing prolonging cuts with other producers beyond 2017. However, many analysts only see an overbundance of talk from OPEC members, as opposed to action regarding stockpiles. "The market is getting tired of hearing from OPEC how good they are, how compliant (with supply curbs) they are," "Those claims do not withstand the reality check with the inventories staying stubbornly high and non-OPEC production rising strongly."

Russia's June exports of ESPO crude oil to dip 17% from May to 2.4 mil mt - Russia's exports of the medium sweet ESPO crude blend in June are set to fall 17.2% from May to 2.4 million mt, according to the latest monthly loading program seen by S&P Global Platts. The June loading program runs from May 30 to June 30 and will comprise a total of 24 cargoes of 100,000 mt each, according to the program. In comparison, ESPO exports in May totaled 2.9 million mt, which comprised 29 cargoes of 100,000 mt each. The loading rate for ESPO exports will average around 547,500 b/d in June, down from 622,647 b/d scheduled for May. The June program showed state-owned Rosneft holding 10 cargoes, Russia's Surgutneftegaz with seven, Swiss-based Tenergy holds six cargoes and Lukoil a single cargo for June. Traders have attributed the shorter program for ESPO Blend crude in June to a field maintenance, although further details were unclear. The lower volumes has helped provide a bit of support for ESPO Blend crude premiums for June-loading cargoes, traders said.

Iran's NIOC plans to boost crude oil output capacity about 80%, by 3 mil b/d: report- Iran plans to raise its crude production capacity by 3 million b/d, oil ministry news agency Shana quoted a senior official as saying Monday. Speaking on the sidelines of a petroleum exhibition in Iran, National Iranian Oil Co.'s deputy head for engineering and development, Gholam-Reza Manouchehri, said the aim of boosting the country's output capacity by such a substantial amount would be to promote and stabilize its footing in OPEC and the global market, Shana reported. The agency did not mention any target date envisioned for the increase. It also reported Manouchehri as saying that NIOC for considering signing $80 billion of deals with domestic and international contractors within the next two years. Following the lifting of international nuclear sanctions on Iran in January 2016, NIOC has so far signed 24 memoranda of understanding with domestic and international companies seeking to join oil and gas development projects in the country, including a recent MOU with Philippine National Oil Co. for studies of Iran's Pazanan and Darkhowin oil fields, he said. Iran produced 3.77 million b/d of crude in April, the latest S&P Global Platts survey of OPEC production shows. Manouchehri made his remarks as Iranian president Hassan Rouhani campaigns for re-election in voting scheduled for May 19. The NIOC official was promoted in April 2016 to his current position, as head of what was then a newly formed division of the national oil company, in a surprise move by Iran's oil minister Bijan Zanganeh.

OPEC Said to Have Discussed Deeper Cuts; No Consensus Reached - Ministers from some OPEC countries have discussed the possibility of deepening their output cuts, in addition to the potential extension of the agreement into 2018, said four delegates. The OPEC delegates, who asked not to be identified because the talks were private, didn’t say that the discussions resulted in any kind of agreement to make deeper cuts. Earlier Monday, Saudi Arabia and Russia signaled they could be willing to extend production cuts into 2018, doubling down on an effort to eliminate a supply surplus just as its impact on prices wanes. The Organization of Petroleum Exporting Countries and its allies are looking at ways to reaffirm their commitment to their historic accord to reduce production amid growing doubts about its effectiveness. Surging U.S. production has raised concern that the curbs are failing to reduce an oversupply. Oil has surrendered most of its gains since the cuts were agreed last year.  

OPEC, non-OPEC discuss extending supply cut by nine months or more: sources | Reuters: OPEC and non-member oil producers are considering extending a global supply cut for nine months or more to avoid a price-sapping output increase in the first quarter of next year, when demand is expected to be weak, OPEC and industry sources said. The Organization of the Petroleum Exporting Countries, Russia and other producers agreed last year to curb production by 1.8 million barrels per day for six months from Jan. 1. Oil prices have gained support but global inventories remain high, pulling crude LCOc1 back below $50 a barrel and putting pressure on OPEC to extend the cuts through the rest of 2017. Production from countries not participating in the deal, such as the United States, has also been rising, keeping crude below the $60 level that OPEC kingpin Saudi Arabia and others would like to see. OPEC countries including core Gulf members are discussing internally whether an extension of nine months or longer is needed to give the market more time to rebalance, the sources said. One industry source familiar with the talks said there had been discussions about extending curbs until the end of the first quarter of 2018, when crude demand should be seasonally weak. "To increase production in those months may have a negative impact (on prices). So we may ask for an extension until the end of Q1 of 2018," the source said. An OPEC source said other ideas and scenarios could be discussed, adding that core Gulf OPEC producers had talked about an extension beyond six months. Another OPEC source said it would be tough to get a consensus on prolonging curbs for more than six months but "anything can happen".

Oil prices end lower after two-session climb -  Oil prices closed lower on Tuesday as traders fretted over rising U.S. crude production as OPEC weighs extend its production-cut agreement late this month. In a monthly report Tuesday, the U.S. government raised its forecast on domestic crude output for this year and next, and cut its 2017 price outlook. On the New York Mercantile Exchange, June West Texas Intermediate crude fell by 55 cents, or 1.2%, to settle at $45.88 a barrel, after briefly trading as high as $46.78.July Brent crude lost 61 cents, or 1.2%, to $48.73 a barrel on the ICE Futures exchange in London.Last week, prices for WTI and Brent marked their lowest settlements since the Organization of the Petroleum Exporting Countries agreed on Nov. 30 to cut output for six months at the start of this year.The EIA Tuesday forecast U.S. crude production at an average 9.31 million barrels a day in 2017, up 1% from the previous forecast. The agency sees 2018 output at 9.96 million barrels a day, up 0.6% from the previous forecast.   “Increased drilling rig activity is expected to boost to U.S. crude oil production this year and next,” said Howard Gruenspecht, EIA acting administrator, in a statement.

WTI Bounces Back Above $46 After Biggest Crude Draw Since 2016 -- WTI and RBOB prices slipped lower today after EIA raised its 2017 US crude output forecast (and the dollar rallied) along with Libya production headlines. WTI bounced on a much bigger than expected draw from API (-5.789mm v -2mm exp), but RBOB slipped towards the lows of the day on another unexpectedly large gasoline build. API

  • Crude -5.789mm (-2mm exp) - biggest since 2016
  • Cushing -133k (+60k exp)
  • Gasoline +3.169mm (+350k exp)
  • Distillates -1.174mm (-800k exp)

Hope (for the bulls) is that crude oil stocks have peaked (with seasonal declines due) and API appears to confirm that with the 5th weekly draw (and largest since December - if this holds for tomorrow's DOE data). Gasoline saw another big build though...

Saudi signals first cut in crude supplies to Asian customers: sources | Reuters: Saudi Arabia, the world's biggest oil exporter, has notified at least two Asian refiners of its first cuts in crude allocations for regional buyers since an OPEC output reduction took effect in January, two refining sources told Reuters on Wednesday. State-owned Saudi Aramco has told Asian buyers it is curtailing supplies for June to meet its commitments for the output cut, one of the sources at a refiner in South Korea said. "Saudi is adjusting supplies because it has somewhat supplied full volumes or even more in the previous months," the source said, declining to give specific details on the cuts. The notification of the reductions in June allocations signals added urgency among members of the Organization of the Petroleum Exporting Countries as evidence mounts that the output cut has so far failed to rein in a global glut in crude. OPEC has previously kept supplies to clients in high-growth Asian markets steady, while cutting allocations to Europe and the United States. Reuters reported on Tuesday that state-owned Saudi Aramco will reduce oil supplies to Asian customers by about 7 million barrels in June, as it keeps to the production agreement and trims exports to meet rising domestic demand for power during the summer. Seven million barrels is roughly two days of oil imports into Japan, the world's fourth-biggest importer. Aramco and other producers typically issue monthly notices to refineries and other buyers with contracted supplies outlining their intended allocations to each customer. Usually they keep volumes at previously agreed levels but sometimes will reduce or increase the supplies depending on market conditions.

Source: Saudi Aramco to Cut June Oil Supply to Asia by About 7 mln Barrels | Rigzone - - Saudi Aramco will reduce oil supplies to Asia by about 7 million barrels in June, a source said on Tuesday, as the oil giant cuts output as part of global supply pact and trims exports to meet rising domestic demand for power during hot summer months. An OPEC-led agreement to cut global oil supplies is currently due to end in June, although Saudi Arabia and other producers in the group of OPEC and non-OPEC states have indicated curbs could be extended to the end of 2017 or beyond. OPEC and other producers are expected to discuss an extension at a meeting on May 25. When OPEC announced the cuts, Saudi Arabia was quick to tell its customers in Europe and the United States that they would receive lower volumes but shielded most of Asia from the cuts. However, summer is a peak period for power demand in the desert kingdom, as citizens turn up air conditioners to keep homes and offices cool, pushing up domestic oil consumption. This year is likely to see an earlier spike in demand as the Muslim fasting month of Ramadan starts sooner, beginning in late May. The traditional big evening meals with family and friends to break the fast tend to create a surge in power demand. As a result, Asia will now also face heavier cuts from the world's top oil exporter in June. According to the June nomination plans, Aramco will cut supplies by 1 million barrels each to Southeast Asia, China and South Korea, a source, who has knowledge of the nominations but did not wish to be identified, told Reuters. A separate industry source said the action in June did not mean Saudi Arabia was preparing to deepen cuts to Asia in the rest of 2017. The kingdom will cut supplies by a little more than 3 million barrels for India and slightly less than 1 million barrels for Japan, the source with knowledge of the nominations said. In total, the cuts should be equivalent to about 233,000-234,000 barrels per day (bpd). Under the global supply pact, OPEC states, Russia and other major producers agreed to cut output by about 1.8 million bpd from Jan. 1 until June 30.

Oil prices rise in Asia in expectation of Aramco supply cut | Reuters: Oil futures rose in Asian trading on Wednesday after Reuters reported Saudi Arabia would cut supplies to the region as OPEC battles against rising U.S. output that is threatening to derail its attempts to end a sustained global glut in crude. State-owned Saudi Aramco will reduce oil supplies to Asian customers by about 7 million barrels in June, a source told Reuters, as part of OPEC's agreement to reduce production and as it trims exports to meet rising domestic demand for power during the summer. Seven million barrels is roughly two days of oil imports into Japan, the world's fourth biggest importer. Aramco had previously been maintaining supplies to its important Asian customers. Global benchmark Brent futures LCOc1 were up 25 cents, or 0.5 percent, at $48.98 a barrel at 0200 GMT. They fell 1.2 percent on Tuesday. U.S. West Texas Intermediate crude CLc1 was up 29 cents, or 0.6 percent, at $46.17 a barrel. It also fell 1.2 percent the previous session, and the closing price for both contracts on Tuesday was the second lowest since Nov. 29, the day before the Organization of the Petroleum Exporting Countries (OPEC) agreed to cut production during the first half of 2017. While prices surged immediately after the agreement, in recent weeks they have come under sustained pressure as U.S. production has ramped up. Many are now pushing back the expected timing for when the oil market will come into balance after prices began slumping nearly three years ago. "Chief among (the) oil market's worries is that the renewed rise in U.S. oil production is reducing the speed at which the supply surplus is being eroded," Fawad Razaqzada, market analyst at Forex.com, said in a note.

Oil Below $65 Per Barrel…For Years --Recognizing that something had to be done to halt the latest crash in oil prices, Saudi Arabia’s energy minister went public with his support not only for an extension of the OPEC cuts for another six months, but he also dangled the possibility of an extension into next year. “Based on consultations that I've had with participating members, I am confident the agreement will be extended into the second half of the year and possibly beyond,” Khalid al-Falih said during an industry event in Kuala Lumpur, according to Reuters. At the same time he waived away the signs that the market is still woefully oversupplied, acknowledging the larger-than-expected rebound in U.S. shale, but still noting that the fundamentals are improving. "I believe the worst is now behind us with multiple leading indicators showing that supply-demand balances are in deficit and the market is moving towards rebalancing," he said. Up until now the decision was whether or not to extend for six months. Now, with a six-month extension looking assured, there are questions about whether even that will be enough. The oil markets no longer appear to be impressed by a six-month extension, judging by the increasingly languid price responses that have come after OPEC comments in recent weeks. OPEC was very successful at talking up oil prices last year, but the rhetorical power of al-Falih is on the wane. With the six-month extension now baked in, OPEC is growing concerned that inventories might still be elevated by the end of the year. As a result, OPEC is starting to look at a nine-month extension, according to Reuters. “To increase production in those months may have a negative impact (on prices). So we may ask for an extension until the end of Q1 of 2018,” an OPEC source told Reuters.  However, the Saudi energy minister also cautioned that oil watchers are being myopic, becoming overly-focused on the near-term while neglecting the longer-term fundamentals. He argues that demand will continue to rise and the severe cutbacks in exploration over the last several years are sowing the seeds of a shortage by the end of the decade. The comments echo recent warnings from the IEA about the pending supply shortage because of a dearth of discoveries since 2015.

IEA Sees Oil Market Supply Deficit Deepen Significantly This Year -  Global oil demand will exceed supply in the second quarter, and even more so until the end of the year, if OPEC extends the production cuts, according to Neil Atkinson, head of oil analysis at the International Energy Agency (IEA).“It is starting to become clear that if the objective of the OPEC cuts was to flip the market from surplus into deficit that is now slowly beginning to happen,” Atkinson said at the Platts Crude Oil Summit in London on Wednesday, as quoted by MarketWatch.The market is largely expecting OPEC to extend its production cuts until the end of this year, and Saudi Oil Minister Khalid al-Falih has even hinted at extending the deal into early 2018, citing producers’ resolve to do ‘whatever it takes’ to rebalance the market. The IEA has been optimistic that the balance will be achieved. As early as its March Oil Market Report, the IEA said that the market needs time to see a significant drawdown, and expected an implied deficit of 500,000 bpd for the first half at current production levels and supply and demand fundamentals. In its April Oil Market Report, the international agency noted that “It can be argued confidently that the market is already very close to balance, and as more data becomes available this will become clearer.” At the time, the IEA downgraded global oil demand growth for 2017, dropping its estimate to 1.3 million bpd. With OPEC’s cuts extended through the end of this year, the supply deficit will deepen in the second half of 2017, according to Atkinson.

For Some, There's Never Been a Better Time to Buy Oil - Oil is trading near $50 again, OPEC seems to be losing its ability to influence prices and a wave of new supply is hitting the market from Texas to Libya. For some, there’s never been a better time to buy.Despite last week’s selloff, the global oil market is rebalancing rapidly, said Jeffrey Currie, head of commodities research at Goldman Sachs Group Inc. If the Organization of Petroleum Exporting Countries extends its cuts into the second half -- as the group has signaled -- demand will significantly exceed production, according to the IEA’s Head of Oil Industry and Markets Neil Atkinson. “Do I want to be long oil? The answer is absolutely yes because we are going into a deficit market,” Currie said at the S&P Global Platts Global Crude Summit in London on Wednesday. “With demand continuing to surprise to the upside,” the global supply deficit may be as wide as 2 million barrels a day by July, he said. Brent crude, the international benchmark, fell to a five month low of $46.64 a barrel last week amid doubts about the effectiveness of OPEC and Russia’s joint supply curbs. Subsequent signals from Saudi Arabia and Moscow that they could extend cuts into 2018 failed to trigger much of a price recovery. While the resurgence in U.S. shale oil continues to cause doubts about whether the three-year supply glut really is over, banks including Goldman and Citigroup Inc. say markets are nevertheless tightening and prices are poised to rise again. The bulls got some powerful backing on Wednesday from the most keenly watched data on the market -- the U.S. Department of Energy’s weekly report on crude stockpiles. The nation’s inventories fell by 5.2 million barrels last week, the biggest reduction this year. West Texas Intermediate crude rallied 3.2 percent after the data release on Wednesday and gained another 1.4 percent to $47.97 a barrel as of 12:10 p.m. in London.

Fuel economy improvements projected to reduce future gasoline use despite recent changes in vehicle sales mix – EIA - Gasoline demand is a function of the fuel economy of the vehicle fleet and the total number of miles driven. Over time, fuel economy of the vehicle stock (those in use) changes as a result of market developments and changes in fuel economy standards for new vehicles. Additional complexities arise from changing vehicle designs and how vehicles are classified. In 2016, total vehicle miles travelled (VMT) reached a record 3.217 trillion miles (3% growth over 2015), pushing U.S. product supplied for finished motor gasoline, a measure of consumption, to a new high of 9.33 million barrels per day (b/d). Fuel economy for the light-duty vehicle stock in 2016 is estimated at 22.2 miles per gallon (mpg), an increase of 1% over 2015.The fuel economy of the vehicle fleet reflects the number of vehicles in use by vintage, as well as the respective fuel economy and the number of miles driven for each vintage. While the average fuel economy of the stock changes only modestly based on sales of new light-duty vehicles in a single year, trends in new vehicle sales and the consequent fuel economy cumulatively have large implications for projected future gasoline consumption. The increase in the sales share of light trucks—a category that includes pickups, minivans, sport-utility vehicles (SUVs), and all other light-duty vehicles that are not classified as passenger cars—in total light-duty vehicle sales, is sometimes cited as a cause of recent growth in fuel consumption. More important for long-term gasoline consumption, however, are the scheduled increases for fuel economy standards covering model years through 2025 and the increasing market role of vehicles that blur the distinction between cars and light trucks.  In recent years, manufacturers have introduced new vehicle types that combine the capabilities of pickup trucks and truck-based SUVs—cargo space, towing capacity, all-wheel or four-wheel drive capability, seating height—with those of cars—comfort, handling, and higher fuel economy. As a result, there has been an increase in the number of models and total sales of vehicles described as crossovers or Crossover Utility Vehicles (CUVs). CUVs have similar appearance, seating height, and cargo space as SUVs, as well as optional all-wheel drive, but have comfort and handling more similar to passenger cars. The rise of CUVs in the marketplace is causing the relationship between vehicle capabilities and vehicle fuel economy to become more complex.

Is US Gasoline Demand Turning Bearish? - The EIA (U.S. Energy Information Administration) estimated that four-week average US gasoline demand fell by 22,000 bpd (barrels per day) to 9,215,000 bpd on April 21–28, 2017. US gasoline demand fell 0.2% week-over-week and 3% year-over-year. The fall in gasoline demand is bearish for gasoline and crude oil (FENY) (USL) (USO) prices.  US gasoline prices hit $1.14 per gallon on March 15, 2016—the lowest price in 12 years. As of May 9, 2017, prices have risen 31% from their lows in March 2016 due to the increase in gasoline demand. Rising gasoline demand partially supported crude oil prices as well. US crude oil prices have risen ~77% during the same period. Changes in gasoline demand drive gasoline inventories. For updates on gasoline inventories, read the previous part of the series.  The EIA released its monthly STEO (Short-Term Energy Outlook) report on May 9, 2017. It estimates that US gasoline consumption will average 9,330,000 bpd and 9,360,000 bpd in 2017 and 2018, respectively. US gasoline consumption figures for 2018 will be the highest ever. US gasoline consumption averaged 9,330,000 bpd and 9,180,000 bpd in 2016 and 2015, respectively. US gasoline consumption hit a record in 2016. High gasoline consumption in 2017 and 2018 could support gasoline and crude oil prices.

Oil prices get respite from selling after encouraging signs on US supply -  Oil futures got some respite from the sellers on Wednesday after an industry group said U.S. crude supplies fell by nearly 6 million barrels last week.The American Petroleum Institute, however, estimated gasoline stockpiles increased again — coming at a time that inventory levels are already unusually high for this time of the year. Official data from the Energy Information Administration will be released later Wednesday. Light, sweet crude futures for delivery in June rose 44 cents, or 1%, to $46.32 a barrel on the New York Mercantile Exchange. July Brent crude was higher by 41 cents, or 0.8% to $49.14 a barrel on London’s ICE Futures exchange. Both contracts settled down 1.2% on Tuesday.But analysts say the price rebound is likely to be short-lived as on Tuesday the EIA boosted its U.S. oil-production forecasts, including 2018’s average now seen being just shy of 10 million barrels a day. Output has only gotten back above 9 million the past several months, and this year’s average is now seen being 9.3 million. Meanwhile, the EIA now sees depressed oil prices at least through next year, citing new oil flowing out of Canada and Brazil set to inundate an already-oversupplied market. While the API and EIA have had the spotlight in recent hours, the market’s primary focus remains the Organization of the Petroleum Exporting Countries and what it might do to counter the anticipated gusher of new oil. The general expectation is the cartel and Russia will roll current production cuts into the second half of this year, or possibly into early 2018. However, production is recovering in Libya and Nigeria. Any sharp increase of output from those two OPEC members, which are exempt from the current output cuts, would add pressure on other OPEC producers to cut even more as the group tries to bring global crude inventories down to five-year averages. Meanwhile, compliance with the production quotas is another potential land mine that imperils the deal’s success. OPEC producers have betrayed their allotted quotas in the past by producing more than they reported; OPEC’s next monthly report will be published Thursday.

WTI/RBOB Jump After Biggest Crude Inventory Draw Since 2016 - WTI and RBOB have rallied since last night's surprisingly large Crude draw (and gasoline build)reported by API, and DOE ata confirmed with inventory draws across the entire complex (including gasoline). WTIO and RBOB prices popped as Crude inventories dropped most since 2016 despite crude production rising above 9.3mm - highest since Aug 2015. DOE

  • Crude -5.247mm (-2mm exp)
  • Cushing -438k (+60k exp)
  • Gasoline -150k (+350k exp)
  • Distillates -1.587mm (-800k exp)

Draws across the board with Crude inventories down most since Dec 2016

Oil prices surge as EIA stockpile report eases market fears: Oil prices surged as much as 4 percent after the latest report on U.S. crude stockpiles eased fears that have permeated the market in recent weeks, helping to drag prices to nearly six-month lows. U.S. West Texas Intermediate futures rocketed back above $47 a barrel and international benchmark Brent topped $50 after the Energy Information Administration reported a much larger drop in the nation's crude stockpiles and a strong rebound in gasoline demand.WTI posted its best performance since Dec. 1, one day after the Organization of the Petroleum Exporting Countries agreed to cut their production to reduce brimming global crude stockpiles. That marked a sharp reversal from the recent trend, which has seen oil prices crash through a number of technical levels to fall as low as $43.76. Oil prices had already been trading higher on a report that Saudi Arabia was cutting exports to the key Asian market and on earlier industry data pointing to a sharp decline in weekly U.S. inventories. "The EIA numbers came in bullish across the board," Roberto Friedlander, head of energy trading at Seaport Global Securities said in a research note. U.S. commercial crude inventories fell by 5.2 million barrels, versus estimates for a 1.8 million barrel decline. This occurred as refinery activity eased from recent elevated levels and oil imports dropped by 644,000 barrels a day. Gasoline demand rose by 252,000 barrels a day, bringing the four-week average closer to levels at this time last year after a string of data showing weekly consumption declines. While gasoline in storage did not decline as much as analysts anticipated, it did not rise as indicated in the earlier industry report. 

Oil bulls draw hope from fall in U.S. crude stocks: Kemp (Reuters) - U.S. crude stocks have shown a sustained decline over the last five weeks, giving oil bulls new inspiration that the market is rebalancing.Commercial crude inventories have fallen by 13 million barrels since the end of March, according to data from the U.S. Energy Information Administration (http://tmsnrt.rs/2r39psy).Crude stocks generally follow an annual cycle driven by seasonal variations in fuel consumption and the maintenance schedule for U.S. refineries.Stocks typically rise during the first four months of the year, reaching an annual peak in early May, before falling steadily through the middle of September.During the decade between 2007 and 2016, crude stocks increased by an average of 45 million barrels between the start of the year and the annual peak on or about May 5 (http://tmsnrt.rs/2q62TDS).In 2017, crude stocks started increasing much faster than usual, rising by 56 million barrels between the start of January and the end of March (http://tmsnrt.rs/2q6g1Zv).Since then, however, stocks have fallen every week, a much earlier start to the draw down season than normal.At the end of March, crude stocks were 35 million barrels higher than at the corresponding point in 2016 and 196 million barrels over the 10-year average.By May 5, stocks had fallen to just 13 million barrels over the prior year and 168 million barrels over the 10-year average (http://tmsnrt.rs/2pClGDT).Commercial stocks have drawn down, despite sales from the government’s strategic petroleum reserves during the period.The drawdown has been the result of slightly slower crude imports and a record rate of refinery crude processing (http://tmsnrt.rs/2pnjXXb).Processingpeaked at 17.3 million barrels per day (bpd) in the middle of April when it was almost 1.4 million bpd higher than in 2016 and 2.4 million bpd higher than the 10-year average.  But such rapid rates of processing are unlikely to be sustainable and refiners have already begun to scale back crude throughput.

Vitol Executive Says Oil Market Not Seeing Expected Destocking (Reuters) - The oil market has not seen the destocking that it expected for the first half of 2017, Vitol executive committee member Chris Bake said on Thursday. Bake told the S&P Global Platts Crude Oil Summit that while oil inventories were shifting, with cargoes moving from the Atlantic Basin into Asia, the overall drawdown that many hoped for amid OPEC-led production cuts had not yet materialised. "This 550 million barrel-plus inventory build of crude and products that started in 2014 is still very much there," Bake said. "How much is tertiary or strategic, how much is going to come out, that is an ongoing debate among all of us." Vitol, the world's largest oil trading house, moved a record 7 million barrels per day of crude and oil products last year. He added that the market had continued to confound expectations since the Organization of the Petroleum Exporting Countries and other producers agreed last year to cut output, as OPEC was no longer a lone heavyweight. "The market is in flux because we’ve all traditionally said there is this huge price regulator sitting there, that has been OPEC, and I think that model is severely challenged today,” he said. "Three months later (after the OPEC-led deal), we see the U.S. rig count double and it says ‘this isn’t the only driver in the market any more. We have this other driver in the market that is incredibly powerful.’”

Interview: IEA sees oil prices firming if OPEC cuts rollover – podcast - Neil Atkinson, Head of the IEA Oil Industry & Markets Division, talks to S&P Global Platts senior oil news editor, Robert Perkins, on the outlook for global oil market balances, the recent oil price slip, the implications of potential rollover of output cuts by OPEC and other key oil producers, the demand picture, the movement of global oil stocks, and the prospects for a supply 'crunch' in coming years due to a collapse in industry upstream spending..

OilPrice Intelligence Report: Oil Stabilizes As OPEC Ponders Deeper Cuts: Oil prices showed some life this week after an encouraging drawdown in inventories in the U.S., sparking large gains on Wednesday. Crude stocks dropped by a sizable 5.3 million barrels last week, and importantly, there was not a corresponding uptick in gasoline inventories, confirming a significant reduction in storage. WTI and Brent jumped up from their six-month lows.  We are roughly two weeks away from OPEC’s official meeting in Vienna, which is expected to result in a six-month extension of the production cuts. But now top OPEC officials are wondering if it will be enough. OPEC’s monthly report revised expected U.S. shale growth sharply upwards, predicting output to increase 64 percent more than originally expected. That equates to projected growth from U.S. shale of 950,000 bpd this year. OPEC fears that an extension will boost prices just enough to allow shale companies to lock in hedges once again, ensuring another wave of supply.   U.S. shale is coming back so quickly that market analysts see additional production posing a threat to oil prices next year as well. "Risks are emerging to 2018 balances," said Martijn Rats, oil analyst at Morgan Stanley, in a Bloomberg interview. "The U.S. is set up for strong supply growth next year, that could exceed one million barrels per day.” The Rapidan Group, an energy consultancy, also sees problems looming next year. "The supply and demand balance for 2018 looks very bad,” said Fared Mohamedi, chief economist at consultant The Rapidan Group. Several top shale players, including Pioneer Natural Resources have breakeven costs that are down around $20 per barrel, so “even in a $40 world, in a $50 world, we are making good returns,” Pioneer’s senior vice president, Frank Hopkins, told Bloomberg.  Goldman Sachs reiterated its belief this week that the oil market is already in a supply deficit. Goldman’s head of commodities, Jeff Currie, said at a London Conference that oil investors should be betting on higher prices. “Do I want to be long oil? The answer is absolutely yes because we are going into a deficit market,” Currie said at the S&P Global Platts Global Crude Summit in London on Wednesday. “With demand continuing to surprise to the upside,” the oil market could find itself short on oil by some 2 million barrels a day by July.

Oil Prices Slip As The U.S. Rig Count Continues To Climb - The number of active oil and gas rigs in the United States rose by 8 on Friday, according to oilfield services provider Baker Hughes. The total oil and gas rig count in the U.S. now stands at 885 rigs, or 479 above the count a year ago. Oil rigs increased by 9, while gas rigs fell by 1. At 12:16pm EST, WTI was trading down 0.23 percent for the day at $47.72, while Brent Crude traded down just 0.04 percent at $50.75—picking up about a $1.50 per barrel from last Friday after the Energy Information Administration (EIA) reported earlier in the week a decrease in both crude oil and gasoline inventories, and after reports that OPEC had reached a consensus on a possible extension of its production cut deal, which may be extended into 2018. This optimism was offset to some degree by reports that Libya—which is exempt from the OPEC deal—had increased its oil production to 780,000 barrels per day, and reports that Nigeria expects to reopen its Trans Forcados Pipeline this week. This week marks the seventeenth straight build for oil rigs (+190 or +36.4 percent since January 13). Gas rigs have climbed 11 of the last seventeen weeks, for a total gain of 36 (+26.5 percent). By basin, the Permian was the big winner this week, with 8 rigs added to its total. Cana Woodford added 2 rigs, and Granite Wash, Utica, and Williston basins each added one rig. Arkoma Woodford and the Mississippian basin each lost a rig. Shortly after data release, both benchmarks started to slip further, with WTI trading at $47.59 or -0.5 percent and Brent trading at $50.61, down 0.32 percent.

BHI: Again mirroring Permian activity, US rig count rises in 17th straight week - Oil & Gas Journal - The US drilling rig count during the week ended May 12 recorded its 17th consecutive increase, bolstered again by rigs targeting oil, drilling horizontally, and stationed on the Permian basin.The overall US tally of rigs gained 8 units to 885, up 481 since its nadir in recent Baker Hughes Inc. data touched during May 20-27, 2016, and its highest level since Aug. 21, 2015. The Permian also was up 8 units this week.Also up on a 17th consecutive occasion, oil-directed rigs jumped 9 units to 712, up 396 since last May 27 and their highest point since Apr. 17, 2015. Gas-directed rigs edged down a unit to 172, still up 91 since Aug. 26. One rig considered unclassified remains operating.Land-based rigs rose 7 units to 860, with horizontal rigs rising 8 units to 742, up 428 since last May 20-27. Directional drilling rigs edged down a unit to 66. The tally of rigs drilling in inland waters dropped 1 to 4, while offshore rigs gained 2 units to 21.The US Energy Information Administration reported that US crude output for the week ended May 5 increased 21,000 b/d to surpass 9.3 million b/d, reflecting increases in the Lower 48 by 16,000 b/d and Alaska by 5,000 b/d.In its May Short-Term Energy Outlook (STEO) released this week, EIA forecasts US crude oil production in 2017 to average 9.3 million b/d—up from the 9.2 million b/d forecast in last month’s STEO—and almost 10 million b/d in 2018.US crude output already in April reached its highest level since March 2016, averaging 9.1 million b/d, agency data indicate. With the oil-directed rig count hitting a 2-year high last week, EIA said it believes “US oil production will likely rise further in the coming months.”According to separate data from Rystad Energy, US Lower 48 oil production could increase 390,000 b/d from May to December assuming a West Texas In termediate price of $50/bbl. The consulting service projects that completion activity is set for a steep expansion throughout the remainder of the year despite growing concerns about service cost inflation in the most active basins. Since the second half of 2016, the rig-count rebound has been outpacing growth in completion activity, resulting in a buildup of drilled but uncompleted (DUC) wells (OGJ Online, May 11, 2017). Should the prices collapse to $40/bbl or even $30/bbl level, Rystad believes a major portion of those DUCs could still be completed commercially, meaning a dramatic downward shift in market conditions would not lead to a rapid collapse of US oil production.

Oil notches first weekly gain in a month as hopes grow for extended output cuts - Oil prices ended nearly flat on Friday, but notched the first weekly gain in a month on expectations the Organization of the Petroleum Exporting Countries will extend an agreement to curb production when the cartel meets later in the month. OPEC officials in recent days have suggested the possibility of an extension that would run past the end of the year, as well as deeper production cuts. The Wall Street Journal also reported Friday that some OPEC members hinted at the possibility of bringing new participants, including Turkmenistan and Egypt, into the agreement, helping to temper losses for oil prices. West Texas Intermediate June crude settled at $47.84 a barrel, up a penny for the session on the New York Mercantile Exchange. It ended roughly 3.5% higher for the week after posting three consecutive weekly declines. July Brent crude on London’s ICE Futures exchange added 7 cents, or 0.1%, to $50.84 a barrel, for a weekly gain of about 3.6%. The “baseline expectation continues to call for an extension” production cut agreement between members of OPEC and some non-OPEC producers, including Russia, “but the details of any arrangement can have significant price impact,”On Friday, Baker Hughes reported that the number of active U.S. rigs drilling for oil climbed by 9 to 712 rigs this week. The oil-rig count has climbed every week so far this year, except for one—and this marked the 17th straight weekly rise.

In Its Fight Against U.S. Shale Oil, OPEC Risks Lower for Longer -  When Khalid Al-Falih arrived at Davos in late January, the Saudi oil minister was exultant. The output cuts he’d painstakingly arranged with fellow OPEC states and Russia were working so well, he said, they could probably be phased out by June. Almost five months later, U.S. production is rising faster than anyone predicted and his plan has been shredded. In a series of phone calls and WhatsApp messages late last week, Al-Falih told his fellow ministers more was needed, according to people briefed on the talks, asking not to be named because the conversations are private. In their battle to revive the global oil market, OPEC and its allies are digging in for a long war of attrition against shale. "OPEC is now recognizing they need longer -- and potentially deeper -- production cuts than they have anticipated," said Jamie Webster, a senior director for oil at the Boston Consulting Group Inc. in New York. From the beginning, Saudi Arabia saw a quick one-off intervention: reduce production for a few months and speed up the recovery. The strategy had an option for a six-month extension, but Riyadh initially thought it wouldn’t be needed. U.S. shale, the plan assumed, wouldn’t recover fast enough. And yet, shale has defied the naysayers. By the time OPEC meets in Vienna on May 25, U.S. output will be approaching the 9.5 million barrels a day mark -- higher than in November 2014 when OPEC started a two-year price war. The rebound has been powered by turbocharged output in the Permian basin straddling Texas and New Mexico. Forced to adjust to lower prices, shale firms reshaped themselves into leaner operations that can thrive with oil just above $50 a barrel. Since OPEC agreed to cut output six months ago, U.S. shale production has risen by about 600,000 barrels a day, wiping out half of the cartel’s cut of 1.2 million barrels a day and turning the rapid victory Saudi Arabia foresaw is turning into a stalemate. Al-Falih said this week Saudi Arabia is now pushing to extend the cuts "into the second half of the year and possibly beyond."

Analysis: OPEC contends with data cacophony as it reviews oil output cut -- When OPEC meets on May 25 to review its production cut deal, it will have to sift through an array of market indicators and analyst projections that paint an often confusing picture of oil supply and demand. For instance, OPEC estimated in its monthly oil market report Thursday that OECD commercial oil inventories were still some 276 million barrels above the five-year average, the benchmark it is aiming for with its output cuts. While those high stocks have led to doubt among traders that the cuts have been effective, OPEC said in its report that this was the second month in a row that stocks have drawn, indicating that the market's oversupply was trending downward. On the other hand, the resilience of US shale prompted OPEC to revise up its projection of US supply for 2017 by 280,000 b/d from last month's report, which it now sees at 820,000 b/d above last year's. The US Energy Information Administration on Tuesday also revised upward its forecast for 2017 US production by 90,000 b/d from the previous month to show year-on-year growth of 440,000 b/d. As for demand, OPEC is projecting growth of 1.27 million b/d globally this year, while the EIA has pegged growth at 1.56 million b/d.

Analysis: Iran sees share of Asian crude oil market slip -- Iran's crude and condensate exports fell in April with regional flows to Asia also slipping, as the country faces stiffer competition for supply into the region from its OPEC oil rivals. Total estimated export volume on Aframaxes, Suezmaxes and VLCCs from Iranian ports in April fell to 2.16 million b/d from 2.35 million b/d in March, data from cFlow, S&P Global Platts trade flow software, showed. Iran now faces a tricky period as there are signs that Iran is losing its market share in Asia to countries like Saudi Arabia and Iraq. Sources also said that Iran's exports in April fell mainly due to two factors, as the country's refineries are now running at full capacity, along with India and China reducing their purchases. Analysts have said that Iran needs a long term strategy to continue to increase its market share in Asia as it faces tougher competition from producers of medium sour crudes. "Iran is losing its market share in Asia to Saudi Arabia but on the other hand its share in European markets is increasing," said Sara Vakhshouri, a Middle East expert who runs consultancy SVB Energy International. "Unlike Saudi Arabia which tries to secure a long-term market share in Asia, Iran doesn't have a long-term market strategy and its focus is day-to-day sale of its oil. At the most it tries to secure annual term-contracts with its customers," she added. Exports to Asia fell sharply to 1.361 million b/d in April from 1.754 million b/d in March, as shipments to its biggest customers, China and India, dropped by 28% month on month. Exports to India fell by almost 300,000 b/d month on month, as a political row between the two countries raises the risk of Iran losing the key crude buyer.

Iran To Raise Oil Output At Oil Field It Shares With Saudi Arabia -- The Iranian Offshore Oil Company will increase production at the Foroozan oil field, which Iran shares with Saudi Arabia, by 12,000 barrels daily, the company’s executive director told Iranian media, adding that it will install two platforms at the field soon.Iran has 11 percent of the field—which Saudi Arabia calls Marjan—whose reserves are estimated at 2.3 billion barrels. Besides it, Iran and Saudi Arabia also share another two fields in the Persian Gulf, Lulu and Dorra, respectively Esfandiyar and Arash on the Iranian side.The ramp-up is part of Iran’s efforts to boost its crude oil and natural gas production as soon as possible, challengingthe market shares of other OPEC producers in the region, most notably Saudi Arabia. Still, the country is cutting exports after it cleared out what was in storage before economic sanctions were removed and the market share challenge may subside. Iran’s crude oil exports in May are expected to come in at 1.66 million bpd, and nearly 100,000 bpd will be put back into storage on tankers. For April, Iran is seen exporting 1.8 million bpd of crude oil and around 370,000 bpd of condensate. This compares to exports of crude and condensate combined of almost 2.9 million bpd in February, which marked a six-year high, Reuters data show.   At the same time, Tehran has indicated that it is on board with an extension of the production cut agreement OPEC struck at the end of last year, which exempted Iran from the cuts provided it didn’t produce more than 3.8 million barrels of oil daily.

Saudis Plan $40 Billion US Investment To "Cement Ties With Trump" -- Having gone all-in on a Hillary Clinton victory ahead of the elections, Saudi Arabia has quickly pivoted in its "appreciation" of the Trump administration, and having realized that the fastest way to Trump's heart is through the US Treasury's bank account, it is preparing to invest an "unprecedented" amount of money in the US. According to Bloomberg, the Kingdom’s sovereign wealth fund will announce plans to "deploy as much as $40 billion into U.S. infrastructure." The investment will likely be unveiled as early as next week when Trump is scheduled to visit the kingdom. While it is clear why Saudi Arabia is eager to appease Trump - after all the all important Aramco IPO is coming up, and the Saudis will be eager to open the world's biggest public offering in history to as many US accounts as possible while doing everything in their power to stay on America's good side  - Bloomberg's explanation that Riyadh felt "shunned by President Barack Obama, who crafted the 2015 nuclear deal with their Shiite rival Iran" leaves a bit to be desired: after all Saudi Arabia has consistently been the best customer of the US military-industrial complex for the past decade, and to claim that it had troubled relations with the previous administration is naive at best. What is certain, however, is that Saudi Arabia would have been delighted had Hillary Clinton become president, considering the millions in "donations" the Clinton Foundation received from Saudi Arabia and its peer Gulf states over the years.  Meanwhile, the kingdom claimed a “historic turning point” in bilateral relations after President Trump met Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman in the White House earlier this year. On May 19, Trump will make his first foreign trip since taking office, visiting Saudi Arabia and Jerusalem before heading to Europe. Or perhaps it's not Trump, but rather his son-in-law, that Saudi Arabia is most delighted with. A White House official told Bloomberg that the plans were in the works and that Trump’s son-in-law and senior adviser, Jared Kushner, had played a critical role in the discussions. The Saudi funding may end up an anchor investment in Trump's massive $1 trillion infrastructure stimulus plan.

The Silent Slaughter of the US Air War - April 2017 was another month of mass slaughter and unimaginable terror for the people of Mosul in Iraq and the areas around Raqqa and Tabqa in Syria, as the heaviest, most sustained U.S.-led bombing campaign since the American War in Vietnam entered its 33rd month. The Airwars monitoring group has compiled reports of 1,280 to 1,744 civilians killed by at least 2,237 bombs and missiles that rained down from U.S. and allied warplanes in April (1,609 on Iraq and 628 on Syria). The heaviest casualties were in and around Old Mosul and West Mosul, where 784 to 1,074 civilians were reported killed, but the area around Tabqa in Syria also suffered heavy civilian casualties. In other war zones, as I have explained in previous articles (here and here), the kind of “passive” reports of civilian deaths compiled by Airwars have only ever captured between 5 percent and 20 percent of the actual civilian war deaths revealed by comprehensive mortality studies. Iraqbodycount, which used a similar methodology to Airwars, had only counted 8 percent of the deaths discovered by a mortality study in occupied Iraq in 2006. Airwars appears to be collecting reports of civilian deaths more thoroughly than Iraqbodycount 11 years ago, but it classifies large numbers of them as “contested” or “weakly reported,” and is deliberately conservative in its counting. For instance, in some cases, it has counted local media reports of “many deaths” as a minimum of one death, with no maximum figure. This is not to fault Airwars’ methods, but to recognize its limitations in contributing to an actual estimate of civilian deaths. Allowing for various interpretations of Airwars’ data, and assuming that, like such efforts in the past, it is capturing between 5 percent and 20 percent of actual deaths, a serious estimate of the number of civilians killed by the U.S.-led bombing campaign since 2014 would by now have to be somewhere between 25,000 and 190,000. The Pentagon recently revised its own facetious estimate of the number of civilians it has killed in Iraq and Syria since 2014 to 352. That is less than a quarter of the 1,446 victims whom Airwars has positively identified by name.

US Foreign Policy is About to Kill 500,000 Children in Yemen — Media Silent -  As previously reported, civilians in Yemen are suffering from an intense and widespread humanitarian crisis. Staggering numbers include 7 million civilians in starvation, and 19 million out of the country’s 27 million population “in need of some form of aid,” according to the Guardian and the UN. “The poorest country in the Middle East, Yemen is now the largest food security emergency in the world,” stated a Unicef report that focused on the war’s effect on Yemeni children. At least 9.6 million children, which amounts to 80% of all Yemeni children, are in need of humanitarian assistance. “Nearly 2.2 million children are acutely malnourished and require urgent care. Close to half a million children suffer from severe acute malnutrition, a life-threatening condition that has seen a drastic increase of 200 percent since 2014,” the report also stated, adding that health care, education, and social systems have deteriorated during the war. Alongside this starvation crisis, is the high number of civilian casualties during the continuing conflict in Yemen. At least 4,773 civilians have been killed over the last two years and an additional 8,272 have been injured. US foreign policy is playing a direct role in the starvation and murder of thousands of innocent civilians. In an effort to ensure power to Yemeni President Abdu Rabbu Mansour Hadi, a Saudi-led coalition has been relentlessly attacking Yemen, targeting heavy military action toward Houthi rebels resistant of a Hadi government which has effectively accelerated the country’s humanitarian crisis. A critical element to this war, which has been ongoing for over two years, is assistance from the United States government. The United States has been a longstanding ally of Saudi Arabia and has been providing weapons deals for the Saudi government for a great number of years.

Southern Yemen leaders launch body seeking split from north | Reuters: Senior tribal, military and political leaders have formed a new council seeking the secession of southern Yemen, the former governor of the area's main city Aden said on Thursday, threatening to bring more turmoil to a two-year-old civil war. Aidaroos al-Zubaidi made his announcement in a televised address in front of the flag of the former nation of South Yemen, whose forces were defeated by the north in 1994 and brought into a reunified country. Zubaidi said a "national political leadership" under his presidency would administer and represent the south - a region which holds much of Yemen's modest oil deposits, the backbone of its economy. The announcement raises the prospect of more division in an already complex conflict in the impoverished Arabian Peninsular country, where Saudi Arabia is leading a coalition of Gulf Arab forces against Houthi fighters allied to Iran. Thousands of Saudi-led air strikes have backed both southern fighters and the forces of Yemen's internationally-recognized government against the Houthis. But the southerners and the government of President Abd-Rabbu Mansour Hadi have been caught up in their own power struggle - undermining Saudi efforts to coordinate the campaign. The Houthis say the Gulf powers are seeking to divide and occupy the country Neither the government, which is nominally based in Aden but works mostly from Riyadh, nor the Saudi-led coalition could be immediately reached for comment.

Syria’s Kurds march on to Raqqa and the sea -- Syria’s Kurds have revealed plans to redraw the northern part of the country by linking the Kurdish region of Rojava with the Mediterranean Sea, in a move that will infuriate neighbouring Turkey.In a further sign of growing Kurdish confidence in Syria’s north, officials say that they plan to ask the US for political support in creating a trade corridor to the Mediterranean as part of a deal for their role in liberating Raqqa and other cities from Islamic State (Isis).Senior figures have also indicated that the Syria Democratic Forces (SDF), a 50,000-strong collection of fighters dominated by the YPJ Kurdish militia and a crucial US partner in its offensive against Isis, is preparing to occupy Raqqa after eradicating Isis before pushing deeper into Arab territory, along the Euphrates valley, and seizing the city of Deir ez–Zor from the extremist group.In another startling development, an official even revealed it was possible that SDF forces might eventually push west to liberate the city of Idlib, 170km west of Raqqa, and currently controlled by a coalition of Islamists and jihadis including the former al-Qaida affiliate Nusra Front. Hediya Yousef, in charge of the federalism project for the self-declared autonomous “democratic federation of north Syria”, which has expanded from the Kurdish region of Rojava to include considerable Arab territory, told the Observer: “Arriving at the Mediterranean Sea is in our project for northern Syria, it’s a legal right for us to reach the Mediterranean.”When asked if that meant asking the US for its political backing to achieve a trading route to the sea once they had helped eradicate Isis from north Syria, Yousef said: “Of course.” Speaking in the Syrian city of Malikiyah near to where recentTurkish airstrikes struck Kurdish targets, killing 20 fighters of the People’s Protection Units (YPJ), Yousef added: “If we arrive at the Mediterranean it will solve many of the problems of the population in northern Syria, everyone will benefit.” Opening the region to international trading routes would significantly empower northern Syria, circumventing the existing blockade on Rojava caused by the closed border with Turkey and tensions with Iraq.

U.S. to arm Syrian Kurds fighting Islamic State, despite Turkey's ire | Reuters: Despite fierce opposition from NATO ally Turkey, U.S. President Donald Trump has approved supplying arms to Kurdish YPG fighters to support an operation to retake the Syrian city of Raqqa from Islamic State, U.S. officials said on Tuesday. Ankara views the Kurdish YPG militia, fighting within a larger U.S.-backed coalition, as the Syrian extension of the Kurdish PKK militant group, which has fought an insurgency in southeastern Turkey since 1984. There was no immediate reaction from Turkey, whose president, Tayyip Erdogan, is expected to meet Trump in Washington next week. The Pentagon immediately sought to stress that it saw arming the Kurdish forces "as necessary to ensure a clear victory" in Raqqa, Islamic State's de facto capital in Syria and a hub for planning the group's attacks against the West. "We are keenly aware of the security concerns of our coalition partner Turkey," Pentagon spokeswoman Dana White said in a statement as she traveled in Lithuania with defense secretary Jim Mattis. "We want to reassure the people and government of Turkey that the U.S. is committed to preventing additional security risks and protecting our NATO ally," White said. The United States has long directly supplied arms to the Arab components of the so-called Syrian Democratic Forces, which include YPG fighters. White said Washington would still prioritize supplying those Arab fighters within the SDF. One U.S. official, speaking on condition of anonymity, said the equipment for the Kurdish fighters could include small arms, ammunition, machine guns, armored vehicles and engineering equipment.

Russia Seeks Accord With U.S. on Iran Role in Syria Safe Zones - Russia is seeking to convince the U.S. to accept an Iranian role in a plan for foreign troops to police safe zones in Syria as a step toward ending the six-year war. The U.S. and Iran must show “compromise and flexibility” in helping to secure the so-called de-escalation zones proposed by Russia to shore up a Syrian cease-fire, President Vladimir Putin’s Middle East envoy, Mikhail Bogdanov, told reporters in Sochi on Thursday. Russia is trying to mediate between the U.S. and Iran, though it’s under “no illusions” about the difficulties, he said. “Does anyone think Iran is going to leave this region and Syria, as if you could wave a magic wand and Iran would disappear?” Bogdanov said. “That’s not going to happen.” Russian Foreign Minister Sergei Lavrov said after talks with U.S. President Donald Trump in Washington on Wednesday that he hoped the U.S. would “make an active contribution” to securing the safe zones. Lavrov suggested the U.S. may “initiate” the process in southern Syria near the borders with Israel and Jordan. Russia, Turkey and Iran signed a memorandum on creating four zones at talks involving the Syrian government and opposition groups in Kazakhstan’s capital, Astana, last week. Russia believes the U.S. should help to enforce the cease-fire in Syria, though it would have to gain approval from Syrian President Bashar al-Assad to deploy any troops to safe zones, Bogdanov said. Trump’s pragmatic approach as “a businessman who loves practical results” is encouraging Russia to “hope that life eventually puts everything in its place” to help end the conflict, he said.’

Qatar says Syria 'de-escalation' plan not an alternative to political transition | Reuters: Qatar's foreign minister on Tuesday welcomed a Russian-brokered agreement for "de-escalation" zones in Syria but said the plan was no substitute for a political transition that would see President Bashar al-Assad step down. Qatar has been a supporter of rebels who have been fighting to overthrow the Syrian president during six years of civil war. "It is good to have de-escalation zones but this must be a step to reach a solution to the Syrian crisis and not to use it as an excuse to delay this solution and to postpone the political transition," the Qatari foreign ministry quoted Sheikh Mohammed bin Abdulrahman al-Thani as telling the Doha-based al-Jazeera network. The remarks came after talks between the Qatari minister and U.S. Secretary of State Rex Tillerson in Washington. Russia brokered the deal for de-escalation zones with backing from Iran and opposition supporter Turkey during ceasefire talks in the Kazakh capital Astana last week. The deal took effect at midnight on Friday. Some fighting has continued in those areas, particularly north of Hama city, but the overall intensity has reduced, the Syrian Observatory for Human Rights monitoring group said.

No, the “New” CNN Video of the Chemical Incident Does NOT Prove that the Syrian Government Did It - The Sun claims that CNN has released new footage of last month’s Syrian chemical incident … and strongly implies that the Syrian government was responsible.Washington’s Blog asked MIT rocket scientist and chemical weapons expert Theodore Postol* what he thought of the footage.Postol replied:I agree that the footage is harrowing. However none of it is new and none of it proves that the Syrian government was the perpetrator of a nerve agent attack.As such, this article merely falls into the category of propaganda.The kindest alternative description of the article is that it might instead be yet another example of bad reporting that mixes ill-considered assumptions with facts that may or may not be relevant to its conclusions.This kind of reporting could actually be encouraging such attacks.If there was a false flag nerve agent attack, this tells the perpetrators that when they engage in the murder of children they can build a stronger false case against the Syrian government and thereby increase their chances of creating political pressure on the US Government to intervene militarily on their behalf. If people are sickened by the inhumanity of these events, they might want to consider alternative explanations of who might be responsible for the immoralities we are seeing.

Drone Images Expose Major US, Jordan Military Build-up On Syrian Border The US and Jordanian military forces may be prepping a massive invasion of Syria, if intelligence reports gathered from surveillance drones suggest.  Following reports today that President Trump confirmed US will provide arms directly to The Kurds to fight ISIS, AlMasdarNews.com reports, Damascus is reportedly on high alert after some 400 American and Jordanian military vehicles were located at a Jordanian military base near the Syrian desert border earlier today.More pictures of the drone surveillance here: The tanks are supposedly Jordanian M60 types. The photos validate previous reports by an Al-Masdar News military source suggesting a major Jordanian and US buildup at the Syrian border. The military base is located east of Az-Zarqa, 43 km away from the Syrian border.

Iraq fears for its future once Isis falls -- Abu Hassan, who asked that his real name not be used, still cannot understand how the friend he grew up with could support the jihadi group that killed thousands and branded his own minority sect infidels worthy of slaughter. “After something like this, how do people live together again?” he asks. As the battle against Isis in Mosul enters its final stages, it is a question many are grappling with in the diverse province of Nineveh, some 300km from Baghdad and with a population of more than 3m.  Over the centuries, Nineveh has hosted Christian sects, Jews who have long since fled, Arabs of the Sunni and Shia Muslim sects, Kurds as well as smaller minorities like the Turkmen, Yazidis and Abu Hassan’s Shabak people. There have been periods of conflict, but few as catastrophic as June 2014, when Isis militants seized Mosul and swept across northern Iraq and Syria. Advancing Iraqi forces, backed by a US-led international coalition, opened a fresh assault last week on the last districts of Mosul, Nineveh’s provincial capital, where several hundred Isis militants are bracing for a fight to the death. The presumed government victory over the coming weeks is seen as critical to delivering a final death knell to Isis’s territorial control in Iraq, where it has only a few remaining footholds. Washington and its allies are likely to support Iraqi security operations even after Isis is driven out. But that alone will not solve the puzzle of how Nineveh, and perhaps all of Iraq, heals the scars left by the Islamists. If the country cannot foster coexistence, Baghdad’s allies may find it mired in conflict yet again.“Of course this isn’t over . . . it will become sect versus sect, party against party, neighbour versus neighbour,” says one Nineveh council official, who asked not to be named. “The killing is easy, because we have not imposed governance here. There is no order.” Nineveh, Iraq’s second-largest province, is rich in oil and fertile land. But its complex ethnic make-up means conflicts, many of which predate Isis, are hard to resolve and relatively easy to reignite.

Iran Threatens To Destroy Saudi Arabia After Saudi Prince Warns Of "Moving Battle To Iran" -- An unexpected war of words erupted between two sworn Middle-Eastern rivals over the weekend, when Saudi Arabia and Iran threatened each other with military action, if not outright destruction.It started on Tuesday, when in "unusually blunt comments" delivered during a nationally-televised interview Saudi Deputy Crown Prince Mohammed bin Salman - the man who is now effectively in charge of Saudi oil policy - ruled out any dialogue with Iran and pledged to protect his conservative kingdom from what he called "Tehran's efforts to dominate the Muslim world.""We know that we are a main goal for the Iranian regime," he said. "We will not wait until the battle comes to Saudi Arabia but we will work to have the battle in Iran rather than in Saudi Arabia."Iran, never one to leave a lingering belligerent comment by its Saudi nemesis unanswered, responded when its defense minister said on Sunday that Iran would hit back at most of Saudi Arabia with the exception of Islam's holiest places if the kingdom does anything "ignorant"according to Reuters."If the Saudis do anything ignorant, we will leave no area untouched except Mecca and Medina," Defence Minister Hossein Dehghan was quoted by the semi-official Tasnim news agency as saying. Taking a jab at the Saudi war in Yemen, the iranian said that "they think they can do something because they have an air force," referring to Saudi attacks on Iran-aligned Houthi forces in control of the capital Sanaa.

Iran Warns It Will Attack 'Terrorist Safe Havens' Inside Pakistan - Iran has warned Pakistan that Tehran would hit militant bases inside the neighboring country if Islamabad does not confront Sunni insurgents who carry out cross-border attacks. Iranian state media quoted the army's chief of staff, Mohammad Hossein Bagheri, as saying on May 8 that Tehran expects "the Pakistani officials to control the borders, arrest the terrorists, and shut down their bases." "If the terrorist attacks continue, we will hit their safe havens and cells, wherever they are," he said. Ten Iranian border guards were killed in April in an attack claimed by the Sunni militant group Jaish al-Adl. Iran's Foreign Minister Mohammad Javad Zarif visited Islamabad early in May to discuss border security with Pakistani authorities. Pakistan assured Iran it would deploy additional troops along its border. The porous frontier between the two countries has long been used by drug smugglers and militants, both of whom occasionally clash with Iranian security forces. Jaish al-Adl that has carried out several assaults on Iranian security forces, claimed responsibility for attacks that killed eight border guards in April 2015 and 14 border guards in October 2013. The militant group says its attacks are aimed at what it calls discriminations against Sunni minorities in predominantly Shi'ite Iran.

Questions for US military after doubt cast on efficiency of Afghan bombing - After dropping its largest conventional bomb ever used in combat in Afghanistan on 13 April, the US military said the massive ordnance air blast, or Moab, was a “very clear message to Isis” that they would be “annihilated”.  Defence secretary Jim Mattis said the bomb was “necessary to break Isis”. The Afghan government claimed the bomb killed 94 Isis militants, while harming no civilians. But a new investigation by independent analysts casts doubt on the efficiency of the bomb, suggesting it inflicted far less damage than initially reported – and raising questions again over why the bomb was dropped. Using satellite imagery, ground footage and 3D visualisation, Alcis, an institute for geographical analysis, surveyed the targeted area in Nangarhar province.  It found 38 buildings and 69 trees destroyed within a 150-metre radius, challenging statements from locals who told reporters the bomb had damaged houses up to two miles away. The imagery also shows no 300-metre crater, as had been expected prior to the strike. Alcis believes damage done further away is a result of ground fighting. Alcis was also sceptical of the Afghan government’s assessment that the bomb killed 94 Isis militants. “I’m staggered by that,” said Richard Brittan, the institute’s managing director. “I simply don’t understand where they can get that number from.” The US has yet to put out a casualty estimate. The US military spokesman in Kabul, Capt William Salvin, would not comment on the Afghan numbers but said: “We have not been able to go in and do that assessment, and we’re probably not going to.” He said it was “too dangerous” and that the military had “better things to do with our time”.

Trump Considers Afghanistan Army Surge - After already escalating the fight in Afghanistan last month by dropping its GBU-43/B Massive Ordnance Air Blast Bomb (MOAB or "mother of all bombs"), the largest non-nuclear bomb in the U.S. arsenal, and engaging in a 3-hour gunfight this past weekend that resulted in the death of ISIS leader Sheikh Abdul Hasib, Trump is apparently considering whether to once again expand U.S. military presence in Afghanistan. According to the Washington Post, the new plan, which still needs the approval of the president, calls for expanding the U.S. military role as part of a broader effort to push an increasingly confident and resurgent Taliban back to the negotiating table, U.S. officials said. The plan comes at the end of a sweeping policy review built around the president’s desire to reverse worsening security in Afghanistan and “start winning” again, said one U.S. official, who like others spoke on the condition of anonymity to discuss internal deliberations. The new strategy, which has the backing of top Cabinet officials, would authorize the Pentagon, not the White House, to set troop numbers in Afghanistan and give the military far broader authority to use airstrikes to target Taliban militants. It would also lift Obama-era restrictions that limited the mobility of U.S. military advisers on the battlefield.Trump is expected to make a final call on the strategy before a May 25 NATO summit in Brussels that he plans to attend.

U.S. poised to expand military effort against Taliban in Afghanistan - President Trump’s most senior military and foreign policy advisers have proposed a major shift in strategy in Afghanistan that would effectively put the United States back on a war footing with the Taliban. The new plan, which still needs the approval of the president, calls for expanding the U.S. military role as part of a broader effort to push an increasingly confident and resurgent Taliban back to the negotiating table, U.S. officials said. The plan comes at the end of a sweeping policy review built around the president’s desire to reverse worsening security in Afghanistan and “start winning” again, said one U.S. official, who like others spoke on the condition of anonymity to discuss internal deliberations. The new strategy, which has the backing of top Cabinet officials, would authorize the Pentagon, not the White House, to set troop numbers in Afghanistan and give the military far broader authority to use airstrikes to target Taliban militants. It would also lift Obama-era restrictions that limited the mobility of U.S. military advisers on the battlefield. The net result of the changes would be to reverse moves by President Barack Obama to steadily limit the U.S. military role in Afghanistan, along with the risk to American troops and the cost of the war effort, more than 15 years after U.S. forces first arrived there. Trump is expected to make a final call on the strategy before a May 25 NATO summit in Brussels that he plans to attend. 

Bin Laden’s son wants to avenge his father, ex-FBI agent says - Personal letters seized in the raid that killed Osama bin Laden reveal the al Qaeda leader's son to be a young man who adores his father and wants to carry on his murderous ideology. That son today is poised to lead a stronger, larger al Qaeda and is bent on avenging his dad's death, says an ex-FBI agent familiar with those documents. Holly Williams interviews Ali Soufan, the former FBI agent who was the bureau's lead investigator of al Qaeda after the 9/11 attacks, on the next edition of 60 Minutes Sunday, May 14 at 7 p.m. ET/PT. Soufan describes a letter from the son, Hamza, that was collected in the raid and now declassified. "He tells him that…he remembers 'every look…every smile you gave me, every word you told me.'" Hamza would be about 28 now and wrote the letter when he was 22 and had not seen his father in several years. Hamza also wrote this: "I consider myself to be forged in steel. The path of jihad for the sake of God is what we live." Hamza's potential as a leader was recognized years ago when he was still a boy, says Soufan. The child was used in propaganda videos, sometimes holding a gun. "He was a poster kid for the al Qaeda…and for members of al Qaeda, who were indoctrinated with these propaganda videos, he means a lot to them," Soufan tells Williams. The U.S. has named Hamza a "specially designated global terrorist" -- the same classification his father once held. He even sounds like his father, says Soufan. "His recent message that came out, he delivered the speech as if it's his father…using sentences, terminology that was used by Osama bin Laden." 

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