Sunday, January 21, 2018

distillates (heat oil) use at a record high, US & global crude supplies continue to drop..

oil prices fell for the first time in the past five weeks this week, and also fell by the most in any week since early October, but not before hitting another three year high, beating the three year high set at the end of last week....after rising every day during the week ending January 12th and closing with a gain for the week of $2.86, or 4.7% at a three year high of $64.30 a barrel, US crude oil contracts for February delivery opened Tuesday morning at $64.43 a barrel and climbed to a new three year high of $64.89, before falling on profit taking and closing at $63.73...oil prices then recovered and rose 24 cents on Wednesday to $63.97 a barrel, buoyed by expectations for a tenth straight weekly drop in U.S. crude supplies and threats by militants to production facilities in Nigeria...oil prices were then mostly flat on Thursday, as the expected bullish drop in US crude supplies was offset by a bearish jump in our crude oil production, with prices ending 2 cents lower at $63.95 a barrel...prices then fell 58 cents to a one-week low on Friday, as the International Energy Agency predicted U.S. crude production would climb to record a high this year, surpassing the output of Saudi Arabia and Russia, with oil closing the week down 93 cents at $63.37 a barrel, a drop of less than one and a half percent for the week but still the biggest down week since October...

natural gas prices also tracked a bit lower this week, ending 1.5 cents lower at $3.185 per mmBTU, after this week's gas withdrawals from storage were in line with seasonal norms, following last week's record inventory drawdown...the Weekly Natural Gas Storage Report indicated that gas in storage fell by 183 billion cubic feet to 2,584 billion cubic feet in the week ending Friday, January 12, 2018, which left our gas supplies 368 billion cubic feet, or 12.5% less than was in storage on January 13th of last year, and 362 billion cubic feet, or 12.3% below the five-year average of 2,946 billion cubic feet for the second week of the year....since that's still higher than the gas that was left in storage on January 17th of the "polar vortex" year of 2014, the EIA characterizes our natural gas supplies as "within the five-year historical range"....

at the same time, heat oil supplies, as represented by distillate inventories, saw their largest consumption over one week in history, which we have to believe was a delayed impact of the prior week's cold appears that the distillate inventories figure accesses data for refinery or wholesales supplies of heat oil, which were apparently not impacted until a week after the cold weather, as retailers of heat oil filled their storage tanks to reflect their sales during the cold snap of the prior week...that left heat oil supplies nearly 18% below their year ago levels, but only just over 5% below their 10 year average for this time of put this year's data for supplies of heating fuels into perspective, we'll include a few graphs on the year's heating requirements from John Kemp of Reuters...

the graph below, of daily heating degree days nationally, came from a package of graphs that John Kemp, senior energy analyst and columnist with Reuters, emailed out on days are used by utilities and suppliers of heating fuels to determine what the daily demand for heating will be, so they can adjust their production or delivery schedules accordingly...they are computed by taking the average daily temperature (typically once hourly readings divided by 24) and subtracting that from 65F, which is considered to be the temperature when most buildings will start to need heating...thus, the colder it gets, the greater the the number of heating degree days; ie, an average temperature of 32F would correspond to 33 degree days, while an average temperature of 20F would be 45 degree days...

January 19 2018 heating demand week ending Jan 12

so, the above graph takes that degree day data from all locations across the US and weighs it by the number of people living in each reporting location to give a population weighted degree average for the US, wherein the yellow graph shows the average degree days needed per capita over the typical US heating season (starting with zero in July) and the red dots show the actual population degree days for each day this heating season of 2017-2018....while those dots are difficult to read and line up, you can orient what the graph shows by noting that the highest number of degree days was on January 1st, when the all time record for natural gas consumption was set...that date looks to be close to 43 degree days, and it appears that our heating demand dropped to around 16 degree days about 10 days later...

the next graph, also from that package of graphs mailed John Kemp, shows the cumulative heating degree days up till at least mid-January...

January 19 2018 heating demand cumulative week ending Jan 12

in this graph, the divergence of cumulative heating degree days from normal for each of the past three heating seasons is shown daily, with the current year shown as a solid yellow line, last year's divergence shown as a dashed yellow line, and with the divergence from normal of the 2015/2016 heating season shown as a dashed red line....note that all three graphs trend downward, or negative from zero, because all three years experienced warmer than normal temperatures, hence less degree days than normal, up until the recent weeks of this year, when the colder than normal weather has brought this year's divergence back up to near zero...without going into monthly detail, we can see that the 2015/2016 heating season started downward and by springtime had accumulated nearly 700 fewer degree days than a normal year...likewise, the 2016/2017 heating season needed even less heating, and by spring had fallen more than 700 degree days below normal for the season...we have often characterized the heating needs of both years as "17% below normal", based on similar graphs we posted at the end of March last year...this year, the pattern we see describes a cool September, and a generally warmer than normal October, November and early December, which has since been completely reversed in the weeks since Christmas...that now normal heating demand has left our natural gas supplies 12.5% below those of a year ago, and our heat oil supplies nearly 18% below those of a year ago, with exports of both commodities exacerbating the shortfalls...

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, which includes details for the week ending January 12th, showed that despite a big pullback in operations at US refineries and a large rebound in oil production from US wells, we again had a large withdrawal of crude oil out of storage, as the week's changes were all obscured by a big shift in the amount of unaccounted for crude oil...our imports of crude oil rose by an average of 292,000 barrels per day to an average of 7,950,000 barrels per day during the week, while our exports of crude oil rose by an average of 234,000 barrels per day to an average of 1,249,000 barrels per day, which meant that our effective trade in oil worked out to a net import average of 6,701,000 barrels of per day during the week, 58,000 barrels per day more than the net imports of the prior the same time, field production of crude oil from US wells rose by 258,000 barrels per day to 9,750,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 16,451,000 barrels per day during the reporting week..

during the same week, US oil refineries were using 16,875,000 barrels of crude per day, 448,000 barrels per day less than they used during the prior week, while 913,000 barrels of oil per day were being pulled out of oil storage facilities in the US....hence, this week's crude oil figures from the EIA seem to indicate that our total supply of oil from net imports, from oilfield production, and from storage was 489,000 more barrels per day than what refineries reported they used during the account for that disparity, the EIA needed to insert a (-489,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the data for the supply of oil and the consumption of it balance out, a fudge factor that is labeled in their footnotes as "unaccounted for crude oil"...that was a swing of 970,000 barrels per day from the +481,000 barrel per day fudge factor the prior week, and thus calls into question the reliability of all our week over week oil metrics...

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports inched up to an average of 7,892,000 barrels per day, still 3.7% less than the 8,195,000 barrels per day average imported over the same four-week period last year....the 913,000 barrel per day decrease in our total crude inventories came about on a 980,000 barrel per day withdrawal from our commercial stocks of crude oil, which was partially offset by a 67,000 barrel per day addition of oil to our Strategic Petroleum Reserve, likely a return of oil that was borrowed from the Reserve during the post Hurricane Harvey emergency... this week's 258,000 barrel per day increase in our crude oil production included a 267,000 barrel per day increase in output from wells in the lower 48 states, which was partially offset by a 9,000 barrels per day decrease in output from Alaska.....the 9,750,000 barrels of crude per day that were produced by US wells during the week ending January 12th was 11.2% more than the 8,770,000 barrels per day we were producing at the end of 2016, and 15.7% above the interim low of 8,428,000 barrels per day that our oil production fell to during the last week of June, 2016...

US oil refineries were operating at 93.0% of their capacity in using those 16,875,000 barrels of crude per day, down from the 95.3% of capacity the prior week, and down from the wintertime record 96.7% of capacity two weeks earlier...the 16,875,000 barrels of oil that were refined this week were 2.4% less than the off-season record 17,608,000 barrels per day that were being refined at the end of December 2017, but were 2.5% more than the 16,468,000 barrels of crude per day that were being processed during the second week of 2017, when refineries were operating at 90.7% of capacity....

even with the decrease in the amount of oil being refined, gasoline production by our refineries was higher, increasing by 185,000 barrels per day to 9,710,000 barrels per day during the week ending January 12th, after falling by 721,000 barrels per day over the prior two weeks....that increase lifted our gasoline production to a level 8.5% higher than the 8,953,000 barrels of gasoline that were being produced daily during the week ending January 13th of last the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 215,000 barrels per day to 5,076,000 barrels per day, after falling by 301,000 barrels per day the prior week...but even with the two big decreases, the week's distillates production was 7.7% higher than the 4,713,000 barrels of distillates per day than were being produced during the the second week of 2017....   

with the increase in our gasoline production, our gasoline inventories at the end of the week rose by 3,620,000 barrels to 240,942,000 barrels by January 12th, their tenth increase in a row...that was as our domestic consumption of gasoline fell by 146,000 barrels per day to 8,668,000 barrels per day, and as our imports of gasoline rose by 132,000 barrels per day to 396,000 barrels per day, while our exports of gasoline rose by 144,000 barrels per day to 948,000 barrels per day....however, even after ten consecutive increases, our gasoline inventories are still down by 2.2% from last January 13th's level of 246,424,000 barrels, even as they are roughly 4.8% above the 10 year average of gasoline supplies for this time of the year...      

however, with this week's drop in distillates production, our supplies of distillate fuels fell by 3,887,000 barrels to 139,201,000 barrels over the week ending January 12th, in the first draw from distillates supplies in 5 weeks...that was as the amount of distillates supplied to US markets, a proxy for our domestic consumption, rose by 1,083,000 barrels per day to a record high of 4,738,000 barrels per day, even as our exports of distillates fell by 163,000 barrels per day to 1,040,000 barrels per day, while our imports of distillates fell by 28,000 barrels per day to 147,000 barrels per day... after this week’s inventory decrease, our distillate supplies were 17.7% lower at the end of the week than the 169,073,000 barrels that we had stored on January 13th, 2017, and roughly 5.3% lower than the 10 year average of distillates stocks at this time of the year… 

finally, even after the slowdown of US refining and the increase in our crude oil production, our commercial crude oil inventories fell for the 34th time in the past 41 weeks, decreasing by 6,861,000 barrels, from 419,515,000 barrels on January 5th to a 28 month low of 412,654,000 barrels on January 12th....while our oil inventories as of January 12th were thus 15.0% below the 485,456,000 barrels of oil we had stored on January 13th of 2017, and 9.3% lower than the 455,169,000 barrels of oil that we had in storage on January 15th of 2016, they were still 13.3% greater than the 364,266,000 barrels of oil we had in storage on January 16th of 2015, at the time when US supplies of oil were just beginning to increase.. 

January OPEC Oil Market Report

since we've also been tracking the impact of OPEC's production cuts on global oil supplies since those cuts were initiated in January this year, we will again review the latest OPEC Oil Market Report (covering December OPEC & global oil data), which was released on Thursday of the past week, and which is available as a free download....the first table from that report that we'll look at is from page 65 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 indicate...for all their official production measurements, OPEC uses an average of estimates from six "secondary sources", namely the International Energy Agency (IEA), the oil-pricing agencies Platts and Argus, ‎the U.S. Energy Information Administration (EIA), the oil consultancy Cambridge Energy Research Associates (CERA) and the industry newsletter Petroleum Intelligence Weekly, 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...    

December 2017 OPEC crude output via secondary sources

as we can see from this table of official oil production data, OPEC oil output increased by 42,400 barrels per day in December to 32,416,000 barrels per day, from an November production total of 32,373,000 barrels per day, but that was a figure that was originally reported as 32,448,000 barrels per day, so their production for December was actually a decrease from previously reported figures (for your reference, here is the table of the official November OPEC output figures as reported a month ago, before this month's revisions) you can tell from the far right column above, the main reasons that OPEC's December output rose by 42,400 barrels per day from revised November figures were the increases of 44,800 barrels per day in output from Angola and of 75,700 barrels per day in output from Nigeria, which were partially offset by an 82,200 barrel per day decrease in output from Venezuela...note that the increase in Angolan production came after an even larger decrease in November, meaning Iraq is still the only OPEC member whose production is well in excess what their pact calls for, as can be seen in the table below:  

December 2017 OPEC output vs quota via Platts

the above table is from the "OPEC guide" page at S&P Global Platts: the first column of numbers shows average daily production in millions of barrels of oil per day for each of the OPEC members over the twelve months of this year, and the 2nd column shows the allocated daily production in millions of barrels of oil per day for each member, as was agreed to at their November 2016 meeting, and the 3rd column shows how much each has averaged over or under their quotas for the twelve months that the OPEC pact to curtail production has been in effect...we should clarify that Nigeria and Libya are no longer exempt from the pact, since they have agreed to a combined output cap of 2.8 million barrels per day at the November 30th OPEC meeting...with a combined output of 2,823,000 barrels per day in December, they were a bit in excess of that new quota for this month, but over the entire past year their output was well below that quota....and as you can see from the above, most OPEC members are pretty close to meeting their commitment to cutting their production back 4%, except for Iraq, whose production has averaged nearly 2% higher than what they committed to...however, cuts in excess of what was agreed to by the Saudis, Venezuela, and other OPEC countries have more than made up for the 80,000 barrels per day that Iraq has been overproducing, so the cartel as a whole has kept their commitment to reduce supply....  

for a visualization of how OPEC's cuts have progressed, we'll next include a longer term historical graph of their monthly oil output: 

December 2017 OPEC oil production historical graph

the above graph was taken from the "OPEC December Oil Production" post at the Peak Oil Barrel blog, where Ron Patterson also posts similar graphs for each of the OPEC members...this graph shows total oil production, in thousands of barrels per day, for all of the current 14 members of OPEC, for the period from January 2005 to December 2017, using the history of the same official data from secondary sources that we saw in the first table above...we can see that OPEC's December production of 32,416,000 barrels per day, despite the increase from November, remains lower than their production of the prior five months, while it's higher than OPEC production of the first 5 months of this year...we can also see how OPEC's production spiked to a record last November, just before they announced their output cuts, giving them quite a bit of leeway to "reduce" production from those elevated levels, without ever having to fully cut back to the level they were producing at in late 2015 and early 2016...

the next graphic we'll include below comes from page 66 of the January OPEC Monthly Oil Market Report, and shows us both OPEC and world oil production monthly on the same graph, over the period from January 2016 to December 2017...on this graph, the cerulean 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...   

December 2017 OPEC report global oil supply

OPEC's preliminary data indicates that total global oil production rose to a 13 month high of 97.49 million barrels per day in December, up by .40 million barrels per day from a November total of 97.09 million barrels per day, which was revised .35 million barrels per day lower from the 97.44 million barrels per day global oil output for November that was reported a month oil output for December was also 0.57 million barrels per day higher than the 96.92 million barrels of oil per day that was being produced globally in December a year ago (see last January's OPEC report online (pdf) for the year ago data)... OPEC's December production of 32,416,000 barrels per day thus represented 33.3% of what was produced globally, the same as their share of November global output, as oil output increases by Canada, Mexico, Norway, Brazil and Kazakhstan were partially offset by decreases in output from the UK, the US and China....OPEC's December 2016 production was at 33,085,000 barrels per day, so even after their production cuts, the 13 OPEC members who were part of OPEC last year, excluding their new member Equatorial Guinea, are producing just 2.4% less oil than they were producing a year ago, in the month before their production quotas went into effect...

  however, even after the increase in global oil output that we can see in the above purple graph, there was again a deficit in the amount of oil being produced globally, as the next table from the OPEC report will show us..   

December 2017 OPEC report global oil demand copy

the table above comes from page 37 of the January OPEC Monthly Oil Market Report, and it shows regional and total oil demand in millions of barrels per day for 2016 in the first column, and OPEC's estimate of oil demand by region and globally quarterly over 2017 over the rest of the table...on the "Total world" line of the fifth column, we've circled in blue the figure that's relevant for December, which is their revised estimate of global oil demand for the fourth quarter of 2017...  

OPEC's estimate is that over the 4th quarter of last year, all oil consuming areas of the globe were using 98.20 million barrels of oil per day, which is an upward revision from their prior 4th quarter estimate of 98.08 million barrels of oil per day.....meanwhile, as OPEC showed us in the oil supply section of this report and the summary supply graph above, after the OPEC and non-OPEC production cuts, the world's oil producers were only producing 97.44 million barrels per day during December, which means that there was a shortfall of around 760,000 barrels per day in global oil production vis-a vis demand during the month... 

global oil production estimates for November were also revised lower with this report, by 0.35 million barrels per day to 97.09 million barrels per day, so combined with the 0.12 million barrel per day upward revision of 4th quarter demand, that now means there was also a deficit of 1,110,000 barrels per day in November global oil output, which we had previously figured to be a global oil deficit of around 640,000 barrels per addition, since there were also revisions to oil demand estimates for 3rd quarter, as well as the 4th (which we have circled in green), that means the surplus or shortfall figures we previously computed for those months will also have to be recomputed...

hence the global oil deficit for October, which we had previously figured to be a deficit of 1,480,000 barrels per day, is now 0.12 millions barrel per day higher, or 1,600,000 barrels per day...revising our prior 3 quarter results for the 0.05 million barrel per day upward revision of 3rd quarter demand, we find there was a shortfall of 1,540,000 barrels per day in September global output, a global shortfall of 1,680,000 barrels per day in August, and a global oil shortfall of 565,000 barrels per day in July...

prior to that, we estimated a global oil surplus of 850,000 barrels per day in June, a global oil deficit of 360,000 barrels per day in May, a global oil deficit of 670,000 barrels per day in April, a global surplus of 390,000 barrels per day in March and average surpluses over January and February of around 610,000 barrels per day....adding those totals together, we find that the data from the 12 monthly OPEC reports we've covered means that after a year of OPEC production cuts, the global oil glut has been reduced by roughly 183.065 million barrels of oil since the 1st of the year, with most of that reduction coming over the last five months of 2017...included in that was at least a 54.549 million barrel drop in US oil supplies, which fell from 479,012,000 barrels on December 30th 2016 to 424,463,000 barrels as of December 29th, 2017, and as we've seen, continued to fall into the new year...

This Week's Rig Count

US drilling activity decreased for the fourth time in the past 11 weeks during the week ending January 19th, as natural gas rigs increased but those drilling for oil decreased by more....Baker Hughes reported that the total count of active rotary rigs running in the US fell by 3 rigs to 936 rigs in the week ending on Friday, which was still 242 more rigs than the 694 rigs that were deployed as of the January 20th report of 2017, while it was also less than half of the recent high of 1929 drilling rigs that were in use on November 21st of 2014...

the number of rigs drilling for oil fell 5 rigs to 747 rigs this week, which was still 196 more oil rigs than were running a year ago, while the week's oil rig count remained far below the recent high of 1609 rigs that were drilling for oil on October 10, the same time, the number of drilling rigs targeting natural gas formations rose by 2 rigs to 189 rigs this week, which was 47 more gas rigs than the 142 natural gas rigs that were drilling a year ago, but way down from the recent high of 1,606 natural gas rigs that were deployed on August 29th, 2008...

offshore drilling activity was unchanged this week, with 19 rigs still drilling from platforms in the Gulf of Mexico; that was down from 23 rigs in the Gulf of Mexico a year ago and a total of 24 rigs offshore a year ago...this week's count of active horizontal drilling rigs was down by 3 rigs to 802 horizontal rigs this week, which was still up by 243 rigs from the 559 horizontal rigs that were in use in the US on January 20th of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of the same time, the vertical rig count fell by 5 rigs to 57 vertical rigs this week, which was also down from the 75 vertical rigs that were in use during the same week of last year....on the other hand, the directional rig count was up by 5 rigs to 77 directional rigs this week, which was also up from the 60 directional rigs that were deployed on January 20th of 2017...

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 the weekly and year over year rig count changes for the major US geological oil and gas both tables, the first column shows the active rig count as of January 19th, the second column shows the change in the number of working rigs between last week's count (January 12th) and this week's (January 19th) count, the third column shows last week's January 12th 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 for the 20th of January, 2017...            

January 19 2018 rig count summary

as i'm sure you'll notice, despite the national increase in natural gas drilling, the Utica shale drillers in Ohio shut down 4 rigs, including 3 natural gas directed rigs, and the only Utica rig that had been targeting oil...on the other hand, 3 natural gas were added in the Marcellus, with one of those in Pennsylvania and two in West the same time, one of the rigs shut down in the Niobrara chalk of Colorado had been targeting gas, while the Haynesville drillers shut down an oil rig and started a gas rig and in the Eagle Ford, they started up a natural gas rig while shutting down 4 rigs targeting oil...there was also a natural gas rig started in an "other" basin, unnamed by Baker Hughes, but other than those, all other changes in activity shown above was for oil rigs...we should also note that other than the major producing states shown in the first table above, Mississippi drillers added a rig and now have 3 running, the same as they had running a year earlier, whereas Alabama saw a rig shut down, leaving just one active, also the same number that they had working last January 20th...


Ohio EPA Reports New Rover Pipeline Spill To Federal Regulators - The $4.2 billion Rover Pipeline cutting diagonally across Ohio is drawing more concern from state regulators. Last week, the Ohio EPA told the Federal Energy Regulatory Commission that it is “deeply concerned” about a new spill from the Rover Pipeline. Nearly 150,000 gallons of drilling fluid was “lost down a hole” beneath the Tuscarawas River in southwestern Stark County. That’s the same site where more than 2 million gallons of the fluid – mixed with diesel – leaked last April and turned up in a wetland. Horizontal drilling to lay the pipe beneath highways and rivers was suspended then but allowed to resume in December. The pipeline owner, Energy Transfer Partners, has said that it’s continuing to follow a plan approved by the feds and state EPA.  Amid spills from the Rover and Keystone pipelines, among others, FERC recently announced plans to review its pipeline policies for the first time since 1999.The state has sued Rover for $2.3 million over the cleanup costs from the first spill, after the pipeline’s owners refused to pay state fines. There’s no indication if the fluid in the latest spill contained diesel.The EPA's letter notes that the company is now flying drones to monitor surface leaks and has recovery equipment in place. The pipeline is expected to pump 3.25 billion cubic feet of gas per day from the Marcellus and Utica shale fields. That’s enough to supply more than 15 million households.

Rover Pipeline Spills Another 150,000 Gallons of Drilling Fluid Into Ohio Wetlands - Energy Transfer Partners ' troubled $4.2 billion Rover pipeline has spilled nearly 150,000 gallons of drilling fluid into wetlands near the Tuscarawas River in Stark County, Ohio—the same site where it released 2 million gallons in April.  The 713-mile pipeline, which will carry fracked gas across Pennsylvania, West Virginia, Ohio and Michigan and Canada, is currently under construction by the same Dallas-based company that built the controversial Dakota Access pipeline . Horizontal directional drilling work to lay the pipe beneath highways and rivers was temporarily halted in the wake of the major April spill, but work was allowed to resume in December. Energy Transfer Partners said it is continuing to follow a plan approved by the federal government and the state EPA, WOSU reported. According to Kallanish Energy , the Ohio Environmental Protection Agency inspected the horizontal directional drilling site on Jan. 10 and reported 146,000 gallons of drilling fluids "lost down the hole," referring to the pilot hole installation under the Tuscarawas River. Three attempts to seal the hole have failed, the state agency said. No inadvertent returns have been detected. Energy Transfer Partners is currently flying drones around the site to monitor the situation. The Ohio EPA said it "intends to closely monitor this situation if loss of returns continues" and pledged to work directly with the Federal Energy Regulatory Commission on "the next course of action."  In September, Energy Transfer Partners was fined $2.3 million for numerous water and air pollution violations across Ohio. Over the last two years, the Rover pipeline has racked up more "noncompliance incidents" than any other interstate gas pipeline.

This pipeline spilled almost 150,000 gallons of waste and it's not even running yet   - Before a pipeline can spill any oil or gas, it must be built. During that process, however, a different type of spill can happen—one that spews not fossil fuels but drilling liquid instead. Now this has happened in Ohio, where the Rover Pipeline, one of the latest projects from Energy Transfer Partners—yes, the same company behind the contested Dakota Access Pipeline—spilled 146,000 gallons of this industrial waste near the Tuscarawas River in Stark County. The spill was discovered by the state’s Environmental Protection Agency a week ago on January 10, but the implications continue today. The liquid was lost into a hole being drilled under the river. During a pipeline’s creation, drilling fluid—usually made up of bentonite, which is just a natural clay—is used to lubricate the drill as it breaks ground. However, if the equipment encounters a crack, crevice, or something much larger, the drilling fluid can flow into those spaces, potentially endangering nearby bodies of water. “Ohio EPA is in continual communication with Rover concerning these concerns, and the agency is determined to fulfill our role in protecting human health and the environment,” James Lee, the EPA’s media relations person, told Earther. Because the liquid has not yet surfaced, Energy Transfer Partners does not consider the loss of the drilling fluid a spill, said Alexis Daniel, public relations specialist for the company, in an email to Earther. “We are continuing to work through the process,” the email read..Since the fluid has not yet surfaced, the Ohio EPA doesn’t yet know where it’ll end up. It certainly has an idea, though. The 713-mile-long interstate natural gas twin-pipeline project—set to run through Pennsylvania, West Virginia, Ohio, and Michigan—suffered a similar mishap in April 2017 in the same spot as this most recent one. That time, 2 million gallons of this industrial waste surfaced on wetland adjacent to the Tuscarawas River. The area became full of mud and deteriorated the wetland’s water quality, according toregulatory filings the Sierra Club received.

Is fracking in parks on way? --  Gov. John Kasich plans to fill all vacancies on the Ohio Oil and Gas Leasing Commission by the end of the year Why should you care about full membership on an obscure state panel? Because that means fracking is likely on its way to Ohio state parks and other public areas. For years, Kasich in effect declared a moratorium on oil and gas drilling in the parks by refusing to appoint members to the commission, which meant nobody could get permission to drill.But the GOP-dominated legislature, extremely friendly to the oil and gas industry, passed an amendment to the state budget this year effectively forcing Kasich to either fill the panel or step aside and let legislative leaders do it. Kasich vetoed the proviso; the House easily overrode it, and the Senate threatened to do so as well unless Kasich got moving to end his moratorium.Kasich spokesman Jon Keeling said two members already have been chosen, and the governor hopes to fill the remaining three vacancies by Dec. 31. Dispatch Reporter Jim Siegel notes that, when asked about the commission last week, House Speaker Cliff Rosenberger said Republican lawmakers are keeping an eye on whether Kasich is following the legislature’s wishes.

These days, oil and gas companies are super-sizing their well pads - Dave Elkin remembers in the earlier days of the Marcellus when EQT drilled three wells from a single well pad and it was considered a technological marvel. It was a quaint memory that contrasts sharply with the company’s and industry’s new normal: superpads — concrete platforms that can house 30 wells, maybe even 40, with long horizontal tentacles stretching underground for up to 4 miles in each direction.  A superpad means a quarter of a billion dollars pumped into a single hillside in a place like rural Washington County. It means fewer well pads in total but much more activity on those that exist. It means that from a 10-acre spot, a company like EQT can theoretically slurp natural gas from underneath an area nearly the size of the City of Pittsburgh.  “I call them mini-industrial complexes,” said David Schlosser, president of exploration and production at EQT. Downtown-based EQT — now the largest producer of natural gas in the U.S. — is leading the Marcellus pack in supersizing its well pads, with about a dozen sites permitted to hold 20 or more wells.  There’s the Big Sky pad in Nottingham, Washington County, with 26 permitted wells. The Strope pad in Franklin Township, Greene County, with 28. The Prentice pad in Forward Township has 37 wells permitted on it. They may not all materialize, Mr. Schlosser cautioned; the company often gets permits for more wells than it will eventually drill to keep its options open. The Cogar pad in Amwell Township is a case in point. It was permitted to hold 30 wells, but to date only 22 have been drilled, and EQT says it is stopping there. The pad itself is on a hill and it’s difficult to see all the machinery on the concrete slab from the winding country roads that encircle it. Yet everything around it hints at the operation. Pipeline ditches, trucks, lights, road signs intended to guide the trucks away from vulnerable roads — all are preludes to the industry on the hill.

Tracking the effects of Energy Transfer's Rover pipeline on gas flows, production -- Energy Transfer Partners’ 3.25-Bcf/d Rover Pipeline recently began service on its next phase — Phase 1B — opening up additional natural gas receipt points for its Mainline A and increasing westbound gas flows from the Marcellus/Utica. The project will help relieve takeaway constraints for growing gas supply in the Marcellus/Utica region, while also increasing gas-on-gas competition for supply basins targeting the Ontario and Gulf Coast markets. This latest launch brings the project closer to achieving full completion, which is expected by the end of March 2018, but volumes on Rover are already changing regional flow and pricing dynamics. Today, we provide an update on Rover’s progress. As we wrote in Against All Odds, initial service on the first portions of the Rover Pipeline began flowing this past September, with just two of six planned laterals online and partial capacity available on just one of its two mainlines (Mainline A). But even with just the first phase of its system operational, Rover quickly began to make its mark on the gas market. Within days of launching initial service, producers filled the pipeline to capacity, which at that time was 700 MMcf/d. New compression was added in early October 2017, boosting capacity to 1.2 Bcf/d, and flows again jumped, this time to more than 1.0 Bcf/d for a period. The additional takeaway capacity helped eastern Ohio gas production volumes reach new highs last fall, and as we discussed in Toe Bone Connected to the Foot Bone, regional gas flows started to shift in response to this new supply route pushing more Marcellus/Utica gas toward the Midwest, where it could then turn south toward the Gulf Coast.

Columbia nuns to argue in federal court that gas pipeline violated their religious freedom --   An order of Roman Catholic nuns near Columbia will get another day in federal court in their pursuit of a lawsuit against a gas pipeline company and a federal agency. In a federal appeals court in Philadelphia on Friday, attorneys for the Adorers of the Blood of Christ will argue that forcibly building the Atlantic Sunrise pipeline through their property was a violation of their deeply held religious beliefs and the federal Religious Freedom Restoration Act. In September, a federal district court judge in Reading dismissed the nuns’ freedom-of-religion lawsuit brought against the Transcontinental Gas Pipe Line Co. and the Federal Energy Regulatory Commission, which approved the project, saying the court didn’t have jurisdiction to hear the lawsuit.The nuns disagreed, and appealed the case to a federal appeals court.In addition to hearing from the nuns’ attorneys on Friday, a panel of three judges will hear arguments from attorneys for FERC and the pipeline company. The nuns maintain that their land ethic, adopted in 2005, holds them to use their West Hempfield Township property in a manner that does not harm the Earth. The pipeline, they say, will carry fracked natural gas, a fossil fuel “that would facilitate climate change and harm the Earth, in direct contravention of their religious beliefs.”  The court will not make a decision on Friday. If the judges eventually rule in favor of the nuns, their freedom-of-religion lawsuit would be remanded back to U.S. District Court. The nuns’ objections to the pipeline has received worldwide attention.

Court Orders Nonprofit Law Firm to Pay $52,000 to Oil and Gas Company for Defending Local Fracking Waste Ban --In early January, a federal judge ordered the nonprofit law firm Community Environmental Legal Defense Fund (CELDF) to pay $52,000 to an oil and gas exploration company for defending a rural Pennsylvania township’s ban on underground injections of frack waste.This sanction comes at the request of Pennsylvania General Energy Company (PGE) and the Pennsylvania Independent Oil &Gas Association, but is part of a growing trend to prevent municipalities across the nation from pushing back against state and federal attempts to overrule them.Starting in 2012, PGE proposed an injection well which, according to Grant Township’s Board of Supervisors, “would receive 30,000 barrels [1.26 million gallons] of frack wastewater per month for 10 years.” The board of supervisors for this small community near Pittsburgh warns that the injection well “threatens to subject every resident of Grant Township to a slow poisoning, and threatens thousands more who depend on Grant Township’s watershed for clean water.” The community’s law, they go on, bans the injection well “as a violation of our basic civil rights.” PGE operates multiple gas-extraction wells in the township. CELDF, which has defended Grant’s efforts to prevent waste injection wells for over three years, has worked with some 200 municipalities in the United States to defend local laws challenging similar corporate projects. The group aims to drive state constitutional change to bolster the rights of local residents and ecosystems against what it calls regressive state preemption and corporate personhood. Grant Township, for example, is elevating a “right of self-government,” rights “to clean air, water, and soil” and “ecosystem rights” above corporations’ “rights” to inject waste from oil and gas extraction in the township. These types of local laws often face substantial legal pushback from private corporations and states which claim authority over issues such as fossil fuel production. Along with the sanctions against CELDF, PGE is suing Grant Township itself, population 741, for damages that would likely be in the hundreds of thousands of dollars. Among its claims: The injection well ban violates the corporation’s rights as a “person” under the First, Fourth, and Fifth Amendments; the Equal Protection Clause of the Fourteenth Amendment; and the Contract Clause and Supremacy Clause of the U.S. Constitution.

Fracking Waste Lawsuit Highlights Dangerous Trend of Corporations Targeting Community Rights Defenders - In early January, a federal judge ordered the nonprofit law firm Community Environmental Legal Defense Fund (CELDF) to pay $52,000 to an oil and gas exploration company for defending a rural Pennsylvania township's ban on underground injections of fracking waste.   This sanction comes at the request of Pennsylvania General Energy Company (PGE) and the Pennsylvania Independent Oil & Gas Association, but is part of a growing trend to prevent municipalities across the nation from pushing back against state and federal attempts to overrule them. Starting in 2012, PGE proposed an injection well which, according to Grant Township's Board of Supervisors, "would receive 30,000 barrels [1.26 million gallons] of frack wastewater per month for 10 years." The board of supervisors for this small community near Pittsburgh warned that the injection well "threatens to subject every resident of Grant Township to a slow poisoning, and threatens thousands more who depend on Grant Township's watershed for clean water ."   CELDF, which has defended Grant's efforts to prevent waste injection wells for over three years, has worked with some 200 municipalities in the U.S. to defend local laws challenging similar corporate projects.   At the heart of the court's decision awarding PGE sanctions against the legal nonprofit (the company originally asked for $500,000) is an argument that the sanctions are justified because CELDF's legal arguments are contrary to "settled" law and therefore "frivolous." This reasoning asserts that corporate personhood and Pennsylvania's authority over municipalities on issues affecting drinking water and fossil fuel development is settled, and therefore CELDF's defense of Grant's claim to the contrary is "clearly unreasonable."  CELDF is not alone in facing sanctions for challenging so-called settled law on similar issues. Defend Local Solutions is a campaign led by Tallahassee's Mayor Andrew Gillum which is aimed at expanding the powers of municipalities in Florida. The campaign said at least seven states have "super preemption" bills on the books that sanction local officials who dare challenge specific state preemption bills that rescind powers from municipalities.

New York rejects a natural gas pipeline, and federal regulators say that's ok - In a setback for the fossil fuel industry, federal energy regulators rejected a petition from the Constitution Pipeline Company to overturn New York State's denial of a water permit for a proposed natural gas pipeline. Without the permit, the pipeline can't be built. In a decision on Jan. 11, the Federal Energy Regulatory Commission (FERC) denied the request from the company to revive the proposed 125-mile Constitution Pipeline from the Marcellus Shale in Pennsylvania to Upstate New York. The decision comes during one of the largest expansions of natural gas infrastructure in U.S. history, a buildout that critics say is driven more bythe financial interests of gas and electric companies than market demand. Officials with New York's Department of Environmental Conservation (DEC) rejected the water quality permit for the pipeline in April 2016 stating, in part, that it failed to meet the state's water quality standards. Constitution challenged the decision on the grounds that the state agency did not act within a reasonable time. The federal commission, in rejecting the company's challenge, wrote: "The record does not show that New York DEC in any instance failed to act on an application that was before it for more than the outer time limit of one year." The company first filed for a water quality permit with New York DEC in August 2013, then withdrew and resubmitted its application in 2014 and again in 2015 at the DEC's request. "States and project sponsors that engage in repeated withdrawal and refiling of applications for water quality certifications are acting, in many cases, contrary to the public interest and to the spirit of the Clean Water Act by failing to provide reasonably expeditious state decisions," the federal commission wrote. "Even so, we do not conclude that the practice violates the letter of the statute."

After new setback, Constitution Pipeline says it will fight FERC order -  The builder of the proposed Constitution Pipeline from Pennsylvania to New York said it will ask the Federal Energy Regulatory Commission to take another look at its recent ruling that upholds New York State’s denial of a water-quality permit for the troubled project. Constitution Pipeline said it will seek a rehearing or appeal FERC’s decision on Jan. 11, in which the commission declined to overturn the permit decision by New York State’s Department of Environmental Conservation (DEC). That decision has stopped the company from beginning to build the 124-mile natural gas line. The company, a unit of the Williams Companies, argues that DEC waived its right to issue a water quality permit under Section 401 of the federal Clean Water Act because it did not act within a “reasonable time,” which FERC interprets as one year. Constitution says FERC got it wrong by failing to recognize that the waiver applied to the company’s application. FERC’s action is the latest setback for the project, which has also failed to persuade an appeals court to overturn the DEC’s permit denial. The DEC denied the water permit in April 2016, three years after Constitution first applied, and after the company twice withdrew and then resubmitted its application. In its denial, the department said Constitution had not provided enough information to allow the DEC to determine whether the pipeline project would meet water-quality standardsAnne Marie Garti, an environmental attorney and founder of the group Stop the Pipeline, said New York’s actions will likely be upheld despite Williams’ appeals.

Conflicting decisions on pipelines frustrate industry, landowners - In March 2016, workers for one of the nation’s largest natural gas pipeline companies cut down a large swath of maple trees in Susquehanna County–a rural patch of northeastern Pennsylvania. A video shot by an activist shows the trees crashing down as chainsaws buzz.  Cathy Holleran was powerless to stop it. At the time, she was tapping the trees for her family’s maple syrup business, but the pipeline company condemned her land using the power of eminent domain. Driving around a year-and-a half later, she’s still in disbelief. A court order had prevented her from interfering, and law enforcement officers came to protect the pipeline workers.“We had to stay completely away. They brought armed U.S. Marshals with assault rifles and Pennsylvania State Police, and had guys walking all over property in bullet proof vests,” Holleran recalls. “I mean, really! We’re making syrup. What are we going to do? Are we going to go attack these guys?” “This used to all be woods– as thick as that,” she says, gesturing to a cluster of remaining trees. She says her family’s maple syrup business has been cut in half. But the real shame of it all, Holleran adds, is this may all have been for nothing. The Constitution Pipeline was supposed to emanate from northeastern Pennsylvania, and run 121 miles through New York State. Federal regulators gave their blessing to the project. So did Pennsylvania regulators. But New York State (whose border is about 20 miles from Holleran’s land) refused to grant a necessary water permit. The pipeline company, Williams, sued, but a federal court recently sided with New York. Holleran says she’d warned the company of this possibility. “All along we kept saying, ‘You might not get through New York. You might not get your permits. You’re gonna come through here and cut our land?’” It has long been assumed by the pipeline industry that once their projects get approval from the Federal Energy Regulatory Commission (FERC) the state permits fall into place.

Cuomo doesn’t want offshore drilling in New York -- Gov. Cuomo on Monday asked the US Department of the Interior to exempt New York from a controversial new plan to expand offshore drilling —one week after the department issued an exemption to Florida.Cuomo said in a letter to Interior Secretary Ryan Zinke that offshore drilling “poses an unacceptable threat” to New York’s ocean resources and economy.“It introduces the unprecedented risk of extremely hazardous oil spills, contributes to the acceleration of climate change, and conflicts with New York’s ambitious agenda to develop offshore wind energy,” the governor said.“With this plan, the federal government is trampling on the interests of New Yorkers and threatening the future well-being of our state.”Cuomo highlighted the importance of the New York Harbor and Long Island as being home to millions as well as a hub of economic activity.The governor also pointed to the department’s sudden exemption of Florida from the new offshore drilling plan as an example that more research needed to be done.“Your decision to remove Florida from consideration of any new oil and gas platforms before your Department has even concluded its public fact-finding process appears arbitrary,” he said.“Nevertheless, to the extent that states are exempted from consideration, New York should also be exempted.” Florida’s unexpected exemption gave a political boost to its governor, Rick Scott, a Republican who is expected to run for the Senate this year.

Environmentalists push own plan to shut down Mackinac Straits pipeline -  Tired of waiting for the state, environmentalists are offering their own plan for shutting down an oil pipeline that runs beneath the Mackinac Straits. In recent years, concerns the aging pipeline could leak prompted calls from various groups to stop oil flowing through the pipeline. The Line 5 pipeline is owned by Enbridge Energy, which is a corporate sponsor of Michigan Radio. “We believe the state ought to be looking at the alternatives to Line 5 for Michigan. Not the alternatives for Enbridge to be getting all of their oil to market. Because Michigan actually benefits very little from Line 5,” says Sean Mc Brearty, with the group Oil and Water Don’t Mix.Attorney General Bill Schuette, who’s also running for governor, said back in July he wants "specific and definite timetable" for decommissioning Line 5.     But six months later, there’s still no state plan.Earlier this month, the state entered into a contract with Michigan Technological University to perform a risk analysis on Line 5 that will evaluate Enbridge’s liability for a worst-case-scenario pipeline spill and the impact it would have on Michigan’s environment and economy.“As the state awaits the completion of thorough analyses of Line 5 to determine the best course of action, the current agreement in place with Enbridge provides additional transparency and measures Enbridge must meet in order to keep the pipeline operating safely,” says Tanya Baker, a spokeswoman for Gov. Snyder. Baker says a shutdown of the pipeline is not off the table.

Tanker With Russian Gas Still Set for Boston After Weather - The liquefied natural gas tanker headed to the U.S. with a controversial cargo is due to resume its journey after making a U-turn in the middle of the Atlantic Ocean last night. The vessel named Gaselys was set to land at a terminal outside Boston on Saturday and changed its course to delay the date of its arrival, according Engie SA, the French utility that owns the cargo.  The ship turned east last night and listed its destination as Algeciras near Gibraltar, and that entry still remains on a ship-tracking database compiled by Bloomberg.“The final destination of the cargo did not change,” Damien de Gaulejac, a spokesman for Engie, said by email. “It is still Everett, but the date of delivery has been adjusted, in particular for weather reasons.” The vessel is carrying a cargo from storage tanks at a terminal near London, which earlier received the first fuel from the $27 billion Yamal LNG plant in Russia’s icy north. It’s a closely-watched shipment because some of the gas came from the project that’s under financial sanctions imposed by the U.S. in 2014 after President Vladimir Putin invaded Ukraine’s Crimea. The shipment was arranged during a polar cold snap that gripped the U.S. northeast earlier this month, sending prices to records.  Engie’s North American unit bought the spot cargo for delivery to the U.S. from Malaysia’s Petroliam Nasional Bhd. to supplement its contracted volumes from Trinidad and Tobago into its Everett terminal near Boston, it said last week. The Yamal LNG project, co-owned by Russia’s Novatek PJSC, Total SA, China Natural Petroleum Corp. and China’s Silk Road Fund, started production in December despite U.S. financial sanctions imposed in 2014 because of Russia’s involvement in the Ukrainian conflict. It plans to deliver 14 spot cargoes by April, when long-term contracts kick in.

Environmental groups sue Corps to block Bayou Bridge pipeline permit -- Environmental groups went to federal court in Baton Rouge on Thursday (Jan. 11) to block construction permits awarded by the Army Corps of Engineers to the Bayou Bridge oil pipeline that would allow it to be built through the environmentally sensitive Atchafalaya Basin.The pipeline, which would eventually connect with the controversial Dakota Access pipeline carrying Bakken oil from North Dakota, "would pose a serious threat, with risks of oil spills into wetlands, rivers and lakes; as well as the potential for permanent destruction of invaluable cypress and tupelo river swamps," said a news release announcing the suit. The suit contends the corps did not adequately address the environmental risks posed by the project in allowing construction to proceed. "Not only is the Atchafalaya Basin the most important ecosystem for neotropical migratory birds in the western hemisphere, but it is also critically important to protect much of south Louisiana and the Mississippi valley from major river floods," said Dean Wilson, Executive Director of Atchafalaya Basinkeeper, one of the organizations filing the suit. "By allowing unsustainable development in the Basin, we are endangering hundreds of cities and communities and millions of people in southern Louisiana." The corps permits were issued Dec. 14. Spokesmen for the corps and the U.S. Justice Department said late Thursday that they are unable to comment on pending litigation. "As with any infrastructure project, we respect there are a wide range of opinions," said a statement released by Energy Transfer.  "Pipelines, like Bayou Bridge,  are heavily regulated by the U.S. Department of Transportation for both safety and reliability, and have proven to be the safest, most efficient means of transporting energy resources.’

Banks gives pipeline developer another chance after pulling funding from Dakota Access - Banks that pulled funding from the Dakota Access Pipeline due to strong public opposition are now teaming up with the pipeline’s developer on another controversial fossil fuel project. Energy Transfer Partners, the lead developer of the Bayou Bridge Pipeline in south-central Louisiana, is using the lessons it learned from the Dakota Access Pipeline saga to win both financial and political support.Bayou Bridge LLC, the company building the pipeline, is a partnership between Energy Transfer Partners and Phillips 66, whose primary business is petroleum refining. Two banks that pulled funding from Energy Transfer Partners’ Dakota Access Project due to public opposition — DNB Capital and US Bank — are both financing Bayou Bridge through credit agreements with Phillips 66 and Energy Transfer, according to a new report released Thursday by the Public Accountability Initiative (PAI), a nonprofit public interest research group.“US Bank and DNB Capital publicly stopped financing Dakota Access when activists called attention to the pipeline’s impacts on indigenous communities,” Robert Galbraith, a senior researcher at PAI and author of the report, said in a press statement Thursday. “But both are still lending to the companies building Bayou Bridge.”Despite Energy Transfer Partners’ dismal safety and environmental track record, financial institutions are lining up to loan the company money. Altogether, 40 banks have granted access to a total of $12.25 billion in credit to the companies building Bayou Bridge, according to PAI. The pipeline is proposed to carry 280,000 barrels of crude oil per day through 11 Louisiana parishes, crossing 700 bodies of water and more than 700 acres of fragile wetlands. If constructed, Bayou Bridge would impact watersheds that supply drinking water for up to 300,000 people.

Groups Opposing Planned Pipeline Sue Company for Records (AP) — Environmental groups trying to keep a crude oil pipeline from crossing Louisiana filed a lawsuit Tuesday to get access to records about the project. By expropriating land and acting as a common carrier, Bayou Bridge Pipeline LLC is acting as a government body and therefore must obey public records laws, the suit contends. The 162-mile-long (261-kilometer) pipeline is a joint venture between Energy Transfer Partners of Dallas, which built the Dakota Access pipeline, and Phillips 66 Partners LP, which owns a smaller share of the Dakota pipeline. The Dakota project sparked a string of violent clashes between protesters and police in North Dakota in 2016 and 2017. Atchafalaya Basinkeeper, the Louisiana Bucket Brigade, and 350 New Orleans sued Bayou Bridge after representatives of the joint venture refused to turn over records about property rights, environmental safety and civil protest. Among other things, the groups are asking for all records about acquiring easements and private property expropriations, and all records of communications with government agencies or officials at all levels. "We will not allow Bayou Bridge to quietly seize hundreds of people's land for private profit with no public oversight," Anne Rolfes, director of Louisiana Bucket Brigade, said in a news release. "The entire process has taken place behind closed doors, leaving in the dark the local people who bear the risks this dangerous pipeline poses to our health, natural environment, and even our very livelihoods." Bayou Bridge did not immediately respond to a query filed through its website. Lee Hanse of San Antonio, Texas, identified on the Louisiana Secretary of State's website as executive vice president of Energy Transfer Partners, the majority owner of the project, did not immediately respond to an email. 

US Gulf Coast distillate flows to Europe at 920,000 mt for Jan -- Distillate volumes heading to Northwest Europe and the Mediterranean from the US Gulf Coast for January are currently at 920,000 mt, according to data from S&P Global Platts' trade flow software cFlow. The current figure is more or less the same as last January's volume despite a difficult arbitrage from the US to Europe at the moment as result of a strong US Atlantic Coast market for heating oil. One LR2, one LR1 and two medium range tankers were seen to leave the USGC in the last seven days. LR2s are relatively uncommon in the USGC compared to LR1s as only a limited number of ports in the region can accommodate them. All of the vessels that left were heading to the Amsterdam-Rotterdam-Antwerp hub, as the Mediterranean market for ultra low sulfur diesel is still sufficiently well supplied to the point of weakness, leaving little option for the volume beyond Northwest Europe. Among the vessels currently on the water is one MR vessel, the Stealth Falcon, that is likely to be carrying gasoil to Algiers in Algeria, after loading in Houston, although this trans-Atlantic arbitrage was still not considered workable by gasoil traders in Europe. The lack of gasoil volumes being produced at local Mediterranean refineries, coupled with a strong demand for gasoil grades across the region over the winter months, has exacerbated recent market tightness in the Mediterranean. Furthermore, North African demand for gasoil has been relatively strong, with Algeria's Sonatrach tendering for six cargoes of 0.1% gasoil over January. Details around the tender volumes for February remain unconfirmed. 

Zinke talks with more governors about offshore drilling plan | TheHill: Interior Secretary Ryan Zinke has so far spoken with seven governors to hear their objections to his plan to open the Atlantic and Pacific coasts to offshore oil and natural gas drilling. The calls were set up after Zinke’s surprise announcement late Tuesday that waters near Florida would be removed from the plan. That came after Zinke briefly met with Florida Gov. Rick Scott (R), a close Trump administration ally who is likely to run for Senate this year. Nearly every other Atlantic and Pacific governor jumped on the Florida announcement to demand that they, too, be removed from consideration in the Interior Department’s plan for drilling rights lease sales between 2019 and 2024. Interior said Friday that in addition to Scott, Zinke has already spoken with South Carolina Gov. Henry McMaster (R), who wants his state out of the drilling consideration. On Friday alone, Zinke spoke with five Democratic governors opposed to drilling: Rhode Island’s Gina Raimondo, California’s Jerry Brown, Washington’s Jay Inslee, Delaware’s John Carney and North Carolina’s Roy Cooper. Zinke plans to talk to Oregon Gov. Kate Brown (D), another opponent of the plan, later Friday, Interior said. Coastal governors have argued in recent days that Interior has to remove them from drilling consideration if they object. The governors and legal experts say that the drilling plan could be overturned in court if Zinke doesn’t extend the standard he granted to Florida, which hosts President Trump’s coastal Mar-a-Lago resort. 

Trump's public lands rollback is on shaky ethical ground -- The Trump administration, aided by a willing but slim majority in Congress, began to comprehensively dismantle public lands protections in 2017. The regulatory results were fairly astonishing. They amount to an unprecedented rollback of conservation norms that date back to Theodore Roosevelt, who made the preservation of natural resources national policy more than a century ago. President Donald Trump’s disassembling of public lands protections include drastically slashing the size of national monuments in Utah, opening up the Arctic National Wildlife Refuge to oil drilling, jettisoning protections for sage grouse throughout vast areas of the arid West and taking a headlong dive into increased fossil-fuel production. The latter involves ending moratoria on coal and oil-and-gas leasing, terminating methane emission controls, scuttling hydraulic fracturing regulations and eviscerating federal consideration of the long-term costs of carbon emissions on the planet’s environment. Americans have lived through public land scandals such as the Teapot Dome affair in the 1920s, in which bribery by oil companies sent the secretary of the interior to prison. In the 1980s, the Reagan administration’s secretary of the interior privatized federal coal in Wyoming’s Powder River Basin without trying to obtain fair market value for it. But those giveaways pale before what is going on now. The legal grounds for the Trump turnaround in national policy will be tested in the courts over the next few years. In some cases, the administration may be unable to show a rational reason for changes in course that were conscientiously vetted and adopted just a few years ago. But the politics of this abrupt about-face should be debated now, as the Trump public lands revolution takes effect. 

API president to Trump: Don't forget energy infrastructure - Jack Gerard, president of the American Petroleum Institute, urged President Donald Trump Tuesday not to forget about the energy sector when it comes to fixing the nation's infrastructure. "Too often, the infrastructure conversation is limited to highways, roads and bridges - which rely heavily on government funding," he said in a prepared speech at an API event in Washington. "By expanding our focus beyond traditional infrastructure and considering the great opportunity of energy infrastructure investments, we could potentially double the economic benefits of infrastructure in this country." The comments come as President Donald Trump works on getting an infrastructure bill before Congress later this year. White House officials are scheduled to meet with Senate Republicans and Democrats on Capitol Hill this afternoon to discuss such a bill, according to the Hill. Energy lobbyists are eager to see Congress take steps to speed up oil and gas pipeline permitting while modernizing the nation's power grid, to address the expansion of non-traditional energy sources like wind turbines and solar panels while also providing better defense against cyber threats.In his speech, Gerard applauded the administration's announcement last week it planned to open up 90 percent of U.S. coastlines to offshore drilling, including the Atlantic and Arctic Oceans. But Gerard was less ebullient about the White House's moves to renegotiate global trade agreements like the North American Free Trade Agreement, of which Trump has been critical."Global trade flows have played a critical role in America's energy renaissance – spurring economic growth and investment and creating American jobs," he said. "As the administration continues negotiations with Canada and Mexico, we urge them to seek modernization in ways that maintain these benefits."

Pipeline Builders Outflank Opposition with Expansions - Fox Business - Some of North America's biggest new pipeline projects are already in the ground. As environmentalists and local activists make it extraordinarily difficult to build new oil and gas lines, energy companies are working around the opposition by supersizing old pipes that already crisscross parts of the continent. Executives at some of the biggest pipeline operators in the U.S. and Canada, including Enbridge Inc. and Kinder Morgan Inc., say they pivoted to the strategy as plans for new pipelines came under attack. For decades, new pipeline projects rarely drew attention, much less ire. "We used to just show up with a map," said Al Monaco, president and chief executive of Enbridge. But in recent years, groups with a goal of keeping fossil fuels in the ground have joined forces with Native American activists, landowners and other local opponents to stall numerous projects, Most notable among these was TransCanada Corp.'s much-debated Keystone XL pipeline. Skipping new lines -- and the environmental reviews and taking of land by eminent domain that they often require -- and instead working under existing permits and rights of way is just common sense, said Mr. Monaco, who added that it is often a far less expensive approach "Once the pipe is in the ground, you can do a lot of things: reverse flows, expand it, optimize it," he added. Pipeline expansions may help explain why, despite the Trump administration's recent approval of the Keystone XL pipeline, TransCanada has yet to make a final decision about moving forward. While the project was stranded in regulatory limbo for years during the Obama administration, Enbridge quietly cobbled together two existing oil lines to create the first sizable spigot to bring Canadian crude to Texas. Its retooled network can move nearly 600,000 barrels a day to Gulf Coast refiners and foreign buyers. Enbridge is also pursuing a combination of other pipeline expansions that together could add another 800,000 barrels a day of capacity to bring Canadian crude south at a cost of just $1.3 billion. That is roughly the same volume Keystone XL would carry -- at a price tag more than 80% lower.

Ample crude supplies help boost Rocky Mountain refiners' margins. -Refiners in the five Rocky Mountain states that make up the U.S. Energy Information Administration’s Petroleum Administration for Defense District 4 — or PADD 4 — enjoy higher margins than their counterparts in every other part of the country except California. Quarterly crack spreads for domestic crude in PADD 4 averaged $25/bbl between 2014 and 2017, while those for Canadian crude averaged $31/bbl. Today, we explain that these lofty cracks reflect an abundance of crude — both from indigenous Rockies production and Canadian and North Dakota supplies passing through the region — as well as higher-than-average diesel and gasoline prices.  We first covered Rockies refining back in 2014 with a two-part series based on analysis by our friends at Turner Mason. Those blogs discussed how PADD 4 refiners planned capacity expansions in response to increased regional demand for refined products — especially diesel fuel for operating drilling rigs — and enjoyed robust margins based on advantaged crude supplies (see Rocky Mountain High Part 1 and Part 2). Refiners in PADD 4 traditionally relied on local conventional crude production in Montana, Wyoming, Colorado and Utah. We described the more recent surge in unconventional production in our series on Niobrara Shale (see Bananarama in the Rockies). The big increase in local Rockies production added to higher inflows of crude from North Dakota and Western Canada, both of which have been covered extensively in the blogosphere (see for example our recent Take My Crude Away post on the Bakken and If We Ever Get Out of Here on Canada). We followed the build-out of crude takeaway infrastructure to get light shale crude from the Denver-Julesburg (DJ) Basin play at the southern end of the Niobrara in Colorado — originally via rail before pipelines were constructed (see Part 3 of our  Slow Train Coming series from February 2016) and most recently looking at pipeline overbuild out of the region in July 2017 (see Colorado (G)Oil).

North Dakota oil output cut back to meet gas capture rules - Houston Chronicle: - Fearing sanctions by the state, some North Dakota oil drillers have begun cutting output to control the amount of natural gas that's being burned off at well sites and wasted as a byproduct of crude production, industry and state officials say. Rebounding oil prices and technology advances in western North Dakota's oil patch have goosed crude production, spurring unanticipated record levels of natural gas that comes with it, said Justin Kringstad, director of the North Dakota Pipeline Authority. The state's gas-gathering and processing capability is 2.1 billion cubic feet daily. In November, the latest figures available, the industry was right at that ceiling - with a record 2.09 billion cubic feet (0.06 billion cubic meters) of natural gas produced daily. Pipeline capacity is adequate to move the natural gas to market, but it's the lack of gas-gathering and processing facilities in between that's the problem. That forces some drillers to restrict oil output at some wells to meet gas flaring rules, said Ron Ness, president of the North Dakota Petroleum Council. "We don't want to be restricted by the state," said Ness, whose group represents hundreds of companies.Ness said an industry group task force is being formed this month to pinpoint where gas-gathering and processing infrastructure is needed most. The rules that went into effect in 2014 allow regulators to set production limits on oil companies if the targets aren't met. Companies that fail to meet the goals could have production at a well limited to as little as 100 barrels a day, depending on the amount of gas flared. The rules that were adopted by the state and endorsed by the industry require oil companies to capture 85 percent of the gas by 2016, and 90 percent by 2020. They came after as much of a third of the gas went up in smoke, drawing criticism from environmentalist and many residents who said the state was losing revenue from the wasted gas, and that it contributed to unnecessary carbon dioxide emissions. 

New NASA Study Solves Climate Mystery, Confirms Methane Spike Tied to Oil and Gas --Over the past few years, natural gas has become the primary fuel that America uses to generate electricity, displacing the long-time king of fossil fuels, coal.   But new peer-reviewed research adds to the growing evidence that the shift from coal to gas isn't necessarily good news for the climate. A team led by scientists at NASA's Jet Propulsion Laboratory confirmed that the oil and gas industry is responsible for the largest share of the world's rising methane emissions, which are a major factor in climate change—and in the process the researchers resolved one of the mysteries that has plagued climate scientists over the past several years. That mystery? Since 2006, methane emissions have been rising by about 25 teragrams (a unit of weight so large that NASA notes you'd need more than 200,000 elephants to equal one teragram) every year. But when different researchers sought to pinpoint the sources of that methane, they ran into a problem.If you added the growing amounts of methane pollution from oil and gas to the rising amount of methane measured from other sources, like microbes in wetlands and marshes, the totals came out too high—exceeding the levels actually measured in the atmosphere. The numbers didn't add up.It turns out, there was a third factor at play, one whose role was underestimated, NASA's new paper concludes, after reviewing satellite data, ground-level measurements and chemical analyses of the emissions from different sources.A drop in the acreage burned in fires worldwide between 2006 and 2014 meant that methane from those fires went down far more than scientists had realized. Fire-related methane pollution dropped twice as much as previously believed, the new paper, published in the journal Nature Communications, reports. Using this data, "the team showed that about 17 teragrams per year of the increase is due to fossil fuels, another 12 is from wetlands or rice farming, while fires are decreasing by about 4 teragrams per year," NASA said in a Jan. 2 press release. "The three numbers combine to 25 teragrams a year—the same as the observed increase."

Residents call on candidates for governor to shut down Aliso Canyon gas facility  - A mysterious disease is spreading through Kyoko Hibino’s neighborhood, but you’d never know it by glancing at her sunny, tree-lined Southern California community, she says.The Porter Ranch resident has suffered bronchitis, heart palpitations, headaches and nosebleeds, none of which amount to a diagnosis by doctors. Hibino said her cat also started getting nosebleeds, and now has cancer.“We are slowly being killed,” she said, noting that the air near her house is clear, making the problem hard to spot. “It’s not ‘dramatic’ enough.”Three years after a massive gas leak at the Southern California Gas Co. storage facility at Aliso Canyon — the largest methane leak in U.S. history — nearby residents say they’re still suffering health problems from toxins in the air.Though not government-owned, Southern California Gas is subject to state regulations. The candidates did not discuss the topic during the forum.“This is our health! This is our air! This is not just in the Valley! The wind blows, and it blows everywhere,” said Jane Fowler of nearby Granada Hills. “Some of you don’t even know you’ve been affected.”Fowler, 58, said she had to stop working in elder care and driving an Uber due to unpredictable dizziness, blackouts and other ailments that she says are tied to the smelly leak. She said the emissions killed her dog and sickened her cats.A broken well at the Aliso Canyon site forced about 8,000 families in the northwest San Fernando Valley to evacuate starting in 2015. After a state appeals court lifted a temporary ban on operations, Southern California Gas resumed injections at the facility this past summer and has been conducting safety improvements.Use of the facility is now allowed on a limited basis, but opponents want the site shut down entirely.

Jordan Cove opponents and supporters disagree on findings of new report - Anti-pipeline protesters said they feel vindicated by a report released Thursday stating the natural gas pipeline and export facility proposed in Southern Oregon would be the state’s largest source of greenhouse gas emissions, while a project spokesman found the information to be inaccurate. The report, published by Oil Change International, says the Jordan Cove project would produce more than 15 times the emissions of the Boardman coal plant, Oregon’s last remaining coal plant set to close in 2020, and equal the emissions of nearly 8 million passenger vehicles. In total, the report says the pipeline will produce 36.8 million metric tons of greenhouse gas emissions per year.  Oil Change International is an advocacy organization focused on “exposing the true costs of fossil fuels and facilitating the coming transition towards clean energy,” according to its website. The 229-mile Pacific Connector Pipeline would have the capacity to push 1.2 billion cubic feet per day of natural gas across Klamath, Jackson, Douglas and Coos counties to a plant in Coos Bay where the gas would be turned into liquid form and be transported to Asian markets. The pipeline would connect to existing pipelines to transport natural gas from Utah, Wyoming, Colorado and the Montney Basin in British Columbia. “The emissions estimate includes an estimated range of methane leakage along the supply chain and finds that even a conservative estimate of methane leakage undermines claims that the gas supplied to global markets via the project would lead to a net reduction in greenhouse gas emissions,” the report said. It also asserts there is no evidence that natural gas from the project would replace coal in global markets, and the project undermines the need to reduce emissions from all sources of fossil fuel to address the climate crisis.

Hess cutting hundreds of workers as it battles activist investor | Fox Business: Hess Corp is cutting roughly 13 percent of its workforce and streamlining operations as it battles an activist hedge fund shareholder pushing for the U.S. oil and gas producer to post its first quarterly profit since 2014.  Most of the cuts, which could start as early as Tuesday and continue through the week, are in Houston, home to a majority of the company’s employees, according to two sources familiar with the matter. Lorrie Hecker, a Hess spokeswoman, confirmed the cuts, saying about 300 workers, or about 13 percent of the company’s workforce, would be dismissed. Executives from the New York-based company’s headquarters were flying to Houston on Tuesday to meet with employees. The job cuts are part of a plan to reduce expenses by more than $150 million a year, the company said. “We are doing all we can to ease the transition for employees who are impacted including severance, outplacement assistance and other benefits and support,” Hecker said in an emailed statement to Reuters. The cuts come despite a more than 20 percent rise in oil CLc1 prices in the past three months as the U.S. shale industry recovers on rising demand and shrinking global stockpiles.Hess had not cut staff two years ago even as some peers let thousands of workers go, with executives publicly saying they would retain talent in anticipation of a price rebound. Recent asset sales and pressure from investors to improve results have the company reversing course just as rivals post improved results from rising commodity prices. Hedge fund Elliott Management Corp last month launched an activist campaign against Hess, saying it was frustrated by the company’s “continuing underperformance” and floated the idea of pushing to remove John Hess as chief executive.

Occidental Well Design Pushes Oil Production Gains -- Unconventional well design continues to drive gains in oil production per foot. Operators are stimulating the source rock more. This increases contact to the wellbore, increasing production. We continue to cover oil production improvements in US operators. EOG Resources continues to outpace everyone else, but we are seeing operators mimicking its success. Concho has also reported a number of monster wells in the Delaware. Devon is seeing better results in the Eagle Ford than the Permian. Pioneer's well design has continued to improve oil production. Occidental has a large Permian footprint, and has been doing a very good job of improving production per foot. Its focus on west Texas has provided some of the best unconventional geology in the US. OXY continues to optimize frac' design. Controling frac' height and wing half length decreases the chance of interference. This increases the number of locations per section and decreases oil left behind. OXY has seen improvements in both the Wolfcamp and Bone Spring. Its largest improvement has been in Delaware Wolfcamp. We pulled 120 horizontals completed after 2016. OXY has had several huge results in Eddy County. Four locations produced over 100 MBO of oil in the first two months of well life. Thirty-five completions had a lateral length between 4,000 and 5,000 feet. Sixty-one were longer than 7,000 feet.

Refinery rates to drop in Q1 after hitting record in late 2017: IEA -- Global refinery intake is expected to drop by 0.1 million b/d in the first quarter of 2018 after hitting a record in the last quarter of 2017, the International Energy Agency said in its latest monthly oil market report. The agency attributed the Q1 throughout drop to maintenance work, which is starting to pick up. But at the end of last year global refining throughput reached record 81.5 million b/d, "instead of seeing the usual seasonal slowdown," the IEA said. High runs defined refinery operations in the US, where they "returned to pre-hurricane highs in December" while China's refiners "ran at their highest ever quarterly level," the report said. December throughput is "likely to finalise as the highest month yet," the report added. But record refinery runs "did not go unnoticed by the market and crude oil futures rallied," the IEA said, adding that as a result "refining margins continuously softened throughout the quarter, as December indicators hit the lowest in more than a year in Europe and the US." The downward pressure on European margins came from "seasonally lower gasoline and weaker fuel oil cracks," the IEA said. The European fuel oil market, currently trading at a multi-month low, has started putting pressure on refineries in the region who are not ruling out potential run cuts. Similar sentiment has been observed in Russia, according to market sources. According to the IEA, margins have weakened in the US as well and, while the cold snap supported "otherwise softening diesel cracks" in the US Gulf Coast, weaker gasoline cracks have been driving margins lower.

U.S. oil industry set to break record, upend global trade (Reuters) - Surging shale production is poised to push U.S. oil output to more than 10 million barrels per day - toppling a record set in 1970 and crossing a threshold few could have imagined even a decade ago. And this new record, expected within days, likely won't last long. The U.S. government forecasts that the nation's production will climb to 11 million barrels a day by late 2019, a level that would rival Russia, the world's top producer. The economic and political impacts of soaring U.S. output are breathtaking, cutting the nation's oil imports by a fifth over a decade, providing high-paying jobs in rural communities and lowering consumer prices for domestic gasoline by 37 percent from a 2008 peak. Fears of dire energy shortages that gripped the country in the 1970s have been replaced by a presidential policy of global "energy dominance." "It has had incredibly positive impacts for the U.S. economy, for the workforce and even our reduced carbon footprint" as shale natural gas has displaced coal at power plants, said John England, head of consultancy Deloitte's U.S. energy and resources practice. U.S. energy exports now compete with Middle East oil for buyers in Asia. Daily trading volumes of U.S. oil futures contracts have more doubled in the past decade, averaging more than 1.2 billion barrels per day in 2017, according to exchange operator CME Group. The U.S. oil price benchmark, West Texas Intermediate crude, is now watched closely worldwide by foreign customers of U.S. gasoline, diesel and crude. The question of whether the shale sector can continue at this pace remains an open debate. The rapid growth has stirred concerns that the industry is already peaking and that production forecasts are too optimistic. 

Chief energy expert: US set to become 'undisputed leader' in oil and gas | TheHill - A global energy chief said he foresees the United States becoming the "undisputed leader" in oil and gas production for "years to come." Speaking at an event at the Center for Strategic and International Studies in Washington, D.C., Tuesday, Fatih Birol, executive director for the International Energy Agency (IEA), said that the U.S. is primed to lead the world in oil and gas production. "With all the implications, this is the most important transformation we're seeing within the oil and gas industry," Fatah said while rolling out the IEA's World Energy Outlook for 2017. Birol, a noted expert in the energy sector, echoed similar comments earlier Tuesday at a Senate Energy and Resources Committee hearing. Speaking on Capitol Hill, Birol told senators that the country's anticipated energy production dominance will be a result of a "shale revolution." "The U.S. is becoming the undisputed leader of oil and gas production worldwide," Birol said. Birol went on to call the growth in oil production within the U.S. "unprecedented" for both its size and pace of growth and compared the increases to Saudi Arabia 50 years ago. In terms of natural gas, Birol guessed that the U.S. would be the largest exporter of the fuel by 2020, adding that China will be the biggest customer. However, Birol warned senators that China's increasing need for energy, as it winds down its own coal production, will lead the country to rival the U.S. for nuclear energy.

EIA expects total U.S. fossil fuel production to reach record levels in 2018 and 2019 -- In its January 2018 Short-Term Energy Outlook (STEO), EIA forecasts that total fossil fuels production in the United States will average almost 73 quadrillion British thermal units (Btu) in 2018, the highest level of production on record. EIA expects total fossil fuel production to then set another record in 2019, with production forecast to rise to 75 quadrillion Btu.  Fossil fuels include dry natural gas, crude oil, coal, and hydrocarbon gas liquids (HGL). Although EIA tends to express fossil fuel production in physical units, such as cubic feet for natural gas, barrels for oil, and tons for coal, expressing production in heat content allows for comparisons across fuel types. Record production levels are largely attributable to increased production of natural gas and crude oil enabled by the use of hydraulic fracturing techniques in tight rock formations. EIA expects increases in natural gas production to be the leading contributor to overall fossil fuels production growth in 2018 and increases in crude oil production growth to the be leading contributor in 2019. In both years, expected growth in natural gas, crude oil, and HGL production more than offset expected declines in coal production. On a heat-content basis, dry natural gas accounted for the largest share of fossil fuel production in 2017 at 41%. Crude oil accounted for 29%, coal for 23%, and HGL for the remaining 7% of the total. As recently as 2010, coal was the leading source of U.S. fossil fuel production, but it was surpassed by dry natural gas in 2011 and by crude oil in 2015.  In 2018, EIA forecasts dry natural gas production will average 80.4 billion cubic feet per day (Bcf/d), an increase of 9% from 2017 levels. If achieved, this level of production would be the highest annual average on record, surpassing the previous record of 74.2 Bcf/d set in 2015. EIA forecasts dry natural gas production will set another record with 83.0 Bcf/d in 2019. Growth is likely to be concentrated in Appalachia’s Marcellus and Utica shales along with the Permian Basin in Texas and New Mexico.

Natural gas prices, production, and exports increased from 2016 to 2017 – EIA - In 2017, natural gas spot prices at the national benchmark Henry Hub in Louisiana averaged $3.01 per million British thermal units (MMBtu), about 50 cents per MMBtu higher than in 2016. The higher prices in 2017 contributed to less natural gas consumption for power generation. Increased domestic production was offset by increased exports of natural gas by pipeline and liquefied natural gas (LNG) cargoes. Overall, natural gas prices at key regional trading hubs were less volatile in 2017 than in previous years, as pipelines that came online throughout the year eased some infrastructure constraints that affect regional prices. In the Northeast, which tends to have large price spikes during periods of cold weather, new pipeline capacity, along with warmer winter weather, helped to moderate price volatility. However, record cold temperatures at the end of December in the eastern United States led to record high demand for natural gas and significant price spikes at many trading locations.  Additional takeaway capacity in the Appalachian region, the region with the largest U.S. natural gas production growth in 2017, continued to narrow price differences between Henry Hub and nearby trading hubs such as Dominion South in western Pennsylvania, Transco Zone 6 NY in New York City, and Algonquin Citygate near Boston, Massachusetts.  Until the last few days of 2017, relatively warm winter weather limited natural gas consumption growth in the residential and commercial sectors compared with 2016 levels. However, higher natural gas prices contributed to a 6% year-on-year decline in natural gas consumption for power generation, based on data through October and projections for November and December. This decline was despite a large increase in natural gas-fired capacity additions in 2017, as coal became more competitive with natural gas.  Mild winter temperatures in early 2017 also limited natural gas storage withdrawals, with the first-ever net injection recorded in the month of February. As a result, natural gas storage inventories ended the injection season lower than last year, but higher than the previous five-year average. EIA expects the United States to become a net exporter of natural gas on an annual basis in 2017 for the first time since 1957.

Latest winter storm in US stokes bullish reaction from gas futures market - Another blast of wintry weather that's forecast to bring frigid temperatures to the US Midwest and a mix of freezing rain, ice and snow to the Atlantic Seaboard began affecting gas markets already on Friday.In late-morning trading, cash prices at the benchmark Henry Hub surged to over $4/MMBtu for weekend flow dates. At the Transco Zone-5 hub in North Carolina and Zone-6 hub in New York, prices surged to more than $20/MMBtu Friday.Further north, in the Boston metro area, prices at Algonquin city-gates hub climbed to $18/MMBtu, data from Intercontinental Exchange showed. While the approaching winter storm's impact on temperatures and gas demand is forecast to fall short of early January's "bomb cyclone," the futures market now appears to be keeping a more watchful eye on the cumulative supply impact of recent wintry weather impacting much of the eastern US. On the NYMEX Friday, the prompt-month February contract gained more than 12 cents/MMBtu, settling at $3.20/MMBtu, its highest since early November.  On Friday, winter weather was already impacting states in the Midwest where a mix of snow and ice saw the region's population-weighted temperature plunge to just 20 degrees Fahrenheit. In response, gas demand across the Midcontinent surged to 29 Bcf/d Friday, its highest since early January. At the Chicago city-gates, prices were elevated Friday, trading just shy of $4/MMBtu. Prices at the Midwest hub are up from under $3/MMBtu at midweek, S&P Global Platts data show.

NYMEX Feb natural gas down 2.4 cents at $3.208/MMBtu ahead of storage data - NYMEX February natural gas futures traded a narrow range in US overnight trading on expectations of a more modest storage withdrawal but lower-than-average end-of-season supply. At 7:08 am EST (1208 GMT), the contract was 2.4 cents lower at $3.208/MMBtu, after trading a $3.191-$3.260/MMBtu range. Milder weather is expected to have significantly slowed US storage withdrawals from the previous week's record high 359 Bcf in the Energy Information Administration's inventory report for the week ending January 12 due at 10:30 am EST. A consensus estimate by analysts surveyed by S&P Global Platts is for a 189-Bcf withdrawal, reducing stocks to 2.578 Tcf. The EIA sees working gas in storage ending the withdrawal season on March 31 at 1.320 Tcf, below the five-year average of 1.697 Tcf, provided draws match the five-year average for the rest of the heating season.

NYMEX Feb natural gas falls 13.6 cents to $3.064/MMBtu on technical selling -- NYMEX February natural gas futures fell in overnight US trading largely on technical selling. At 7:00 am EST (1200 GMT), the contract was 13.6 cents lower at $3.064/MMBtu. Market sentiment is that the contract is overbought after it rose 40.5 cents during the previous business week. Milder weather is feeding expectations of a modest pull from stocks in the next inventory report ager a record-high draw of 359 Bcf in the week to January 5. In its latest update for the week to January 10, the Energy Information Administration said US gas consumption fell 14% week on week and dry gas production was up 2%. The latest six-to 10-day and eight-to 14-day forecasts from the National Weather Service show the US split between above-average temperatures in almost the entire East and below-average temperatures in most of the West, separated by a band of average temperatures.

NYMEX Feb natural gas ticks back up to $3.156/MMBtu amid mixed fundamentals --NYMEX February natural gas futures were up slightly ahead of Wednesday's open, as changing weather looks to drive a fluctuating pace of storage erosion. After settling 7.1 cents lower Tuesday, NYMEX February gas was trading at $3.156/MMBtu at 6:40 am ET (1140 GMT) Wednesday, up 2.7 cents overnight in the US. Following a deep freeze to start the year that drove a record-high storage pull of 359 Bcf during the week ended January 5, milder weather in the succeeding week is seen to have trimmed demand for natural gas and kept a lid on the rate of weekly storage draws when the next inventory data is released. The US Energy Information Administration's latest Natural Gas Weekly Update for the week to January 10 outlined a 14% decline in total US gas consumption amid diminished domestic demand across nearly all sectors, as temperatures moderated from the previous week's cold. Forecasts for the forthcoming storage report that will cover the week ended January 12 signal a step down in the pace of inventory erosion, calling for stock withdrawals in the mid-190s Bcf to the mid-200s Bcf. This would compare to the 203 Bcf five-year average draw and a 230 Bcf year-ago pull. Returning frigid weather on tap for the current week to January 19 feeds expectations for a reprise of a large storage withdrawal in excess of 260 Bcf for the review period, according to analyst projections, but the absence of cold across major heat-consuming regions further out suggests a renewed weakness in demand that should allow more gas to remain in underground storage facilities.

NYMEX Feb natural gas 3.5 cents lower at $3.154/MMBtu on bearish fundamentals NYMEX February natural gas futures fell in overnight ahead US trading on bearish fundamentals. At 7:13 am EST (1213 GMT), the contract was 3.5 cents lower at $3.154/MMBtu. US storage withdrawals slowed significantly to 183 Bcf in the Energy Information Administration inventory report for the week ended January 12, taking total working gas stocks to 2.584 Tcf, or 368 Bcf lower on the year and 362 Bcf below the five-year average. Cold weather returned to the major heat-consuming regions of the Northeast and Midwest this week, but overall gas demand throughout much of that period reflected little change week on week, feeding mixed expectations for the next weekly storage data due out on Thursday. Medium-range weather outlooks from the National Weather Service show warmer conditions across the major heating regions in the central and eastern US.

Kinder Morgan further delays Canada Trans Mountain oil pipeline (Reuters) - Kinder Morgan Canada said on Wednesday that the start-up of its Canadian Trans Mountain oil pipeline expansion would be delayed by three months to December 2020, marking the latest setback to a project facing fierce local opposition. Trans Mountain originally had an operational date of December 2019, but the company in October pushed that back to September 2020 because of difficulty in obtaining permits. The company is focusing on gaining permit approvals, and is holding off on starting full construction of the C$7.4 billion ($5.95 billion) project, Chief Executive Steve Kean said. “What we’re doing here is all the right things,” Kean said on a conference call with analysts about quarterly results. “We are being careful stewards of our capital and we’re doing everything we can to get the clarity we need to proceed.” The proposed pipeline expansion from Canada’s oil-rich Alberta province to the British Columbia coast would nearly triple its capacity to 890,000 barrels per day. Canadian oil producers, whose landlocked product trades at a discount to the West Texas Intermediate benchmark, say they need additional pipeline capacity to fetch better prices. But Trans Mountain faces opposition from some municipalities along the pipeline’s route, certain aboriginal groups and environmental activists. Concerns range from potential spills to providing an outlet for Alberta’s oil sands, which some consider a dirtier form of extracting oil than conventional means. Last month, Canada’s energy regulator ruled in favor of the company’s appeal to sidestep some municipal permits for the pipeline. 

340 billion gallons of sludge spur environmental fears in Canada - Amid the bogs and forests of northern Alberta, in the heart of the Canadian oil patch, lie some of the largest waste dumps of the global energy business. In the shadow of the pipes and smokestacks that turn oil sands into flowing crude, earthen dams as long as 11 miles encircle lakes of toxic sludge, the byproduct of decades of extraction. These waste pools -- known as tailings ponds -- represent perhaps the most serious environmental challenge facing the oil-sands industry. Now, the battle over how quickly to clean them up -- and fears about who will pay -- are escalating anew. To howls from environmentalists, the provincial energy regulator granted two industry giants -- Suncor Energy Inc. and Canadian Natural Resources Ltd. -- approval for plans that could push a full cleanup decades into the future. Critics say the industry could end up sticking taxpayers with the bill, estimated at C$27 billion ($22 billion). At issue is how, and by extension when, the ponds must be returned to a natural state. The industry is seeking more time to find cheaper ways to do the job. Environmentalists argue the problem has festered for half a century -- and the waste keeps piling up. “Rather than waiting for that silver bullet and continuing to test things out in the lab, we think that the technologies that exist today should be implemented in full force,” said Jodi McNeill, a policy analyst at the Pembina Institute, an energy researcher in Calgary. 

Fox Creek earthquakes linked to completion volume and location of hydraulic fracturing -- The volume of hydraulic fracturing fluid and the location of well pads control the frequency and occurrence of measurable earthquakes, new Alberta Geological Survey and UAlberta research has found.  Ryan Schultz has been studying earthquakes in the Fox Creek, Alberta area since they started in December 2013. The seismologist—who works at the Alberta Geological Survey (a branch of the Alberta Energy Regulator) and with the University of Alberta—wanted to better understand what was causing the quakes. Schultz and his colleagues found that when increased volumes were injected in susceptible locations (i.e., in connection with a nearby slip-ready fault), it transmits increased pressure to the fault line, leading to more numerous measurable earthquakes. It's not as simple as more volume equals more earthquakes, though-a link that scientists have long identified in the history of induced seismicity, dating back to the 1950s. There is another factor at play in the Fox Creek area, and it's all about location, explained Schultz. "If there is a pre-existing fault, but you're not connected to it by some sort of fluid pathway, you can hydraulically fracture the formation, and you're probably not going to cause a significant earthquake," said Schultz. "It's conceptually quite simple, but actually determining those things underground is really hard to do in practice." Since 2013, there has been a marked increase in the rate of earthquakes near Fox Creek, ranging up to magnitude 4s. While other research has pointed to industry activity as contributing to the quakes, this study is the first to identify specific factors causing the seismic activity. 

Volume of fracking fluid pumped underground tied to Canada quakes - Volume of fracking fluid pumped underground tied to Canada quakes - The amount of water pumped into fracking wells is the No. 1 factor related to earthquake occurrence at Fox Creek, a large oil and gas production site in central Canada, researchers report January 19 in Science. An injection of 10,000 cubic meters of fluid or more at a well appears to trigger a quake.Fox Creek sits atop the Duvernay Formation, a sedimentary layer rich in oil and gas. Before December 2013, the area was earthquake-free. Since then, hundreds of earthquakes have shaken the region; most were below magnitude 4, but a magnitude 4.8 quake in 2016 temporarily shut down operations.Previous investigations revealed that fracking well injections at the site were triggering earthquakes on an underlying fault system. But mysteries remained: For example, why didn’t the quakes didn’t start until almost three years after fracking activities began in 2010?Ryan Schultz of the Alberta Geological Survey in Edmonton and his colleagues compared the timing and location of the earthquakes with fracking activity at 300 wells in the region.  An analysis of rates of injection, fluid pressure and fluid volume for the wells closest in proximity to the quakes revealed that, at this site, only volume was linked to the quakes. A previous study has linked the rate of wastewater disposal injections to seismic slip (SN: 7/11/15, p. 10). As for the three-year delay, the authors say, fracking well injections tend to increase in volume over time as operations mature. So once the injection volumes reached that 10,000-cubic- meter threshold, the earthquakes began.

Crisis-hit Venezuela's oil output plummets in 2017 to decades low (Reuters) - Venezuela’s crude oil production fell nearly 13 percent last year, according to figures released by OPEC on Thursday, hitting a 28-year annual low that points to a deepening economic crisis and increased chances of a debt default. The South American country produced 2.072 million barrels per day (bpd) in 2017 versus 2.373 million bpd the previous year, a nearly 300,000-bpd drop. That was the biggest decline among the members of the Organization of the Petroleum Exporting Countries that have pledged to restrain production since the start of 2017 through 2018. But unlike voluntary cuts by Saudi Arabia, Russia and others intended to stoke higher crude prices by draining a global glut, Venezuela has been unable to stop a now six-year-long production decline. Insufficient investments, payment delays to suppliers, U.S. sanctions, and a brain drain have hammered Venezuela’s oil industry. The production fall has hit oil exports – its only major source of foreign currency to repay debt - and refining, creating intermittent fuel scarcity in the country and at some of its main allies, such as Cuba. An alleged crackdown on oil graft in the last few months, seen by critics as an effort by President Nicolas Maduro to consolidate power, has sown panic across the energy industry and all but paralyzed state oil company PDVSA, according to people at the firm and in the sector. It is a remarkable downfall for the OPEC member home to the world’s biggest crude reserves. “This is one of the worst collapses in history. It happened without an invasion like in Iraq, the breakup of a country like in the Soviet Union, or a civil war like in Libya,” 

Fracking is one of the least sustainable ways to produce electricity, says new study - Shale gas ranks among the least sustainable sources of electricity, according to research from a team of Manchester scientists. Hydraulic fracturing, or “fracking” to extract shale gas is a controversial technique that has been opposed by many environmental campaigners and local residents in proposed fracking areas.  Despite being banned by the Scottish government, fracking projects are currently being rolled out in other parts of the UK.     After finding a “very sizeable quantity of natural gas” in Lancashire’s Bowland Shale, fracking company Cuadrilla announced on Friday it intends to drill four exploratory horizontal wells to extract gas.However, there is still much debate surrounding fracking, and in a study published in the journal Science of The Total Environment, a research team has for the first time examined the environmental, economic and social sustainability of shale gas.  “Many countries are considering exploitation of shale gas but its overall sustainability is disputed,” said Professor Adisa Azapagic of the University of Manchester.  As it stands, the US is still the only nation that is undertaking fracking on a large scale.

US forcing Europe to abandon Russian gas & buy more expensive American LNG - The United States is afraid of fair competition in the energy sector, and is hampering the implementation of the Russian Nord Stream 2 gas pipeline project, according to Russian Foreign Minister Sergey Lavrov. Read more EU has no legal way to block Russia’s Nord Stream 2 pipeline - Vestager “There is reprisal in the energy sector against North Stream 2. It is the US which is calling it politicized, leading to a split in Europe, and the strangling of Ukraine,” he said at a press conference on Monday. “Washington clearly forces Europeans to abandon Nord Stream 2, despite the fact that gas deliveries to Germany via the pipeline could be 2,000km shorter than through Ukraine, and the cost of transit could be halved,” said the Russian diplomat. Europeans “are being forced to buy much more expensive liquefied gas from the United States instead of Russian gas,” Lavrov added. He also said that the US could not withstand fair competition from Russia in the gas-export sector. Russia plans to build the Nord Stream 2 natural gas pipeline under the Baltic Sea to Germany, and to double the existing pipeline's capacity of 55 billion cubic meters per year. The project has faced fierce resistance from some EU members, especially from the Baltic states and Poland. They say the pipeline will cut gas transit through Ukraine and will result in a Russian monopoly in the EU gas market. Other countries like Austria, Hungary and Germany are in favor of buying Russian gas.

How a ‘sneaky’ US fracking firm is taking flak in SA -- Most of the recent debates on fracking have focused on the Karoo region, with much less scrutiny on similar plans to dig for gas and oil next to some of SA’s most valuable farming areas and mountain "water factories".Rhino Resource Partners, a Texas-based company, has been pushing for approval to search for gas in a 4.4-million-hectare chunk of land in KwaZulu-Natal, Free State and the Eastern Cape. A significant part of the search area — initially encompassing about 19,000 properties — includes farm land adjacent to mountain catchment areas. Late in 2017, despite opposition from affected parties, Rhino got the go-ahead to begin searching for a wide variety of petroleum resources, including oil, gas, condensate, coal bed methane, helium and biogenic gas in a reduced exploration area covering about 2.4-million hectares (slightly larger than Kruger National Park). The exploration venture is led by Dallas attorney and businessman Patrick James Mulligan, who boasts about closing several recent deals in West, East and Southern Africa for offshore and onshore oil and gas. Nearly 40 formal objections have been lodged against the exploration project by farmers, traditional leaders, environmentalists and other interest groups. A common thread running through many of the formal appeals is the claim that Rhino has deliberately employed "incremental" stealth tactics to win permission for exploration. Rhino adopted a slowly-slowly approach to dodge the need for a comprehensive upfront environmental impact assessment.  Rhino’s recent application for environmental authorisation speaks about "early-phase exploration" only, obviating the need to explore the potential negative effects of invasive drilling methods.

Niger Delta Avengers To Resume Massive Attack On Oil Facilities - Nigeria’s oil militant group, the Niger Delta Avengers (NDA), has vowed to launch a fresh round of attacks on the country’s oil installations and facilities in the next few days The threat was made in a press statement signed by Major-General Murdoch Agbinibo, the group’s spokesperson. The statement bore the apocalyptic headline “Happy doomed year, Nigeria”, an indication of the NDA’s fury. The group warned that the planned attack will be very deadly and target the deep sea operations of the oil multinationals. “We mean it when we say they (the oil installations) shall dance to the sound of the fury of the Niger Delta Avengers. Good a thing the ocean is wide enough to accommodate as many wrecks as possible,” the group raved. The group said its "High Command" has summoned a meeting of all its operatives to review the progress of its operations and deliberate on the planned actions for the future. “It was agreed at the meeting that the killings and division presently playing out in Nigeria along divergent grounds makes this the perfect time to restructure this country. While promising a brutal outpour of our wrath, which shall shake the coffers of the failed Nigerian nation, our demand is for the government to restructure the country,” said the NDA.

Congo Republic plans to join OPEC (Reuters) - Congo Republic plans to join the OPEC oil cartel, the government said, as the former French colony presses ahead with projects that could help it become the third-largest oil producer in sub-Saharan Africa. “The Republic of Congo has decided to accede to the Organization of the Petroleum Exporting Countries (OPEC),” the statement dated Jan. 11 but sent out to journalists on Wednesday. Congo’s oil sector was badly hurt by the global dip in prices and a slowdown in its own output since 2014, but it has been rejuvenated by new projects scheduled to boost output by a quarter to 350,000 barrels per day (bpd) this year. If successful, the country, where Italy’s ENI and France’s Total are among the operators, will be the no. 3 oil producer in sub-Saharan Africa, analysts say. “This imminent accession expresses the will of his Excellency (Congo President) Denis Sassou Nguesso to place our country in the rank of the world’s leaders,” the statement, signed by Nguesso’s director of cabinet Florent Ntsiba, added. He said Saudi Arabia’s Foreign Minister Adel al-Jubeir had expressed support for the idea during a visit to Brazzaville on Jan. 8. But sticking to strict OPEC quotas could prove tough for a central African country that is in major financial trouble and which depends almost exclusively on oil for its foreign exchange and government revenues. The economy has been badly hit by low oil prices and poor fiscal management, causing total government revenue to fall by nearly a third since 2015 and public or publicly-guaranteed debt to rise to around 110 percent of GDP. 

Shell Gives North Sea Shot in Arm With Field Redevelopment -  Royal Dutch Shell Plc made one of its biggest commitments to the North Sea in 30 years, with plans to redevelop the Penguins oil and gas field. The Anglo-Dutch oil major will build a floating production, storage and offloading vessel -- its first new manned installation in almost three decades -- to take output from eight wells it plans to drill. Peak production will be the equivalent of 45,000 barrels a day, with a break-even price of less than $40 a barrel, Shell said on Monday. “It is another example of how we are unlocking development opportunities, with lower costs, in support of Shell’s transformation into a world class investment case,” Andy Brown, Shell’s upstream director, said in a statement. Penguins, a joint venture between Shell and Exxon Mobil Corp., is already operational after first being developed in 2002. Oil from the field -- about 150 miles (240 kilometers) northeast of the Shetland Islands -- will be transported by tanker to refineries, while the gas will be sent by a pipeline to the St. Fergus terminal in Scotland. Production in the North Sea has fallen by about two-thirds since its heyday in the 1990s as fields have depleted. The U.K. is making it easier to claim tax relief to encourage companies to apply new technology to extract oil and gas from fields previously considered too expensive and difficult to develop. The U.K. Oil and Gas Authority said the redevelopment is “a vote of confidence” for the area. “We are expecting further high-value projects to move forward to sanction this year, which will help prolong U.K. production for many years,” 

BP Accused of 'Side-Stepping' Russian Sanctions - A new expose published Monday reveals how BP , working closely with the British government, has been "side-stepping" sanctions introduced after the Russian annexation of Crimea.The expose is based on documents, obtained under British Freedom of Information laws, which have been obtained by the campaign organization, Culture Unstained , part of the ArtNotOil Coalition , which campaigns to kick fossil fuel money out of the arts. The campaign group is particularly critical of BP's ongoing sponsorship of the British Museum in the UK.The documents reveal what Culture Unstained calls the "close working relationship between UK government and BP over Russia" despite the fact that the material "suggests that BP is attempting to bypass sanctions preventing shale drilling in Russia."The British Government's hypocrisy is evident in the fact that despite taking a strong public line on Russia, the UK government has been helping BP water down U.S. sanctions and hosting events to boost UK ties with Russian oil and gas sector.Over a period of several months, the documents outline how BP had numerous meetings with British government ministers and embassy staff, with British Ministers repeatedly offering support for BP's business in Russia. For example, in February 2017, the British Embassy in Russia hosted a Seminar on Vocation and Professional Education in the Oil and Gas Sector . It was designed to strengthen collaboration on "UK and Russia education companies, schools and universities in one of the key industries—oil and gas." The president of BP Russia, David Campbell, gave the opening remarks at the event. Two months later, the Department for International Trade hosted a workshop on "How to break into the Russian Oil & Gas Sector." It highlighted that "maintaining oil & gas production requires large scale use of new technologies, which largely are not restricted by sanctions, and offered 'presentations by legal advisors about sanctions.'" Meanwhile, in June 2017, when new U.S. Sanctions on Russia were being proposed, BP and other oil companies started mobilizing against the U.S. bill. Within days, the British Embassy in Russia emailed BP to discuss "what this could mean for UK interests." Of particular concern was BP's 19.75 percent stake in Russian state oil company, Rosneft.

Shell Bids a Long Goodbye to Middle Eastern Oil - Energy company abandons last Iraqi oil fields but maintains a presence in natural-gas industry. Shell said Monday it is selling for an undisclosed amount a stake in the West Qurna 1 oil field in Iraq to Japan’s Itochu Corp. , the latest step in a gradual retreat from the region. The company is also expected to give up its holding in Iraq’s Majnoon oil field later this year, though it will retain its natural-gas interests in the country. Once it officially leaves Iraq later this year, Shell will have oil assets in Oman that produce about 220,000 barrels a day.Shell is keeping its considerable natural-gas interests in Middle Eastern countries, including Qatar, Oman, Egypt and Iraq, a strategy it has followed after its $50 billion deal to buy gas giant BG Group PLC in 2016. The deal also brought Shell big business in Brazil’s offshore oil fields, where it has centered its oil-production strategy. The move reflects the waning attraction of the Middle East’s once-prized oil reserves, as companies find that the free flow of crude in the region often comes at a political or financial cost. U.S. oil giants Exxon Mobil Corp. and Chevron Corp. have ratcheted up their focus on shale interests on their home turf in recent years, though both retain interests in Iraq.

Burning Iranian Oil Tanker Off China Coast Sinks After One Week - The Iranian oil tanker burning in the East China Sea for more than a week has finally sunk, Chinese media reported on Sunday. The Sanchi tanker and a cargo ship collided 260km (160 miles) off Shanghai on 6 January, with the tanker then drifting south-east towards Japan. China Central Television said that the Sanchi had gone down after "suddenly igniting" around noon (04:00 GMT).Earlier, the Iranian press reported that all 32 crew members - 30 Iranians and two Bangladeshis - on the tanker are dead. The tanker was carrying 136,000 tonnes of ultra-light crude but Chinese officials, credible as always, said there is no major slick.Even though some 13 vessels and an Iranian commando unit had been taking part in the salvage operation, amid bad weather, no survivors were found, and according to a spokesman for the Iranian team, Mohammad Rastad, there was no hope of finding any survivors.According to BBC, on Saturday, salvage workers had boarded the vessel and found the bodies of two crew members in a lifeboat. Only one other body had been found during the week of salvage operations. The rescue workers retrieved the ship's black box but had to leave quickly because of the toxic smoke and high temperatures. The Panama-flagged Sanchi was bringing the condensate from Iran to South Korea when the collision with the Hong Kong-registered freighter CF Crystal, carrying grain from the US, happened in the East China Sea. The cause of the collision is still not known. Condensate is very different from the black crude that is often seen in oil spills. It is toxic, low in density and considerably more explosive than regular crude. Condensate creates products such as jet fuel, petrol, diesel and heating fuel.

Iranian Tanker Leaves Massive Oil Slick, Worries Mount Over Environmental Damage - Experts have expressed concern about the potential environmental aftermath of a stricken Iranian oil tanker that exploded and sank in the East China Sea on Sunday. The Sanchi—carrying 150,000 tons, or nearly 1 million barrels, of condensate oil—collided with the CF Crystal on Jan 6. The tanker caught fire and burned for more than a week before sinking. Iranian officials said all 32 crew members on the tanker were killed. According to the BBC , Chinese ships are racing to clean up a 46 square mile oil slick left behind. The slick is thought to be made up of heavy fuel used to power the vessel.BBC's China Correspondent Robin Brant reported that the oil slick has more than doubled in size since Sunday, noting that the big concern now is the environmental impact.There could also be a very tall plume of condensate oil underneath the surface, Brant noted. Condensate is an ultra-light oil that is highly toxic and much more explosive than regular crude oil. Experts worry that ship's sinking would likely expel the remaining condensate and the tanker's bunker fuel, contaminating the surrounding waters, Reuters, "bunker fuel is the dirtiest kind of oil, extremely toxic when spilled, though less explosive. Condensate is poisonous to marine organisms." As Rick Steiner, a U.S. marine scientist explained to the news service, the East China Sea is known for its rich—but already polluted—marine ecosystem that includes whales, porpoises and seabirds.

Oil spill from sunken tanker is expanding in East China Sea — Several oil slicks have been found in waters around a sunken Iranian tanker ship in the East China Sea in a spill that is growing and whose potentially major impact on the marine environment is still being assessed. The State Oceanic Administration said late Monday oil slicks around the site of the sunken ship were much larger than the previous day. The Sanchi sunk on Sunday after burning for more than a week following a collision with a Hong Kong-registered tanker. All 32 members of its crew — 30 Iranians and two Bangladeshis — are believed dead. The State Oceanic Administration said a 15-kilometer (9-mile)-long oil slick was found southwest of the site of the sinking and another slick stretched 18 kilometers (11 miles) to the east. The site is about 530 kilometers (330 miles) from Shanghai and 310 kilometers (193 miles) from Naha, Japan. The administration said two ships and an aircraft were on the scene monitoring developments, but described no further action being taken at present. The ship was carrying natural gas condensate, which continued to burn on the ocean surface. Condensate is highly toxic but readily evaporates or burns off in a fire. If trapped underwater, however, it could seriously harm the marine environment. The cause of the Jan. 6 collision between the Sanchi and the Chinese freighter CF Crystal, which was carrying grain, remains unclear. The ship’s voice data recorder was reportedly recovered Saturday, possibly helping reveal how the collision and resulting fire occurred. 

Huge Oil Spill Spreads in East China Sea, Stirring Environmental Concerns - — An oil spill from an Iranian tanker that sank in the East China Sea is rapidly spreading, officials said Tuesday, alarming environmentalists about the threat to sea and bird life in the waterway.The tanker, the Sanchi, was carrying 136,000 tons of highly flammable fuel oil when it crashed into a freighter on Jan. 6. On Sunday, the Sanchi sank after a huge blast sent up a great plume of black smoke and set the surface of the water on fire, China Central Television said.The bodies of three crew members have been recovered, and the remaining 29 were presumed dead, the Iranian government said. Thirty Iranians and two Bangladeshis were believed to have died.The oil slicks from the sunken tanker were growing in size, China’s State Oceanic Administration said Tuesday. There are now two huge slicks covering 52 square miles, compared with just four square miles the previous day. Strong winds were pushing the spill toward Japan, away from China, and it was now less than 200 miles from Naha, Japan. One concern is that, since the Sanchi sank, marine life will be endangered by the fuel oil’s spreading instead of burning off. And experts are further concerned that the even dirtier bunker fuel powering the tanker will be released into the sea, exposing delicate marine life to the extremely toxic substance. Greenpeace expressed alarm about the threat to the marine ecosystem in the East China Sea, which is one of the world’s most heavily trafficked waterways, saying the disaster occurred in “an important spawning ground” for fish. The tanker was carrying more than one million barrels of condensate, an extremely light crude oil, to South Korea when it collided with the freighter. When spilled, the condensate can produce a deep underwater plume damaging to marine life.The Japanese Coast Guard said the fire on the surface of the sea was extinguished early Monday.“Given the poor condition of the ship after a week of fire and explosions, it is likely that all cargo (and fuel) tanks are breached, and all of this toxic hydrocarbon mixture has now been released into the environment,” said Rick Steiner, a marine conservation specialist formerly with the University of Alaska. “If so, this is the single largest environmental release of petroleum condensate in history,” he said.

Oil Spill Spreading in East China Sea 'Now the Size of Paris' - There are increasing environmental and health concerns surrounding the oil spill in the East China Sea from the Iranian registered tanker, the Sanchi, which sank on Monday carrying 136,000 tons, or one million barrels, of a highly flammable oil mix called condensate. The tanker had burned for a week before exploding after colliding with another ship on Jan. 6, with all 32 crew now presumed dead or missing.   There are now four separate oil slicks of the condensate from the Panama registered tanker, which together cover over 100 square kilometers, or just under 40 square miles, the same size as Paris , according to a statement by the Chinese State Oceanic Administration released Wednesday.  Regarding the ecological impact of the spill, the Guardianreported Thursday that "Consumers in Japan, China and South Korea should be wary of buying seafood until governments in the region have monitored and released details about the toxic impact of the Sanchi oil spill, scientists have warned."  The paper added that "millions of fish are likely to have been contaminated by carcinogens."  Greenpeace added that the region was "an important spawning ground" for fish. A Greenpeace spokesperson told the New York Times , "At this time of year the area is used as wintering ground by common edible species such as hairtail, yellow croaker, chub mackerel and blue crab." However, it is not just fish that are threatened by the spill, as Greenpeace noted: "The area is also on the migratory pathway of many marine mammals, such as humpback whale , right whale and gray whale." Wherever the oil ends up, the disaster looks like it will be the largest tanker spill since the early nineties.

The Unprecedented East China Sea Oil Spill - Over the last two weeks, the maritime world has watched with horror as a tragedy has unfolded in the East China Sea. A massive Iranian tanker, the Sanchi, collided with a Chinese freighter carrying grain. Damaged and adrift, the tanker caught on fire, burned for more than a week, and sank. All 32 crew members are presumed dead. Meanwhile, Chinese authorities and environmental groups have been trying to understand the environmental threat posed by the million barrels of hydrocarbons that the tanker was carrying. Because the Sanchi was not carrying crude oil, but rather condensate, a liquid by-product of natural gas and some kinds of oil production. There has never been a condensate spill like this. While it might seem that all oil spills would at least be similar, in this case that is not true. Underground, crude is a liquid you can pump. Condensate, on the other hand, is a gas amid the heat and pressure down there. Bring it up to the surface and it condenses into liquid. This liquid is made of hydrocarbons like crude—and is sometimes classed as a form of it—but contains a different mix of molecules than other crude oils. That mix is substantially lighter, containing more small, simple molecules and fewer large, complex molecules.  In technical terms, condensate is primarily made up of alkanes: methane, propane, butane, and the octane of high-octane gasoline.Condensate, as you might expect, is highly flammable, which explains the towering flames that are visible in some photographs and video of the incident. It’s also very low-density. It has a specific gravity that is much, much lower than water, which means that it almost certainly is going to rise to the surface after it is leaked, Hunt says.“[There is] the classic image of a spill at sea—black oil floating on the water, people attempting to use booms and skimmers or to use dispersants,” he says. “In a case like this, a product like this, those techniques would not be recommended. It’s flammable so you wouldn’t want to contain it, or use a skimmer to recover it, because then you are risking a fire.” There have also been some reports that the condensate might dissolve in water and travel vast distances. While studies of condensate’s environmental effects are limited, one lab study found that its toxicity to corals, for example, was greater than expected based on its molecular components.

Japanese LNG buyers' average spot contract price in Dec highest since Jan 2015: METI - Japanese LNG buyers paid an average $10.20/MMBtu for spot cargoes contracted in December, up 13.33% from November and also the highest level since January 2015, Ministry of Economy, Trade and Industry data showed Monday. The delivery months for these contracts are not disclosed. The spot market has been well supported by strong demand from end-users due to colder winter weather in Northeast Asia, while steady demand from China also provided support on the back of the country's policy to switch from coal to gas for heating. S&P Global Platts JKM averaged $10.568/MMBtu in December, reflecting deals for January and February deliveries. METI also said the average price of cargoes delivered into Japan in December was $8.10/MMBtu, rising 14.08% from $7.10/MMBtu in November. Platts JKM for cargoes delivered in December averaged $9.183/MMBtu.

CNPC forecasts Chinese 2018 oil demand to grow 5% to 12 million b/d -- China's apparent oil demand is expected to rise 4.6% year on year to hit 600 million mt (12.05 million b/d) in 2018, with net crude imports to increase 7.7% to 451 million mt, according to a report released Tuesday by state-owned China National Petroleum Corp.'s Economics and Technology Research Institute. China's oil product exports are forecast to surge 30.7% year on year to 46.8 million mt amid strong growth in output but slow domestic demand. The projections are based on the assumption that Chinese GDP will grow 6.7% in 2018, slower than the 6.9% that the institute estimated for 2017. In contrast, the institute's estimate for apparent oil demand was 590 million mt for 2017, up 5.9% from the previous year. In 2017, for the first time China surpassed US to become the world's largest crude oil importer, with the dependency on imported oil hitting 67.4%, according to the report. "If domestic crude output recovers, China's dependency on imported petroleum will reach 68.8% in 2018," the institute said in the report. At the same time, the institute expects China to add 36 million mt/year (723,000 b/d) of refining capacity in 2018 to reach 808 million mt/year. The independent sector accounts for about 69.4% of the capacity increase, and the sector's total capacity would account for 33% of the country's total refining capacity, rising to 36% in 2020. Supported by the additional capacity, China is forecast to produce 378 million mt of oil products this year, up 4.8% year on year.

Russia To Discuss Possible Exit From OPEC Deal - Russia may be on its way out of the OPEC output reduction deal, according to the country’s Energy Minister, Alexander Novak.Reuters reports that Novak might discuss the country’s potential exit from the pact in Oman next week. Russia had vowed to cut output by 300,000 barrels per day under the agreement as part of a group of non-OPEC producers who elected to coordinate the bloc’s market stabilization initiative. “We see that the market is becoming balanced. We see that the market surplus is decreasing, but the market is not completely balanced yet and, of course, we need to continue monitoring the situation,” Novak said.  Russian oil majors have been complaining about the deal and how it is creating stumbling blocks on the road towards the industry’s expansion plans. Brent barrel prices are currently approaching $70 a barrel, suggesting crude markets are rebalancing as we approach June, when the deal is set for “review” – a process with little description in the full text of the OPEC deal’s renewal, which was agreed upon in November.As far as OPEC members are concerned, the deal could carry on beyond the end of 2018. Speaking to CNBC, the United Arab Emirates’ energy minister, Suhail al-Mazrouei said: "I am expecting that this group of countries that stood and have become responsible for helping the market to correct, (that) there is a very good chance that they could stick together and put a shape around that alliance." His statement comes amid a variety of scenarios on how the deal might come to an end, featuring civil unrest in Venezuela and Iran that may lead to supply disruptions; Russia pulling out of the pact in June; OPEC members and other parties to the deal starting—or continuing—to cheat; and oil prices rising too high.

OilPrice Intelligence Report: Can The Oil Rally Continue?: Oil prices hit $70 per barrel for the first time in more than three years on Thursday. The last time Brent traded that high, prices were falling off a cliff after the November 2014 OPEC meeting left members producing without restraint, leading to a global glut of supply. The next steps for oil are unclear. Market sentiment is decidedly bullish, but speculators have piled into extremely bullish bets, which exposes the market to a correction if the upward momentum starts to sputter. The EIA sharply revised up its forecast for U.S. oil production this year and next, predicting average output of 10.3 mb/d in 2017 (up nearly 300,000 bpd from last month’s forecast) and 10.8 mb/d in 2019. By November 2019, the EIA says, the U.S. could hit 11 mb/d, surpassing Russia as the world’s largest producer. The strength of U.S. shale is one of the main bearish factors looming over the oil market, but it remains to be seen if shale drillers can achieve such lofty production levels. Few expected Brent to hit $70 per barrel so soon, and what happens next is a matter of opinion. With outages in key oil producing countries, strong demand expected this year, and ongoing declines in inventories, some analysts see more room on the upside. “Pretty much all of the fundamental boxes are supportive of the current rally and a bit more,” said Paul Horsnell, head of commodities research at Standard Chartered Plc in London. But others believe the rally has gone too far. “Seventy dollars is too much,” said Eugen Weinberg, head of commodities research at Commerzbank AG, according to Bloomberg. “It’s not completely unexpected, given the price momentum. But there will be a reaction in U.S. shale, and OPEC’s strategy will backfire massively.” 

Lower inventories may help crude prices to reach $70 this year - The OPEC+ method of cutting production to lower inventories may not be the fastest way but it is probably the least-painful way from a price standpoint to balance the oil market, John Spears, President of Spears & Associates told Azernews. Spears went on to say that the other method to balance the market would be for OPEC+ to increase its oil production and reduce oil prices to the marginal lifting cost (perhaps as low as $20/bbl) in order to shut-in high-cost oil fields and spur oil consumption. “In the past oil prices have swung usually because oil demand and oil supply did not grow at the same rate. Most of the time oil demand tends to rise or fall smoothly from year to year. However, supply from new oil fields tends to come on stream irregularly and in big increments, like the Kashagan field, since most big oilfields traditionally take the better part of a decade to discover and bring on line. As a result of this supply-demand mismatch, the oil market has swung from undersupply to oversupply and prices have reacted accordingly,” the company’s President stressed. Further touching upon the issue of the prolongation of the OPEC+ deal, Spears noted that the OPEC+ production cuts can only be effective in reducing global oil inventories if compliance with the agreement remains high. “On this point, the high level of compliance with production cuts over the past year by the members to the agreement has led the market to expect that compliance will remain high going forward. However, we expect that the level of compliance will begin to slip as inventories near the level that OPEC+ is targeting,” the expert said. Spears believes that the other two factors that will play an important role in determining if the production cuts are effective are the growth in global oil demand in 2018 and the level of oil production in the U.S. 

Money managers raise length in crude futures to record highs - Money mangers raised their stakes in bullish bets on NYMEX crude to record highs in the week that ended Tuesday, Commodity Futures Trading Commission data showed Friday. The group's length increased 36,580 contracts to 463,262 contracts, topping the previous record of 448,846 contracts set February 21. At the same time, the size of the short position has been sharply reduced since October, revealing a bullish bias held by money managers. That short position fell by 6,934 contracts to 30,612 contracts the week that ended Tuesday, leaving the group's net length at 432,650 contracts. By comparison, money manager's net length stood at 405,328 contracts February 21, then fell as low as 105,983 June 27 a few days after NYMEX crude had sunk to around $42/b, which proved to be the low point of 2017. Crude then stabilized around $50/b, before a rally began in October that took out $60/b by late December and has yet to run out of steam. Front-month NYMEX crude settled Friday at $64.30/b, a three-year high. Higher oil prices have also coincided with a growing short position held by swap dealers, which likely reflects more hedging activity by producers. Swap dealers serve as counterparties to producers in over-the-counter transactions, and then sell futures to mitigate price risk. The short position swap dealers held has pushed further into record territory, up 34,815 contracts to 782,569 contracts the week ending Tuesday. This move isn't surprising in light of higher oil prices, but greater production also means there are more barrels to hedge. US shale oil companies might also be under more stringent requirements from their lenders to lock in higher prices given investor pressure for them to live within their cash flows. A cold spell across the US that lasted from around Christmas into the first week of the New Year pushed NYMEX ULSD futures above $2.08/gal, a high last seen in February 2015. With the cold snap lifting this week, the stage was possibly set for some length to leave the market. 

Hedge fund bulls have left oil market looking very stretched - (Reuters) - Hedge funds and other money managers have boosted their bullish position in oil to a new record, but with crude taking over from fuels as the main target of fresh buying.Hedge funds boosted their net long position in the six most important futures and options contracts linked to crude and fuels by 67 million barrels to a record 1,399 million barrels in the week to Jan. 9.Portfolio managers have increased their net long position in Brent, NYMEX and ICE WTI, U.S. gasoline, U.S. heating oil and European gasoil by a total of 1,089 million barrels since the end of June.The accumulation of bullish positions is easily the largest on record and far outstrips anything seen even during the spike in oil prices during late 2007 and the first half of 2008 ( the last six months, funds have added 374 million barrels of net long positions in Brent, 344 million in WTI, 112 million in gasoline, 128 million in heating oil and 131 million barrels in gasoil.The scale of the buying has left positions looking very stretched on many measures and prices vulnerable to a correction if fund managers try to realise some of their paper profits.Hedge funds now hold more than 10 long positions in crude and fuels for every short position, up from a ratio of less than 1.60:1 at the end of June.If fund managers try to sell some of those positions, they may have difficulty finding buyers, which could cause a sharp downward move in prices ("Why stock markets crash", Sornette, 2003).In the past, large concentrations of hedge fund positions, either long or short, have normally preceded a reversal in the price trend ("Predatory trading and crowded exits", Clunie, 2010).In the current case, however, portfolio managers seem to be gambling oil prices will break up into a new, higher trading range before eventually correcting.The global economy is growing strongly and world trade volumes are increasing at the fastest rate since the start of the decade.Oil consumption is increasing strongly while OPEC and its allies continue to restrict production to draw down inventories.U.S. shale production is set to increase strongly in 2018 as a result of the increase in prices, but the impact will most likely be felt later in the year, and that has not daunted most of the oil bulls. Few fund managers are willing to bet against the rising trend in prices - yet.

Crude futures: Crude slips back after reaching $70/b; dollar weakens -- Crude futures slipped down in European trading Monday morning, after hitting a high of $70.03/b in the early hours of the day, supported by a weaker dollar and speculative buying. At 1200 GMT, March ICE Brent crude futures were 19 cents/b lower at $69.68/b, while February NYMEX WTI crude was down 10 cents/b at $64.20/b. The US Dollar Index was down 0.32 at 90.30, the lowest level since December 2014, boosting oil prices. Speculative net long positions in crude futures were at record levels in the last reporting week, providing upward support as speculators invest in crude. The managed money net long position in ICE Brent futures was at a record high of 567,852 contracts for the week ended January 9, according to data from the Intercontinental Exchange. Meanwhile, analysts have upped their price forecasts amid a tightening supply balance in crude markets following increased demand and high compliance with OPEC/non-OPEC production cuts. "We now see a deficit of 430,000 b/d in 2018 compared to 100,000 b/d prior, and thus see Brent crude oil prices averaging $64/b in 2018 compared to $56 prior," a BofA Merrill Lynch Global Research report released Monday said. Analysts are now increasingly convinced that the market is rebalancing, although a concern remains over the resurgence of US shale output, which could bring prices back down. Data from Baker Hughes released Friday showed an increase in drilling activity in the US, with the oil rig count increasing by 10 to 752 over the week, the highest weekly increase since June 2016. Market participants will be watching US Energy Information Administration data published tomorrow evening, which will contain estimates of shale oil production.

Oil hovers near three-year high despite rising U.S. output (Reuters) - Oil hovered near a three-year high above $70 a barrel on Monday on signs that production cuts by OPEC and Russia are tightening supplies, although analysts warned of a “red flag” due to surging U.S. production. International benchmark Brent crude futures LCOc1 last traded 29 cents higher at $70.16 by 1937 GMT, having risen to a high of $70.37 a barrel earlier in the session. U.S. West Texas Intermediate (WTI) crude futures CLc1 gained 51 cents at $64.81 a barrel. Both benchmarks hit levels not seen since December 2014, although trading was thin due to a holiday in the United States. A production-cutting pact between the Organization of the Petroleum Exporting Countries, Russia and other producers has given a strong tailwind to oil prices. Growing signs of a tightening market after a three-year rout have bolstered confidence among traders and analysts. Bank of America Merrill Lynch on Monday raised its 2018 Brent price forecast to $64 a barrel from $56, forecasting a deficit of 430,000 barrels per day (bpd) in oil production compared to demand this year. “OPEC and non-OPEC producers remain committed to production cuts at the same time world oil demand continues to increase,” “As we go through 2018, the market is also going to continue to look at geopolitical supply disruptions that could occur in Libya, Nigeria and Venezuela.” Still, some analysts have warned that the 13 percent rally since the start of the year could peter out due to global refinery maintenance and rising North American production. U.S. energy companies added 10 oil rigs in the week to Jan. 12, taking the number to 752, energy service firm Baker Hughes said on Friday. That was the biggest increase since June 2017. In Canada, energy firms almost doubled the number of rigs drilling for oil last week to 185, the highest level in 10 months. 

Oil prices drop off three-year highs but strong demand supports ---(Reuters) - Oil prices dropped off three-year highs on Tuesday as traders booked profits but healthy demand underpinned prices near $70 per barrel, a level not seen since the market slump in 2014. Prices have been driven up by oil production curbs in OPEC nations and Russia, and demand amid healthy economic growth. Imports to India, the world’s third-biggest oil consumer, rose by about 1.8 percent in 2017 to a record 4.37 million barrels per day (bpd) as the country boosted purchases to feed its expanded refining capacity. Brent futures LCOc1 fell $1.11, or 1.6 percent, to settle at $69.15 a barrel after hitting a session low of $68.83. The global benchmark hit a peak of $70.37 on Monday, matching a high from December 2014 at the start of a three-year market decline. U.S. West Texas Intermediate (WTI) crude futures CLc1 ended at $63.73 a barrel, down 57 cents, or 0.9 percent. WTI hit a December 2014 peak of $64.89 earlier in the session. “It’s such a quiet day ... I think this is a pause as you try and decide what the rise in rig counts means and what the Russia comments mean,” said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management. Reacting to the three-year price high, Russian Energy Minister Alexander Novak said the oil market was not yet balanced and that the global deal to cut output should continue as the price rise could be due to cold weather. The U.S. rig count, an early indicator of future output, rose by 10 oil rigs last week to 752 and is much higher than a year ago when only 522 rigs were active. [RIG/U] “All in all, this is still a pretty positive day because even though there is no news to drive prices, you’re not giving up much ground here,” Haworth said. Most analysts and market participants said oil is vulnerable to profit taking as hedge funds and money mangers have amassed a record number of bullish bets on U.S. crude. In addition, trading was thin on Monday due to the Martin Luther King Jr. Day holiday in the United States. 

Crude futures: Brent slips back, struggling to hold on to $70/b - Crude futures struggled to hold onto gains made the previous day, slipping back from $70/b in European morning trading Tuesday. At 1145 GMT, March ICE Brent crude futures were 98 cents lower at $69.28/b, while February NYMEX WTI crude was down 45 cents at $63.85/b. Related analysis: Brent strength could pressure Atlantic Basin crude differentials After settling at its highest since December 2014 Monday, Brent has fallen back, languishing below $70/b on profit taking and a lack of fresh bullish drivers. "It's trying to break above the $70 level several times but not succeeding, it's more of a technical setback with lots of hot money on the prompt," Global Risk Management's Michael Poulson said. Speculators on the oil curve are able to move their positions quickly and with a record high net speculative long, according to ICE data, the futures are struggling to hold on to recent gains. "We are approaching the five-year average, and the large speculative position is a good sign we are approaching the high," Poulson added. Commerzbank analysts also pointed to this large speculative position, saying that the level of the speculative long in Brent and WTI contracts at over 1 million contracts is equivalent to "nearly the total amount of commercial crude oil stocks in the OECD countries," according to an analysts' note Tuesday. "We therefore expect prices to correct in the coming weeks, just as soon as inventory trends shift and attention is focused more on the growing US oil production," the Commerzbank note added.

Has Oil Become Overbought? - Oil prices trimmed their gains at the start of trading on Tuesday, although the losses were relatively minor. Benchmark prices are holding up amid strong demand, falling inventories and bullish sentiment.   The head of Russian oil company Lukoil said that Russia should withdraw from the OPEC/non-OPEC production cuts if oil prices stay at $70 per barrel for six months. Russia’s participation is crucial to the cohesion of the group, and the comments are the first in what will likely be a lot more rumors about the compliance to the production cuts, particularly if oil prices remain elevated.   A group of investment banks, including Citigroup, Societe Generale, and JPMorgan Chase predict that compliance with the OPEC cuts will falter this year. The banks estimate that inventories will clear and by mid-year OPEC may find it difficult to maintain compliance. “There could be an agreement over the summer on ramping production back up,” Ed Morse, head of commodities research at Citigroup, told Bloomberg. The predictions come as ministers from OPEC countries have sought to reassure the markets that the deal will remain intact.   Energy Transfer Partners has run into trouble with two key projects. The Rover pipeline, which would carry Marcellus shale gas through Ohio, Michigan and into Canada, has been beset with environmental challenges. Last April, the ETP spilled 2 million gallons of clay and water, and more recently it spilled 148,000 gallons of drilling fluid. Ohio regulators are seeking to block the company from further horizontal drilling to advance the $4.2 billion project. Separately, environmental groups have sued the U.S. Army Corps of Engineers to block the construction of ETP’s Bayou Bridge Pipeline in Louisiana.   Top shale gas drillers in the Marcellus are super-sizing their wellpads. In the past, a wellpad would be used to drill a handful of wells. But some gas drillers are building much larger wellpads, and using them to drill upwards of 30 or 40 wells. These “superpads” can produce a lot more gas in a smaller footprint. It also means that gas drillers can drill a group of wells in one moment, then come back later and drill more wells from the same pad. EQT, the largest gas producer in the U.S., is reportedly one of the leaders of this new practice, which can see $250 million invested in a single supersized wellpad.

Crude futures: ICE Brent crude retreats further, undergoing correction after rally - Crude futures continued to ease in European morning trading Wednesday, with ICE Brent retreating further from $70/b amid some concerns that fundamentals did not justify the highs seen early this week. Related video:Market Movers Europe, Jan 15-19 At 1200 GMT, March ICE Brent crude futures were 36 cents/b lower at $68.79/b, while February NYMEX WTI crude was down 25 cents/b at $63.48/b. Brent crude hit the psychologically important $70/b level earlier this week. Analysts have expressed concern that the rally in crude futures, which began late last year, was overdone with some of the fundamental factors which triggered the rally having now reversed. The Forties pipeline outage, Libyan production issues and geopolitical tensions involving Iran all helped to support prices in previous months, but those factors have since subsided. The rally continued into this year with record net speculative long positions, stoking worries oil markets were primed for a large correction. However, analysts were skeptical that speculators will liquidate their positions at once, taking profits at the current levels, as backwardation in the futures incentivizes funds to hold onto a long position.

    WTI/RBOB Extend Gains After Bigger Than Expected Crude Draw - Crude edged higher as OPEC showed increased determination to curb production and tighten markets ahead of inventory data tonight, but extended gains after API reported a bigger than expected crude draw (9th in a row). API:

    • Crude -5.121mm (-3.15mm exp)
    • Cushing -3.936mm (2.5mm exp)
    • Gasoline +1.782mm
    • Distillates +609k

    This is the 9th straight week of crude draws and gasoline builds...There could be some weather-impact in this data as Bloomberg notes that at least two Gulf Coast refineries aren’t producing product because of issues related to sub-freezing temperatures sweeping across the South while multiple other sites are having cold-related upsets.“The market continues to take support from signs that OPEC and Russia’s compliance with their production cuts is really high and it doesn’t seem that there are any worries that there is cheating going on yet,” Gene McGillian, a market research manager at Tradition Energy in Stamford, Connecticut, said by telephone. Prices were higher on the day but limped into the API data as the Dollar spiked but resumed climbing after the bigger than expected crude draw.

    WTI/RBOB Jump After Biggest Cushing Stock Draw On Record -  WTI/RBOB prices have fallen after a brief pop on last night's API data but kneejerked higher after DOE reported a bigger than expected crude draw (9th straight week). Cushing saw its biggest draw ever and Distillates surprised with a draw as US crude production bounced back. Ahead of the DOE dats, Bloomberg noted the market's anxiety: A ninth-consecutive crude draw would be helpful, but a tenth consecutive weekly gasoline build would not. And a fifth straight distillate build would add more bearish sentiment. Survey data already see sizable builds in both product categories, and figures coming in showing larger builds could have bulls questioning the insanely long positioning of the crude market.  DOE:

    • Crude -6.86mm (-3.15mm exp) - 9th straight week of draws
    • Cushing -4.184mm (2.5mm exp) - biggest draw ever
    • Gasoline +3.62mm - 10th straight week of builds
    • Distillates -3.887mm - biggest draw since Oct 20th

    Another crude draw and another gasoline build but Cushing's 4.18mm draw is the largest on record. Distillates surprised with a draw that is perhaps weather-driven as several refiners were shut in... That cold snap across the eastern US is showing its effects on heating fuel. Distillate demand soared the most for any week since 2000, to the highest level in a decade.  That surprise distillate draw didn't seem to come from exports which actually dropped last week, but, as Bloomberg's Bert Gilbert notes, the chart below shows that product supplied for diesel last week hit the highest level since February 2008.

    Oil Prices Rebound After EIA Reports Another Large Crude Draw - Amid emerging doubts that OPEC and Russia have outdone themselves with the oil production cuts and are starting to suffer the consequences, the Energy Information Administration reported another large draw in oil inventories this week. At 6.9 million barrels, the draw is significant enough to support a further price rise for WTI. Yesterday, the American Petroleum Institute reported yet another draw, of 5.12 million barrels, keeping spirits high. Analysts expected the EIA to report its ninth straight weekly inventory draw, with a Reuters poll setting the size of the draw at 3.5 million barrels, the same as last week’s analyst poll by Platts showed. In g asoline, the EIA reported another build, of 3.6 million barrels for the week to January 12. That’s compared to a 4.1-million-barrel build in the prior week. Production of the fuel averaged 9.7 million bpd last week, up from 9.5 million bpd in the week to January 5.   Last week, the EIA shook markets with the latest edition of its Short-Term Energy Outlook, in which the authority forecast U.S. oil production would reach 10.3 million barrels daily this year and rise further to 11 million bpd in late 2019. This has not affected prices negatively, however, as supply continues to tighten, according to observers.  As a result, two banks have already raised their price targets for oil for this year. BofA said it had revised its supply and demand forecast for the year and now expected a deficit of 430,000 bpd versus an earlier one of 100,000 bpd. As a result, BofA now expects Brent crude to average US$64 a barrel and WTI to hover around US$60 a barrel. That’s up from US$56 and US$52 a barrel, respectively.

    $70 Oil Cripples European Refiners --In the latest indication of the strength of the recovery of global oil prices, European refineries are struggling to pay their crude bills as margins decline and demand weakens for some of their products, Bloomberg reports.The profit curve for fuel oil, used by shippers and power stations, has fallen the most dramatically. High inflows of diesel in the Middle East are making that fuel difficult to bank on as well.As a result of the capital crunch, refinery runs could become shorter, KBC Advanced Technologies, a research firm in the sector, says, though part of these fluctuations are owed to normal seasonal tendencies.“Oil demand usually slackens in the first quarter and into the second quarter, so sooner or later refinery intakes will have to slacken and the usual signal for that is lower margins,” KBC chief economist Stephen George said.The timing of the revised production strategy comes just as refinery margins reach a three-year low, Barclays says, which is particularly telling. The oil price crash in late 2014 largely shapes the market. Hydroskimming facilities, which refine fuels in a relatively unsophisticated process, have it tough because their techniques do not allow for diesel or gasoline production like complex refineries. “Fuel oil cracks are paltry, which is impacting hydroskimming margins, with Urals margins in particular falling,” Ehsan Ul-Haq, of the London-based Resource Economist Ltd. told Bloomberg. Russia’s Urals crude grade is more sensitive to the strong markets because of its high fuel yield, he added.

    OMR: Is seventy plenty? -- The price of Brent crude oil closed earlier this week above $70/bbl for the first time since 2 December 2014 (shortly after OPEC’s “market share” ministerial meeting) and money managers have placed record bets on the recent upward momentum continuing. The factors contributing to this burst of optimism by investors include; the possible unravelling of the Iran nuclear deal and recent demonstrations in the country, disruption to the industry in Libya, and the closure of the Forties pipeline system. Although these factors might have faded somewhat, there are others at work. The general perception that the market has been tightening is clearly the overriding factor and, within this overall picture, there is mounting concern about Venezuela’s production.Taking Venezuela first, production has been sliding for a long time – it is now about half the level inherited by President Chavez in 1999 – and in December output was 490 kb/d lower than a year ago, having fallen to 1.61 mb/d. It is reasonable to assume that the decline will continue but we cannot know at what rate. If output and exports sink further other producers with the flexibility to deliver oil similar in quality to Venezuela’s shipments to the US and elsewhere, including China, might decide to step in with more barrels of their own. The oil market is clearly tightening; in the three consecutive quarters 2Q17-4Q17 OECD crude stocks fell by an average of 630 kb/d; such a threesome has happened rarely in modern history: examples include 1999 (prices doubled), 2009 (prices increased by nearly $20/bbl), and 2013 (prices increased by $6/bbl). Since the nadir for Brent crude in June when the price was $45/bbl, the 2017 OECD crude draws have coincided with a price increase for Brent of nearly $25/bbl.

    WTI Tumbles To $62 Handle After IEA Predicts "Explosive" US Shale Production As Oil Prices Surge --Overnight, the International Energy Agency became the latest entity to recognize that 2018 is shaping up to be a pivotal year for energy production in US shale fields, and a showdown between OPEC and non-OPEC producers, namely those in the US.According to the latest IEA report, US shale output is poised for "explosive" growth in 2018 as WTI trades at its strongest level since the summer of 2015, which in turn will unleash pent up US output, potentially leading to a sharp oversupply of black gold,As Bloomberg  notes, the IEA's forecast supports OPEC's own projections: As we pointed out yesterday, the cartel also expects US production to ramp up in 2018 as shale producers - much more lean and efficient and significantly delevered after the 2015/2016 "episode" - unleash output as oil price continue to rise well above the generally accepted shale breakevens in the low $50s. The IEA boosted its forecasts for non-OPEC supply growth this year by 100,000 barrels to 1.7 million barrels a day compared with last month’s report, modestly higher than OPEC's projections. It also warned 2018 could be a “volatile” year as Venezuela's energy industry teeters on the brink of collapse. Both OPEC and IEA expect Venezuela's difficulties to continue after Latin America's socialist paradise brooked the biggest unplanned production decline of 2017. “The big 2018 supply story is unfolding fast in the Americas,” the IEA said in its monthly report. “Explosive growth in the U.S. and substantial gains in Canada and Brazil will far outweigh potentially steep declines in Venezuela and Mexico.”"Given Venezuela’s astonishing debt and deteriorating oil network, it is possible that declines this year will be even steeper than the 270,000 barrels a day in 2017," the report said. The country’s output last year was 1.97 million barrels a day, the lowest in nearly 30 years." "Yet, the IEA doesn’t see a “clear sign yet of OPEC turning up the taps to cool down oil’s rally” to “compensate for a precipitous drop in supply from Venezuela."

    OilPrice Intelligence Report: The Shale Surge Is Far From Over: Oil prices fell back a bit at the end of this week. EIA data shows a rise in U.S. production, but also another strong decline in inventories. Brent is struggling to hold above $70, and benchmark prices await some direction.The IEA’s latest Oil Market Report paints a mixed picture for prices. Clearly, the market is tightening, the IEA says, but it also says that shale growth will be “explosive” this year. The agency revised up its forecasts growth for U.S production from 870,000 bpd to 1.1 mb/d in 2018. That, combined with gains from other non-OPEC countries, could end the price rally, although the IEA says a lot of uncertainty remains.   Venezuela’s December output cratered to 1.6 million barrels per day (mb/d), falling by 216,000 bpd from a month before. The shocking single-month decline raises the prospect of a much more serious meltdown in the country’s oil sector than most analysts previously believed. Debt, lack of maintenance, a lack of cash to invest, the decrepit state of PDVSA’s oil assets, and a brain drain are all contributing to the steep decline. Analysts see output falling to 1.3 mb/d this year, perhaps lower. “The only discussion right now is how much is it going to decline by. There is no talk of a turnaround,” Luisa Palacios, analyst at consultancy Medley Global Advisors in New York, told the WSJ. Argus Media reports that surging oil production in the Permian could run into a ceiling of midstream capacity in the coming years, threatening the boom. For now, there is enough pipeline capacity to carry Permian oil to the Gulf Coast, but at some point the pipeline network will be maxed out, and there is “going to be a day of reckoning,” Enterprise Products Partners senior vice president Brent Secrest said at the Argus Americas Crude Summit in Houston, Texas. Pipeline companies see the bottleneck beginning in 2019 or 2020.

    Oil Rig Count Declines Amid Falling Prices -- The number of active oil and gas rigs fell this week, according to Baker Hughes data, decreasing by 3 total rigs. This brings the total number of oil and gas rigs to 936, which is an addition of 242 rigs year over year.The number of oil rigs in the United States fell by 5 this week after gaining 10 last week, while the number of gas rigs increased by 2. The number of oil rigs stands at 747 versus 551 a year ago. The number of gas rigs in the US now stands at 189, up 142 a year ago.At 10:11am EST, the price of a WTI barrel was trading down $0.40 (-0.63%) to $63.49—nearly the same as this time last week. The Brent barrel was trading down $0.40 (-0.58%) to $68.91. Prices fell further in the early afternoon prior to the data release. US crude oil production rose last week, resuming the upward movement that oil prices enjoyed throughout Q4 2017. The first week of 2018 saw production in the United States slipping from 9.782 million bpd in the last week of 2017, down to 9.492 million bpd. But this week, production moved upward again to 9.750 million bpd.  Canada has seen severe swings in its active oil and rig count. Last week, Canada saw 102 oil and gas rigs added. This week, Canada added another 49, bringing its total to 325.Despite the overall decline in the number of rigs for the week, the Permian basin rig count increased by 6 this week, and now stands at 409 rigs, or 128 above this same week last year. At 1:11pm EST, WTI was trading at $63.29 (-$0.60) with Brent trading at $68.64 (-$0.67).

    US oil drillers cut rigs for 2nd week in three -Baker Hughes -- (Reuters) - U.S. energy companies this week cut oil rigs for the second time in three weeks even though crude prices traded near their highest level since 2014. Drillers cut five oil rigs in the week to Jan. 19, bringing the total count down to 747, General Electric Co's Baker Hughes energy services firm said in its closely followed report on Friday. RIG-OL-USA-BHI The U.S. rig count, an early indicator of future output, is much higher than a year ago when only 551 rigs were active after energy companies boosted spending in 2017 as crude started recovering from a two-year price crash. U.S. crude futures traded above $63 a barrel on Friday after hitting $64.89 this week, its highest since December 2014. That compares with averages of $50.85 in 2017 and $43.47 in 2016. Looking ahead, futures were trading around $62 for the balance of 2018 and $58 for calendar 2019 . In anticipation of higher prices in 2018 than 2017, U.S. financial services firm Cowen & Co said 23 of the roughly 65 E&Ps they track, including Antero Resources Corp , have already provided capital expenditure guidance for 2018 indicating an 8 percent increase in planned spending over 2017. Cowen said the E&Ps it tracks planned to spend about $66.1 billion on drilling and completions in the lower 48 U.S. states in 2017, about 53 percent over what they planned to spend in 2016. Antero said it planned to keep its drilling and completion capital budget flat at $1.3 billion annually through 2020. Analysts at Simmons & Co, energy specialists at U.S. investment bank Piper Jaffray, this week slightly increased their forecast for the total oil and natural gas rig count to an average of 1,004 in 2018 and 1,128 in 2019. Last week, it forecast 996 in 2018 and 1,126 in 2019. There were 936 oil and natural gas rigs active on Jan. 19. On average, there were 876 rigs available for service in 2017, 509 in 2016 and 978 in 2015. Most rigs produce both oil and gas. U.S. oil output is expected to continue to rise in February with production from shale formations rising by 111,000 barrels per day (bpd) to 6.55 million bpd, the U.S. Energy Information Administration said on Tuesday.

    Oil prices fall 1 pct as growing U.S. crude output weighs - (Reuters) - Oil prices slid 1 percent on Friday and were on track for the biggest weekly falls since October as a bounce-back in U.S. production outweighed ongoing declines in crude inventories. Brent crude futures LCOc1 were trading 69 cents lower at $68.53 a barrel at 11:22 a.m. EST (1622 GMT). On Monday, they hit their highest since December 2014 at $70.37. U.S. West Texas Intermediate (WTI) crude futures CLc1 were trading at $63.21 a barrel, down 74 cents. WTI marked a December-2014 peak of $64.89 a barrel on Tuesday. Both benchmarks were on track for a weekly loss of nearly 2 percent. The International Energy Agency (IEA), in its monthly report, said that global oil stocks have tightened substantially, aided by OPEC cuts, demand growth and Venezuelan production hitting near 30-year lows. But it warned that rapidly increasing production in the United States could threaten market balancing. "Explosive growth in the U.S. and substantial gains in Canada and Brazil will far outweigh potentially steep declines in Venezuela and Mexico," the IEA said of 2018 production. The energy watchdog forecast U.S. supply growth will push its output past 10 million barrels per day (bpd), overtaking Saudi Arabia and rivalling Russia. U.S. crude oil production C-OUT-T-EIA rose to 9.75 million bpd last week, according to government data. Some analysts, however, contend the IEA may be underestimating oil demand growth this year amid strong U.S. shale production trends as global economies show signs of growth to absorb the commodity. "The demand side of the equation is keeping us well-healed," said Phil Flynn, analyst at Price Futures Group in Chicago, who expects oil demand to hit between 1.8 million bpd to 2 million bpd. "While it's great to be adding shale, it's coming at the expense of deepwater projects. Demand is going to continue to surprise on the upside," he added. Overall, however, oil prices remain well supported, and most analysts do not expect steep declines.

    Oil Prices Book Biggest Weekly Loss Since October --Oil prices accumulated a more than 1-percent decline this week, pressured by U.S. production growth, despite the variety of bullish demand forecasts and data about tightening global supply. A record-high number of long positions on Brent and WTI also helped fuel a concern about the immediate future of benchmark prices.The ratio of long to short positions on Brent and WTI, Reuters’ John Kemp noted in his latest column, now stands at 10:1, compared with 1.60:1 at end-June 2017.The Energy Information Administration reported yesterday that overall oil production in the Untied States had hit 9.75 million barrels daily last week, up by 258,000 bpd from the previous week and a whopping 806,000 bpd from a year earlier. At this rate of weekly growth, U.S. drillers could hit the 10-million-bpd mark much sooner than expected unless they deliberately decide to rein in production to stop prices from falling. As this figure is comprised of numerous individual companies, a concerted effort to rein in prices is highly unlikely. Adding to the negative reaction was a reported 258,000-bpd build in gasoline inventories that took the joy out of a ninth consecutive weekly decline in crude oil inventories, and not a small one, at 6.9 million barrels.  The weekly price decline for West Texas Intermediate could come in as high as 1.8 percent, MarketWatch notes, and Brent could book an accumulative loss of the same size. “The market appears a bit overextended after a 30% rally, with barely a move lower, over the past three months,” a Bank Wealth management investment strategist, Rob Haworth, told MarketWatch.

    OPEC Oil Production Rose In December Despite Plunge In Venezuela Output - In its latest monthly report, OPEC announced that according to secondary sources, December oil production by the cartel rose by 42.4kbpd from November to 32.416mmbpd, if 144kbpd below October's 32.56mmbpd level, and just below the mandated production ceiling of 32.5mmbpd. While the biggest producer Saudi Arabia saw its output dip by 11kbpd to 9.918mmbpd, it was Venezuela's production that tumbled by nearly 5%, or 82.2kbpd, to 1.745mmbpd, and is rapidly becoming the biggest swing factor in rising oil prices. The decline was offset by a jump in Nigerian oil production, which pumped 75.7kbpd more in December, to 1.861mmbpd. Algeria, Angola, Iran and Kuwait also saw their output increase in December. OPEC also revised its 2017 global oil demand growth higher, now at 1.57mmbpd, averaging some 96.99mmbpd in 2017. For 2018, oil demand growth is anticipated at 1.53mmbpd, or some 98.51mmbpd.   Meanwhile, world oil supply in December increased by 0.40 mb/d m-o-m, to average 97.49 mb/d, representing an increase of 0.83 mb/d y-o-y. Preliminary non-OPEC oil supply, including OPEC NGLs, was up by 0.35 mb/d m-o-m in December to average 65.07 mb/d. For 2017, non-OPEC supply is estimated to grow by 0.77 mb/d y-o-y to average 57.79 mb/d, representing a downward revision of 0.04 mb/d from last month’s report, following a downward revision in OECD and DCs by 28 tb/d and 35 tb/d, respectively, while the oil supply forecast for the FSU was revised up by 32 tb/d. For 2018, y-o-y growth of 1.15 mb/d is forecast, following an upward revision for production in the US, Canada, Mexico and the UK and downward revisions in Norway and Argentina, and showing total supply expected at 58.94 mb/d. In December 2017, OPEC crude oil production increased by 42 tb/d, according to secondary sources, to average 32.42 mb/d. Separately, non-OPEC oil supply growth - mostly shale - in 2017 was revised fractionally lower to 0.77mmbpd.The non-OPEC supply growth estimation for 2017 has been revised downward by 0.04 mb/d since last month’s assessment to 0.77 mb/d y-o-y, to average 57.79 mb/d. While the oil supply growth estimation for the US, Canada, other OECD Europe and Russia improved, expected growth in Norway, UK, Indonesia, Argentina and Brazil has been adjusted down.The US remains the key driver of non-OPEC supply growth, adding 0.62 mb/d to non-OPEC production in 2017, supported by other countries such as; Canada with 0.32 mb/d, Brazil with 0.17 mb/d, Kazakhstan with 0.18 mb/d, Russia with 0.09 mb/d, Ghana with 0.07 mb/d and Congo with 0.04 mb/d.

    OPEC sees more oil supply from rivals, countering its cuts and Venezuelan woes (Reuters) - OPEC has raised its forecast for oil supply from non-member countries in 2018 as higher prices encourage U.S. shale drillers to pump more, offsetting an OPEC-led deal to clear a supply glut and a deepening plunge in Venezuelan production. In a monthly report on Thursday, the Organization of the Petroleum Exporting Countries said outside producers would boost supply by 1.15 million barrels per day (bpd) this year, up from 990,000 bpd expected previously. “Higher oil prices are bringing more supply to the market, particularly in North America and specifically tight oil,” OPEC said in the report, using another term for shale. OPEC, Russia and several other non-OPEC producers began to cut supply a year ago to get rid of a global glut of crude that had built up since 2014. They have extended the pact until the end of 2018. The OPEC forecast of higher rival supply could add to a debate about the effectiveness of keeping the curbs in place. A ministerial monitoring panel meets this weekend in Oman and is expected to discuss the eventual exit strategy from the deal. But the forecast was balanced by figures in the report showing OPEC’s compliance with the supply cuts remained high in December and a further sharp slide in Venezuelan oil output. Oil prices edged higher after the report was released to trade above $69 a barrel and later steadied. Prices are close to the highest since December 2014. In a further sign excess supply is easing, OPEC said inventories in developed economies declined by 16.6 million barrels in November to 2.933 billion barrels, 133 million above the five-year average. OPEC’s stated goal is to reduce stocks to the five-year average. 

    Speculation Grows That OPEC Will End Cuts Early - As oil trades near a three-year high and crude stockpiles fall rapidly, analysts are questioning whether the OPEC-led production cuts will last until the end of the year. As the producer group gears up for a meeting with its partners to review strategy in Muscat, Oman, this weekend, there are growing expectations that the deal will be phased out early. The "probability is growing" that the accord may conclude before the end of the year, said Harry Tchilinguirian, BNP Paribas SA’s head of commodity strategy. Discussions around an early exit are likely to emerge at the next OPEC meeting in June, he said. "If Brent is still trading around $60 a barrel and oil inventories are close enough to OPEC’s five-year average," the deal may be phased out informally by nations gradually weakening their compliance with production cuts, Tchilinguirian said. It would be "prudent" to expect OPEC members will start cheating given higher oil prices, said Energy Aspects Ltd.’s chief oil analyst Amrita Sen. Other analysts predict a more formalized unwinding of the cuts. "I don’t think the deal per se will end" as inventories near the five-year average, said Bjarne Schieldrop, chief commodity analyst at SEB AB. The Declaration of Cooperation -- the 2016 accord that first established the group of 24 oil producers-- will still stand, but be modified to allow for production cuts to gradually unwind from mid-2018, he said. 

    The OPEC Deal May End In June -- A couple of weeks ago, comments from the UAE’s energy minister spurred the oil price rally higher. What the minister said — or rather, hinted — was that the oil production cut deal that OPEC agreed to at the end of 2016 with Russia could continue beyond its December 2018 deadline. The rise, however, may have been too high for OPEC and Russia’s liking. In a market that runs on rumor and comments, prices were bound to jump higher after Suhail Al-Mazrouei’s comments and a string of bullish forecasts on oil demand. They are now apparently too high, and OPEC might be considering ending the deal at the June meeting of the so-called Vienna Club that includes Russia and the other countries that agreed to cap their oil production. A growing number of commodity analysts are predicting that this is how events will unfold. Citi’s Ed Morse, for example, told Bloomberg recently that OPEC and Russia have reason to “want to talk the price down” because they fear how U.S. shale will respond to Brent above $70. What’s more, Morse noted, U.S. shale is not the only threat for OPEC’s peace of mind: deepwater oil and Canadian oil sands can be just as dangerous at the right price level. Then there’s Russia, of course, which, as Morse says, is particularly concerned about high oil prices lifting the ruble — and Russia doesn’t want an expensive ruble, as it would diminish the competitiveness of its exports. As a result, the Russian central bank is currently on a dollar-buying spree to help keep the local currency cheap.  Morse is part of a growing company that also includes the commodity analysts of Societe Generale and JPMorgan. Deutsche Bank analyst Michael Hsueh said earlier this week that Brent hitting $70 would accelerate the process of devising an exit strategy.

    Saudi Wealth Fund Is Said to Weigh Bank Loans for Investments - Saudi Arabia’s sovereign wealth fund, which aims to become a $2 trillion investment giant, is considering borrowing from banks for the first time as it seeks investments in the kingdom and abroad, according to people familiar with the matter. The Public Investment Fund, or PIF, has held talks with local and international banks and could raise about $5 billion this year, some of the people said, asking not to be identified because the information is private. No final decisions on timing or size have been made and the PIF may instead turn to government financing, the people said. A spokesman for the PIF declined to comment.The fund is willing to borrow as it seeks to diversify the kingdom’s oil-dependent economy and boost returns from investments, Managing Director Yasir Al-Rumayyan said in a Bloomberg Television interview in October. Saudi Arabia is stepping up efforts to turn the PIF into a global giant by giving it ownership of state-owned oil company Saudi Aramco, which is preparing for what could be the world’s biggest initial public offering.  The sovereign fund has announced some large international deals, including a commitment to put $20 billion into a U.S. infrastructure fund managed by Blackstone Group LP, and as much as $45 billion in a technology investment fund managed by SoftBank Group Corp., as well as a $3.5 billion stake in Uber Technologies Inc. The PIF is also behind several large real estate developments in Saudi Arabia, including a new city called Neom that will be built on the Red Sea Coast, an entertainment city on the edge of Riyadh and another tourism project on the Red Sea. It has also finalized an accord to take over the management of Riyadh’s $10 billion unfinished financial hub as the government attempts to revive the project, people familiar with the matter said last year.

    Prince Alwaleed Moved To Highest Security Saudi Prison After Refusing To Pay $6 Billion For Freedom: Report -  -- Saudi Arabia's billionaire prince Alwaleed Bin Talal, has been carted off to Al Ha'ir prison, south of Riyadh, after refusing to pay  a reported $6 billion to Crown Prince Mohammed Bin Salman to secure his freedom, following a massive consolidation of power on November 4, 2017 in which over 300 princes, ministers and other elites were rounded up in an "anti-corruption" purge. Sources told the Middle East Montior  that nearly 60 detainees were transferred to the most high security prison in the Kingdom. The prisoners include Prince Al-Waleed Bin Talal as Prince Turki Bin Abdullah and a number of government officials who refused to make the large financial payments for their release.  Among those arrested on allegations of corruption is Prince Alwaleed Bin Talal, the Saudi King's nephew who is worth more than $17bn according to Forbes, and owns stakes in Twitter, Lyft and Citigroup. According to a Daily Mail source, the crown prince had lulled Alwaleed into a false sense of security, inviting him to a meeting at his Al Yamamah palace, then sent officers to arrest him the night before the meeting.'Suddenly at 2.45am all his guards were disarmed, the royal guards of MBS storm in,' said the source.'He's dragged from his own bedroom in his pajamas, handcuffed, put in the back of an SUV, and interrogated like a criminal.'They hung them upside down, just to send a message. Purged princes and the like were taken to the Riydah Ritz Carlton Hotel, where they have reportedly been allowed to buy their freedom by giving up their billions in oil wealth for their lives.

    Saudi Arabia Closes the World’s Ritziest Prison - The Ritz-Carlton in Riyadh is due to resume life as a five-star hotel next month, but the purge that turned it into the world’s most luxurious prison still carries risks for Saudi Arabia’s young leader.Crown Prince Mohammed bin Salman, 32, held relatives and scores of others from his anti-corruption sweep in the 492-room establishment since November. Some are still there, while others are thought to be abroad, under house arrest or banned from traveling. The Ritz website is now taking reservations from Feb. 14, signaling an end to one chapter of a campaign whose goal is to recoup as much as $100 billion of allegedly misappropriated money.The detentions are part of Prince Mohammed’s drive to transform Saudi society and the economy and cement his power. At the same time, they have strained ties within the royal family, once the pillar of Saudi stability, and raised questions over the increasingly authoritarian heir’s intentions amid the prospect of facing some new powerful enemies.“Prince Mohammed runs a risk that former detainees may seek to coalesce into small groups to undermine further reforms and his leadership,” said Theodore Karasik, senior adviser at Gulf State Analytics in Washington. “He will have created enemies with some royal family members despite their pledges of loyalty.”

    With Saudi princes dead, arrested, King Fahd's grandson flees kingdom to... Iran - A member of the Saudi royal family has reportedly fled to arch-rival Iran, hours after the death of his uncle Prince Abdul Aziz bin Fahd. A report by India today raises questions about the nature of Prince Turki’s departure from Saudi Arabia, as all of the country’s royals have been barred from travelling. #Saudi Prince Turki bin Mohamed, late King Fahd’s grandchild, fled to Iran seeking political asylum after arrest of his father in MBS’ purge — SaadAbedine (@SaadAbedine) November 7, 2017 One commentator on the region’s politics tweeted that asylum has already been granted:Source to @kann: Saudi Prince Turki Bin Mohammed Bin Fahd, grandson of #Saudi King Fahd (d. 2005), was granted asylum in Iran.— Mohamed Soltan (@soltanlife) November 6, 2017 There are rumours that Prince Abdulaziz bin Fahd, Prince Turki’s uncle and the youngest son of late King Fahd, died while resisting arrest by Saudi security forces. AlIthad News reported on the death of Prince Abdul Aziz but did not mention a cause of death. Other news outlets also covered his death:

    US military to maintain open-ended presence in Syria, Tillerson says - The US intends to maintain an open-ended military presence in Syria, not only to fight Isis and al-Qaida but also to provide a bulwark against Iranian influence, ensure the departure of the Assad regime and create conditions for the return of refugees, the secretary of state, Rex Tillerson, said on Wednesday.The new Syria policy, outlined by Tillerson in a speech at Stanford University, represents a significant expansion of US aims in the country, which theTrump administration had previously restricted to counter-terrorism throughout its first year in office.It had been unclear for some time how a strictly limited counter-terrorism role squared with Trump’s stated goal of containing Iranian influence, or how it would give the US clout at negotiations over Syria’s political future. Tillerson’s speech suggested that asRussia drew down its military presence, the US would expand its own. How far it is ready to risk troops and invest resources in the policy remains far from clear.Tillerson’s comments came as the number of internal refugees fleeing fighting in Idlib has more than doubled in the last week, to 212,000 people, in an escalating humanitarian crisis that officials have warned could spur a new migration wave.In his Stanford speech, Tillerson laid out five US goals in Syria: the defeat of Isis and al-Qaida, a UN-brokered resolution for Syria that involved Bashar al-Assad’s departure, a curb on Iran, conditions for the safe return of refugees, and the complete elimination of remaining chemical weapons.While the focus of US military effort thus far has been on Isis, Tillerson warned: “Al-Qaida is still a grave threat and is looking to reconstitute in new and powerful ways.

    Tillerson denies US plans to form Syria border force --US Secretary of State Rex Tillerson has said that Washington owed Turkey an explanation over reports that it was creating a 30,000-strong border force in northern Syria, adding that the issue has been "misportrayed"."That entire situation has been misportrayed, misdescribed, some people misspoke. We are not creating a border security force at all," Tillerson told reporters on his way back from giving a speech at Stanford University in California on Wednesday.According to media reports, Washington is working to establish the border security force with the involvement of Kurdish militias.Citing several other US officials, reports published earlier this week said that the US-led coalition fighting the Islamic State of Iraq and the Levant (ISIL, also known as ISIS) armed group would recruit around half of the new force from the Syrian Democratic Forces (SDF), an umbrella group of fighters dominated by the Kurdish People's Protection Units (YPG) and considered by Ankara to be a "terrorist" group.  The Turkish government said that it would carry out a military operation into Kurdish-held areas in northern Syria if Washington goes ahead with the reported plan.Furthermore, Turkish Foreign Minister Mevlut Cavusoglu said relations between Turkey and the US would be "irreversibly harmed" if Washington forms the force in question, after meeting Tillerson in Vancouver on Tuesday on the sidelines of a gathering to discuss sanctions against North Korea.Tillerson said in California he had told Cavusoglu that the US' intention was to train local forces in the fight against remaining ISIL fighters in Syria."We have ISIS still attacking in parts of northwest Syria and along the Euphrates valley, so this is just more training and trying to block ISIS from their escape routes," said Tillerson. "We understand why they reacted the way they did," he said, amid Turkish preparations to launch an operation against the YPG.

    Syria Kurds vow to cleanse enclave from Turkish ‘scourges’ - The head of a powerful Kurdish militia hit back on Tuesday at Turkish threats to attack its forces in northern Syria, pledging to "cleanse" the area of Ankara's "scourges". Turkish President Recep Tayyip Erdogan on Tuesday vowed to soon launch an operation against towns in Syria held by the Kurdish People's Protection Units (YPG), which Ankara considers "terrorists". The YPG, a key US ally in the fight against jihadists, controls key urban hubs in northern Syria including the towns of Afrin and Manbij. In an interview published Tuesday with Kurdish news agency ANF, YPG chief Sipan Hemo said his forces stood "ready" to defend those towns against a Turkish assault. "Our forces will be able to cleanse the area from Erdogan's scourges, just as we were able to cleanse it from Daesh," Hemo said, using the Arabic acronym for the Islamic State group. "This is what the war in Afrin will be like," he said. With US backing, the YPG has cleared swathes of territory in northern and eastern Syria from IS and has established semi-autonomous rule in those areas. And at the weekend, the US-led coalition fighting IS said it was working to create a 30,000-strong border security force in northern Syria that would deploy along the Turkish frontier. Ankara immediately objected to such a move out of fear the new force would be comprised of the YPG, which it accuses of being a branch of the outlawed Kurdistan Workers' Party (PKK) that has waged an insurgency in Turkey since 1984. Erdogan has long threatened an operation against the YPG's enclave in Afrin but has stepped up his threats in recent days. 

    Turkey Notifies NATO Of Imminent Massive Invasion Of Syria To Fight Kurds -  Turkey is poised for an imminent massive ground invasion of Northern Syria to quash Kurdish militia groups currently holding Afrin near the Turkish border. Multiple regional outlets have reported a build-up of forces that could constitute the largest external intervening force thus far in the entirety of the Syrian war. According to Middle East based Al-Sura News, Turkey's military build-up currently underway includes special forces troops, Army units, Turkish-backed Syrian Rebels and Turkey's air force. The Kurdish YPG/J (People's Protection Units) has held Afrin since the Syrian government withdrew from the area in 2012, which constitutes the western-most part of the self-declared Rojava autonomous Kurdish zone. Turkey considers it a "terrorist" enclave as it sees Syrian Kurdish factions as an extension of the PKK, while the US has claimed not to be active in supporting Kurdish operations in Afrin, which lies a mere 40 kilometers from Aleppo where the Syrian Army continues to advance through the Aleppo countryside and into Idlib province.Over the weekend President Recep Tayyip Erdogan slammed recent US efforts to ramp up support for the Kurdish dominated Syrian Democratic Forces (SDF), saying during a speech in Ankara, “A country we call an ally is insisting on forming a terror army on our borders." He framed US support to Syrian Kurds as undermining Turkey's security, adding, “What can that terror army target but Turkey? Our mission is to strangle it before it’s even born."Meanwhile a top Turkish general told a meeting of NATO military commanders, "We cannot and will not allow support and arming of the YPG terror group under the name of an operational partner. We hope this mistake will be corrected in the shortest time."Regional outlets Al Jazeera and Al Masdar News have confirmed that the large Turkish convoy has entered northwest Syria and that sporadic fighting against Kurdish forces is already underway. Notably the air force is said to be mobilized - a significant factor as Turkish ground forces, including its proxy rebel forces making up its "Euphrates Shield Operation", have had little success in the past dislodging Kurdish fighters without air support.

    Syria Vows To Shoot Down Turkish Jets As Erdogan Orders Putin "Do Not Oppose" Assault -  According to the Associated Press, this morning Syria said it would shoot down any Turkish jets carrying out attacks inside Syria. This comes as preparations continue for an imminent large-scale Turkish attack of Kurdish militia groups currently holding Afrin near the Turkish border. Multiple regional outlets have confirmed a build-up of forces that could constitute the largest external intervening force thus far in the entirety of the Syrian war, including special forces troops, Army units, Turkish-backed Syrian rebels and Turkey's air force. In response to Turkey's President Recep Tayyip Erdoğan vowing military action to "destroy all terror nests" in Syria - a reference to the US-backed YPG (which makes up the core of the SDF) which holds vast territory along Turkey's border spanning into northeast Syria - the Syrian Deputy Foreign Minister Fayssal Mekdad told reporters Thursday that Syrian defense systems have regained full operational power and stand ready to destroy Turkish air targets in Syrian airspace should Afrin be attacked. Mekdad also stated that Damascus would consider any Turkish attack on Afrin an act of aggression. Sporadic fighting and shelling has already occurred according to reports from the region. Though Turkish shelling of Kurdish positions along the border is nothing new in the conflict, should Turkey mobilize its air force in support of ground forces this would mark a dramatic escalation, especially given that both Russia and the US operate over Northern Syria, with Russia controlling the airspace over Afrin Canton and Idlib. Whether the operation against Syrian Kurds moves forward or not into a full scale Turkish assault by land and air depends in large part on Russia, which has administered 'deconfliction' zones in the Afrin area, and has sponsored trilateral talks with Turkey and Iran which seeks cooperation among the three powers to wind down the war in Syria. Russia is also widely reported to have long had military advisors on the ground in Afrin, which have in the past helped coordinate the fight against ISIS.

    Russians asking for help after swarming drone attacks | Asia Times: Russia is seeking international assistance in its quest to determine the source of swarming drone attacks on two of its military bases in Syria. The twin strikes represent the first time swarming drones have been used by terrorists against hardened targets, and judging from the excitement on the Russian side, they are clearly worried and upset. While denying that they lost any equipment in the strikes, it is hard to explain otherwise the level of alarm in Russia’s military.The Russian General Staff held a briefing in Moscow to show off some of the  home-made drones that were used to attack Hmeimim Air Base in Latakia, Syria and the important Russian naval base in Tartus.The drones themselves are simple.  They use a small commercial gasoline two stroke engine that might be found in a weed whacker or used to power a bicycle. Structurally the drones are made out of wooden spars and styrofoam “boards” that are tied into the wooden structure with glue and plastic wrap.The drone itself is launched from some sort of simple rail platform and guided by two piece of wood on the drone with cutouts to protect the drone’s aerodynamic quality.  The drones carry either eight or ten bomblets, each stuffed with the explosive PETN (pentaerythritol tetranitrate), a very energetic explosive that has been favored by terrorists such as the shoe bomber, Richard Reid.  PETN needs to be ignited by an explosive fuse, and the bomblets all have fuses that explode on contact. The Russians have pointed to the Ukraine as a possible source of PETN for the bombs. But there are many other sources and PETN and other explosives such as RDX are widely available on the black market.

    Russian Military Pulls Out Of Syrian Kurdish Town As Turkey Initiates "Massive Cross-Border Attack" -Turkey's defense minister has confirmed the Turkish military has begun cross-border shelling of the Syrian Kurdish enclave of Afrin in what he further describes as the "de facto start" of the operation in order to destroy - in President Recep Tayyip Erdoğan's words - Kurdish "terror nests" - and which has been dubbed previously by Turkey as a 'massive cross-border attack.' Crucially, the Turkish state-run news agency Anadoul confirmed that Russian military personnel have started pulling out of Afrin ahead of Turkey's "expected" and imminent cross-border military operation. Russia has administered 'deconfliction' zones in the Afrin area while controlling airspace overhead, and has sponsored trilateral talks with Turkey and Iran which seeks cooperation among the three powers to wind down the war in Syria. The Russian military has long had "military advisors" on the ground in Afrin, which have in the past helped coordinate the fight against ISIS. As we explained previously, the question of whether or not the large-scale Turkish assault on the Syrian Kurds moves forward or not depends in large part on Russia. . As Reuters reported, "Foreign Minister Mevlut Cavusoglu also told broadcaster CNN Turk that Turkey will coordinate with Russia and Iran on an air operation in Afrin." However, according to many observers, the key element to a successful Turkish operation will be airpower as previously Turkish-backed forces making up "Euphrates Shield Operation" have had little success in the past dislodging Kurdish fighters without air support. On Thursday Syria said it will shoot down any Turkish jets carrying out attacks inside Syria.

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