Sunday, October 7, 2018

oil prices at a 4 year high; US crude supplies jump most in 19 months, natural gas supplies increase most since May 11th

oil prices rose for the 4th week in a row in trading that was largely focused on the US sanctions imposed on Iranian oil and the subsequent ability or inability of other oil producers to replace their exports...after rising 3.5% to $73.25 a barrel on the threat to Iran last week, the benchmark US crude contracts for November delivery rose $2.05 on Monday to $75.30 a barrel, the highest level since November 2014, as North American oil demand was secured by the resolution of the US, Canada and Mexico trade dispute while Chinese cuts of Iranian oil heightened fears of a global supply crunch...after trading as high as $75.91 on Tuesday, oil prices slipped back to close 7 cents lower at $75.23 a barrel ahead of data releases expected to show an increase in U.S. crude inventories...however, even after the reported inventory increases, US crude rose 1.6% to 4-year high of $76.41 on Wednesday, despite the biggest weekly jump in U.S. crude supplies in more than a year...however, with international crude at its most technically overbought level since February 2012 and US crude the most overbought since January*, profit taking set in and oil prices tumbled $2.08 to $74.33 a barrel on Thursday, after news broke on an agreement between Saudi Arabia and Russia to increase production to replace Iranian production as US sanctions took effect...oil prices then steadied on Friday, with US crude prices, supported by US jobs data, holding onto a one cent increase at $74.34 a barrel, while the global benchmark Brent crude for December delivery fell 42 cents to settle at $84.16 a barrel, still up 1.4% on the week, while US crude ended with a gain of 1.3% for the week...

* (note that speculators had accumulated long positions, or bets on a further increase in prices, amounting to almost 1.2 billion barrels of oil...that is more than 100 times daily US oil production of 11.1 million barrels per day)

natural gas prices were also higher this week, driven by abnormal weather patterns and the now widespread understanding that we would be heading into winter with our natural gas supplies at or near a 15 year low...natural gas prices were initially 8.6 cents higher at $3.094 per mmBTU on Monday, as shifting weather forecasts projected to leave cooling demand nearly unchanged through early October, which would leave current storage deficits relatively intact through the so-called "shoulder season", or that period each spring and fall when there is usually neither large demand for heating nor for cooling...that prospect carried prices 7.2 cents higher on Tuesday and 6.4 cents more on Wednesday, until the EIA reported a larger than expected injection of natural gas into storage which sent prices tumbling 6.5 cents on Thursday...another smaller decline of 2.2 cents on Friday then left natural gas prices at $3.143 per mmBTU at the end of trading for the week, still 4.5% higher than last Friday's close..

this week's natural gas storage report from the EIA for week ending September 28th indicated that natural gas in storage in the US rose by 98 billion cubic feet to 2,866 billion cubic feet during that week, which left our gas supplies 638 billion cubic feet, or 18.2% below the 3,502 billion cubic feet that were in storage on September 29th of last year, and 607 billion cubic feet, or 17.5% below the five-year average of 3,473 billion cubic feet of natural gas that are typically in storage after the fourth week of September....this week's 98 billion cubic feet increase in natural gas supplies was more than double the 46 billion cubic feet that was added to natural gas storage last week, was somewhat more than the median forecast 88 billion cubic feet from a Reuters poll of natural gas traders, and also was well above the 84 billion cubic foot average of natural gas that have typically been added to storage during the fourth week of September in recent years, but was still only the 3rd above average inventory increase in the past thirteen weeks...natural gas storage facilities in the Midwest saw a 36 billion cubic feet increase this week, reducing their supply deficit to 14.1% below normal, while supplies in the East increased by 34 billion cubic feet and are now only 10.0% below normal for this time of year...meanwhile, the South Central region saw a 22 billion cubic feet increase in their supplies, as their natural gas storage deficit decreased to 25.4% below their five-year average, while just 3 billion cubic feet cubic feet of gas were added to storage in the Pacific region, where natural gas supplies remain 21.8% below normal for this time of year....

since we have just seen the amount of natural gas added to storage in the continental US swing from 46 billion cubic feet in one week to 98 billion cubic feet in the next, it seems it would be an appropriate time to look at some pictures captured from the EIA's natural gas storage dashboard which will help show how that could happen...we will start with a US map showing how much the temperatures in each geographical area of the 48 states varied from normal during the week ending September 20:

September 29 2018 temperature variance for week ending Sept 20

again, this map comes from the EIA's natural gas storage dashboard, an EIA website with dozens of interactive graphics tracking various facets and factors influencing US natural gas supplies, which is updated with the most recent data on Thursday of each week...from the legend underneath this map, we can see that most of the US saw temperatures above normal during the cited week, with a broad swath from the central Rockies through the deep South and Great Lakes all the way east to Maine showing temperatures 5 to 9 degrees above normal...for the middle week in September, that means that most of the country saw cooling demand closer to what one would expect in late August than in mid-September, and hence with the associated utility burn, less natural gas than normal was left to be added to winter supplies...

the next map shows how much the temperatures in each area varied from normal during the week ending September 27th:

October 6 2018 temperature variance for week ending Sept 27

here we see that only a handful of states saw temperatures as much as 5 degrees greater than normal during the week ending September 27th, with most of the country seeing temperatures between 4 degrees below normal and 4 degrees above normal...as you know, normal for the last week of September doesnt involve much heating or cooling for most of the country, and hence there was more natural gas left to be added to winter supplies..

next we'll include a map showing how much temperatures changed between the week ending September 20 and the week ending September 27 across the various regions of the US:

October 4 2018 temperature change week to September 27

as you can see, most of the country except for the already cooler Pacific coast states was cooler during the week ending September 27th than the prior week, with almost half the country seeing temperatures 5 to 9 degrees cooler, with the broad Midwest section and the Northeast seeing temperatures 10 to 14 degrees cooler, and with parts of a few central states seeing temperatures 15 to 19 degrees cooler...hence, we went from a week of summer like air conditioning demand to almost none at all...that change, then, is what accounted for the swing from 46 billion cubic feet of surplus gas during the week ending September 21st to 98 billion cubic feet of surplus during the week ending September 28th..

lastly, since all the maps we've shown so far only show a relative change in temperature, we'll include one that shows the actual temperatures on September 24th across the lower 48 states:

October 6 2018 actual temperature on Sept 24

the above map was taken from the interactive daily animation feature on the national temperature graphic on the EIA's natural gas storage dashboard, which i paused on September 24th so as to take a picture...as the heading indicates, it shows the average daily temperature for each location on the map, as indicated by the legend below the map...the EIA computes the average daily temperature by adding the high temperature for the day to the low for the day and dividing it by 2; thus, if the afternoon high was 75 degrees at your location while the nighttime low was 65, your average for that date shown above would be 70 degrees (the national weather service also reports daily averages taking temperatures each hour)...of course, this is only one day from the two week period covered, so if you want to see the rest, go to the EIA's natural gas storage dashboard and run the animation yourself...

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering the week ending September 28th, showed that because of much lower oil exports coupled with higher oil imports, we were able to add oil to our commercial crude supplies for the second time in seven weeks... our imports of crude oil rosel by an average of 163,000 barrels per day to an average of 7,965,000 barrels per day, after falling by an average of 222,000 barrels per day the prior week, while our exports of crude oil fell by an average of 917,000 barrels per day to an average of 1,723,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 6,242,000 barrels of per day during the week ending September 28th, 1,080,000 more barrels per day than the net of our imports minus exports during the prior week...over the same period, field production of crude oil from US wells  was reportedly unchanged at 11,100,000 barrels per day, which means that our daily supply of oil from the net of our trade in oil and from wells totaled an average of 17,362,000 barrels per day during the reporting week... 

meanwhile, US oil refineries were using 16,591,000 barrels of crude per day during the week ending September 28th, 77,000 barrels per day more than the amount of oil they used during the prior week, while over the same period 1,139,000 barrels of oil per day were reportedly being added to the oil that's in storage in the US....hence, this week's crude oil figures from the EIA would seem to indicate that our total working supply of oil from net imports and from oilfield production was 388,000 fewer barrels per day than what refineries reported they used during the week plus what oil was added to storage....to account for that disparity between the supply of oil and the consumption of it, the EIA needed to insert a (+388,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a fudge factor that is labeled in their footnotes as "unaccounted for crude oil"...(for more on how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, see this EIA explainer).... 

further details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports rose to an average of 7,846,000 barrels per day, now 10.2% more than the 7,122,000 barrel per day average that we were importing over the same four-week period last year....the 1,139,000 barrel per day increase in our total crude inventories was all added to our commercially available stocks of crude oil, while the amount of oil in our Strategic Petroleum Reserve still remained unchanged, even as a sale of 11 million barrels from those reserves to Exxon et al closed four weeks ago....this week's crude oil production was reported as being unchanged at 11,100,000 barrels per day because the rounded output from wells in the lower 48 states remained at 10,600,000 barrels per day, so the 10,000 barrels per day increase in oil output from Alaska was not enough to raise the national total, which is now being rounded to the nearest 100,000 barrels per day....last year's US crude oil production for the week ending September 29th was at 9,561,000 barrels per day, so this week's rounded oil production figure was 16.1% above that of a year ago, and 31.7% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...

meanwhile, US oil refineries were operating at 90.4% of their capacity in using 16,591,000 barrels of crude per day during the week ending September 28th, unchanged from the prior week, thus maintaining a refinery utilization rate higher than in any previous September over the past 14 years....the 16,591,000 barrels per day of oil that were refined this week were again at a seasonal high, for the 17th out of the past 18 weeks, 3.5% higher than the 16,029,000 barrels of crude per day that were processed during the week ending September 29th 2017, when US refineries were operating at 88.1% of capacity....

with the increase in the amount of oil being refined this week, gasoline output from our refineries was likewise higher, increasing by 118,000 barrels per day to 9,950,000 barrels per day during the week ending September 28th, after our refineries' gasoline output had decreased by 432,000 barrels per day during the week ending September 21st...as a result, our gasoline production during the week was 1.0% higher than the 9,853,000 barrels of gasoline that were being produced daily during the same week last year...meanwhile, our refineries' production of distillate fuels (diesel fuel and heat oil) increased by 34,000 barrels per day to 5,029,000 barrels per day, after that output had fallen by 462,000 barrels per day the prior week....even so, this week's distillates production was still 2.0% higher than the 4,929,000 barrels of distillates per day that were being produced during the week ending September 29th 2017, as refineries continue to catch up with this summer's distillates shortfall.... 

even with the increase in our gasoline production, our supply of gasoline in storage at the end of the week still fell by 459,000 barrels to 235,680,000 barrels by September 28th, the 18th decrease in the past 32 weeks, encompassing the spring and summer periods of higher consumption when gasoline supplies usually trend lower....our supplies of gasoline fell this week primarily because the amount of gasoline supplied to US markets rose by 115,000 barrels per day to 9,102,000 barrels per day, after falling by 547,000 barrels per day the prior week, and because our imports of gasoline fell by 150,000 barrels per day to 713,000 barrels per day, while our exports of gasoline fell by 145,000 barrels per day to 816,000 barrels per day....but this week's decrease notwithstanding, our gasoline inventories are again at a seasonal high, 7.4% higher than last September 29th's level of 218,936,000 barrels, and roughly 8.8% above the 10 year average of our gasoline supplies for this time of the year...

meanwhile, even with a small increase in our distillates production, our supplies of distillate fuels were somewhat lower, decreasing by 1,750,000 barrels to 136,131,000 barrels during the week ending September 28th, their second decrease after 8 weeks of increases...our distillates supplies decreased even though the amount of distillates supplied to US markets, a proxy for our domestic demand, fell by 414,000 barrels per day to 3,877,000 barrels per day, because our exports of distillates rose by 416,000 barrels per day to 1,564,000 barrels per day, while our imports of distillates rose by 38,000 barrels per day to 162,000 barrels per day....even after this week's decrease, however, our distillate supplies were fractionally higher than the 135,439,000 barrels that we had stored on September 29th, 2017, while they remained roughly 4.9% below the 10 year average of distillates stocks for this time of the year...     

finally, with the drop in our oil exports, our commercial supplies of crude oil increased for the 18th time in 2018 and by the most since March 2017, as they jumped by 7,975,000 barrels during the week, from 395,989,000 barrels on September 21st 403,964,000 barrels on September 28th...that increase brought our crude oil inventories back up to the five-year average of crude oil supplies for this time of year, and to a level roughly 19.9% above the 10 year average of crude oil stocks for the end of September, because it wasn't early 2015 that our oil inventories first rose above 400 million barrels...but since our crude oil inventories had been falling through most of the past year and a half, our oil supplies as of September 28th were still 13.1% below the 470,986,000 barrels of oil we had stored on September 29th of 2017, 13,9% below the 469,108,000 barrels of oil that we had in storage on September 30th of 2016, and 5.8% below the 429,028,000 barrels of oil we had in storage on October 2nd of 2015...   

This Week's Rig Count

US well drilling rig activity slowed a bit for the second time in 3 weeks during the week ending October 5th, and remains slower than it was at the end of May, as the steady increases in drilling for oil we saw with higher oil prices during the first part of this year have stalled, with the backlog of uncompleted oil wells increasing monthly while oil futures' prices remained in backwardation....Baker Hughes reported that the total count of rotary rigs running in the US decreased by 2 rigs to 1052 rigs over the week ending on Friday, which was still 116 more rigs than the 936 rigs that were in use as of the October 6th report of 2017, but was down from the shale era high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began their attempt to flood the global oil market...  

the count of rigs drilling for oil was down by two rigs to 861 rigs this week, the third decrease in a row, which was still 113 more oil rigs than were running a year ago, while it was well below the recent high of 1609 rigs that were drilling for oil on October 10, 2014...at the same time, the number of drilling rigs targeting natural gas formations was unchanged at 189 rigs, which was two more than the 187 natural gas rigs that were drilling a year ago, but way down from the modern high of 1,606 natural gas rigs that were deployed on August 29th, 2008...in addition, two rigs that are categorized as "miscellaneous" continue to drill this week, up from the one such "miscellaneous" rig that was deployed a year ago...

offshore drilling in the Gulf of Mexico increased by 4 rigs to 22 rigs, now the same number of Gulf of Mexico rigs that were active a year ago...in addition, another rig continues to drill offshore from Alaska this week, so the total national offshore count has risen to 23 rigs, up from last year's total of 22 offshore rigs, as a year ago there was no offshore drilling other than in the Gulf...meanwhile, 2 of the rigs that had been drilling through bodies of water in southern Louisiana were shut down this week, cutting the inland waters rig count down to three, still up from the single rig drilling through inland waters a year ago...

the count of active horizontal drilling rigs was down by 3 rigs to 919 horizontal rigs this week, which was still 127 more horizontal rigs than the 792 horizontal rigs that were in use in the US on October 6th of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...in addition, the directional rig count was also down by 3 rigs to 66 directional rigs this week, which was also down from the 79 directional rigs that were in use during the same week of last year....on the other hand, the vertical rig count was up by 4 rigs to 67 vertical rigs this week, which was also up from the 65 vertical rigs that were operating on October 6th 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 basins...in both tables, the first column shows the active rig count as of October 5th, the second column shows the change in the number of working rigs between last week's count (September 28th) and this week's (October 5th) count, the third column shows last week's September 28th active rig count, the 4th column shows the change between the number of rigs running on Friday and those on the equivalent weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was on Friday the 6th of October, 2017...    

October 5 2018 rig count summary

despite the 5 rig drop in Texas and the overall decrease in the Permian, drilling in the core Permian Texas Oil District 8, indicated as the Delaware basin, actually increased by 3 rigs to 330 rigs this week, as 6 Midland basin rigs in Texas Oil District 7C were shut down at the same time...since the overall Permian rig count was only down 1 rig, that would suggest a there was 2 rig increase in the Permian Delaware basin on the New Mexico side of the state line...the 3 rig increase in the Mississippian Lime seems to include one rig in Kansas and two rigs in Oklahoma, with another Oklahoma rig increase offsetting the Cana Woodford decrease not shown...natural gas rigs, meanwhile, netted no change, because the increase in Pennsylvania's Marcellus was offset by the shutdown of a natural gas rig in the Eagle Ford of south Texas, where 9 natural gas rigs and 69 oil rigs continue to drill...

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FirstEnergy Solutions can retire 4,004 MW of fossil generation without reliability impact: PJM -- Retirement of FirstEnergy Solutions' 4,004 MW of coal and diesel generating units in Ohio and Pennsylvania by June 2021 and June 2022 will not adversely impact reliability, PJM Interconnection said Monday in revealing the results of a new study.  PJM completed its 30-day reliability analysis of the units Friday, according to an emailed statement. While the report is not public, it will be discussed at an October 11 Transmission Expansion Advisory Committee meeting and the presentation slides will be posted to the grid operator's website October 8, spokesman Jeff Shields confirmed in an email Monday."The planned deactivations can proceed as scheduled without compromising reliability in the PJM transmission grid, according to the study," the statement said. "Any potential reliability impacts will be addressed by a combination of already planned baseline transmission upgrades and the completion of new baseline upgrades."Akron, Ohio-based FES, formerly a subsidiary of FirstEnergy, has said it will continue normal operations at the facilities until the announced retirement dates. FES announced the power-plant retirements in an August 29 statement.In March, FES said it would deactivate three nuclear power plants with combined capacity of 4,001 MW between May 2020 and October 2021, which brings the total potential deactivations to roughly 8,000 MW of coal-fired, oil-fired and nuclear generation.On March 29, FES sent a letter asking Energy Secretary Rick Perry to issue an emergency order directing PJM to take steps to forestall nuclear and coal-fired retirements. Two days later, FES and FENOC, the FirstEnergy Nuclear Operating Company, and six other subsidiaries filed for bankruptcy. The Trump administration is considering policy action to prevent the retirement of coal and nuclear plants that have been challenged by historically low wholesale power prices pulled down by abundant low-priced natural gas. These market dynamics have made it more economical over the past few years in multiple US markets to run natural gas-fired plants and other power generation resources than coal oil or nuclear plants.

Four Permits Issued in Ohio's Utica – The Ohio Department of Natural Resources issued four permits for horizontal wells in eastern Ohio’s Utica shale during  the week ended Sept. 22, the agency reported. Eclipse Resources obtained three permits for horizontal wells in Monroe County, while XTO Energy secured a single permit for a new well in Belmont County, according to ODNR. There were 18 active oil and gas rigs operating in the Utica during the week, ODNR reported. As of Sept. 22, ODNR has issued 2,889 permits in Ohio’s Utica and 2,421 of those wells are drilled. Of that number, 2,205 wells are in production. There were no new permits issued in the northern tier of the Utica, which encompasses Mahoning, Trumbull and Columbiana counties. Nor were there new permits issued to energy companies in neighboring Lawrence and Mercer counties in western Pennsylvania, according to the Pennsylvania Department of Environmental Protection.

Ohio shale gas production spikes as driller Ascent pushes expansion - Utica Shale gas from three counties and five producers led Ohio's 50% year-on-year increase in production to 6.4 Bcf/d in the second quarter.The three counties -- Jefferson, Monroe and Belmont -- all directly across the Ohio River from West Virginia, accounted for 75% of the total second-quarter production reported to the Ohio Department of Natural Resources by Wednesday. Likewise, the state's top five producers, led by Ascent Resources, accounted for 75% of the state's shale gas production.Jefferson County wells, which tripled production from the 2017 second quarter, are split almost exactly in half between two drillers, Ascent and Chesapeake Energy. Ascent was formed around a core of the same executives who pioneered the Utica play for Chesapeake and is now backed by private equity investors First Reserve Management and Energy & Minerals Group.  Ascent more than doubled production in a year and continued to widen its lead over rival Gulfport Energy as Ohio's top Utica Shale producer by volume. The company looks to expand in the play, having struck deals to buy $1.5 billion of Utica wells and leases from Hess and CNX Resources as the second quarter was ending.  Gulfport, the state's previous production leader, increased production 17% compared with the same period of 2017. Gulfport is in the process of milking its Utica dry gas operations, which do not require much new spending, for cash to fund what it says are higher-margin oily wells in the Woodford Shale of Oklahoma's SCOOP play.Gulfport is cutting back from two drilling rigs to one in the Utica after operating as many as six rigs in Ohio and will turn its attention to completing the 50 to 60 Utica wells it has drilled but not yet fracked and placed online."At current crude oil and natural gas prices, the SCOOP offers higher returns (71% for Woodford wet gas) than the Utica (57% Utica dry gas east) and commands a higher allocation of capital,"   Judging by the number of drilling permits pulled by Ohio's producers, the three river counties can expect a mild slackening of activity as drillers start to chase wetter wells with higher proportions on NGLs in interior counties such as Harrison and Guernsey as gas prices stay flat and NGL prices increase.

ODNR Issues 14 Permits in Utica Shale – The Ohio Department of Natural Resources last week issued 14 new permits for horizontal wells in eastern Ohio’s Utica shale to two energy companies. Ascent Resources, fast becoming the most aggressive oil and gas exploration company in the Utica, secured 10 of the 14 new permits, according to the latest update from ODNR dated Sept. 29. Seven of the permits are for wells in Jefferson County, while three are targeted for Belmont County, according to the agency. ODNR approved four permits for Triad Hunter LLC, which plans to drill new wells in Monroe County. The rig count in the Utica remained unchanged at 18 from the previous week. As of Sept. 29, ODNR had issued 2,892 permits in the Utica, of which 2,420 are drilled and 2,029 are in production. There were no new well permits issued in Mahoning, Trumbull or Columbiana counties during the week. Nor were there new permits issued in neighboring Lawrence and Mercer counties in western Pennsylvania, according to the Pennsylvania Department of Environmental Protection.

Organizers make last-ditch effort to get anti-fracking initiative on ballot - The Columbus Dispatch - The Ohio Supreme Court is being asked to reconsider whether a proposal to ban oil and natural gas extraction and waste disposal in Columbus should go on the Nov. 6 ballot.Last month, the Franklin County Board of Elections denied the environmental group Columbus Community Bill of Rights' effort to get the measure on the ballot, questioning its legality. The group filed a complaint with the Ohio Supreme Court, which ruled with the Board of Elections."(The Board of Elections members) are limited to counting signatures and making sure the forms are filled out right. They're not allowed to consider the substance of the proposal," said Terry Lodge, a Toledo-based attorney who is representing the Community Environmental Legal Defense Fund.  Last week, in a last-ditch effort, the group filed its motion for reconsideration with the state Supreme Court."They're looking for every reason to keep us off the ballot. This is our only recourse," said Carolyn Harding, a co-organizer for Columbus Community Bill of Rights.Meanwhile, the clock is ticking. Military and overseas absentee voting began Sept. 22. Early in-person voting and absentee voting will begin Oct. 10. With each passing day, there’s less time to launch a public-awareness campaign about the issue, Lodge said."The group is sort of in suspended animation," he said. "They don’t know whether to campaign or put up signs or what."The proposed ballot initiative would make it illegal to drill for oil and natural gas in Columbus, as well as store or dump drilling waste in the city or transport waste across the city. A "bill of rights" also would assert that residents should have clean water, air and soil that are free from fracking waste in central Ohio. The Ohio Department of Natural Resources regulates oil and natural gas exploration and operation at the state level.The Ohio Supreme Court can uphold its initial ruling or decide to place the measure on the ballot, but there’s no timeline for that to happen. If history is any indication, the court could rule in favor of the group, but just days shy of Election Day:

'Regulatory issues’ delay opening of Sunoco’s Mariner East 2 pipeline - The Mariner East 2 pipeline, previously scheduled to be in operation by the end of September, is delayed again.Sunoco said it is still working to overcome “regulatory issues.” The company missed its own target of starting to operate the troubled natural gas liquids pipeline by the end of September.“ME2 is not in service at this time due to regulatory issues we continue to work through. These issues have slowed our construction in a few areas along the route. We will put the line in service once it is mechanically complete,” Vicki Granado, a spokeswoman for Sunoco’s parent, Energy Transfer Partners said in a statement.Granado did not specify the issues, but Nils Hagen-Frederiksen, a spokesman for Pennsylvania’s Public Utility Commission, said there are “numerous ongoing matters” regarding the project that are before the PUC and have yet to be resolved. They are:

  • A PUC injunction that blocks construction at two sites in Chester County’s West Whiteland Township;
  • A complaint to the PUC by state Sen. Andy Dinniman (D-Chester) and others, seeking to stop construction in West Whiteland;
  • An investigation into the June spill of 33,000 gallons of gasoline into Darby Creek near Philadelphia from an existing ETP pipeline that the company plans to use temporarily as part of ME2 while the new pipeline is being completed;
  • An investigation into a strike on a section of ME2 by a water contractor at Middletown, Delaware County, in May;
  • A joint federal-state investigation into “allegations concerning weld inspections.”

In late August, the PUC said it was looking into reports of “improper” weld inspections. At the federal level, the Pipeline and Hazardous Material Safety Administration said it too was investigating concerns about welds, but said it was focused on how weld x-rays had been taken rather than on the welds themselves.

Zinke talks LNG exports, pipeline constraints, offshore wind in Pa. visit  - Interior Secretary Ryan Zinke stopped in Pittsburgh on Friday to say that natural gas from places like Pennsylvania plays a key role in helping the United States deal with foreign adversaries. If an energy-rich nation like Russia or Iran were to act aggressively toward the United States, he said having an abundance of natural gas would help counter that move. “We can make sure their energy does not go to markets if we need to, and place great economic leverage,” he said. The U.S. can do that because it’s the world’s largest producer of oil and natural gas, he said. Zinke said he foresees the United States helping supply places like Japan and South Korea that rely on energy imports. “I think the big gun is probably liquid natural gas because the market overseas is liquid natural gas, and the U.S. has a lot of it,” he said. Liquefied natural gas terminals such as Maryland’s Cove Point recently began shipping Marcellus Shale gas to Asian nations. The CEO of pipeline developer Williams, who also spoke at the conference, said Pennsylvania continues to be constrained by a lack of pipelines that can carry gas out of the state. “The problem is you’ve got to get it where there is new market,” Alan Armstrong said. “Most of the new market is developing in the southeast states and in the Gulf Coast.” Work on several new liquefied natural gas export terminals is underway in Texas and Georgia.  The company ran into an obstacle constructing its Constitution Pipeline, which would carry Marcellus Shale gas north out of Pennsylvania. New York denied the project a key permit in 2016.  Williams challenged that decision, but the U.S. Supreme Court this year opted to leave in place a lower court ruling that sided with New York. Zinke added that other states have blocked energy-related infrastructure projects, including Washington, which has held up proposals to build a coal export and an oil-by-rail facility. “We’re going to have to have a discussion on whether a state has the right to diminish the economic livelihood of another state, of an adjacent state,” he said.

After the gas explosions, a community looks for alternatives to natural gas -  Nearly 9,000 households in eastern Massachusetts have had to make do without natural gas since mid-September, when an aging natural gas pipeline failed and set off a series of explosions and fires across the cities of Lawrence, Andover and North Andover.Residents who relied on gas to heat their homes and cook their food won't have service again until mid-November at the earliest, according to Columbia Gas of Massachusetts. The company has 48 miles of pipeline to replace, and industry experts question whether it can meet even that timeline.Environmental advocates say it's time to completely rethink the communities' energy systems. They are calling for a "green new deal" that would shift thousands of homes off natural gas and onto electric heating.Columbia Gas has offered to reimburse "reasonable costs" for residents who lost gas service and want to permanently shift to another heating source. Some area residents, rocked by damage to dozens of homes and the death of one person from the gas explosions, have expressed concerns about ever returning to natural gas.But environmentalists will have to work quickly. Columbia's offer to pay residents to cut ties with natural gas could also result in households moving backward—to high-polluting fuel oil. "The choice is open to the customer whether they want to go back to the 19th century or go into the 21st century,"

Orphan Wells: States Wrestle With Soaring Costs For Oil & Gas Industry Mess - On a recent rainy Monday, William Suan treks down a muddy hill on the backside of his property. Hidden in the wooded thicket is a three-foot-tall rusted tube jutting out of the ground. A soft bubbling sound emanates from the well. “See the gas bubbling out of it?” he said. “Sometimes there’s oil. There’s where they had one of those pads to soak up the oil last time I complained about it.”Having enough resources to plug old, inactive wells is a challenge not unique to West Virginia. Across the country, many state regulators have few resources to deal with an ever expanding list of abandoned wells. “The states are pretty good at regulating wells that are being explored, are being fracked,  are in production, but they kind of lose interest once that happens,” said Alan Krupnick, a senior fellow with the nonpartisan environmental think tank, Resources For the Future. “There’s not enough attention being paid to reducing the risk from these abandoned wells.” Across the Ohio Valley, thousands of oil and gas wells sit idle. An analysis of state data by the Ohio Valley ReSource estimates more than 8,000 oil and gas wells are considered “orphan.” Definitions of orphan and abandoned wells vary by state, but in general, orphan wells lack an operator or company that can pay to plug them. That responsibility then falls to state regulators who are frequently struggling to keep up with demand and scrambling to find money to clean up the mess.

Mountain Valley Pipeline is Damaging & Very Expensive - Mountain Valley Pipeline never sufficiently showed that it would face harm without access to landowners’ properties, lawyers for those landowners told the 4th Circuit Court of Appeals in Richmond, Virginia, on Tuesday.They also said that, as court battles over the pipeline continue to play out, the landowners are facing irreparable harm. Oral arguments were available on audio recording Wednesday.The case challenges the preliminary injunctions issued by three district judges that granted Mountain Valley Pipeline immediate possession in condemnation proceedings. It’s the first of five pipeline hearings playing out in Richmond this week. On Friday, a panel of judges will hear arguments in two cases challenging permits issued to the Mountain Valley Pipeline, and two challenging the Atlantic Coast Pipeline.On Tuesday, though, lawyers challenged the injunction granted to developers, and their ability to take property without immediately compensating landowners. “You’d better believe losing possession is important to these landowners,” Christopher Johns, a lawyer for the landowners, said. “It’s substantive to them, and it makes a difference to them.” Allowing early possession through a preliminary injunction through condemnation under the Natural Gas Act is far-reaching and unconstitutional, Johns argued. And Mountain Valley Pipeline’s claims of irreparable harm without access to land were only possible, not inevitable, said Derek Teaney, an Appalachian Mountain Advocates lawyer.Mountain Valley Pipeline had said it would face economic loss and lose its Federal Energy Regulatory Commission certificate without speedy access to properties, Teaney said. The project would span 300 miles from Northern West Virginia to Southwest Virginia.Initial plans said the project would cost $3.7 billion and be completed by the end of 2018. But after a panel of judges on the 4th Circuit said the federal government had skirted rules when it approved the pipeline, and FERC halted the project. Developers say that halt pushed completion into 2019 and caused the price of the project to climb to $4.6 billion.

Mountain Valley Pipeline Construction Permit Revoked by Federal Court - Communities along the 300-mile proposed route for the Mountain Valley Pipeline (MVP) heard some good news this week. On Tuesday, the Fourth Circuit Court of Appeals unanimously voted to vacate a permit required by the Clean Water Act, which was previously issued by the U.S. Army Corps of Engineers. The ruling stated the Army Corps lacked the authority to substitute one type of construction for another for the natural gas pipeline, which would crisscross rivers and other sensitive aquatic ecosystems hundreds of times between northern West Virginia and southern Virginia.The case—brought by the Sierra Club, the West Virginia Rivers Coalition, and other citizen organizations—does not kill the project outright, but it is a significant roadblock.MVP is one of two pipelines (the other is the Atlantic Coast Pipeline) that have drummed up fierce public backlash across the region. Concerned residents have been peacefully protesting the projects for months, sometimes among the trees they would be helping to save.The Trump administration hastily approved both pipelines late last year, ignoring the serious risks a spill would pose to the region's watersheds, such as the Chesapeake Bay. Between the two projects, more than315 acres of critical wetlands are at stake, many of which drain into Virginia's Great Dismal Swamp National Wildlife Refuge. The extra sediment that construction would kick up would also harm fish and other aquatic life. Tuesday's decision isn't the first time the Fourth Circuit Court of Appeals has pushed back against the Trump administration's fast-track approval process for environmentally questionable projects. It also pulled a key permit for the Atlantic Coast Pipeline in May after finding that the U.S. Fish and Wildlife Service failed to set clear and adequate limits on its threats to the environment and endangered species.

Troubled $4.6B Pipe Hits New Snag on Surprise Ruling - -- A $4.6 billion shale gas pipeline that’s already been delayed by about a year is facing yet another setback after a court unexpectedly vacated a key permit.   A U.S. appeals court voided a federal authorization for the Mountain Valley project, which will be operated by EQT Midstream Partners LP and is designed to carry natural gas from the Marcellus basin in Appalachia -- America’s biggest reservoir of the fuel -- to Southeast markets.  Other eastern U.S. projects, including Dominion Energy Inc.’s Atlantic Coast pipeline, have faced similar woes. The conduits would join several built in the region over the past few years as Marcellus drillers seek outlets for abundant shale supply. In the case of Mountain Valley, the court sided with environmental groups in a ruling Tuesday, saying the Army Corps of Engineers isn’t allowed to substitute a construction method for the pipeline to get around West Virginia’s requirement that work at stream crossings be completed in 72 hours. The decision is “a huge blow to the project,” said Brandon Barnes, an analyst at Bloomberg Intelligence in Washington. It also comes as a shock to policy and legal analysts because the court had lifted a previous stay involving the same permit, said Christi Tezak, managing director at ClearView Energy Partners. The Aug. 29 decision to lift the original stay, put in place in late June, looked "encouraging" for Mountain Valley and the Corps, she said.  Shares of EQT Midstream fell as much as 2 percent in New York  on Wednesday. The Pittsburgh-based company is “disappointed” with the decision and is in the process of figuring out whether it can continue with construction that doesn’t include stream and wetland crossings along the affected portion of the pipeline route, spokeswoman Natalie Cox said in an emailed statement. The developer expects to apply for a new Army Corps permit once West Virginia’s proposed water-crossing modifications are considered. Mountain Valley anticipates receiving a new permit early in 2019, allowing it to maintain is target of being fully in-service in the fourth quarter of next year, Cox said.

MVP hopes for new permit in early 2019, after 4th Circuit action strikes W.Va. authorization— After a federal appeals court struck a general permit for West Virginia water crossings for the Mountain Valley Pipeline, the project developer said it expects to secure a new permit from the US Army Corps of Engineers early in 2019. An order Tuesday by the 4th US Circuit Court of Appeals struck the general permit for stream and water crossings that was in place for 160 miles of pipeline in West Virginia.  Environmentalists who prevailed in the case were quick to argue work must stop on the full route. "Because the MVP certificate from [FERC] specifies that all necessary permits must be in place before the project can proceed anywhere, MVP must also halt work along its entire route," Sierra Club said in a statement late Tuesday. The case at issue involved a dispute over whether the US Army Corps of Engineers had authority to issue a general permit, known as Nationwide 12, rather than an individual stream-by-stream permit, for the pipeline in West Virginia. Sierra Club and other environmental groups argued the general permit failed to meet a state standard that all crossings must be able to be completed in within 72 hours. They argued the Corps improperly imposed one condition requiring the use of a "dry cut" method for constructing four river crossings in the state.  The court, in a brief order, concluded the Corps lacked authority to substitute the dry-cut method and vacated in its entirety the Corps' verification of the pipeline's compliance with the permit. It cited regulation stating that if any part of a project requires an individual permit, the nationwide permit does not apply. Each of the four river crossings using the method are expected to take four-to-six months to complete, the court said.  A continued legal battle is likely over whether MVP has authority to use a general permit for the route, or must pursue an individual permit, which requires more extensive analysis of individual water crossings. Sierra Club has argued in September 13 comments to West Virginia regulators that it believes legal authority is lacking for the modification that would allow use of the general permit.  ClearView Energy Partners predicted the environmental groups would return to FERC promptly with a renewed request to stop work, and suggested FERC would grant that within days in a manner similar to its August stop-work order, in this case, halting all  incomplete water crossings.   Nonetheless, MVP's extension of its in-service date to the fourth quarter of 2019 should be enough time for West Virginia or MVP to change the route to cross rivers using a horizontal directional drilling method, they said. 

US approves part of TransCanada Mountaineer natgas pipe for service (Reuters) - U.S. federal energy regulators on Friday approved a request by TransCanada Corp's Columbia Gas Transmission unit to put part of its $3 billion Mountaineer XPress natural gas pipeline project into service in West Virginia. Mountaineer is one of several pipelines designed to connect growing output in the Marcellus and Utica shale basins in Pennsylvania, West Virginia and Ohio with customers in other parts of the United States and Canada. Specifically, the U.S. Federal Energy Regulatory Commission (FERC) approved Columbia's request to put Mountaineer's Elk River compressor station into service. One billion cubic feet is enough gas to power about 5 million U.S. homes for a day. New pipelines built to remove gas from the Marcellus and Utica basins have enabled shale drillers to boost output in the Appalachia region to a forecast record high of around 29.4 bcfd in October from 24.2 bcfd during the same month a year ago. That represents about 36 percent of the nation's total dry gas output of 81.1 bcfd expected on average in 2018. A decade ago, the Appalachia region produced just 1.6 bcfd, or 3 percent of the country's total production in 2008. In other news, TransCanada said on Friday that it placed the first Western phase of its WB XPress project into service. The Western phase is designed to move about 0.76 bcfd of gas from producers in Appalachia to consumers in the Gulf Coast. The company said it plans to finish the second Eastern phase of the $900 million project by the end of the year. TransCanada also said it plans to finish its $600 million Gulf XPress project by the end of the year. Gulf XPress is designed to move 0.88 bcfd of gas from Appalachia to the U.S. South.

US approves part of TransCanada WB XPress natgas pipe for service (Reuters) - U.S. federal energy regulators on Thursday approved a request by TransCanada Corp's Columbia Gas Transmission unit to put part of its WB XPress natural gas pipeline project into service in West Virginia. WB XPress is one of several pipelines designed to connect growing output in the Marcellus and Utica shale basins in Pennsylvania, West Virginia and Ohio with customers in other parts of the United States and Canada. The U.S. Federal Energy Regulatory Commission (FERC) said in a filing approving the startup of the $900 million project that Columbia has "adequately stabilized the areas disturbed by construction and that restoration is proceeding satisfactorily." One billion cubic feet is enough gas to power about 5 million U.S. homes for a day. New pipelines built to remove gas from the Marcellus and Utica basins have enabled shale drillers to boost output in the Appalachia region to a forecast record high of around 29.4 bcfd in October 2018 from 24.2 bcfd during the same month a year earlier. That represents about 36 percent of the nation's total dry gas output of 81.1 bcfd expected on average in 2018. A decade ago, the Appalachia region produced just 1.6 bcfd, or 3 percent of the country's total production in 2008. 

WB XPress Project’s Western Build Placed Into Service -- TransCanada today announced it has placed the Western Build of its WB XPress (WBX) project into service. “WB XPress provides an attractive outlet for our producer customers, creating significant new takeaway capacity in Appalachia,” said Stan Chapman,  executive vice president & president, U.S. Natural Gas Pipelines. “We are pleased to deliver on the first phase of this project and look forward to placing the Eastern Build in-service later this year.” The Western Build of WBX is designed to move approximately 760 million cubic feet of natural gas per day to a delivery point on Tennessee Gas Pipeline’s Broad Run System for transportation to the Gulf Coast. Highlights of the project include construction of the Elk River Compressor Station in Clendenin, West Virginia, along with associated pipeline and facilities. WBX is an approximate US$900 million investment, upgrading and enhancing an existing TransCanada pipeline system that has been safely serving customers for over 60 years. The project includes two new compressor stations, 30 miles (48 kilometres) of greenfield pipeline and modifications to seven existing pipelines, allowing an additional 1.3 billion cubic feet of natural gas to flow through the system per day. The project is part of TransCanada’s $28 billion near-term growth portfolio that includes US$8 billion in natural gas pipelines in the United States. 

US approves Williams' Atlantic Sunrise natgas pipe for service (Reuters) - U.S. federal energy regulators on Thursday approved a request by Williams Cos Inc’s Transcontinental Gas Pipe Line Co (Transco) unit to put the Atlantic Sunrise natural gas pipeline from Pennsylvania to South Carolina into service. Atlantic Sunrise is one of several pipelines designed to connect growing output in the Marcellus and Utica shale basins in Pennsylvania, West Virginia and Ohio with customers in other parts of the United States and Canada. The U.S. Federal Energy Regulatory Commission (FERC) said in a filing approving the startup of the nearly $3 billion project that Transco has “adequately stabilized the areas disturbed by construction and that restoration is proceeding satisfactorily.” The 1.7 billion-cubic-feet-per-day (bcfd) Atlantic Sunrise project includes about 198 miles (319 km) of new pipe located mostly in Pennsylvania, two new compressor stations and compressor station modifications in five states. One billion cubic feet is enough gas to power about 5 million U.S. homes for a day. Cabot Oil & Gas Corp has secured about 1 bcfd of transport capacity on Atlantic Sunrise. New pipelines built to remove gas from the Marcellus and Utica basins have enabled shale drillers to boost output in the Appalachia region to a forecast record high of around 29.4 bcfd in October 2018 from 24.2 bcfd during the same month a year earlier. That represents about 36 percent of the nation’s total dry gas output of 81.1 bcfd expected on average in 2018. A decade ago, the Appalachia region produced just 1.6 bcfd, which was only 3 percent of the nation’s total production in 2008. Williams said it started laying new pipe in Pennsylvania in September 2017. FERC authorized construction of the project in February 2017. 

FERC Issues Trio of Orders to Advance Appalachian Gas Pipeline Projects -- FERC on Friday issued letter orders to advance a trio of natural gas pipeline projects in the Appalachian Basin.The Federal Energy Regulatory Commission granted Columbia Gas Transmission LLC (CGT), a TransCanada Corp. affiliate, permission to enter the Elk River Compressor Station into service to support its Mountaineer XPress Project [CP16-357]. Elk River, in Kanawha County, WV, was constructed as part of CGT's WB XPress Project [CP16-38], and was given authorization by the Commission to enter service for the latter project on Thursday.FERC approved a CGT request to increase the initial monthly incremental recourse reservation rate on Mountaineer XPress last August, and issued a certificate of public convenience and necessity for the project in January. It is expected to enter service late this year.Mountaineer XPress would add 164.5 miles of 36-inch diameter pipe and six miles of 24-inch diameter pipe to expand CGT's system. It would add about 2.7 Bcf/d of capacity to the Columbia Gas system and is designed to allow additional volumes of Marcellus and Utica shale gas to reach markets in the Midwest, Northeast, South and Gulf Coast.In a second letter order, FERC approved a variance request by Rover Pipeline LLC for 0.3 acres of temporary workspace in Monroe County, OH, to repair an off-right-of-way slip and to retrieve sediments associated with the Rover Pipeline Project [CP15-93]. The workspace is along the 42-inch diameter Seneca Lateral.Last month, Rover asked for FERC authorization to start service on two final supply laterals, Sherwood and CGT, to support the 3.25 Bcf/d Appalachian takeaway project. FERC gave authorization for two additional Rover laterals, Burgettstown and Majorsville, to enter service last August. FERC also approved, in a third letter order, a request by Dominion Energy Transmission Inc. to use 0.24 acres in Doddridge County, WV, as additional temporary workspace for truck turn-arounds at its 1.5 million Dth/d Supply Header Project (SHP) [CP15-555]. SHP includes about 37.5 miles of pipeline looping and modifications to existing compressor stations in West Virginia and Pennsylvania, and is related to work on the embattled Atlantic Coast Pipeline.

US Forest Service seeks 'streamlined' oil and gas permit process - A public comment period ends Oct. 15 for a plan by the U.S. Forest Service to accelerate the permitting process for oil and gas development in the 44 national forests where drilling is authorized, and West Virginia’s Monongahela National Forest is among them.The Forest Service announced earlier this month that it is planning to revise “outdated and inefficient regulations for oil and gas resources” on national forest lands.“This is one of many efforts that our agency is undertaking to focus on our priority of regulatory reform,” Interim Forest Service Chief Vicki Christiansen said in the announcement. “Our goal is to make our processes as simple and efficient as possible while ensuring a sustainable environment for future generations.”About 60 active gas wells, most of them storage wells, are currently found in the Mon. None of the wells were horizontally drilled, as is common in Marcellus Shale production areas. The plan to “update, clarify and streamline internal processes related to environmental review and permitting,” as it is described in the Federal Register, was undertaken to clear a backlog of nearly 2,000 pending Expressions of Interest to acquire oil and gas leases. The pending leases involve nearly 2 million acres of national forest lands. The proposed streamlining would make possible “quicker leasing decisions” for oil and gas developers who, under existing rules, sometimes wait five to 10 years for final leasing decisions to be made, according to the Forest Service’s notice in the Federal Register. The rule changes would “promote domestic oil and gas production by allowing industry to begin production more quickly.”

Great Lakes 'At Risk' From Plan to Replace Aging Enbridge Pipelines, Environmentalists Argue - The state of Michigan and Canadian pipeline company Enbridge announced a deal Wednesday to replace controversial aging pipelines that environmental groups worried put Lakes Michigan and Huron at risk for anoil spill, The Detroit Free Press reported. Under the new plan, the existing 65-year-old pipelines, which are part of Enbridge's Line 5 carrying oil and liquefied natural gas between Wisconsin and Ontario, will be replaced with a new pipeline in a tunnel to be drilled into the bedrock beneath the Straits of Mackinac connecting Lakes Huron and Michigan, The Associated Press reported. The project will take seven to 10 years to complete and cost as much as $500 million. Enbridge will foot the bill.Michigan Governor Rick Snyder called the proposal "a common-sense solution" to the problem posed by the aging pipelines, saying that it would resolve "nearly every risk" of an oil spill in the Straits of Mackinac.But environmental groups, who have long opposed the pipeline, disagreed that the new plan was any sort of solution."Today, Governor Snyder cemented his disastrous legacy for the Great Lakes and the people of Michigan," Michigan organizer for Clean Water Action Sean McBearty told The Detroit Free Press. "As his administration comes to a close, he announced a last-minute deal with Enbridge Energy that will succeed in keeping the Great Lakes at risk from a massive Line 5 oil spill for the foreseeable future."Mike Shriberg of the National Wildlife Federation also told The Associated Press that the plan would leave the body of water vulnerable to spills for many years, and David Holtz of Oil and Water Don't Mix said that Michigan's own studies showed there were better ways to provide the state with energy. Enbridge said it would take measures to reduce the risk of an oil spill from the older pipelines during construction, including (a) conducting underwater investigations, (b) placing cameras in the straits to keep track of ship movements and enforce a no-anchor zone, and (c) making Enbridge staff available to manually shut down the pipeline during high-wave days if electric mechanisms fail.

Washington rolls back safety rules inspired by Deepwater Horizon disaster - NYTimes — The Trump administration has completed its plan to roll back major offshore-drilling safety regulations that were put in place after the Deepwater Horizon oil rig disaster in 2010 that killed 11 people and caused the worst oil spill in American history.The Interior Department’s Bureau of Safety and Environmental Enforcement, which was established after the spill in the Gulf of Mexico and regulates offshore oil and gas drilling, has finalized a proposal for loosening the regulations as part of President Trump’s efforts to ease restrictions on fossil fuel companies and encourage domestic energy production.The rules “created potentially unduly burdensome requirements for oil and natural gas production operators on the Outer Continental Shelf, without meaningfully increasing safety of the workers or protection of the environment,” says the new 176-page rule, which is scheduled in the coming days to be published in the Federal Register, before becoming the administration’s final policy.“This rule supports the administration’s objective of facilitating energy dominance by encouraging increased domestic oil and gas production and reducing unnecessary burdens on stakeholders, while ensuring safety and environmental protection,” the new rule says.Among the changes, the new rule removes a requirement for independent verification of safety measures and equipment used on offshore platforms.It also removes a requirement that oil companies design their equipment to function in “most extreme” scenarios involving weather, high heat, strong winds or high pressure from within the undersea oil wells, which was a key factor in the deadly 2010 blowout.And it removes a requirement that professional engineers certify the safety of the design of some pieces of offshore drilling equipment for new wells. The new rule appears to reflect many of the requests made by the oil industry, including the American Petroleum Institute, which lobbies on behalf of oil companies.

Ryan Zinke to the oil and gas industry: “Our government should work for you” -- Interior Secretary Ryan Zinke let the mask slip this week, turning the subtext of his term in office into the headline as he spoke to a friendly audience.On Tuesday, Zinke gave the keynote address at the Louisiana Oil and Gas Association’s fall meeting in Lafayette, Louisiana. He told the conference over lunch “our government should work for you,” according to organizers:  You can debate what Zinke meant by “work for you,” but many heard it as a pledge of allegiance to the industry. And according to the Louisiana Oil and Gas Association, the industry members in the room were thrilled with the pledge, giving Zinke a standing ovation. (An organizer told me none of the speeches at the event were recorded.) However, environmental activists and some lawmakers were appalled by the statement. But Zinke has said pretty much the same thing before. In March, he told an energy industry conference: “Interior should not be in the business of being an adversary. We should be in the business of being a partner.” For the record, the Interior Department’s job is to manage about 75 percent of federal public land, which amounts to about one-fifth of the total area of the United States. This means conservation, preserving culture, and facilitating recreation. It also entails leasing rights to mining, drilling, grazing, and logging. However, it does not mean that the agency needs to advance the fossil fuel industry’s interests, certainly not at the expense of the environment.

Trump likely to make pipeline push next year, aide says -- President Trump is likely to make a renewed push to permit and build oil and natural gas pipelines next year, his top economic adviser said Thursday. Larry Kudlow said a new pipeline push would be both a continuation of Trump’s aggressive energy deregulation streak and his ongoing infrastructure agenda. “We need infrastructure, including pipelines,” Kudlow said at an Economic Club of Washington event. “We need east to west, we need west to east.” Kudlow said the need for pipeline is especially strong in the natural gas industry, where drillers, thanks to the boom in fracking and horizontal drilling, are producing more gas than there is pipeline capacity to carry. He said an executive from an unnamed energy company that drills in the Permian Basin in Texas and New Mexico came to the White House Wednesday and spoke with both him and Trump. “He’s got more than he knows what to do with. They’re burning it off, flaring,” Kudlow said of the unnamed executive. Kudlow indicated that Trump’s push is likely to include federal actions to override states that have blocked pipelines. 

Climate Emissions From Gulf Coast’s New Petrochemical, Oil and Gas Projects Same as 29 New Coal Power Plants - In the last six years, officials in Texas and Louisiana issued permits allowing 74 petrochemical, oil, and gas projects to pump as much climate-warming pollution into the atmosphere as running 29 coal-fired power plants around the clock, according to numbers released September 26 by the nonprofit watchdog Environmental Integrity Project.And construction appears to be speeding up, with over 40 percent of those projects permitted between 2016 and mid-2018. The 31 most recent projects combined will add 50 million tons of greenhouse gases — equal to 11 new coal-fired power plants — to the world’s atmosphere in a year, the watchdog adds.  Environmentalists pointed to the risks that climate change poses to Gulf Coast states, where these projects are being built, and noted that the greenhouse effect has already led to sea level rise and a higher risk of extreme storms.“Louisiana is already sinking into the Gulf of Mexico, and yet our state government is permitting more of the emissions that cause flooding and storms,” Anne Rolfes, Founding Director of the Louisiana Bucket Brigade, said in a statement accompanying the numbers. “It’s mind boggling.”  The most recent projects tallied by the group include seven Liquefied Natural Gas (LNG) plants or terminals, 15 chemical and plastic resin plants, five petroleum refineries, and two natural gas processing plants, as well as a fertilizer manufacturer and hydrogen plant, all in Texas and Louisiana. The count does not include plants outside the Gulf Coast, like the Marcellus shale region of Pennsylvania, Ohio, and West Virginia, where a glut of natural gas liquids (NGLs) like ethane, a petrochemical feedstock produced by many shale wells, is attracting attention from plastics and chemical manufacturers. The Marcellus region now produces 27 billion cubic feet of natural gas a day, roughly a third of total U.S. output.  Another report, issued last week by Food and Water Watch, called attention to $35.8 billion worth of petrochemical and plastics projects in central Appalachia, including the Appalachia Development Group’s $10 billion NGL storage hub proposed in West Virginia.

Crude oil entering Gulf Coast refineries has become lighter as imports have declined - The density of crude oil processed by U.S. Gulf Coast refineries has become lighter since 2008 as refineries moved away from heavier imported crude oil to lighter crude oil produced in Texas. The Gulf Coast is home to most of the nation’s petroleum refineries, and these refineries tend to run a diverse mix of crude oils that, similar to the national average, has become lighter since 2008. API gravity is a measure of crude oil density that refiners consider when making decisions about the types of crude oil to process. Crude oil with a higher API gravity is lighter, or less dense. Small changes in the API gravity of the combination of crude oils that a refiner processes, called the crude slate, can affect the profitability of the refinery and the shares of petroleum products produced.Between 1985 and 2008, crude oil inputs to refineries in the Gulf Coast (defined as Petroleum Administration for Defense District 3) were getting heavier, from an API gravity of 34.1 degrees in 1985 to their heaviest at 29.5 degrees in 2008. At about the same time, imported crude oil processed in the Gulf Coast was increasing from 1.4 million barrels per day (b/d) in 1985 to its highest level of 5.8 million b/d in 2004. That trend reversed between 2008 and 2017, when the API gravity of crude oil inputs to refineries in the Gulf Coast increased to 32.0 degrees and imported crude oil processed in the region decreased to 3.1 million b/d.  Most imports of crude oil to the Gulf Coast region are relatively heavy, as crude oils less than 27 degrees API accounted for 46% of the region’s imports in 2009 and 71% of regional imports in 2017. Relatively lighter crude oil imports accounted for 21% of imports in 2009 but had virtually disappeared by 2017.

The experienced, deep-pocketed team behind the Golden Pass LNG project - It’s crunch time in the race to advance the next-round of liquefaction/LNG export projects along the U.S. Gulf Coast to a Final Investment Decision (FID). And if we’re to assume that only a small number of these multibillion-dollar projects will get their financial go-aheads, it would seem eminently reasonable to put a win-place-or-show bet on a joint venture that includes the world’s leading LNG producer (by far) and one of the largest U.S. natural gas producers — oh, and the partners have very fat wallets too. Size and money aren’t everything, of course, but as we discuss in today’s blog, the team behind the Golden Pass LNG project plans to build its liquefaction trains at the site of an existing LNG import terminal with strong interconnections with coastal pipelines already in place.2019 will be a pivotal year for the second wave of U.S. LNG  export projects. Global demand for LNG continues to rise, and LNG marketers and customers — acutely aware of how much it takes to build new liquefaction  capacity — are eager to line up the incremental LNG supply they will need in the early to mid-2020s. Want proof? Royal Dutch Shell, the lead partner in the LNG Canada project, on Tuesday (October 2) announced a FID on the 14-million-metric-tonnes-per-annum (MMtpa) liquefaction/export terminal in Kitimat, BC. (The project’s other partners are Petronas, PetroChina, Mitsubishi and Korea Gas.)Today, we look at Golden Pass LNG, a joint effort by three global energy powerhouses — Qatar Petroleum, ExxonMobil and ConocoPhillips — to expand their existing LNG import terminal (photo above, magenta diamond in Figure 1) on the Sabine-Neches Waterway near Sabine Pass, TX, into a liquefaction/LNG export facility. Much like Austin’s East Sixth Street is a mecca for live music and New Orleans’ Bourbon Street is a hub of late-night debauchery, the greater Sabine Pass area (on the border of Louisiana and Texas) already has drawn more than its share of liquefaction/LNG export facilities (Sabine Pass LNG, Cameron LNG and a number of second wave contenders, including Venture Global’s Calcasieu Pass), and for good reason. There’s easy, deep-water access to the Gulf of Mexico and large tracts of waterfront land, but just as important, there are few places on the planet with as many long-haul gas pipelines nearby to deliver large volumes of U.S.-sourced natural gas.

Hi-Crush Temporarily Idles One Sand Plant on 'Temporary Softness in Completions - Hi-Crush Partners LP said Wednesday it temporarily has shuttered dry sand plant operations at the Whitehall, WI, facility given “softness” in U.S. completions activity. Whitehall’s wet sand plant remains operational, and Hi-Crush still is selling inventory from on-site storage to meet northern white customer demand for hydraulic fracture (frack) and completions activity. Wet and dry plants also remain operational at the Wyeville, Augusta and Blair sand mines in Wisconsin, as well as the Kermit sand mine in Winkler County, TX, which serves Permian Basin producers. “Our strategic decision to temporarily idle Whitehall’s dry plant was driven by recent, temporary softness in completions activity and frack sand demand,” said CFO Laura C. Fulton. “This reduced level of expected activity is reflected in our updated guidance for sales volumes of 2.8 to 3.0 million tons for the third quarter we previously communicated.” The Kermit facility “continues to run above its nameplate capacity and we anticipate strong demand for northern white and our in-basin Permian sand in 2019 and beyond,” Fulton said.

Select Sands Halting Independence Expansion Project Due to Softer Demand for Northern White Silica Fracking Sand - -- Select Sands Corp. has announced that it will be halting its previously announced Independence expansion project due to a period of softer demand for Northern White silica/fracking sand.The expansion project will be under regular review and progress will resume once demand reaches appropriate levels. The Company will remain fully operational during the interim period, with a nameplate capacity of 600,000 tons per year of premium Northern White silica. Zig Vitols, President and CEO, commented: "We feel it is prudent to coincide the timing of the expansion project and its completion with increased basin activity and proppant demand. Select Sands is committed to adding new business and pursuing opportunities to generate value for shareholders."

Power to the Permian- Spotty at Best, Outrun by Shale Boom - America’s fastest-growing source of energy has a power problem. The Permian Basin, which produces almost 4 million barrels of oil a day, has expanded so quickly that suppliers of the electricity needed to keep wells running are struggling to keep up. The Delaware portion alone consumed the equivalent of 350 megawatts this summer, tripling the load from 2015. That’s enough to power about 280,000 U.S. homes. And providers say the draw is likely to triple again by 2022. While providers are rushing to build new power lines, it takes three to six years to get them up and working. In the meantime, drillers are bemoaning the reliability of the system and desperately seeking alternatives, exploring the use of solar and natural gas to fuel power-generating gear on-site. The electrical grid in West Texas “was not set up to withstand that much power going through it,"  "Plain and simple, you have reliability challenges." Power is just one more oilfield complication in a region struggling to deal with extraordinary growth over an incredibly short period of time. Worker and pipeline shortages are major concerns, along with the growing levels of water and sand needed for fracking. Meanwhile, highways initially designed for minimal use are gridlocked in the day and deadly at night. Conventional drilling with vertical wells in the region reached an apex in 1973, producing about 763 million barrels for the year. Output then steadily declined, falling to 309 million barrels in 2006.   Then fracking hit. The iconic 40-horsepower “nodding donkeys” that power vertical wells draw about 30 kilowatts each. Shale wells developed using fracking can run horizontally for miles. To lift oil out, companies now depend on electric submersible pumps that individually draw about 300 kilowatts

Permian Needs $300B in CAPEX for Growth through 2023 -A new report by consulting firm Arthur D. Little finds that U.S. independents will need to adjust their business models to keep up with forecasted growth in the Permian.While production in the Permian Basin has been abundant, U.S. independent operators will need to look at new ways of doing business to position themselves for long-term value, according to a report released Oct. 2 by consulting firm Arthur D. Little.Data in the report forecasts Permian activity through the next five years to:

  • Rise by up to 3 million barrels of oil equivalent per day
  • Possibly produce up to 5.4 billion barrels of oil equivalent per day
  • Have a need for up to 41,000 new wells (mostly unconventional) to be drilled to meet production outlook
  • Require more than $300 billion in capital expenditures (CAPEX) to keep pace with growth projections

In turn, independents will need to “comprehend and exploit global markets,” the report states, while suggesting partnership opportunities for U.S. independents as refineries in Mexico, Latin America and China.Independents will also need to collaborate.The report called the demands on infrastructure “tremendous,” citing trucking, roads, water usage, power consumption, sand to frack wells and community services like housing, schools and hospitals.Additionally, about one million barrels per day in production growth are at risk due to the inability of the local infrastructure to support daily operations, according to the report.Pioneer Natural Resources’ effort to potentially pool power generation to benefit both the operator’s community and local towns and ranches was an example mentioned in the report of the type of collaboration needed.  Still, the biggest challenge remains the amount of capital needed.

No Relief Likely in Permian Takeaway Before Late 2019, Energy Execs Tell Dallas Fed - Oil and natural gas sector activity continued its momentum during the third quarter across Texas, northern Louisiana and southern New Mexico, according to a survey of energy executives, but many are concerned that it’s going to take awhile before any relief in pipeline constraints in the Permian Basin.The Federal Reserve Bank of Dallas, which covers the Eleventh District, published its 3Q2018 energy survey on Monday, comparing activity to the second quarter. Data were collected Sept. 12–20, and 171 energy firms responded to the survey. Of the respondents, 110 were exploration and production (E&P) firms and 61 were oilfield services (OFS) firms.The business activity index, considered the broadest measure of conditions facing the region’s energy firms, dipped “very slightly” to 43.3 from 44.5, but it remained near the highest level since the survey began.The OFS business activity index also declined to 45.9 from 54.2 in 2Q2018, “suggesting a slight deceleration in growth.” Meanwhile, the business activity index for E&Ps rose sequentially to 41.8 from 37.2.Positive readings in the survey generally indicate expansion, while readings below zero generally indicate contraction. “All indexes in the latest survey reflected expansion on a quarterly basis,” Dallas Fed researchers said.Oil and gas production increased for the eighth quarter in a row, according to E&P executives. The oil production index moved down to 34.8 from 39.0 in the second quarter, suggesting crude production “rose at a slightly slower pace relative to last quarter.” However, the natural gas production index edged up sequentially to 35.5 from 33.4, “its highest level since the survey began. This suggests gas production rose at a slightly faster pace relative to last quarter.”

West Texas ex-senator Uresti and businessman Bates charged in fracking Ponzi scheme --The bad news for former West Texas Senator Carlos Uresti and San Antonio businessman Stanley Bates just keeps coming.The U.S. Securities and Exchange Commission officially charged the two men Friday with securities fraud in an alleged $11 million oil and gas fracking Ponzi scheme. The SEC will not have difficulty serving the federal complaint on either man. In June, Uresti was sentenced to 12 years in federal prison after being found guilty of 11 counts of fraud and money laundering. In August, Bates was arrested by FBI officials after he agreed to plead guilty to eight counts of defrauding investors. In an 18-page complaint filed in the U.S. District Court for the Western District of Texas, the SEC’s Fort Worth Regional Office said Uresti and Bates raised $11.2 million from investors for a company they owned called Fourwinds Logistics Laredo. Fourwinds’ business plan called for the company to buy and sell sand used in hydraulic fracking to extract oil and gas from shale rock. The SEC claims that Bates used a significant portion of the $11 million to pay for prostitutes, drugs, models to work in his office, his mother’s housing costs, child support payments, his son’s fraternity dues, designer shoes for his girlfriend and a Ferrari. He listed these charges as investor relations expenses or corporate housing. “Bates misrepresented his background and experience, overstated the profitability and safety of the investments and failed to disclose his misuse of investor funds to make Ponzi payments to earlier investors and to make extravagant office and personal expenditures,” the SEC complaint states. “Bates also provided investors with a doctored bank statement showing FWLL had $18.8 million in the bank, when in reality FWLL had less than $100,000.”

In Nebraska, resistance and negotiation along Keystone XL pipeline – public radio audio - TransCanada, the company behind the Keystone XL pipeline, is pressing forward with plans to build an oil pipeline between Alberta and Nebraska. Many landowners along Nebraska’s portion of the company’s planned route have joined the Nebraska Easement Action Team to help them resist the pipeline by refusing to sign easements or negotiate with the company. Others have even raised constitutional issues that will be argued in Nebraska’s Supreme Court in November. Other landowners who haven’t joined are trying to negotiate a better deal themselves.

Enbridge is said to eye long-term deals on biggest oil pipeline - Enbridge Inc. plans to overhaul its system of awarding space on the biggest pipeline carrying  Canadian oil to U.S. refiners. Canada’s largest pipeline operator wants to contract 90 percent of the capacity on its 2.85 million-barrel-a-day mainline system by signing long-term deals with potential shippers in an open season early next year, according to people familiar with the matter. The so-called take-or-pay agreements will begin January 2020, assuming the company gets necessary approvals from the nation’s regulators. This would effectively displace Enbridge’s current system of operating the mainline as a common carrier, where anyone can seek to ship crude on the line. It represents Enbridge’s latest attempt to more efficiently transport Canadian crude south of the border and solve a years-old problem of shippers gaming its nomination process by requesting space for more barrels than they actually have. "In a take-or-pay system, a company commits to making a payment for a fixed volume for a fixed term, regardless of whether you use it," Kevin Birn, a director on the North American crude oil markets team at IHS Markit, said in a phone interview. "It can provide a midstream company like Enbridge greater financial security." The changes may help better allocate space at a time when Canada is severely lacking in pipeline capacity to the U.S. The acute shortage has pressured heavy Canadian crude to the weakest level in more than four years. Enbridge’s mainline system has been consistently oversubscribed this year. The process of having long-term shippers on a pipeline is commonplace among U.S. and other Canadian pipelines, but the system could sideline small users and favor larger companies such as Chicago-area refiners that take the lion’s share of Canadian oil.

Don’t Frack So Close to Me: Colorado to Vote on Drilling Distances From Homes and Schools -- Coloradans will vote on a ballot initiative in November that requires new oil and gas projects to be set back at least 2,500 feet from occupied buildings. If approved, the measure—known as both Initiative 97 and Proposition 112—would mark a major change from their state's current limits: 500 feet from homes and 1,000 feet from schools.  As sociologists who have researched oil and gas drilling in the communities that host it for the past seven years, we think this measure would provide local governments and Coloradans more say over where drilling occurs and enhance the rights of those who live near these sites. Partly because fracking and related industrial processes often occurs close to homes, schools and other occupied buildings, the debate over Proposition 112 is contentious.Opponents, especially those funded by industry groups, argue that stricter rules will mean less state tax revenue, job losses and weakened private property rights. Proponents express concerns about air pollution,earthquakes, water well contamination and explosions to explain why they want the public to have more sway. But many state governments have tried to stymie the attempts of communities to gain this power. For example, Colorado's Supreme Court ruled in 2016 that local communities have no right to regulate where drilling occurs. And industry-funded groups and the Colorado Farm Bureau, which represents farmers, ranchers and other agricultural interests, are countering this electoral effort to restrict drilling with their own measure. Known asAmendment 74, it would force any city or county government that limits drilling to compensate property owners if new setback rules were to lower property values or reduce revenue from fracking leases.

Oil and gas firm plans Loveland fracking  — Oil and gas operator Magpie Operating, Inc. is planning a 2019 drilling operation in southeast Loveland that will include fracking, according to a Loveland Reporter-Herald report.A Magpie representative told the newspaper that the company hopes to fast-track the permitting process before November’s election. Colorado voters will be deciding then whether to approve Proposition 112, which would expand oil and gas setback requirements.If the drilling moves forward, many mineral rights holders in southeast Loveland could be eligible for financial compensation.

BLM OKs 175-Well Natural Gas Project in Utah - ExxonMobil Corp. subsidiary XTO Energy Inc. on Thursday received a green light from the Bureau of Land Management (BLM) to pursue three-year-old plans for drilling up to 175 natural gas wells in the Uinta Basin of Utah.An environmental assessment (EA) and record of decision were issued by BLM’s Utah office for the Horse Bench Natural Gas Development Project.The project is to be done on 6,565 acres of federal and state lands in Carbon County, where XTO plans to drill from 16 well pads.The EA supported the finding that no environmental impact statement was needed for the project, which is about 36 miles from Price.Horse Bench is in the West Tavaputs Plateau in the Desolation Canyon area, considered one of the largest roadless areas managed by BLM. XTO’s project is to include access roads and natural gas gathering pipelines. XTO has been working in Utah for several years. In 2011, it acquired leases in a quarterly BLM auction and more acreage in a state sale. According to its filings with BLM, XTO indicated it now works across 381,000 acres in Utah, with 90 employees helping to produce an estimated 46 MMcf/d.Assuming the Horse Bench wells are productive, the project has an anticipated life span of 30 years, BLM noted. Final well abandonment and reclamation indicated XTO is committed to “specific environmental protection measures designed to reduce impacts to existing resources, and are integral to this decision.”

Oil and gas firm battles with coal giant over right to develop minerals in Campbell County - An oil and gas firm is seeking help from the courts to stop Peabody Energy from destroying wells in a case of conflicting rights to produce coal or oil and gas. Berenergy and the coal giant have overlapping lease rights in Campbell County, and they have fought over who gets the right to develop minerals for more than three years. The dispute traveled all the way to the Wyoming Supreme Court before the Bureau of Land Management made a final decision in August in favor of coal.Berenergy’s wells are nearing the end of life, whereas Peabody’s coal would be part of one of the largest existing open surface mines in the country.The Denver-based oil and gas firm is appealing the BLM’s decision to favor Peabody’s leases and wants the courts to keep the coal firm from continuing to plug Berenergy’s wells until the Interior Board of Land Appeals has made a final decision, which is due Nov. 4.“The BLM does not have the power to ignore its own regulations, violate the first-in-tine operating rights it granted to a federal oil lessee, and act without statutory authorization in order to serve the private economic interests of a federal coal lessee,” Berenergy’s lawyers argued in court docs. “Nonetheless, that is precisely what the BLM did.”A spokeswoman for Peabody Energy said the firm is in compliance with the Bureau of Land Management decision from August.“Peabody fully supports this decision and will oppose all requests by Berenergy for a finding that the BLM decision is not valid or should not be effective,” Charlene Murdock said in an email Monday. In August, the BLM suspended the oil and gas leases that would interfere with coal production, with the caveat that the coal firm would pay for plugging and abandoning the seven affected oil and gas wells. Berenergy would be allowed to restart production once Peabody is done mining.

Standing Rock Sioux pledges support for pipeline protests  (AP) — The American Indian tribe that's led opposition to the Dakota Access oil pipeline has formally pledged support for protests against pipeline projects in four states.The Standing Rock Sioux Council this month in unanimous votes approved resolutions supporting efforts by other tribes to oppose the Enbridge Line 3 project in Minnesota, the Keystone XL pipeline in Montana and South Dakota, and the Bayou Bridge pipeline in Louisiana.The resolutions don't come with any promise of money or other aid but are a payback of sorts for other tribes' support of Standing Rock's struggle against Dakota Access. Standing Rock led protests in 2016 and 2017 against that pipeline, and thousands of people traveled to protest camps just outside the reservation that straddles the North Dakota-South Dakota border to support the tribe.

ACLU Fears Protest Crackdowns, Surveillance Already Being Planned for Keystone XL - The Keystone XL pipeline is expected to draw protests from indigenous and environmental activists when construction begins, and many activists are worried law enforcement agencies may be planning surveillance and a militarized response. Now, the American Civil Liberties Union is accusing federal agencies of trying to hide the extent of these preparations, which the group says are clearly underway. The ACLU and its Montana affiliate sued several federal agencies this week, including the Departments of Justice, Defense and Homeland Security, saying the agencies are withholding documents that discuss planning for the expected protests and any coordination among state and local authorities and private security contractors.Fears about the law enforcement response follow the 2016 armed crackdown on people protesting the Dakota Access Pipeline, where authorities used tear gas and turned water cannons on protesters in freezing temperatures. Since then, dozens of bills and executive ordershave been introduced in at least 31 states to clamp down on protests. Activists say the bills are part of a concerted campaign by energy companies and their allies in government to suppress these protests by increasing criminal penalties for minor violations and in some cases trying to use anti-terrorism laws against activists. The ACLU says documents it obtained from state agencies in Montana suggest law enforcement agencies have begun extensive trainings in preparation for the Keystone XL project, and that federal agencies are involved.

Ordinary High Water Mark Study Accepted By The NDIC -- September 29, 2018 -- NDIC accepts "ordinary high water mark study" results: the state owns 9,500 more acres than originally shown by the US Army Corps of Engineers; mineral owners along the river between New and Williston may find they don't have as many acres as they once thought they did.The study, directed by the Legislature, aimed to resolve disputes over oil and gas ownership by investigating the accuracy of the 1950s river survey conducted by the U.S. Army Corps of Engineers.The Industrial Commission’s action determines the ordinary high water mark of the Missouri River. The final report concludes that North Dakota owns about 9,500 more acres than the corps survey of the river showed. The consultant did reduce the state’s ownership by about 900 acres based on “clear and convincing evidence” received during a public comment period last spring.Josh Swanson, an attorney who represents several mineral owners, said Thursday he’s disappointed by the Industrial Commission’s decision, which he called sanctioning “a blatant taking of thousands of acres of mineral acres of private landowners.”  My understanding is that the study, at the NDIC website, which has been previously linked, is the study that the NDIC accepted. The links are at this post.

Third federal defendant sentenced from DAPL protest - U.S. District of North Dakota Chief Judge Daniel Hovland has sentenced the third of seven federal defendants indicted from the Dakota Access Pipeline protests. As part of a plea agreement with prosecutors from earlier this year, Michael Markus pleaded guilty to civil disorder, with the more serious crime of use of fire to commit a federal felony dismissed. Hovland sentenced Markus on Thursday in Bismarck's federal court to 36 months in federal prison followed by three years supervised release, under attorneys' joint recommendation.   He will also serve at least a year of supervised release, depending on a potential recommendation from his probation officer to Hovland to lessen the three-year period of supervision. Markus was indicted with several others for starting a barricade fire on the Morton County Road 134 bridge on Oct. 27, 2016, one of the most chaotic days of  the monthslong protests in southern Morton County. Law enforcement officers swept south along North Dakota Highway 1806, where protesters had erected a camp on a pipeline easement. Markus poke for several minutes in federal court in Bismarck, noting how his original involvement in the protests was to deliver supplies and food, but grew more "heavily" involved after pipeline construction bulldozed what protesters have said were sacred sites.  "How would you feel if someone went through your family cemetery and plowed through? Or Arlington (National Cemetery)?" Markus said before Hovland. Markus wiped his eyes and said his role in camp was to protect people, be they protesters or police. "That is what I'm meant to do, protect people, no matter who they are," he told Hovland.

Trial Will Test New Weapon Against Climate Change: Necessity Defense -- No one—least of all the defendants—disputes the facts of the case against four people known as valve-turners: activists who trespassed on private property to shut down an oil pipeline in 2016. As their otherwise straightforward case goes to trial in October, it’s their defense that has everyone’s attention.  Part of a multi-state protest in 2016 dubbed #Shutitdown, their goal was straightforward: to force Enbridge to shut down the pipeline, which the activists viewed as a serious and imminent threat to the global environment. If the company refused to do so, the activists would turn the valves themselves. Enbridge did stop the flow safely, until the trespassers were arrested. Annette Klapstein and Emily Johnson were both charged with multiple felonies and could face up to 10 years in prison. Videographer Steve Liptay and Benjamin Joldersma, who was on hand to lend support, are both facing misdemeanor charges. Their defense is that their crime was part of preventing a greater harm: climate change. It’s called the necessity defense and when the judge in archly conservative and rural Clearwater County ruled last year (and was upheld by an appeals court in August) that the defendants could use it in this trial, it threw an entirely new wrinkle into the battle to force climate action through the courts. That battle has gathered steam in the past two years on multiple fronts, with a landmark youth-led suit, Juliana v. United States, also headed to trial in October, with 21 young people arguing the federal government is robbing them of a safe climate and livable future. A wave of communities and one state attorney general have begun to sue the fossil fuel industry to pay for the spiraling costs of climate impacts. And two states, New  York and Massachusetts, are using consumer and investor protection statutes to investigate whether the biggest of the U.S. oil giants, Exxon, is guilty of fraud.

Environmental Groups Sue Over Venting/Flaring Rule - A coalition of 21 environmental and citizens' groups asked a federal district court in San Francisco to block the Trump administration's plans to rescind most of an Obama-era rule governing associated natural gas flaring and venting on public and tribal lands. According to a complaint filed Friday in U.S. District Court for the Northern District of California, plans by the Department of Interior (DOI) to rescind and revise its Waste Prevention, Production Subject to Royalties, and Resource Conservation Rule, aka the venting and flaring rule, are unlawful because they would revoke "reasonable protections designed to limit waste of natural gas by oil and gas companies on federal public and Indian lands..." Under a final rule issued last month, DOI's Bureau of Land Management (BLM) plans to rescind provisions of the Obama-era rule pertaining to waste minimization plans, gas-capture percentages, well drilling, well completion and related operations, pneumatic controllers, pneumatic diaphragm pumps, storage vessels, and leak detection and repair. For the remaining provisions, BLM said it plans to return to the regulatory environment that preceded the Obama-era rule when it came out in 2016."The Trump administration's action will imminently harm Americans by allowing substantial waste of natural gas that will result in lost money for taxpayers and additional air pollution that puts families at risk," said Environmental Defense Fund (EDF) Lead Attorney Peter Zalzal. "We plan to vigorously challenge the administration's decision to eliminate the Waste Prevention Rule, which completely disregards these foundational public interests." EDF filed the lawsuit with the Sierra Club; Los Padres ForestWatch; the Center for Biological Diversity; Earthworks; the Natural Resources Defense Council; The Wilderness Society; the National Wildlife Federation; Citizens for a Healthy Community; Diné Citizens Against Ruining Our Environment; the Environmental Law and Policy Center; Fort Berthold Protectors of Water and Earth Rights; the Montana Environmental Information Center; San Juan Citizens Alliance; the Western Organization of Resource Councils; Wilderness Workshop; WildEarth Guardians; the Wyoming Outdoor Council; Earthjustice; the Clean Air Task Force, and the Western Environmental Law Center.

700 gallons of oil spilled near Woodland --In a suspected act of vandalism, someone opened a valve on a construction truck and caused 700 gallons of oil to spill onto the ground near Woodland Monday night, according to state and other sources.The oil soaked a nearby field and the job site where Granite Construction is working on Dike Road. The diking district dug up the affected dirt and the spill was cleaned up by Wednesday evening, said Jeff Woolever, owner of West Coast Training, a school near the spill. Department of Ecology spokeswoman Sandy Howard said the agency was notified and is responding along with local authorities. “The company has a spill plan. The environmental cleanup contractor on contract, River City Environmental, was being contacted to perform the cleanup,” Howard said.

A pipeline in SLO County was shut down after an oil spill. The company wants to rebuild - The company that was recently found guilty of several criminal counts in connection to a pipeline break that caused an oil spill near Refugio State Beach is moving forward with a proposed replacement project to reopen the pipeline — including 37 miles through San Luis Obispo County.  Texas-based Plains All American Pipeline applied last year to replace 123 miles of existing non-operational pipelines to move domestic crude oil produced offshore through Santa Barbara County, south San Luis Obispo County along Highway 166 and Kern County.  The existing lines, known as Line 901 and Line 903, began operation in the early 1990s. They have remained shut down since 2015, after a corroded on-shore pipeline ruptured suddenly and released 142,800 gallons of heavy crude oil onto the coastline near Gaviota.  Signaling the next stage in a long permitting process, San Luis Obispo County supervisors on Tuesday will consider signing an agreement with Santa Barbara County to work together to review and prepare an environmental impact report under the California Environmental Quality Act. A spokeswoman for Plains All American Pipeline said that company representatives hope the environmental impacts will be limited because the proposed route largely follows the existing right-of-way that has already been disturbed. That route travels through federal Bureau of Land Management lands, Los Padres National Forest and Bitter Creek National Wildlife Refuge. The project also includes a new pump station that would be located just south of the Carizzo Plain National Monument boundary.

Trump Administration Moves to Open 1.6 Million Acres to Fracking, Drilling in California  Ending a five-year moratorium, the Trump administration Wednesday took a first step toward opening 1.6 million acres of California public land to fracking and conventional oil drilling, triggering alarm bells among environmentalists. The U.S. Bureau of Land Management said it’s considering new oil and natural gas leases on BLM-managed lands in Fresno, San Luis Obispo and six other San Joaquin Valley and Central Coast counties. Meanwhile, activists in San Luis Obispo are pushing a ballot measure this fall to ban fracking and new oil exploration in the county. If BLM goes ahead with the plan, it would mark the first time since 2013 that the agency has issued a new lease for oil or gas exploration in California, according to the Center for Biological Diversity, which immediately vowed to fight the move. California is the nation’s fourth largest oil-producing state, after Texas, North Dakota and Alaska, with much of the production concentrated in the southern San Joaquin Valley and Southern California. The Trump administration is trying to “sell off our public lands again,” said Clare Lakewood, a senior attorney with the Center for Biological Diversity in San Francisco. The federal government oversees about 15 million acres of public lands in California, and leases some of them for private use by contractors. Lakewood said environmentalists are particularly concerned about the possibility of a big increase in hydraulic fracturing, or fracking, the controversial process of extracting oil or gas by injecting chemicals or other liquids into subterranean rocks. The notice released Wednesday by the BLM, which allows for 30 days of public comment, specifically seeks “public input on issues and planning criteria related to hydraulic fracturing.” Environmentalists say fracking can contaminate groundwater and increase earthquake risks, and they’ve called on Gov. Jerry Brown to ban the practice. The energy industry says there’s no evidence of environmental harm from fracking. The U.S. Geological Survey says that, when “conducted properly,” poses little risk to groundwater.

Shale Oil Propels U.S. Crude Export Increase -- Dallas Fed  - Crude oil exports from the U.S. are rising, reaching 2.2 million barrels per day (mb/d) in June 2018, triple the 2016 average and the highest ever for the nation. More than 90 percent of crude exports this year have originated on the Gulf Coast, generating jobs, capital and income for ports in Houston and Corpus Christi. Such exports were at a trickle before Congress lifted a federal crude oil export ban that had been in place since 1975. The change, which took effect in December 2015, allows U.S. producers to sell oil directly to the global market at a time when shale oil production is high and risingU.S. crude oil production has grown steadily since 2008, reaching a record of more than 10 mb/d this year, with 12 mb/d expected by the end of 2019, according to the Energy Information Administration. Shale oil accounts for 99 percent of the production growth. Shale yields a light-sweet crude oil, requiring a simple refining configuration to produce gasoline and diesel. As domestic crude production declined in the 1990s and 2000s, U.S. refiners made significant investments in their refining capabilities to process imported heavy-sour crude, primarily from Venezuela and nearby Mexico and Canada. Heavy-sour crude, which is generally cheaper than light sweet, provided greater profitability for refiners.

US shale exports find new pathways to China -China exceeded Canada as the largest buyer of U.S. crude exports for the first time in February 2017 and in year-to-date 2018 has averaged 378 Mb/d versus Canada’s 347 Mb/d. Ramping up purchases from virtually nothing in 2015 to more than 500 Mb/d in June 2018 was no small feat — the logistics in getting that much oil across the world include multiple ship-to-ship transfers, several weeks at sea and a whole lot of negotiating between U.S. crude marketers and the major Chinese buyers: Unipec and PetroChina. That already complicated process has recently been made just a little more complicated by the escalating trade war rhetoric between the U.S. and China. In today’s blog, which launches our new Crude Voyager service, we explain how crude flows to China are evolving. Given the explosion of interest around U.S. crude exports, not a day goes by that our clients and readers aren’t asking us about developments in this burgeoning market. After several consulting projects and a lot of time staring at maps and crude oil tanker movements, we’ve created a weekly tool that puts into perspective the dynamic relationships between crude export terminals and export volumes, including the reverse-lightering operations across the U.S. Gulf of Mexico. In addition to the weekly service, which will give readers our estimate of crude exports about 24 hours before the Energy Information Administration’s (EIA), the report includes quarterly supplements tracking all the developments, investments and projects planned for U.S. crude exports.

U.S. crude oil shipments to China "totally stopped" amid trade war - Shipper (Reuters) - U.S. crude oil shipments to China have “totally stopped”, the President of China Merchants Energy Shipping Co (CMES) said on Wednesday, as the trade war between the world’s two biggest economies takes its toll on what was a fast growing businesses. Washington and Beijing have slapped steep import tariffs on hundreds of goods in the past months. And although U.S. crude oil exports to China, which only started in 2016, have not yet been included, Chinese oil importers have shied away from new orders recently. “We are one of the major carriers for crude oil from the U.S. to China. Before (the trade war) we had a nice business, but now it’s totally stopped,” Xie Chunlin, the president of CMES said on the sidelines of the Global Maritime Forum’s Annual Summit in Hong Kong. 

Oil, Gas Producers Could See More Money from Lenders in 2018 - A new survey by Haynes and Boone offers a bright outlook for oil and gas producers. Oil and gas producers have a reason to be optimistic, if results from law firm Haynes and Boone, LLP’s recent survey is any indication. The September 2018 borrowing base redetermination survey which included responses from oil and gas producers, service companies, financial institutions, private equity firms and professional services providers revealed that more than 78 percent expect borrowers to see a borrowing base increase in Fall 2018. And 36 percent of respondents expect borrowing bases to increase by 20 percent or greater. “The survey shows that optimism for the upstream oil and gas industry is really gaining momentum,” Kraig Grahmann, head of Haynes and Boone’s Energy Finance Practice Group, stated in a release. “We have now had several recent surveys, including the Fall 2018 survey, predicting that producers will see borrowing base increases of 10 to 20 percent.” The survey also found that two-thirds of respondents believe borrowers have locked in prices for the majority of their 2019 production. And producers are expected to use cash flow from operations (21 percent), debt from banks (20 percent) and equity from private equity firms (17 percent) as their sources of capital in 2019. However, the greatest challenge oil and gas producers will face in 2019 by far, according to respondents, is midstream capacity constraints (42 percent). This is followed by oilfield service costs (19 percent) and commodity price volatility (17 percent). “In prior years, producers were worried about a sudden drop in commodity prices or high costs of oilfield services,” Grahmann said. “Now … survey respondents were most concerned about midstream capacity constraints in transporting production to market.”

$32B Worth of Oil, Gas M&A Deals in 3Q Breaks Record- Drillinginfo reports that the US saw a 250% increase in mergers and acquisitions activity in the third quarter. U.S. oil and gas M&A activity soared in the 3Q to $32 billion, a 250 percent increase from $9.1 billion in 2Q, according to new data from Drillinginfo, which provides software and data analytic services to the energy industry. Third quarter numbers reflect big upstream deals including BP plc’s $10.5 billion purchase of BHP Billiton subsidiary Petrohawk Energy Corporation to acquire onshore assets in the Permian, Eagle Ford, Fayetteville and Haynesville plays, Permian-focused Diamondback Energy’s $9.2 billion all-stock deal purchase of Energen Corporation and Chesapeake Energy Corp.’s sell of its Utica shale assets to Encino Acquisition Partners for $1.9 billion. Drillinginfo said 3Q’s M&A activity broke all quarterly records dating back to as far back as 4Q 2012. It’s also 76 percent above the quarterly average of $18.3 billion dating back to 2009. In 3Q, BP’s $10.5 buy of BHP’s U.S. onshore assets is included in Multiple/Other Play. Deal value is allocated as follows: Permian $3.9B, Eagle Ford $4.8B, Haynesville $1.8B. | Source: Drillinginfo Drillinginfo senior director Brian Lidsky said he expects U.S. M&A activity to continue at a heightened level. “The industry is regularly reporting record well results across the U.S. shales as it continues to de-risk acreage positions and advance technology,” he said in a release. “As Wall Street is increasingly discriminating among public companies, the food chain of the big getting bigger is alive and well – shale basin leaders are being rewarded for mastering scale, efficiency and technology. This sets the stage for additional mergers that not only checks all the accretive boxes for the buyer, but also provides sellers upside by joining forces with these leaders.”

Hydraulic fracturing Market size is forecast to cross USD 68 billion by 2024-- Increasing investment towards exploration and production of unconventional resources due to rising concern towards rapid depletion of conventional resources will drive the hydraulic fracturing market size during the forecast period. Growing petroleum demand, rapid infrastructure development and demographics will drive industry growth. Global hydrocarbon based liquid fuel demand for2015 was more than 92 mb/d.Natural gas is expected to witness the considerable growth owing to wide applications across industries and power plants. Its environment friendly nature makes it preferable over other alternatives. Tight gas accounted for over 15% of global hydraulic fracturing market share in 2015. Horizontal fracturing demand is expected to witness substantial growth, owing to its ability to access natural gas surrounding the entire portion of horizontal drilled section.Plug and perforation hydraulic fracturing market size was valued at over USD 15 billion in 2015 and is expected to witness handsome growth in future. Ease of accessibility for fracking in horizontal wells will boost technology demand. Several restrictions in some countries owing to its adverse environmental impact including noise and visuals impact, seismic events, land surface disturbance etc. may hamper the business. High operational expenditures involved in development of shale gas is also among the major restraints.

Crude oil, natural gas may be about to repeat coal's hubris: Russell (Reuters) - The crude oil and natural gas industries believe they have got their mojo back, with the overwhelming impression gained at two recent conferences that the future is indeed bullish. It was hard to find any downbeat delegates at last week’s Asia Pacific Petroleum Conference, the region’s largest annual event, or at the well-attended GasTech in Barcelona the prior week. However, one advantage of having been around the commodity sector for what seems like ages is that sometimes one can get a sense of deja vu. The crude and natural gas industries today sound remarkably similar to the coal industry of a decade ago. In the recovery from the 2008 global recession, the coal industry found itself in the happy place of being in strong demand to fuel robust economic growth in China and India, the two fast-growing economies that displaced Japan as the region’s top importer of the polluting fuel. The refrain at numerous coal industry events at the time was the outlook is bright because coal is cheap, reliable and necessary to bring electricity to populations in Asia that were rapidly moving from poverty to a more middle-class existence. This optimism manifested itself in some extremely bullish forecasts, which seem ridiculous with the benefit of hindsight. Among those was a forecast that China’s coal imports would rise to 1 billion tonnes a year, when they in reality peaked at 327 million tonnes in 2013. This rosy outlook for coal led the industry to invest heavily in mines to boost the availability of seaborne supplies, which in turn led to five consecutive years of declining prices as supply overwhelmed demand. But that wasn’t the real problem for the coal industry, what is causing them more problems now is the fact that they didn’t see either renewables and natural gas in their rearview mirror.

Oil and Gas Cyber Attacks Increased in Past Year - Cyber attacks in the oil and gas sector increased over the past year, according to Mike Spear, industrial cyber security global operations director at Honeywell. “You’re looking at about 365,000 new malware every year … that’s like four per second,” Spear told Rigzone during a briefing at a recent conference in Madrid. “What we’re seeing is in the space, or in what we call the process industries … the level of the malware, the more sophistication that’s coming up,” he added. “Some of it now is being very targeted, which is kind of different than it was say five years ago. Everybody was focused on the financial systems, the Walmarts … that type of chain, now we’re seeing a significant increase targeting the critical infrastructure of the process industries,” Spear continued. Oil and gas cyber security is lagging behind cyber security in other sectors, according to Mark Littlejohn, Honeywell’s global leader in cyber security managed services, who spoke to Rigzone during the same conference in a one-on-one interview. “Financial of course is doing much better … and then hospitals I think are doing a pretty good job. They still have a bit to go, but they’re still way ahead,” Littlejohn said, providing examples of fields the oil and gas sector was trailing behind in terms of cyber security. When asked if the oil and gas industry could learn from these sectors, the Honeywell representative said, “absolutely”.

U.S. net natural gas exports in first half of 2018 were more than double the 2017 average -- From January through June of 2018, net natural gas exports from the United States averaged 0.87 billion cubic feet per day (Bcf/d), more than double the average daily net exports during all of 2017 (0.34 Bcf/d). The United States, which became a net natural gas exporter on an annual basis in 2017 for the first time in almost 60 years, has continued to export more natural gas than it imports for five of the first six months in 2018.  U.S. natural gas exports have increased primarily with the addition of new liquefied natural gas (LNG) export facilities in the Lower 48 states. U.S. exports of LNG through the first half of 2018 rose 58% compared with the same period in 2017, averaging 2.72 Bcf/d.  Total U.S. LNG export capacity reached 3.6 Bcf/d in March 2018. The LNG facility at Sabine Pass in Louisiana has an export capacity of 2.8 Bcf/d, which includes the recently completed Train 4. Cove Point LNG in Maryland, which has an export capacity of 0.8 Bcf/d, delivered its first cargo in March 2018 and entered full commercial service in April. In the first two full months of operation after the capacity additions (May and June), Cove Point exported an average of 0.57 Bcf/d (76%) of its nameplate capacity. Another four LNG facilities are under construction and planned to enter into service by the end of 2019, ultimately increasing U.S. LNG export capacity to 9.6 Bcf/d. While U.S. LNG exports have continued to grow in 2018, U.S. natural gas pipeline import and export volumes have either remained relatively flat or declined from 2017 levels. Exports of natural gas by pipeline to Mexico grew by just 4%, while exports of natural gas by pipeline to Canada declined 14%. Most of this decline occurred in deliveries from St. Clair, Michigan, to the Dawn hub in Ontario, Canada. Although U.S. exports into eastern Canada declined, eastbound flows on the TransCanada Mainline from western Canada increased by 0.26 Bcf/d from 2017 as tolls on the pipeline were lowered this year, according to data from Canada’s National Energy Board. January was the only month so far in 2018 in which the United States was not a net exporter of natural gas. In that month, extreme and prolonged low temperatures led to record demand for natural gas. U.S. natural gas imports from Canada during January averaged 9.25 Bcf/d, its highest level since January 2014.  According to EIA’s Short-Term Energy Outlook, net natural gas exports are expected to continue rising through the end of 2018 as additional LNG export capacity comes online and as natural gas infrastructure in Mexico is placed into service. Overall net natural gas exports are expected to average 2.0 Bcf/d in 2018 and 5.8 Bcf/d in 2019.

Prices Edge Higher On Bullish Storage Levels --Highlights of the Natural Gas Summary and Outlook for the week ending September 28, 2018 follow. The full report is available at the link below.

  • Price Action: The now prompt November rose 3.4 cents (1.1%) to $3.008 on a 16.1 cent range ($3.111/$2.950).
  • Price Outlook: Prices rose as a smaller than expected EIA storage injection helped to lift the market. Demand remains incredibly impressive. This month’s EIA data noted record US production even as past production levels were revised even higher. However, with no change to previous storage levels, the higher production was also accompanied with revised record demand.
  • Weekly Storage: US working gas storage for the week ending September 21 indicated an injection of +46 bcf. Working gas inventories rose to 2,768 bcf. Current inventories fall (698) bcf (-20.1%) below last year and fall (608) bcf (-18.0%) below the 5-year average.
  • Storage Outlook: The EIA weekly implied flow was (6)bcf from our EIA storage estimate. Although our weekly storage error has been somewhat disappointing, over the last 5 weeks the EIA has reported total injections of 336 bcf compared to our 323 bcf estimate and that is more tolerable.
  • Supply Trends: Total supply rose 0.8 bcf/d to 81.1 bcf/d. US production rose. Canadian imports rose. LNG imports fell. LNG exports fell. Mexican exports rose. The US Baker Hughes rig count rose +1. Oil activity decreased (3). Natural gas activity increased +3. The total US rig count now stands at 1,054 .The Canadian rig count fell (19) to 178. Thus, the total North American rig count fell (18) to 1,232 and now exceeds last year by +79. The higher efficiency US horizontal rig count rose +3 to 922 and rises +128 above last year.
  • Demand Trends: Total demand rose +4.9 bcf/d to +73.1 bcf/d. Power demand rose. Industrial demand rose. Res/Comm demand fell. Electricity demand rose +3,982 gigawatt-hrs to 83,579 which exceeds last year by +1,596 (1.9%) and exceeds the 5-year average by 5,629 (7.2%%).
  • Nuclear Generation: Nuclear generation fell (7,343)MW in the reference week to 85,308 MW. This is (6,806) MW lower than last year and (4,178) MW lower than the 5-year average. Recent output was at 83,335 MW.

The cooling season is now entering its final stretch. With a forecast through October 12 the 2018 total cooling index is at 5,606 compared to 4,781 for 2017,  5,483 for 2016, 4,384 for 2015, 3,451 for 2014, 4,811 for 2013, 7,205 for 2012 and 6,706 for 2011.

Natural Gas Could Well Be The Energy Story Of 2018-2019 --   -- Re-posting from earlier today, since "natural gas could well be the energy story of the year." US natural gas:

Natural gas: this might be the story of the year -- lots of buzz, lots of talk -- from SeekingAlpha yesterday --

  • a severe cold spell could raise Henry Hub natural gas prices to a range of $12-$16/MMBtu, “similar to where marginal generation costs of fuel oil and diesel would be,” says Citi’s Anthony Yuen
  • and if bitter cold weather hits both the U.S. and “either Europe or Asia at the same time... spot LNG [liquefied natural gas] prices could surge to $20/MMBtu at the extreme," Yuen writes; Nymex U.S. natural gas currently trades at ~$3.00/MMBtu
  • Yuen thinks a spike in gas prices this winter could lift shares of gas-oriented companies such as Range Resources, Southwestern Energy, and Cabot Oil & Gas
  • shares of many gas companies, while up from winter lows, are still lower YTD, reflecting concerns that there is too much new gas supply to sustain a rally in the gas market

Cold Winter Could Burn Natural Gas Traders  - Inventory for the winter may be headed toward its lowest level since 2005, when prices hit a record high.  Fortunately for utilities eyeing natural gas prices for the coming winter, forecasts by The Farmer’s Almanac are about as accurate as a coin flip. Unfortunately for them, official long-range temperature forecasts are only slightly better. While the almanac warns of a very cold winter, government forecasters point to a mild El Niño pattern in the Pacific Ocean, which lessens the odds of a frigid North American winter in parts of the country that rely heavily on the fuel for heating. That matters more than usual this year because, despite being a decade into a glut with no end in sight, there is little margin for error over the coming months.Domestic natural gas production of about 82 billion cubic feet a day isn’t nearly enough to provide for peak winter demand, which is why up to about 4 trillion cubic feet of gas is stored underground and nearly 3 trillion drawn upon during some heating seasons. This year, though, the U.S. Energy Information Administration expects the starting amount at the end of next month to be around 3.3 trillion cubic feet—the lowest since 2005, when natural gas prices hit their all-time high. A projected ending storage level much below 1 trillion cubic feet often spooks traders. A 2005-style hurricane-fueled squeeze is out of the question, but a big price spike isn’t. It was just four winters ago that a cold winter caused a 75% surge in futures prices to above $6 a million British thermal units. So far there is little sign of anxiety among traders, with both front-month and February futures below $3. Thursday’s weekly inventory report and forecasts for continued builds in coming weeks were encouraging, yet storage is now 20% below year-ago levels and 18% below the five-year average. Possible tough sledding ahead.

Natural Gas Prices Could Quadruple This Winter, Says Analyst --Natural gas prices could spike this winter if there is a severe cold snap. Gas stockpiles are expected to end the month of October at 3,330 to 3,370 billion cubic feet, the lowest level for an October month-end since 2005—making the market vulnerable to potential winter supply disruptions, according to a note published Thursday by Anthony Yuen, global energy strategist at Citi.

NGSA outlook sees 'flat pressure' on US prices as production helps offset record demand, lower storage — The Natural Gas Supply Association anticipates lower storage levels will be countered by soaring production this winter, resulting in neutral pressure on wholesale natural gas prices, despite record domestic consumption this winter. NGSA on Wednesday released its winter outlook, which evaluates the combined impact of weather, economic growth, customer demand, storage, supply and "wild card" factors on prices winter over winter. Overall, it said a flexible, stable marketplace is likely despite consumer demand exceeding the extremely cold winter of 2013-2014. The outlook anticipates a record demand of 102.7 Bcf/d, mostly tied to an increase in electric sector and industrial use of gas, as well as exports, combining to add 3.4 Bcf/d, on average, to consumption. On the supply side, lower storage inventories at the start of the winter -- 3.3 Tcf versus about 3.8 Tcf last winter -- were seen as exerting upward pressure on prices this winter compared with last. In contrast, offering downward pressure, production this winter was forecast to average 84.9 Bcf/d, up from 77.4 Bcf/d last winter. "You've got a flowing supply that can directly go to market that will reduce the need to draw on storage," said Donald "Blue" Jenkins, vice chairman of NGSA and chief commercial officer of EQT. "I think we're going to learn a lot about how flowing supply and storage interface with one another and how the market gets comfortable with that moving forward." A key caveat is "how does the winter show up," he said. For instance, cold in the front end of the season that requires an early storage draw could affect thinking in the first quarter, while a warmer start would make the market more comfortable headed into January and February. Jenkins added that "storage is a regional conversation." Having 3.7 Tcf in storage does not preclude regional disruptions, particularly in places that haven't invested in infrastructure to resolve winter peaks. New England and California still have the potential to be "a bit more volatile," he said. Demand was up in every category, Jenkins noted, with electricity demand forecast to reach a record 24.8 Bcf/d. The outlook considered that demand factors exert neutral pressure overall on prices. LNG exports, at 4.7 Bcf/d, were forecast to average 57% above last winter's level, but still make up only 5% of the 2018-2019 winter demand. Weather is the largest determinant in the forecast, Jenkins said. Temperatures are forecast to be 1% warmer than last winter, exerting neutral pressure on prices.

EIA Reports Larger-than-Expected 98 Bcf Storage Injection; November NatGas Drops - After a substantially bullish storage report last week, the Energy Information Administration (EIA) flipped the script as it reported a 98 Bcf build into storage inventories for the week ending Sept. 28, beating some low-ball estimates by more than 20 Bcf but still coming in within the larger range of expectations. The Nymex November natural gas futures contract was already trading about 4 cents lower just ahead of the EIA’s 10:30 a.m. ET release, but then fell another couple of cents to around $3.17 as the print hit the screen. By around 11 a.m., the prompt month had bounced back a bit to trade at $3.181, down about a nickel on the day. The EIA’s reported 98 Bcf injection was a full 10 Bcf above Bespoke Weather Services’ projection. “This comes after a 14 Bcf smaller injection last week, and in this regard, we see what may be an implicit revision following last week’s very tight print.” With the 98 Bcf build, inventories stood at 2,866 Bcf, 636 Bcf below year-ago levels and 607 Bcf below the five-year average. Broken down by region, the EIA reported a 36 Bcf injection in the Midwest, a 34 Bcf build in the East and a 22 build in the South Central. Some 8 Bcf was injected into salt dome storage, while 14 Bcf was injected into non-salt facilities. “This eases some of the storage concerns that played a role in the recent run-up in price, especially with a larger salt build,” Bespoke said. Even with Thursday’s build, however, salt dome storage remains at a 120 Bcf deficit to year-ago levels and a 107 Bcf deficit to the five-year average. But Wood Mackenzie natural gas analyst Gabe Harris questioned whether it was necessary for inventories to recover to historical highs given the rampant production growth in the United States. “The long-haul pipes from these high deliverable facilities” to the Northeast and Midwest “are not crucial anymore with production going through the roof,” he said. Another market observer agreed, saying that salts play less of a role in balancing winter demand today as Northeast production has the ability to ramp up and down daily to match price/demand. “I've see production in 2017 jump by almost 1.2 Bcf/d in a matter of three days ... as demand and cash prices rocketed higher.” Instead, salts are needed just to balance supply/demand in the Southeast quarter of the country as little wind there and plenty of coal retirements have left the Southeast “as one of the best places” for natural gas demand growth, Harris said. 

Natural gas prices are on fire this month — here's why - The country is heading into the winter with natural gas stockpiles at their lowest in at least a decade, according to the commodities research group at Barclays. At the same time, power plants are grappling with a hotter-than-usual autumn that is keeping air conditioners running. Add a series of nuclear power plant outages to the mix, and you've got a recipe for a rally. Natural gas prices are up about 12 percent over the last month to roughly $3.16 per million British thermal unit. On Wednesday, they hit a more-than-seven-month high, at $3.26 per mmBtu. Prices backed down 2 percent on Thursday after government data showed a weekly increase of 98 billion cubic feet in U.S. natural gas stockpiles. However, prices are still near their highest since the dead of last winter. Barclays expects prices to ease, but the bank warns that heading into the winter with so little gas in storage leaves the market susceptible to price spikes. "If winter weather comes in mild, then this current storage shortfall is a speed bump on the way to a looser market in 2019. If cold weather comes to fruition, though, the tenor of the 2019 outlook is fundamentally changed and the market will spend a good portion of next year just digging out of the storage deficit," Michael Cohen, head of energy markets research at Barclays, wrote in a research note on Thursday. The bank's weather outlook calls for natural gas prices to average $2.99 per mmBtu this winter, but if temperatures are 10 percent colder than anticipated, that estimate shoots up to $3.65 per mmBtu. Barclay's view that natural gas prices will moderate speaks to the roots of the rally. While low stockpiles provide a bearish backdrop, it's largely the unseasonably warm weather and unplanned nuclear power outages that are to blame. Cooling degree days, or days that were warm enough to require air-conditioning, were 20 percent higher in September than the 10-year average, according to Barclays. Meanwhile, Hurricane Florence forced power plants in the Carolinas region to shut down as much as 17 gigawatts of nuclear power, or about 10 gigawatts more than usual over the last four years. While those issues will soon pass, Barclays warns that a tug of war between market forces will determine how skinny natural gas supplies get — and how high prices rise — this winter.

Both natural gas supply and demand have increased from year-ago levels – EIA - In the first half of 2018, U.S. natural gas supply and demand grew significantly compared to the first half of 2017. According to EIA’s Natural Gas Monthly, natural gas consumption and exports averaged 93.4 billion cubic feet per day (Bcf/d) during the first half of 2018, or 12% greater than during the first half of 2017. Total supply of U.S. natural gas, including domestic production, imports, and storage withdrawals, averaged 93.3 Bcf/d during the first half of 2018, a 12% increase from the first half of 2017. The increase in U.S. natural gas supply was driven by production, especially from the Appalachia region. Total U.S. dry natural gas production rose 7.4 Bcf/d (10%) compared to the same period last year. The additional pipeline capacity brought into service since June 2017 has enabled production increases, including the Leach XPress, the Rover Pipeline, and Phase 1 of Atlantic Sunrise, all of which transport natural gas out of the Northeast region. Domestic natural gas consumption in the first half of 2018 increased in all sectors compared with year-ago levels. The largest growth occurred in the residential and commercial sectors, which increased by 3.8 Bcf/d (16%) combined, compared to the first half of 2017. Residential and commercial consumption is primarily related to heating needs, and the beginning of 2018 experienced record, prolonged cold temperatures across many of the Lower 48 states. Population-weighted heating degree days, a temperature-based proxy for heating demand, were 17% higher in the United States during the first half of 2018 than in the first half of 2017.In the U.S. electric power sector, power plants used 3.6 Bcf/d (16%) more natural gas during the first half of 2018 compared with the same time last year. Electricity demand tends to increase as hot weather increases demand for air conditioning or as cold weather increases demand for electric space heating. Natural gas consumption in the power sector has also increased with the increased buildout of natural gas-fired power plants in much of the country. Industrial consumption of natural gas in the United States (including lease and plant fuel) was 1.6 Bcf/d (6%) higher in the first half of 2018 compared to the first half of 2017. Industrial consumption of natural gas is affected by weather-related space heating needs, particularly in the Northeast and Midwest.  Overall, consumption and exports increased 2.7 Bcf/d more than production and imports in the first half of the year, which prompted withdrawals of natural gas from storage facilities. Relatively high net withdrawals and low net injections so far in 2018 have resulted in natural gas inventories falling 18% lower than the previous five-year average as of September 21, 2018.

Shell, Partners Approve $31 Billion Project to Speed Gas to Asia - -- Royal Dutch Shell Plc and its partners announced an agreement to invest in a multibillion-dollar liquefied natural gas project in western Canada -- the largest of its kind in years that will carve out the fastest route to Asia for North American gas. LNG Canada -- comprised of Shell, Malaysia’s Petroliam Nasional Bhd, Mitsubishi Corp., PetroChina Co. and Korea Gas Corp. -- confirmed the expected final investment decision in the C$40 billion ($31 billion) project, according to a statement from Shell on Tuesday. Bloomberg News reported Sunday that the group had approved the investment and an announcement was imminent. The project marks a turning point for Canada and the global gas industry. Set to be the nation’s largest infrastructure project ever, LNG Canada augurs a new wave of investments for major gas export projects after a three-year hiatus forced by fears of a global supply glut. LNG Canada will be able to send cargoes from Kitimat, British Columbia, to Tokyo in about eight days versus 20 days from the U.S. Gulf. “As the market grows, our LNG business needs to grow,” Shell Chief Financial Officer Jessica Uhl said in a call with reporters. “Demand has exceeded expectations. We believe that that pattern will continue going into 2020s.” TransCanada Corp. said in a separate statement it will move forward with its C$6.2 billion Coastal GasLink pipeline, a 420-mile (676-kilometer) conduit that will carry gas from British Columbia to LNG Canada for export. The project has all necessary permits and will have an initial capacity of 2.1 billion cubic feet a day -- about a third of Canada’s total gas demand, government data show.  Shell believes LNG demand will roughly double by 2035. LNG Canada will generate a 13 percent internal rate of return to Shell, if gas prices in Tokyo are $8.50 per million British thermal units or higher, according to the company. Prices have been lower than that for the vast majority of the past four years, but Uhl suggested there would be a “supply gap” opening up around the time the project starts selling fuel that will raise prices.

Massive Canada LNG project gets green light as Asia demand for fuel booms  (Reuters) - A massive liquefied natural gas (LNG) export project in Canada has received final approval from its partners, LNG Canada said on Tuesday, making it the first major new project for the fuel to win approval in recent years. FILE PHOTO: Cranes work in the water at the Kitimat LNG site near Kitimat, in northwestern British Columbia on April 13, 2014. REUTERS/Julie Gordon/File Photo First gas from the C$40 billion ($31 billion) project, led by Royal Dutch Shell Plc, is expected before 2025, aiming to feed an expected surge in demand for the super-chilled fuel from Asian buyers, mainly China. LNG Canada is the largest private-sector investment project in Canadian history, Prime Minister Justin Trudeau said at a news conference in Vancouver. The announcement provides a much-needed boost for Trudeau’s ruling Liberals, who have struggled with an exodus of global majors from Alberta’s oil sands and setbacks in building a crude pipeline expansion to Canada’s Pacific Coast. “We can’t build energy projects like we did in the old days where the environment and the economy were seen as opposing forces,” Trudeau said. “They must go together.” Canada is committing C$275 million to infrastructure and environmental performance measures related to LNG Canada, which will have the lowest carbon intensity of any large LNG facility in the world, Trudeau said. The project will move LNG to Asia faster than from the U.S. Gulf Coast. With global LNG demand expected to double by 2035, much of the growth will come from Asia where gas is displacing coal,

Looming large: Shell's LNG Canada seen as tip of megaproject iceberg (Reuters) - The launch of a massive liquefied natural gas (LNG) export project in Canada could fire the starting gun on a wave of other approvals around the world, potentially curbing a supply crunch expected after 2020. Royal Dutch Shell on Tuesday said it would export LNG from the west of Canada by 2025 after approving a C$40 billion ($31.2 billion) project capable of initially producing 14 million tonnes a year. That comes just weeks after Qatar, the world’s top LNG exporter, said it would expand its already huge annual output of 77 million tonnes to 110 million tonnes in the coming years. The Canada and Qatar developments will significantly boost the around 300 million tonnes of LNG traded per year, helping ease a supply shortage expected in the next decade amid surging appetite for cleaner fuels from places such as China and wider Asia. The projects are seen as just the start, with a host of other approvals - known as final investment decisions (FIDs) - expected to follow after waiting in company drawers while LNG prices recovered from a three-year slump. “LNG Canada’s FID ... (signals) the appetite to invest in LNG is back,” said Saul Kavonic, an energy researcher at Credit Suisse. With prices almost tripling from 2016 lows to over $11 per million British thermal units (mmBtu) as demand gathers steam, the industry has regained confidence and is preparing to invest in new projects again. Another 175 million tonnes per year of capacity is expected to be approved by the end of 2019. “We believe 2019 could be the busiest year of LNG FIDs ever,” said Wood Mackenzie’s director of North America gas, Dulles Wang. 

LNG Canada Raises Bar for Gulf Coast Projects - It could become harder to justify US Gulf Coast greenfield LNG proposals.Now that Shell and its partners in the $31 billion LNG Canada project have decided to proceed with the investment on Canada’s West Coast, it could become more difficult to make the economic case for greenfield LNG export proposals on the U.S. Gulf Coast. A major reason why, say analysts interviewed by Rigzone, is the difference in shipping costs to Asia from British Columbia versus facilities on the Texas and Louisiana coasts. While LNG carriers from British Columbia would enjoy a straight shot to Asian markets, vessels departing U.S. Gulf Coast terminals do not enjoy direct access to the Pacific Ocean.“There are no choke or strategic shipping points in this route such as the Panama Canal, straits of Hormuz and the straits of Malacca,” said Madeline Jowdy, senior director of global gas and LNG analysis with S&P Global Platts, adding that Asia is home to three-quarters of the global LNG market.“West Coast Canada is the closest non-Asian supplier to the north Asian demand centers of China, Japan and Korea,” said Jowdy. “Shipping costs are a critical factor in LNG due to boil off costs. During periods of global gas price convergence, the lower shipping costs are a critical factor in producing the marginal cargo.” Jowdy added that the trade war between the United States and China – specifically, perceptions about the political risk of supplying U.S.-sourced LNG to China – could dampen the prospects for some next-generation Gulf Coast projects. “China will account for roughly 35 percent of total demand growth over the next five years and, at this point, they are under-contracted,” Jowdy noted.

Canada Won’t Appeal Pipeline Ruling – WSJ —Canada said Wednesday it would waive its right to appeal a court ruling that blocked work to expand the existing Trans Mountain pipeline, arguing it would unnecessarily delay government efforts to complete the energy project.The Liberal government also unveiled plans to kick-start a new round of consultations with indigenous groups, whose lawsuits led to the latest setback to Canada’s efforts to add to limited pipeline capacity.The difficulty domestic producers face to move their crude to the U.S. and other foreign markets is weighing on the price of western Canadian crude, which now trades at a significant discount compared with global benchmarks such as Brent and West Texas Intermediate. In August, Canada’s Federal Court of Appeal annulled regulatory approval for the pipeline project, which envisages nearly tripling the amount of landlocked crude oil that can be moved from the province of Alberta to a Pacific coast port, where it can be loaded on tankers and transported to faster-growing economies in Asia. In the ruling, the appeal court said the government didn’t adequately carry out its constitutional duty to consult with affected indigenous communities, and the energy regulator relied on a study that didn’t fully consider the impact of increased oil-tanker traffic on the environment. Wednesday’s decision to waive its right to appeal and restart such consultations is the latest move by the Liberal government to get construction going on the project following the court judgment. Last month, the government instructed the country’s energy regulator to conduct another review in the span of 22 weeks, or 5½ months, with a focus on the impact of increased oil-tanker traffic on the Pacific coast.  Prior to a Wednesday morning Liberal Party caucus meeting, Canadian Prime Minister Justin Trudeau said an appeal “would take another few years” before construction could start. He said a blueprint laid out in the court ruling on how Ottawa should proceed with Trans Mountain “will allow us to get things done quicker and get our resources to new markets other than the U.S. in a more rapid fashion.”The initiatives to date from Canada demonstrate “tangible and substantial ways that our government will follow on our duty to consult on the Trans Mountain pipeline in the right way” in the aftermath of the appeal court ruling, Amarjeet Sohi, Canada’s natural resources minister, said at a news conference in the nation’s capital. “We are not going to presuppose what we are going to hear from indigenous communities. We are going to listen very carefully,” Mr. Sohi said. “And if there are appropriate accommodations to emerge, those will be considered.  Mr. Sohi declined to put a timeline on how long consultations with the affected 117 indigenous groups would take. He acknowledged some indigenous communities would likely remain opposed to the project following talks, due to the threat the pipeline project poses to their livelihood, which involves fishing off the coastline in British Columbia, Canada’s westernmost province.

Tribal Cooperation Sought to Move Trans Mountain Expansion Forward - A retired Supreme Court of Canada judge, Frank Iacobucci, has been appointed to lead a native affairs team seeking tribal cooperation with the suspended Trans Mountain Pipeline expansion project.In Ottawa, Natural Resources Minister Amarjeet Sohi said Wednesday the consultations would follow guidance in a book-length Federal Court of Appeal verdict that had overturned the project’s approval. The government will not launch a further appeal, said Sohi and Prime Minister Justin Trudeau.The Canadian government’s decision to buy the pipeline from a Kinder Morgan Inc. subsidiary was completed even after the unanimous ruling by the appeals court, which concluded that the government’s review was flawed and said Indigenous groups had not been adequately consulted.Iacobucci’s team plans to meet all 117 tribes affected by the plan to triple capacity to 890,000 b/d on the Trans Mountain conduit across Alberta and British Columbia to a Vancouver harbor tanker dock, Sohi said.The appellate  court ruled native consultations to date on the project fell short of constitutional requirements for “meaningful” and “focused” work. Sohi set no deadlines for completing the new round but indicated the government has not set a target of unanimous native consent that could delay the pipeline indefinitely."We understand there will be groups who will still oppose this project,” said the natural resources minister. “That's fine, because that's their right to do so. But that doesn't mean if we fulfill our constitutional obligation that those groups may have a veto to stop this project." The native consultations will run in parallel with a 22-week further review of oil tanker safety and environmental standards by the National Energy Board, also following instructions in the appellate court verdict. The legal setback foiled hopes for a quick start on Trans Mountain expansion construction because the government bought the pipeline for C$4.5 billion ($3.6 billion). The Canadian government has set no target date for rescuing the project from legal limbo.

Canadian Oil Pain Grows as Crude Discount to WTI Hits $40  - (Bloomberg) -- Canadian heavy crude’s discount to West Texas Intermediate futures increased to the widest in almost five years, raising the specter of local oil producers curtailing operations. Western Canadian Select’s discount for November fell 65 cents to $41.40 a barrel Wednesday, the biggest since November 2013, data compiled by Bloomberg show. The plunge came as new supply from Suncor Energy Inc.’s Fort Hills mine helps to fill pipelines to capacity. “If you get this sustained wide differential, you are going to see these guys start to ramp down production,” Mike Walls, a Genscape Inc. analyst, said by phone.When discounts widened to $30 a barrel early this year on the back of a pipeline outage, companies including Cenovus Energy Inc. and Canadian Natural Resources Ltd. said they were cutting some production or starting maintenance earlier than planned. Yet, with oil sands maintenance soon to wind down and further maintenance not planned until next spring, there is “no relief valve for the next two to four months,” according to Walls.Other grades of Canadian crude are also suffering. Light synthetic crude, produced from bitumen processed in an oil sands upgrader, fell to a $19.75 a barrel discount to New York futures on Tuesday as Syncrude Canada Ltd. prepared its upgrader next month back to full production after a plant-wide shutdown in June. New pipeline projects, including the Trans Mountain expansion to the Vancouver area, have been stymied by court-imposed delays. While increasing volumes of oil are being shifted onto rail cars, the pickup in crude-by-rail has been slow, Walls said. Exports rose one percent in July from June to 207,000 barrels a day, National Energy Board data show. Cenovus said last month it signed oil-by-rail agreements to ship about 100,000 barrels a day on tracks but the agreements won’t go into full effect until the second quarter next year.

3 reasons why Alberta oil prices have sunk - Around the world oil prices are on the rise, except in Alberta where a barrel is worth less than half of what it would fetch in the United States. Global prices are climbing as some key, oil-producing countries are in trouble — whether it's Iran facing new sanctions or Venezuela creeping closer to an economic implosion. Even in the United States, oil production growth is showing signs of a slow down. That's why prices are spiking just about everywhere. The Brent oil price, considered the global benchmark, has surged above $85 US per barrel. In the U.S., West Texas Intermediate cruised past $75 US. But in Alberta, Western Canada Select is stuck at $35 US per barrel. The divide between WCS and WTI has never been larger, according to Martin King, commodities analyst with Calgary's GMP FirstEnergy. The steep discount in Canadian oil prices compared to American prices could cost Alberta oil producers billions this year in foregone revenues. The main problem is a backlog of oil in Alberta. Here are the three reasons why that's happened.

  • Refinery outages - As the summer driving season began to wind down, some U.S.-based refineries shutdown for maintenance. That was an unpleasant surprise for Canadian oil companies in August and September because those refineries process heavy oil from Alberta. One of the refineries still shutdown is BP Plc's Whiting operation in Indiana, which is the single largest consumer of Canadian heavy crude in the U.S.
  • Pipelines full. Oilsands production continues to climb as projects like Suncor's Fort Hills facility ramp up to full activity. The problem is all that supply is "bumping into a dearth of pipeline capacity available to take it to market,"  Export pipelines out of Alberta continue to run near full capacity, and some companies are struggling to export their oil.
  • New marine fuel standards. The International Maritime Organization will have a sulfur limit rule in place for 2020, which is known as IMO 2020. The policy generally will target heavy sour crudes like those produced in Alberta in favour of low-sulphur sweet oil.  experts also say refineries in North America are sophisticated enough to reduce the sulphur content when they process Canadian heavy oil. Regardless, the sulphur restrictions are still weighing on future prices of heavy oils around the world because the potential impact is unknown.

That other trade battle—in energy—heats up - North America has a new free-trade agreement. But PetroChinamay soon be tanking up in British Columbia rather than on the Gulf Coast.The Chinese state-owned energy giant on Friday gave the thumbs-up for its 15% stake in Canada’s first liquefied-natural-gas export port, at $30 billion the country’s largest infrastructure project ever. On Tuesday 40% owner Royal Dutch Shell and its other joint-venture partners followed suit.The timing—as President Trump aims to isolate China by reaching new direct-trade agreements with allies—doesn’t look coincidental.The global energy business has always come with a heavy dollop of geopolitics, but the emergence of the U.S. as a significant exporter—and China as the world’s largest net importer—is adding a new twist. The burgeoning U.S. liquefied-natural-gas (LNG) export industry could end up as collateral damage.LNG Canada will start shipping in the early 2020s, eventually as much as 26 metric million tons of gas a year. For perspective, the U.S. exported just 14 million metric tons last year, and the whole global market amounted to just 285 million. China, by far the fastest-growing major market, already slapped a 10% tariff on American gas, and just signed a big supply deal with Qatar. With Canada also entering the game, U.S. energy companies’ ambitious expansion plans are starting to look riskier.  The irony is that in pre-trade fight days, the U.S. looked well-positioned to capture a big chunk of the Chinese market. Cheniere Energy , the largest U.S. exporter, in 2017 estimated its break-even point on sales to Asia from future projects at $7.50 to $8.50 per million British thermal units. That’s substantially below the $9 to $12 estimates for LNG shipped from Western Canada, as calculated by Paris-based Cedigaz and the Canadian Energy Research Institute.  But an increase in Chinese tariffs to 25%—as threatened—would move U.S. LNG overnight from the low end of the cost curve firmly into the middle. Add in higher steel costs for pipeline and terminal construction thanks to U.S. import tariffs, and a report that PetroChina is already considering curtailing American LNG purchases, and the storm clouds over U.S. exporters are getting hard to ignore.  Given the scale of China’s near-term needs, it may not be able to avoid U.S. LNG this winter. But the long winters to come could be chilly ones for U.S. Gulf Coast exporters—and surprisingly warm up north in Canada—if Sino-U. S. trade tensions keep ratcheting higher.

New NAFTA deal omits climate change, and hands oil and gas yet another win - President Donald Trump’s deal to tweak the trade agreement among the United States, Mexico, and Canada won early praise for changes meant to raise wages and improve safety regulations on cross-border trucking.  But on Monday, environmental groups panned the accord to replace the North American Free Trade Agreement, arguing it includes “corporate giveaways” for fossil fuel giants, excludes binding agreements on lead pollution, and contains no mention of human-caused global warming.  Neither “climate” nor “warming” are among the words in the 31 pages of the new deal’s environment chapter. NAFTA was long criticized for encouraging companies to shift polluting operations to Mexico, the poorest country with the laxest environmental rules in the trilateral trade agreement. Particular complaints focused on the investor-state dispute settlement process, a system in which companies have been historically afforded broad corporate rights that override local environmental regulations.  The new deal limits those rights, with one major exception: U.S. oil and gas companies. Under the rules, firms that have, or may at some point  obtain, government contracts to drill or build infrastructure like pipelines and refineries in Mexico ― such as ExxonMobil Corp. ― can challenge new environmental safeguards Mexican President-elect Andrés Manuel López Obrador has vowed to erect. “It’s like saying, ‘From here on, we’re going to protect the henhouse by keeping all animals away, except for foxes, they’re cool,’” That’s not the only giveaway for the oil and gas industry. The updated deal, which requires congressional approval, preserves a provision that requires the U.S. government to automatically approve all gas exports to Mexico, despite another rule mandating regulators consider the public interest.  “We urge Congress to approve” the revised deal, said Mike Sommers, chief of the American Petroleum Institute, the oil and gas industry’s biggest lobby. “Retaining a trade agreement for North America will help ensure the U.S. energy revolution continues into the future.”

Here's What Trump's New Trade Deal With Mexico Means For The Energy Industry - President Donald Trump’s new trade pact with Canada and Mexico contains provisions that free up the energy industry to continue expanding U.S. natural gas exports into Mexico without worrying about tariffs.The U.S., Mexico, and Canada Agreement (USMCA) focuses mostly on differences between the countries on the exportation of automobiles. But it does allow for continued market access for U.S. gas and investments in Canada and Mexico, which is highly dependent on U.S. natural gas exports.The oil industry’s biggest lobbying group is pushing Congress to pass the deal. “We urge Congress to approve the USMCA,” API President and CEO Mike Sommers said in a statement Monday morning. “Having Canada as a trading partner and a party to this agreement is critical for North American energy security and U.S. consumers. Retaining a trade agreement for North America will help ensure the U.S. energy revolution continues into the future.”Some in the energy industry were concerned Trump’s decision to rip up the more than 25-year-old North American Free Trade Agreement would dramatically affect oil producers’ ability to capitalize on Mexico’s growing natural gas market.“For the energy sector, there was never really a huge amount of positive stuff that could come out of this,” Sarah Ladislaw, senior vice president and director of the Energy and National Security program at the Center for Strategic and International Studies, told reporters in August. Mexico accounts for the bulk of U.S. gas exports, with 90 percent coming from pipelines and the rest from LNG. The country receives roughly 60 percent of its total gas supply from the U.S., while oil production inside Mexico has fallen nearly 45 percent since 2010.Those numbers are unlikely to change much once newly-elected Mexican President Andrés Manuel López Obrador (AMLO) takes office in December. AMLO has expressed a desire to ban fracking, which could give the U.S. an even larger market share in Mexico.

Investors wary of Mexico's new president's plans for oil -The revamped Nafta deal has raised the prospect of investment picking up again in Mexico, but foreign investors remain wary of the incoming president's proposed policies and will be closely watching his plans for the country's oil sector.The newly-minted United States-Mexico-Canada Agreement (USMCA), agreed earlier this week, has helped to soothe trade tensions between the longtime strategic allies and eased investor concerns about the Mexican economy."The agreement removes a major risk," said Jorge Mariscal, the chief investment officer for emerging markets at UBS Wealth Management. "It sets the rules of the game and injects an important source of stability that will bring back confidence."With trade concerns now ebbing, investors have shifted their attention to another potential hazard: president-elect Andrés Manuel López Obrador. He will take office in December following his landslide victory against Mexico's political establishment.While Mr. López Obrador has somewhat moderated his leftwing, nationalist stance, vowing to adhere to fiscal prudence and respect the central bank's independence, many investors are concerned about what he could do with such a decisive political mandate."He believes the public sector should have a strong hand in the economy and distrusts the private sector's ability to do business in a fair and clean way," said Kim Catechis, a portfolio manager at Martin Currie, a Legg Mason affiliate. "He's also a man who has very high convictions in himself, his ability and his policy. You put all that together and you see a higher perception of risk in Mexico." Michael Gomez, head of emerging markets at Pimco, sees the energy sector as Mr. López Obrador's "litmus test." Investors have long cheered outgoing President Enrique Peña Nieto's landmark reform in 2013 to reverse a 75-year history of state ownership and allow foreign and private investment in the oil, gas and electricity industries.

Mexico President-Elect Says Oil, Gas Contracts to be Honored -- Mexican President-Elect Andrés Manuel López Obrador signaled late last week that his administration will honor the 107 contracts awarded so far through oil and gas bid rounds conducted under the current administration led by President Enrique Peña Nieto. In a meeting last Thursday with the Asociación Mexicana de Empresas de Hidrocarburos (Amexhi), a trade group that includes heavyweights such as BP plc, Royal Dutch Shell plc, Chevron Corp. and ExxonMobil Corp., López Obrador expressed his commitment to maintaining the current energy model and to eliminating bureaucratic red tape in regulatory institutions, Amexhi said. “I’m optimistic because together we’re going to reverse the decline in oil production and move the energy industry forward,” the president-elect was quoted as saying. “This administration will not act arbitrarily. We want you to be able to invest, but we want results.” López Obrador “was very clear on respecting the contracts and was very clear that we must fulfill the obligations of these contracts,” local paper El Universal quoted Amexhi President Alberto de la Fuente as saying. López Obrador’s transition team is currently fulfilling a campaign pledge to review the contracts, which has driven speculation that his government could dispute their legality. 

Fracking expected to start at Lancashire site next week despite judge's interim order - Fracking at the UK’s first horizontal shale gas well is expected to start next week, despite a judge granting an interim order to stop the work.Francis Egan, chief executive of energy firm Cuadrilla, said he was confident the controversial hydraulic fracturing process would begin at the site in Lancashire within a week, despite continued protests.A High Court hearing will be held on Wednesday after Lancashire campaigner Bob Dennett applied for an injunction to stop the work going ahead pending the determination of a judicial review case against Lancashire County Council, which claims the authority’s emergency response planning and procedures were inadequate.  A court order issued by Mrs Justice Farbey requires Cuadrilla to stop any fracking pending the outcome of the hearing.Speaking at a media day on the Preston New Road site in Little Plumpton, near Blackpool, Mr Egan said: “We have everything on site, everything has been set up, everything has been tested and we should be ready to start fracturing next week.”Cuadrilla said work had not been scheduled to start before the hearing on Wednesday.Speaking after the request for the injunction was made, Mr Egan said: “I think it’s probably a last gasp attempt at trying to frustrate the process, trying to slow down the process, but no, this is going to go ahead.“I’m confident about that.” On Friday, small group of protesters with placards remained outside the site, which has two of the horizontal shale gas exploration wells.

Council investigating oil spill in Nelson city marina - Nelson City Council are investigating an oil spill that has affected the city's marina. Believed to have come from a vessel's bilge between 7pm and 2am on Sunday night, the spill was cleaned up by the council's environmental response team, with between two and three tonnes of vegetation removed from the foreshore. "Due to the large amount of pollutant, we believe this spill has come from a larger vessel," says Clare Barton, Group Manager Environmental Management. "We were lucky that the northerly wind direction blew the oil into the marina where it could be more easily removed, if the wind had been blowing the other direction and had it been swept along the Boulder Bank there could have been serious impacts for our wildlife. Costs of clean-up are estimated to be considerable, with material needed to be trucked from Christchurch for appropriate disposal.

Oil spill reported in Vistabella; clean-up operations ongoing - An oil spill has been reported in Vistabella. The Environmental Management Authority (EMA) says it received a report at 10 a.m. on Saturday of the presence of oil in a watercourse within the Vistabella area. The EMA said its Emergency Response and Investigations(ERI) Unit conducted an investigation to identify the potential source of the spill. The environmental body said the source was identified as Petrotrin’s Mossetville Manifold buried high pressure gas and oil line. It said Petrotrin is engaged in clean-up operations and have taken precautions of shutting off the line and deploying booms to ensure that oil will not reach the coast. The EMA said Petrotrin at this time cannot confirm the quantity of oil spilled. The environmental body says it will continue to monitor this incident.

How the world's oil refiners plan to grapple with their fuel oil output after 2020 (Reuters) - High-sulfur fuel oil (HSFO), essentially the leftovers of an oil refiner’s output, will still flow from refineries around the world even after new rules start up in 2020 curtailing its use in the global shipping fleet, a Reuters survey showed. Sixty percent of the 33 refineries contacted by Reuters in a global survey will still produce HSFO in 2020 although the supply will tighten as 70 percent of these refiners plan to reduce their output. Starting that year, ships will have to use marine fuel, which primarily consists of residual fuel oil, with a maximum sulfur content of 0.5 percent under International Maritime Organization (IMO) rules to reduce air pollution. Currently, the global shipping fleet, which includes oil and chemical tankers as well as container ships, uses as much as 3.3 million barrels per day of HSFO with a maximum of 3.5 percent sulfur. Refiners will have little incentive to produce HSFO after the regulations though some demand will remain as a small but growing number of vessels are fitted with smokestack scrubbers that remove the sulfur from the exhaust fumes and power plants will continue to consume the fuel. “Although HSFO demand for ships is expected to decline substantially in 2020, the oil’s demand for power generation and general users will remain,” When asked how they plan to reduce HSFO output, just over half of the refiners said they will upgrade their plants to further process their fuel oil to produce more higher value products such as gasoline and diesel. Two-thirds of the 16 refiners who responded to a question about how much investment they plan to pump into their plants to produce more ultra-low and low-sulfur fuel oil, said they plan to spend less than $100 million. Five of them are investing between $500 million and more than $1 billion in such projects. 

Petrochemicals set to be the largest driver of world oil demand, latest IEA analysis finds - Petrochemicals – components derived from oil and gas that are used in all sorts of daily products such as plastics, fertilisers, packaging, clothing, digital devices, medical equipment, detergents and tyres – are becoming the largest drivers of global oil demand, in front of cars, planes and trucks, according to a major study by the International Energy Agency.Petrochemicals are set to account for more than a third of the growth in world oil demand to 2030, and nearly half the growth to 2050, adding nearly 7 million barrels of oil a day by then. They are also poised to consume an additional 56 billion cubic metres (bcm) of natural gas by 2030, and 83 bcm by 2050.The Future of Petrochemicals is part of a new IEA series shining a light on “blind spots” of the global energy system – issues that are critical to the evolution of the energy sector but that receive less attention than they deserve. The report is among the most comprehensive reviews of the global petrochemicals sector, and follows other reports in the series, including the impact of air conditioners on electricity demand, the impact of trucking on oil demand, or the role of modern bioenergy in the renewables sector.Petrochemicals are particularly important given how prevalent they are in everyday products. They are also required to manufacture many parts of the modern energy system, including solar panels, wind turbines, batteries, thermal insulation and electric vehicles.“Our economies are heavily dependent on petrochemicals, but the sector receives far less attention than it deserves,” said Dr Fatih Birol, the IEA’s Executive Director. “Petrochemicals are one of the key blind spots in the global energy debate, especially given the influence they will exert on future energy trends. In fact, our analysis shows they will have a greater influence on the future of oil demand than cars, trucks and aviation.”Demand for plastics – the key driver for petrochemicals from an energy perspective – has o utpaced all other bulk materials (such as steel, aluminium, or cement), nearly doubling since 2000. Advanced economies currently use up to 20 times more plastic and up to 10 times more fertiliser than developing economies on a per capita basis, underscoring the huge potential for global growth.

Iran Finalizing Mechanism To Bypass SWIFT In Trade With Europe - Just days after Europe unveiled a "special purpose vehicle" meant to circumvent SWIFT and US monopoly on global dollar-denominated monetary transfers - and potentially jeopardizing the reserve status of the dollar - Iran said it was finalizing mechanisms for the oil trade to bypass US sanctions against the country, said Iranian Deputy Foreign Minister Abbas Araghchi.According to RT, Araghchi said that Tehran is not ruling out the possibility of setting up an alternative to the international payments provider SWIFT to circumvent sanctions imposed by Washington."As we know, Europeans are also trying to see how SWIFT can continue working with Iran, or if a parallel [financial] messaging system is necessary… This is something that we are still working on," Araghchi said.According to the Iranian diplomat, the independent equivalent of the SWIFT system that was earlier suggested by the EU to protect European firms working in Iran from US sanctions will be available for third countries.“This is the important element in SPV (Special Purpose Vehicle) that it is not only for Europeans but other countries can also use this. We hope that before the re-imposition of the second part of the US sanctions [from November 4], these mechanisms can be in place and be functional,” said the official.One can see why: the Iranian economy has been hit hard in recent days, and the Rial has plunged to all time lows, amid fears that the sanctions will cripple Iran's most valuable export resulting in a shortage of hard currency, eventually leading to a replica of Venezuela's economic collapse.Separately, Iran's Foreign Ministry spokesman Bahram Qassemi said that "after much negotiation over a clear mechanism with Europe, we have neared certain understandings; and for sure, US sabotage in that regard will fail."On September 24, Iran and its five partners released a joint statement announcing the setting up of a "Special Purpose Vehicle" to facilitate continued trade with Iran, bypass the US's financial system, and avoid any impact of America's secondary sanctions. That statement did not provide details. And EU foreign policy chief Federica Mogherini said technical talks would ensue.

Iran builds 10 million barrel capacity crude oil storage on Sea of Oman — Iranian companies signed a contract Sunday to build infrastructure for the storage of 10 million barrels of crude in the southern port of Jask on a build-operate-transfer basis, which will be Iran's second oil exports terminal, the National Iranian Oil Co. said on its website. The Eur200-million ($232-million) project will be completed in three years and will operate for 15 years. NIOC arm Petroleum Engineering and Development Co. signed the contract with Petro Omid Asia and Omid Investment Management Group. The ownership will be transferred to NIOC at the end of the 15 years. "The tanks will gather oil from West Karoun, shared oil fields and central oil fields," Managing Director NIOC Ali Kardor told state television. The storage will also feed refineries to be built in Jask. Iran aims to raise its oil-product output and sales in the face of US sanctions on its crude exports to avoid capping its oil wells like it did during the previous period of sanctions between 2012 and 2016. "This company has no plans to cut oil production; and production is continuing at full steam ahead," Kardor was quoted as saying by state television. "Iran has access to all of its oil money and can use it. We even had an around 40% increase in income from oil exports," he added. Kardor said Iran would sign an upstream deal with an unnamed "Russian consortium" under its new contract model. Twenty metal tanks will be built to store light and heavy oil received from a 42-inch, 1,100-km (682-mile) pipeline. The oil will be pumped into future marine pipes and floating buoy mooring facilities for export. Jask is a port in Hormozgan province on the Sea of Oman. A littoral area of around 5,000 hectares, 65 km west of Jask town has been allocated for oil, gas, refining and petrochemical projects. The area allocated to the storage facility is around 600 ha and can be expanded for storage of up to 30 million barrels. The contract signed was to carry out the first phase of the major plan. A second phase has been designed to store 10 million barrels.

Trump calls Saudi's King to discuss oil supplies (Reuters) - U.S. President Donald Trump called Saudi Arabia’s King Salman on Saturday and they discussed efforts being made to maintain supplies to ensure oil market stability and global economic growth, Saudi state news agency SPA reported. The call comes days after the U.S. president criticized OPEC for high oil prices and called again on the exporting group to boost crude output to cool the market ahead of midterm elections in November for U.S. Congress members. Saudi Arabia is the world’s top oil exporter and OPEC’s de-facto leader. Speaking at the United Nations General Assembly in New York last week, Trump said OPEC members were “as usual ripping off the rest of the world”. “I don’t like it. Nobody should like it,” Trump said on Tuesday. “We defend many of these nations for nothing, and then they take advantage of us by giving us high oil prices. Not good. We want them to stop raising prices, we want them to start lowering prices.” The White House said in a statement that the two leaders had a call “on issues of regional concern”, without giving further details. Oil prices rose more than 1 percent on Friday, with Brent climbing to a four-year high, as U.S. sanctions on Tehran squeezed Iranian crude exports, tightening supply even as other key exporters increased production. Brent crude LCOc1 futures settled at $82.72 a barrel, while U.S. West Texas Intermediate (WTI) crude CLc1 futures settled at $73.25 a barrel. Saudi Arabia is expected to add oil to the market to offset the drop in Iranian production. Two sources familiar with OPEC policy told Reuters that Saudi Arabia and other OPEC and non-OPEC producers had discussed a possible production increase of about 500,000 barrels per day (bpd). But OPEC and other major oil producers have so far ruled out any immediate official increase in output. The move effectively rebuffed Trump’s calls on oil producers to take action. 

How Much Oil Can Saudis Really Pump? We're Set to Find Out - Does Saudi Arabia have the extra oil? For the first time since Saddam Hussein invaded Kuwait in 1990, Saudi Arabia could face the ultimate petroleum test: pushing its complex network of oilfields, processing plants, pipelines, tank farms and export terminals to the limit, pumping every possible barrel of oil. Today another Middle East crisis is stretching the Saudi oil machine. U.S. sanctions on Iran are crippling exports from the Islamic Republic, prompting buyers to look to the world’s largest exporter for replacement barrels. In a pithy description of its role during a supply crisis, Majid Al-Moneef, a former Saudi senior oil official, told U.S. lawmakers a few years back that "Saudi Arabia is the ‘Federal Reserve of oil,’" according to American intelligence cables published by Wikileaks. Yet, unlike a central bank, the Saudis can’t print unlimited amounts of money. Their crisis-fighting tool is finite: a buffer of wells sitting idle in the desert. Use them now, and there’s nothing left for the next crisis. "Any unforeseen outages such as those from Libya, Venezuela or elsewhere could potentially expose the lack of OPEC’s spare capacity -- particularly of Saudi Arabia," said Abhishek Deshpande, an oil analyst at JPMorgan Chase & Co. The Saudis and their OPEC allies seem aware that using their spare capacity is a now a double-edged sword: it may cool down prices, but the impact could be limited by the risk-premium as the market worries about what’s left. Oil’s already passed the $80 mark despite assurances from Riyadh and its allies that it can fill Iran’s gap. Some traders are predicting oil could reach $100 this winter as the impact of sanctions ratchets up.

Hedge funds doubt Saudi Arabia will replace Iranian oil : Kemp (Reuters) - Hedge fund managers are increasingly betting Saudi Arabia and its allies cannot or will not replace all the crude lost from the market when U.S. sanctions on Iran go into effect fully from November. Hedge funds and other money managers increased their combined net long position in the six major petroleum contracts by another 50 million barrels in the week to Sept. 25. Portfolio managers have raised their combined net long position by a total of 196 million barrels over the last five weeks, according to exchange and regulatory data. Bullish long positions now outnumber bearish short ones by a ratio of more than 12:1, and the imbalance is rapidly closing in on the record 14:1 back in April. But the new wave of hedge fund bullishness is concentrated almost entirely in Brent rather than WTI or refined fuels (https://tmsnrt.rs/2OvBJTE ). Fund managers have raised their net in Brent by 172 million barrels since Aug. 21 compared with an increase of just 5 million in WTI. Fund managers now hold a net long position of almost 500 million barrels in Brent betting prices will increase even further from their current four-year high. Hedge fund long positions outnumber short ones in Brent by more than 19:1, up from a ratio of just 8:1 at the start of August, and closing in on the record 21:1 set in April. Traders foresee a shortage of seaborne crudes linked to Brent as U.S. sanctions on Iran go into effect on Nov. 4, despite reassurances from Saudi Arabia, Russia and the United States supplies will remain adequate. Concern about feedstock shortages linked to sanctions explains why position-building has been overwhelmingly concentrated in Brent rather than WTI or refined fuels. The inland U.S. crude market remains well-supplied and refined fuel markets appear balanced as an international freight slowdown and higher prices take their toll on consumption. But Brent spot prices have climbed by more than $12 per barrel (17 percent) since mid-August while the six-month calendar spread has risen almost $2.60 and swung from contango into a pronounced backwardation. 

Saudi Crown Prince to discuss Neutral Zone oil output during Kuwait trip: source (Reuters) - Saudi Arabia’s Crown Prince Mohammad bin Salman is expected to discuss the resumption of oil output from the Neutral Zone, which the kingdom’s shares with Kuwait, during a trip to the Gulf Arab state on Sunday, a source familiar with the matter told Reuters. Prince Mohammad will be accompanied by Energy Minister Khalid al-Falih during his trip to Kuwait, two separate sources said. The Saudi crown prince will hold talks with Kuwaiti Emir Sheikh Sabah al-Ahmad al-Jaber al-Sabah, the Kuwaiti News Agency has reported. The closure of the Neutral Zone’s jointly operated oilfields, mainly Khafji and Wafra, has become a political sticking point between the two Gulf OPEC allies and senior officials have been trying to resolve the issue for months. It was not clear whether the renewed talks on the Neutral Zone would result in the resumption of oil production from the area, one of the sources said. The Saudi government media office did not immediately respond to a Reuters request for comment. Khafji was shut in October 2014 for environmental reasons and Wafra has been shut since May 2015 due to operating difficulties. Any restart would come at a sensitive time for the oil markets as Washington presses Riyadh to increase oil production to bring crude prices down. The resumption of the Neutral Zone’s oilfields could add up to 500,000 barrels per day of oil output capacity to both Saudi Arabia and Kuwait. 

OPEC Output Edges Higher - -- OPEC production rose last month as deepening losses in Iran due to looming U.S. sanctions were countered by other members. The group’s 15 nations pumped 32.83 million barrels a day in September, 30,000 more than the month before, according to a Bloomberg survey of officials, analysts and ship-tracking data. Even though Iranian production fell by 140,000 barrels a day to 3.36 million -- the lowest since early 2016 -- Saudi Arabia, Angola and Libya offset the losses. Iran’s decline is expected to accelerate once sanctions formally begin in November. Major buyers of the country’s crude have already started to diversify their supplies. India was said to plan no purchases of Iranian crude in November, according to officials at the largest state-run refiners. That followed similar moves by South Korea and Japan. The Middle Eastern nation’s shipments of crude have fallen 1.1 million barrels a day, or 39 percent, since April, according to tanker tracking data compiled by Bloomberg. That outpaces the 11 percent drop in production over the same period. The tracked shipments exclude volumes held on tankers that remain close to Iran’s export terminals, after the nation resorted to storing some of its barrels at sea last month. Offsetting Losses Combined with deepening losses in Venezuela due to an economic crisis, the U.S. sanctions on Iran have propelled crude prices to a three-year high above $80 a barrel in London. While the rally has prompted President Donald Trump to demand the rest of the Organization of Petroleum Exporting Countries open the taps, they’ve been cautious so far. Although Saudi Arabia, the most powerful OPEC member, has promised to fill any shortages, it’s taking a gradual approach. The kingdom raised output by 80,000 barrels a day to 10.53 million, according to the survey. Angola, which has been ramping up the Kaombo project operated by Total SA, pumped an extra 90,000 barrels a day. Nigeria and Libya also revived some output halted earlier by internal strife. Russia, which has partnered with OPEC in a grand coalition established in late 2016, is also pushing ahead with production increases. At one point last month, its output jumped as high as 11.36 million barrels a day, a post-Soviet record, according to a government official. That means the country has fully reversed the cutbacks it implemented with OPEC last year, and is boosting output even further.

OPEC and traders in standoff over oil outlook: Kemp (Reuters) - OPEC and oil traders are now in fundamental disagreement about the market outlook and the standoff is fuelling a sharp rise in prices that could spell trouble for the global economy over the next 18 months. The overall balance between supply and demand is "healthy" according to a statement from the Joint Ministerial Monitoring Committee of OPEC and non-OPEC producers last month. The committee expressed its satisfaction regarding the current oil market outlook, according to a press statement released afterwards ("JMMC meets in Algiers to monitor developments in the oil market", OPEC, Sept. 23). But where the committee sees a balanced market and warned about downside risks to demand in 2019, traders see a market that is increasingly tight and are worried about the adequacy of future supply. Front-month Brent crude futures have jumped by almost $14 per barrel (20 percent) since the middle of August, including an increase of nearly $6 (7 percent) since the JMMC meeting, to their highest in almost four years. Brent's six-month calendar spread, which has been a good proxy for the global supply-demand balance in the last 25 years, has risen by $2.50 per barrel and swung from a small contango into a pronounced backwardation. The recent intense backwardation in Brent futures close to delivery and the surge in Oman crude prices to a rare premium over Brent are all consistent with a market that fears physical shortages in the next few months. Hedge funds and other money managers have boosted their bullish position in Brent by 172 million barrels since late August, an increase of more than 50 percent, including 50 million barrels in the aftermath of the JMMC. Nearly all hedge fund managers expect oil prices to rise rather than fall in the short to medium term, according to exchange data (https://tmsnrt.rs/2OyHccI ). 

Trump: Saudi king wouldn't last 'two weeks' without US support - US President Donald Trump said close ally Saudi Arabia and its king would not last "for two  weeks" without US military support at a rally in Mississippi on Tuesday."We protect Saudi Arabia. Would you say they're rich? And I love the king, King Salman. But I said 'King - we're protecting you - you might not be there for two weeks without us - you have to pay for your military,'" the president said to cheers at the rally.Trump did not say when he made those remarks to the Saudi monarch, but they come amid increasing oil prices in the US.Saudi Arabia is the world's top oil exporter and the de facto leader of the oil-producing bloc, OPEC, which has been criticised by Trump for high oil prices. Trump called King Salman on Saturday to discuss efforts to maintain supplies to ensure oil market stability and global economic growth, according to Saudi state news agency SPA.Saudi Crown Prince Mohammed bin Salman travelled to Kuwait last weekend to speak with Kuwaiti Emir Sheikh Sabah al-Ahmad al-Jaber Al Sabah, reportedly about increasing oil production. No further developments have surfaced from the Kuwait meeting but media reports said the Gulf crisis was also on the agenda of the talks. Speaking at the United Nations General Assembly in New York last month, Trump said OPEC members were "as usual ripping off the rest of the world".

Qatar's energy minister defends OPEC from Trump, says it has not manipulated oil prices - Qatar's energy minister has defended OPEC's oil market strategy,  saying a deal between the oil producing group and non-OPEC producers is not aimed at manipulating oil prices."OPEC is not trying to manipulate the price, it's trying to bring the market to balance," Qatar's Minister of Energy and Industry Mohammed Bin Saleh Al-Sada, told CNBC on Wednesday.President Donald  Trump has argued that OPEC and non-OPEC producers' late-2016 deal to curb production, made in a bid to support prices and balance oil market supply and  demand dynamics, is hurting consumers. He has called on OPEC's de facto leader Saudi Arabia, and Russia, to raise output.Al-Sada said low oil prices do not  necessarily have a positive impact on global economic growth, however."When OPEC took the measure to restrict the production from its end, as well as some allied (oil producing) countries, it was meant to shave the extra excessive stock which was at a record high that was depressing the oil price. That depression of the oil price led to what? (Did it) lead to a better world economy?," he told a panel moderated by CNBC's Geoff Cutmore at the Russian Energy Week in Moscow."In fact, there was the worst record for the global economy during that downturn in the oil price," he said. "Now during the journey of the recovery in the oil price looks what happened - the balance (in the market) between supply and demand has taken place, the world economy is at its best now," he added.

OPEC 'powerless to prevent' oil prices jumping toward $100 a barrel this year OPEC - kingpin Saudi Arabia is ill-equipped to prevent a supply shock in the energy market, analysts told CNBC on Monday, as oil traders prepare for the possibility of $100 a barrel before year-end."Nobody wants to get caught short, full in the knowledge that more Iranian barrels are poised to be removed from the market," Stephen Brennock, oil analyst at PVM Oil Associates, said in a research note published Monday. Late last month, President Donald Trump urged OPEC producers to ratchet up production levels to prevent further price rises ahead of the mid-term elections in early November. China initially rejected a U.S. request to choke off the flow of petrodollars to the Islamic republic but, amid intense pressure from the Trump administration, the Asian giant is now reportedly taking steps to comply.China's top state refiner, Sinopec Corp, was seen halving its loadings of Iranian crude in September, Reuters reported Friday, citing unidentified sources. The prospect of a reduction from Sinopec would constitute a significant blow for Iran. That's because OPEC's third-largest producer considers China to be its leading oil client at a time when European producers and other global buyers are dramatically reducing Iranian crude purchases to avoid U.S. sanctions.

US State Department tweets but should the Middle East listen? - An undiplomatic tweet from the US State Department has betrayed a worrying lack of understanding both of the oil market and American strategy in the Middle East.  The missive, which apparently reflects President Donald Trump’s views, stated that, “Opec nations are ripping off the rest of the world. We defend many of these nations for nothing, and then they take advantage of us by giving us high oil prices.”  OPEC nations are ripping off the rest of the world. We defend many of these nations for nothing, and then they take advantage of us by giving us high oil prices. We want them to stop raising prices, we want them to start lowering prices — EnergyAtState (@EnergyAtState) September 25, 2018  This chimes with a recent report by Securing America’s Future Energy, a campaigning group advocating less American reliance on oil, which argues that the US military spends at least $81 billion (Dh297.4bn) annually on protecting global oil supplies, equivalent to $11.25 per barrel consumed in the US.  Yet the US is pushing up oil prices itself by imposing sanctions on Iran and Venezuela. And, through purchases of American armaments, the Middle East states do in fact make a large financial contribution.  But the biggest weakness in this view is that it misunderstands the reason for the US military presence  in the Middle East. The US is no longer in the region to defend its own oil supplies; it is there to maintain its global power, and to deter China. Otherwise, who, other than a weak Iran, is the Middle East foe that requires $81 billion per year to deter?

China halts all oil imports from US amid escalating trade war RT  -America’s second-largest oil client, China, has completely stopped buying crude from the United States as trade tensions between the world’s two largest economies continue to grow.  While oil has not been included on the list of bilateral tariffs, Chinese refiners have been staying away from buying crude from the US.  “We are one of the major carriers for crude oil from the US to China. Before [the trade war] we had a nice business, but now it’s totally stopped,” Xie Chunlin, the president of CMES, said on the sidelines of the Global Maritime Forum’s Annual Summit in Hong Kong, as quoted by Reuters.“It’s unfortunately happened, the trade war between the US and China. Surely for the shipping business, it’s not good,” the CMES president said.He added that the trade war was also forcing China to diversify its soybean supplies. Beijing is now buying most of its soybeans from South America.China’s crude oil imports from America reached an average of 334,880 barrels per day through August, making Beijing the second-largest buyer of US oil after Canada.In fact, China may be the largest buyer of American crude since much of the oil imported by Canada is re-exports – Canadian crude that briefly crosses into the US on pipelines before re-entering Canada. After ending a 40-year ban on oil exports in late 2015, the US has ramped up sales to two million barrels per day (bpd).China buys most of its crude from Russia, with imports soaring from 665,000 bpd in 2014 to 1.2  million bpd last year. Beijing’s other major suppliers are Saudi Arabia and Iran.

Putin says Trump is right about oil prices being too high — but adds US is partly to blame -Russian President Vladimir Putin has said President Donald Trump is "right" to complain that global oil prices are too high — but added Trump is to blame for higher prices."President Trump has said he thinks the oil price is too high. Well, probably to some extend he's right, but we are absolutely OK with it at $65 to $75 per barrel to ensure the efficient operation of oil companies and ensure investment," Putin said Wednesday during an address to delegates at the Russia Energy Week forum in Moscow."But let's be frank, such oil prices are to some extent the result of the U.S. administration. I'm talking about sanctions against Iran, about political problems in Venezuela and just looking at what's happening in Libya."Putin added: "If we touched upon the topic we are discussing now with him (Trump), I would say, if you want to find the culprit of who's guilty that prices are growing then you should just have a look in the mirror." Putin's comments come after Trump criticized Russia and OPEC for a 2016 deal in which they agreed to curb oil output in a bid to support prices that had slumped in mid-2014 due to a glut in global supply.The deal has worked and oil prices rose. The deal, and subsequent price rise, has drawn criticism from Trump, who said OPEC, Saudi Arabia and Russia are keeping prices high and called on them to increase production and thereby bring down oil prices. Trump's criticism of the major oil producers ignores the fact that his own decision to implement sanctions on OPEC members Iran and Venezuela has also put pressure on oil prices, with markets fearing a shortfall in global supply.

Russian Oil Output Rises to Record as OPEC Cuts Rolled Back --  Russia’s oil production rose to a post-Soviet high last month as the country completely rolled back the output cuts it had agreed on with OPEC, then pumped some more.The country produced a record 11.356 million barrels of oil and condensate a day in September, according to data released Tuesday by the Energy Ministry’s CDU-TEK statistical unit. That’s an increase of almost 150,000 barrels a day from August and follows Russia’s June agreement with OPEC to boost supplies amid climbing prices.OPEC itself raised output by 30,000 barrels a day last month as deepening losses in Iran were countered by other members, a Bloomberg survey showed.Russia’s production exceeded the previous high of 11.247 million barrels a day reached two years ago. That shows the country has completely erased its 300,000-barrel-a-day cut agreed on with the Organization of Petroleum Exporting Countries in 2016, and has added over 100,000 barrels a day more. The nation’s production next year may increase by an average of 300,000 barrels a day, excluding seasonal factors, according to Sagers.Energy Minister Alexander Novak said last month that the country had spare capacity to add more barrels if needed -- “a few hundred thousand barrels” -- yet a specific amount would depend on the market.  Among Russia’s top producers, state-run Rosneft PJSC and the Sakhalin-1 project, led by Exxon Mobil Corp., were key drivers of September’s output boost, according to Bloomberg calculations based on the CDU-TEK data. Smaller companies also contributed, as other majors including Lukoil PJSC, Gazprom Neft PJSC and Surgutneftegas PJSC held output steady or even reduced supply. Rising output from Russia -- and from OPEC partner Saudi Arabia -- hasn’t stopped oil prices from surging to an almost four-year high as losses from Iran boost supply concerns even before U.S. sanctions take effect in November. Brent crude rallied almost 10 percent in the past month, topping $85 a barrel on Monday for the first time since October 2014.

Oil's Leap Toward $100 Softens the Blow of Russia Sanctions -- When former U.S. President Barack Obama first imposed sanctions on Russia in 2014, a plunge in global crude prices turned the penalties into a crushing blow. This time round, oil markets are doing the opposite. As U.S. lawmakers mull a new round of “crippling” sanctions, some traders are predicting the price of Russia’s main export will hit $100 a barrel for the first time since 2014. The windfall from higher oil revenue could end up mitigating the effect of even the harshest measures under discussion in Washington and investors are picking up Russian government bonds on the back of crude’s gains. “The surge in oil prices should outweigh the sanction fear,” said Viktor Szabo, a portfolio manager at Aberdeen Standard Investments in London. “Russia is one of the strongest among emerging markets in terms of fundamentals.” The renewed threat of U.S. penalties lumped Russian assets in with the worst performers amid the summer’s broader emerging-markets slump, but the subsequent crude-oil rally and central bank ruble support have sparked a rebound. In Washington meanwhile, U.S. lawmakers continue to brandish sanctions that could see a ban on new sovereign debt sales and even shut Russian banks out of the international financial system.

US Interior Secretary: Naval Blockade is an Option for Dealing with Russia  - Speaking Friday at an industry event in Pittsburgh hosted by the Consumer Energy Alliance, US Interior Secretary Ryan Zinke said the US Navy can blockade Russia if needed in order to keep it from controlling energy supplies in the Middle East as it does in Europe. "The United States has that ability, with our Navy, to make sure the sea lanes are open, and, if necessary, to blockade… to make sure that their energy does not go to market," Zinke said. According to Washington Examiner, Zinke attended the event to explain why the technology of hydraulic fracturing, also known as fracking, and the shale energy boom has supposedly given the US an edge over its rivals Russia and Iran, by making the US less dependent on foreign sources of energy.The Interior Secretary believes that the reason why Russia entered the Middle East is hydrocarbons trade.  "Russia is a one trick pony," Zinke said, stating that Russian economy depends solely on its ability to sell energy. "I believe the reason they are in the Middle East is they want to broker energy just like they do in Eastern Europe, the southern belly of Europe."Answering the question on how the US should deal with Russia and Iran, Zinke said that "there are two ways.""There is the military option, which I would rather not. And there is the economic option," he said. "The economic option on Iran and Russia is, more or less, leveraging and replacing fuels."  "We can do that because… the United States is the largest producer of oil and gas," Zinke added.

Official- Washington ready to impose naval blockade on Moscow over oil supplies - The US could impose a naval blockade on Russia if necessary to limit its role in controlling global energy supplies, according to a senior US official."The United States has that ability, with our navy, to make sure the sea lanes are open, and, if necessary, to blockade ... to make sure that their energy does not go to market," Secretary of the Interior Ryan Zinke said Friday at an industry event hosted by the Consumer Energy Alliance, Press TV reported.Zinke underscored that hydraulic fracturing, or fracking, along with the shale energy boom had put the US in an advantageous position over Russia, by making the country less dependent on foreign energy.The administration of President Donald Trump has fiercely opposed energy projects by Russia, including the Nord Stream II pipeline to Germany, because it would give Moscow leverage over Europe. Trump has been pressuring European countries to purchase more US natural gas and reduce their dependence on Russian energy."President Trump has been clear: America has to be energy dominant," Zinke said. "We have relit the pilot light of American energy under this president. We are incorporating industry innovation, best science and best practices to improve reliability, safety and environmental stewardship. Our energy strategy is ‘all-of-the-above,’ leveraging every source of energy to take our nation forward. I am bullish about America’s energy future."

US energy executives expect $69/b WTI, but uncertainties abound: Dallas Fed  — US energy executives expect WTI to close 2018 at nearly $69/b as oil production continues to grow, but at a slower pace than earlier this year, the Federal Reserve Bank of Dallas said in its quarterly survey of oil and gas firms. Not registered? Receive daily email alerts, subscriber notes & personalize your experience. Register Now But there are a growing numbers of uncertainties, including the arguably sluggish pace of developing oil takeaway capacity out of the Permian, pending sanctions on global oil flows and the impact of steel tariffs on US shale development, the survey shows. Respondents to the survey, which included executives at 110 exploration and production companies and 61 oilfield services companies, said they expected WTI prices to be between $55/b and $85/b at the end of 2018. NYMEX WTI November was trading at $74.05/b Monday morning, up 80 cents/b from Friday's settlement. EIA currently forecasts WTI to average $67.69/b in Q4 and then to fall to $64.69/b in Q1. Overall, EIA expects WTI to average $67.03/b in 2018 and $67.36/b in 2019. But anonymous comments from within the Dallas Fed survey show that there is much uncertainty about future oil prices, particularly due to the supply impact of looming US sanctions on Iranian crude and continued declines in Venezuelan output. "Shale producers in the US will not be able to ramp up production as fast in 2019 as we have over the past two years," one executive at an oil services firm said. "Calls for increased production could only be answered by Saudi Arabia and Russia, and I doubt they have the excess capacity to satisfy demand growth."  An E&P executive said that any major disruption out of the Middle East will likely cause a price spike. "The capacity of any of the major producers to significantly increase daily production from current levels is limited, at best, and that is a formula for an exaggerated price of crude if a disruption does occur," the executive said. Overall, 64% of the executives polled said the global oil market will be close to balance in 2019, with 26% stating it will be undersupplied and 10% believing it will be oversupplied. EIA forecasts total global liquids production to average 101.65 million b/d in 2019, about 80,000 b/d above global demand.

Brent oil near four-year high ahead of Iran sanctions, but demand concerns loom -- Brent crude oil hovered close to its highest since November 2014 on Monday, supported by supply concerns before U.S. sanctions against Iran come into force next month. Benchmark Brent crude oil futures rose 48 cents to $83.21 at 9:48 a.m. ET (1348 GMT), having touched their highest in almost four years at $83.32. U.S. West Texas Intermediate (WTI) crude futures were up 26 cents at $73.51 a barrel.  "Saudi Arabia are signalling that they do not have a lot of prompt spare capacity available, or that they don't have the will to really use it on a proactive basis,"  There's nothing right now that gives a strong incentive to be a strong seller of the market."Investors have indicated that they see prices rising, loading up on options that give the holder the right to buy Brent crude at $90 a barrel by the end of October. Open interest in call options at $90 a barrel has risen by nearly 12,000 lots in the past week to 38,000 lots, or 38 million barrels. Higher oil prices and dollar strength, which has battered the currencies of several big crude importers, could hit demand growth next year, analysts said.But for now the focus is U.S. sanctions on Iran's energy industry, which come into force on Nov. 4 and are designed to cut crude exports from the third-biggest producer in the Organization of the Petroleum Exporting Countries (OPEC).Several major buyers in India and China have signaled that they will cut purchases of Iranian oil. China's Sinopec said it had halved loadings of Iranian oil in September. "If Chinese refiners do comply with U.S. sanctions more fully than expected, then the market balance is likely to tighten even more aggressively,"

Oil surges above $75 to the highest level since November 2014 - U.S. crude prices surged on Monday, hitting a nearly four-year high on signs that sanctions are shrinking Iranian crude exports and as North American trade tensions ease.U.S. West Texas Intermediate crude ended Monday's session up $2.05, or 2.8 percent, at $75.30, its best closing prices since Nov. 24, 2014. WTI hit a session high of $75.48, breaking through this year's intraday peak in July.International benchmark Brent crude was last up $2.31, or 2.8 percent, at $85.04, having hit its highest since November 2014.Oil prices rose after the United States, Canada and Mexico announced they had agreed on a path forward for the North American Free Trade Agreement, or NAFTA. A trade dispute among the three trading partners has raised fears of a slowdown in growth that could impact oil demand."The stock market is loving it. It unleashes some more economic activity. It should enable Mexico to buy some crude oil off of us," said John Kilduff, founding partner at energy hedge fund Again Capital.The market was also bouncing on news that China's Sinopec has cut crude imports from Iran in half ahead of the Trump administration's Nov. 4 deadline for oil buyers to stop importing Iranian supplies.Questions have lingered about whether China, the world's second biggest crude consumer, would comply with the U.S. sanctions.The National Iranian Oil Company's deal to build a crude oil storage facility at the port of Oman is also being viewed as tacit acknowledgment that Iran expects the market for its crude to shrink, Kilduff said.U.S. sanctions on Iran, OPEC's third biggest oil producer, are expected to wipe roughly 1 million barrels a day off the market by the end of the year.

What Drove Brent Above $85- Oil prices spiked on Monday on heightened fears of a supply crunch as more Iranian oil goes offline. Also, news reports suggesting that China is also cutting imports from Iran are only going to add to the bullish sentiment since China was expected to resist U.S. pressure regarding Iranian oil purchases. Brent topped $85 per barrel on Monday. “It shows that the market is not convinced about the ability of the producers’ group to replace Iranian barrels,” said Tamas Varga, an analyst at PVM Oil Associates Ltd., according to Bloomberg. Iranian oil exports are plunging, and fell to their lowest level since at least February 2016 last month at 1.72 million barrels per day. That was a decline of around 250,000 bpd from August, and down roughly 1 mb/d since a peak in April, according to Bloomberg. However, Iran likely has diverted more oil to storage at sea in the Persian Gulf.  Saudi crown prince Mohammad bin Salman reportedly discussed the idled Neutral Zone oil fields with Kuwait when he held talks with the Kuwaiti Emir on Sunday. The fields, capable of producing around 500,000 bpd, have been shuttered for several years. The latent capacity is more important than ever as the oil market continues to tighten and traders focus their scrutiny on Saudi spare capacity.  U.S. President Donald Trump reportedly called Saudi King Salman on Saturday, and although the White House was cagey about the specifics, it appeared to be about a request to keep oil prices in check. The call comes just days after Trump criticized OPEC in a speech at the UN General Assembly.  A U.S. Senate subcommittee will hold a hearing on Wednesday to look at the No Oil Producing and Exporting Cartels Act (“NOPEC Act”), which would revoke the sovereign immunity that has protected OPEC countries from lawsuits over manipulating the oil market. If passed, the U.S. could sue OPEC members for collusion. The bill has been kicked around for years but past American administrations, from both parties, have opposed it for fear of damaging the U.S.-Saudi relationship. The difference now is that some analysts think that Donald Trump may actually support it.

U.S. and Brent crude reach highest settlements in nearly 4 years -- Oil futures rallied by almost 3% on Monday, lifting both U.S. and global benchmark crude to their highest price settlements in nearly four years. Michael Lynch, president of Strategic Energy & Economic Research, told MarketWatch he was surprised by the strength of Monday’s rally, but believes that prices got a boost from the pending trade agreement between the U.S., Canada and Mexico, as well as “growing attention on the possibility that we’ll hit $100,” a barrel. Still, “almost any bearish news should see a sell off” in prices, he said. November West Texas Intermediate crude CLX8, -0.04% the U.S. benchmark, rose $2.05, or 2.8%, to settle at $75.30 a barrel on the New York Mercantile Exchange. December Brent crude LCOZ8, -0.40% rose $2.25, or 2.7%, to mark a finish at $84.98 a barrel on the ICE Futures Europe exchange, after tapping a high of $85.40. WTI marked its highest front-month contract settlement since late November 2014, while Brent finish at its highest since late October 2014, according to FactSet data. Read: Oil prices usually decline in the fourth quarter, but may buck that trend this year Monday’s moves come after Brent crude posted a weekly gain of 5%, based on the front-month contract, while WTI oil saw a weekly climb of 3.5%, according to Dow Jones Market Data. For the month, Brent advanced 6.8%, while the U.S. contract returned 4.9% in September.

Middle East sour crude oil grades surge to 4-year highs amid global crude rally — Prices of Middle East sour crudes surged to four-year highs within the first two trading days of October, carried by a global rally in crude oil, market sources said Tuesday. The price for December Dubai crude, currently the front month in the Platts Market on Close assessment process, rose to $82.95/b at the end of Asian trading hours on Tuesday. It was $80.80/b Monday, marking a surge of $2.15/b on the day and a four-year high for cash Dubai M1. Cash Dubai M1 was last higher in 2014, when the flat price touched $83.61/b on October 31, 2014, according to S&P Global Platts data. Global sentiment for crude oil remained bullish on supply side concerns stemming from questions about OPEC's remaining spare capacity amid rising end-year demand and impending Iranian sanctions, market participants said. "Market focus is on how much an OPEC production increase will compensate for the supply losses due to Iranian sanctions," ANZ analysts said in a note. The increase in Dubai prices was more than simply a structural result of the global crude complex moving higher, sources said. Data on the screen of the Intercontinental Exchange showed active volume traded on the various Brent/Dubai spread derivatives available on the exchange Tuesday. "November Brent/Dubai [instruments] on ICE also going through in very large numbers [volume wise] - 4 to 5 million barrels done today," a Singapore-based trader said Tuesday. At the close of business at 4:30 pm Singapore time (0830 GMT), approximately 4.6 million barrels equivalent of November and December Dubai-related contract volume had been traded via ICE, including private broker deals, the data showed. The volume includes the November/December Dubai 1st line spread, as well as the December Brent/Dubai Exchange Futures for Swaps spread. The robust trading activity on the Dubai derivatives continued from the Monday, when approximately 3.69 million barrels equivalent of these contracts traded as of 4:30 pm Singapore time, for a combined total of 8.29 million barrels in the first two days of October. December Brent/Dubai EFS -- an indicator of Dubai's strength relative to Brent -- kept pace with the global rally in December ICE Brent crude futures this week. The EFS has kept steady at $3.54/b since Monday, despite the sharp uptick in the Brent half of the spread, implying equivalent strength for the Middle East sour crude grade.

As oil prices rise, US locks in on Iran sanctions — Rising global oil prices will not deter the Trump administration from pushing sanctions forward on Iranian crude exports in November, several analysts told S&P Global Platts Tuesday. And, rather than developing a contingency plan which may delay or phase in Iranian sanctions, the administration appears emboldened by the current price environment, these analysts said. "I just don't see them wavering right now,"  said Amy Myers Jaffe, director of the Council on Foreign Relations. After closing at their highest levels since 2014 on Monday, ICE December Brent settled at $84.80 Tuesday, down 18 cents/b from Monday and NYMEX November WTI settled at $75.23/b Tuesday, down 7 cents/b from Monday. Trump administration officials are confident they can get Saudi Arabia and other OPEC nations to boost supply in coming weeks and an expected increase in US shale oil production will also further dull the impact of Iranian sanctions, set for reimposition on November 5, Myers Jaffe said. US oil production is expect to climb roughly 500,000 b/d by the end of the year, from about 10.7 million in September to about 11.2 million b/d in December, according to the US Energy Information Administration. S&P Global Platts Energy Symposium: North American Crude Oil Exports Summit | October 9, 2018 | Houston, TX The summit invites international buyers and North American producers, midstream managers and port officials to examine the changing dynamics of U.S. crude specifications, flows, prices and arbitrage. REGISTER Platts Analytics expects Iranian crude and condensate exports to fall to 1.1 million b/d by October loadings, and to 800,000 b/d by Q4 2019, down from 2.91 million b/d in April. It remains unclear how much the loss of that much oil from the world market may impact prices, but administration officials are not considering a weakening of sanctions or a gradual imposition in response, said Elizabeth Rosenberg, director of the energy program at the Center for a New American Security and a former senior sanctions adviser at the Treasury Department. "That isn't to say that some people aren't mindful of the price and are concerned about its fallout," Rosenberg said. "But, broadly speaking, this administration is very comfortable with economically destructive policies and they even embrace them. They'll be happy to place the blame on someone else." No matter how oil prices may go, the administration is unlikely to ever weaken its sanctions reimposition approach and is likely not even considering a delay. "It would be intolerable for them to back off such an important policy," Rosenberg said. "Appearing weaker than the Obama administration would be a tough pill for them to swallow."

Brent oil prices near Nov. 2014 highs ahead of US sanctions against Iran --Oil prices dipped on Tuesday but remained near their highest since November 2014 as markets braced for tighter supply once U.S. sanctions against Iran kick in next month.International benchmark Brent crude oil were down 16 cent at $84.82 per barrel by 11:15 a.m. ET (1515 GMT) after reaching a new four-year high of $85.45 in the previous session.U.S. West Texas Intermediate (WTI) crude futures fell 21 cents to $75.09 a barrel, having hit a nearly four-year high of $75.91 earlier in the session. Brent and WTI have roughly tripled compared with lows seen in January 2016, which prompted OPEC and allies led by Russia to curb oil supplies to rebalance an oversupplied market starting in January 2017. Sentiment was lifted by a last-gasp deal to salvage NAFTA as a trilateral pact between the United States, Mexico and Canada, rescuing a $1.2 trillion a year open-trade zone that had been about to collapse. More fundamentally, oil markets have been pushed up by looming U.S. sanctions against Iran's oil industry, which at its most recent peak this year supplied nearly 3 percent of the world's almost 100 million barrels of daily consumption.  A Reuters survey of OPEC production found Iranian output in September fell by 100,000 barrels per day, while production from the group as a whole rose by 90,000 bpd compared with August."Oil prices continue to climb, supported by the nearing Iran embargo and related supply concerns," said Norbert Ruecker, head of commodity research at Swiss bank Julius Baer.HSBC said in its fourth-quarter Global Economics outlook that "our oil analysts believe there is now a growing risk it (crude) could touch $100 per barrel."  The Trump administration set a deadline of Nov. 4 for oil buyers to stop purchasing Iranian crude. Many analysts say OPEC will struggle to cover a decline in exports from Iran. Britain's Barclays bank, however, said "OPEC has ample spare capacity."

Oil dips below four-year highs; U.S. inventory build expected  (Reuters) - Oil prices eased slightly on Tuesday after rallying for three straight sessions, but remained close to four-year highs on worries that global supplies will drop due to Washington’s sanctions on Iran. In addition to the worries that Iran, prices are being supported by global demand that has remained strong in the face of trade tensions. Brent fell 18 cents to settle at $84.80 per barrel, a day after hitting a four-year high of $85.45. U.S. West Texas Intermediate (WTI) crude futures CLc1 were off 7 cents at $75.23 a barrel, after earlier touching a four-year high of $75.91. Analysts polled by Reuters forecast that U.S. crude stocks rose about 2 million barrels last week ahead of data from industry group the American Petroleum Institute (API) due out at 4:30 p.m. and from the U.S. government on Wednesday morning. Crude prices have roughly tripled from lows hit in January 2016 after the Organization of the Petroleum Exporting Countries and allies led by Russia cut output. Oil market sentiment was lifted by Sunday’s last-gasp deal to salvage NAFTA as a trilateral pact between the United States, Mexico and Canada. The U.S. sanctions against Iran’s oil industry, which at its peak this year supplied nearly 3 percent of the world’s daily consumption, are due to go into effect on Nov. 4. A Reuters survey of OPEC production found Iranian output in September fell by 100,000 barrels per day, while production from OPEC as a whole rose by 90,000 bpd from August. “Our oil analysts believe there is now a growing risk it (crude) could touch $100 per barrel,” HSBC said in its fourth-quarter Global Economics outlook. Many analysts say OPEC will struggle to cover a decline in exports from Iran. Britain’s Barclays bank, however, said, “OPEC has ample spare capacity.” Soaring crude prices and weak emerging market currencies may erode economic growth. “Softening demand growth and new supply should cool the bullish sentiment and push prices lower by the end of the year,” Barclays said.

WTI Holds Gains After Cushing Stocks Build Most Since March - WTI held above $75 today but did not extend yesterday's surge gains ahead of tonight's API print. After last week's surprise build, crude was expected to build again, and did but it was Cushing that surprised with the biggest rise in stocks since March.“It shows that the market is not convinced about the ability of the producers’ group to replace Iranian barrels,” said Tamas Varga, an analyst at PVM Oil Associates Ltd. in London. API:

  • Crude +907k (+1.5mm exp)
  • Cushing +2.018mm (+800k exp) [Genscape +600k]
  • Gasoline -1.703mm
  • Distillates -1.197mm

A second weekly build for crude and the biggest weekly rise in Cushing stocks since March...WTI hovered just above $75 ahead of the API print, holding most of yesterday's impressive ains, and thoroughly unimpressed at the crude builds from API...“The market bounces around a lot,” Michael Lynch, president of Strategic Energy & Economic Research, said. “As of now, people are hedging on the side of fear rather than working the probabilities.”

Oil Climbs as Iran Fears Eclipse Big U.S. Crude Build - - Oil prices gained ground on Wednesday as market participants stayed focused on upcoming Iranian sanctions and their expected squeeze on supply, despite weekly data showing U.S. crude stockpiles ballooning four times more than expected. Crude oil inventories across the United States rose by 7.975 million barrels during the week ended Sept. 28, vs. analysts’ forecasts for a build of 1.98 million, the Energy Information Administration (EIA) said. In the previous week to Sept. 21, stockpiles rose by 1.85 million. Crude prices fell initially on the outsize inventories reported by the EIA. As trading progressed, however, the mood shifted back to the theme that had dominated the market over the past few months. U.S. sanctions on Iranian oil exports will begin on Nov. 4 and could take some 3% off the global market’s daily supply. New York-traded West Texas  Intermediate (WTI) crude for November delivery settled up $1.18, or 1.6%, at $76.41 per barrel, after racing to $76.90, a new peak since November 2014. It fell as much as 92 cents initially, to an intraday low of $74.31, on the EIA report. London traded Brent crude for December delivery was up $1.40, or 1.7%, at $86.20 a barrel by 3:00 PM ET (19:00 GMT). Brent’s high for the day was $86.73, a peak since October 2014. Some traders, who had expected oil prices to settle lower on the EIA report, said Wednesday’s highs were clearly against fundamentals, particularly given the stronger performance of the dollar, which was another negative for commodities. “In our opinion, on the global macro, with the front 10-year yield inching higher along with a little strength in the U.S. dollar, the only thing keeping crude from a large move down is the upcoming Iran sanctions,” said Tariq Zahir, managing member at Tyche Capital Advisors in New York, which typically makes bets on calendar spreads of WTI. Iran is the world’s fourth-largest oil producer and the third-largest exporter in the Organization of the Petroleum Exporting Countries (OPEC). It produced a peak of 2.7 million barrels per day in May and could be prevented from shipping up to 1.5 million bpd under U.S. sanctions. Many energy analysts fear that OPEC and other major non-OPEC producers, including Russia, have little spare capacity to make up for the shortfall in Iranian supplies from November, and expect Brent to hit $100 a barrel or so from the squeeze

Weekly EIA petroleum report-- October 3, 2018 - Weekly EIA petroleum report: link here.

  • wow!  US crude oil inventories increased by most I have seen in the two years I have followed
  • US crude oil inventories up a whopping 8.0 million bbls
  • refiners are operating at 90.4% of their operable capacity
  • crude oil imports keep increasing; up 10.2% more than the same four-week period one year ago
  • WTI up almost 1%; OPEC up over 2% but let's see what WTI/OPEC basket does by the end of the day
  • at 404.0 million bbls, US crude oil inventories at five-year average; my threshold is 400 million bbls; the five-year average includes the Saud Surge, 2014 - 2016
  • gasoline? awash in gasoline -- inventories decreased by half a million bbls, but gasoline inventories still 7% above five-year average for this time of year
  • gasoline and distillate production right on target: 10.0 and 5.0 respectively
  • 30-second speech: refiners at 90% capacity (autumn maintenance; switch over to winter grades) simply means that inventory built up; once we get to 97% capacity, the inventories will start to drop
  • this happened back in March -- same thing -- spring maintenance; switch over to summer blends
  • by the way, Cushing inventories were getting so low, some thought some tanks would bottom out

WTI Tumbles On Biggest Crude Build In 19 Months -  Modest overnight gains following API's data have been erased as DOE reports a massive surprise (biggest since March 2017) crude build...“We’re right in the middle of refinery maintenance season and you’ll probably see a lot of demand coming offline,” says Michael Loewen, a commodities strategist at Scotiabank. “It might take a few market participants by surprise to see a larger build than what we are used to in crude oil inventories” DOE:

  • Crude +7.975mm (+1.5mm exp) - highest since Mar 2017
  • Cushing +1.699mm (+800k exp) [Genscape +600k] - highest since March 2018
  • Gasoline -459k (+1.25mm exp)
  • Distillates -1.75mm

Massive crude build shocks the market...Bloomberg notes that you can't really pin this week's huge crude build on refiners. Gross inputs were little changed and are the highest ever historically for this week. US Crude production held at record highs...WTI hovered risght around $74 ahead of the DOE data, then dumped... Bloomberg Intelligence Senior Energy Analyst Vince Piazza warns that with WTI approaching $80 a barrel, we believe oil has moved too far, too fast, notwithstanding reduced Iran exports because of sanctions and declining production from Venezuela. Demand destruction remains a concern due to elevated prices and geopolitics. We also expect heightened hedging by U.S. E&Ps at current prices, while trade tensions, robust production and seasonal refinery maintenance in the U.S. add to the negative price outlook.

Oil prices dip on rising US supply, but Iran sanctions still loom - Oil rose on Wednesday, touching a fresh four-year high as the market focused on upcoming U.S. sanctions on Iran and shrugged off a surprisingly big build in U.S. crude stockpiles and reports of higher Saudi Arabian and Russian production."Nothing matters between here and Nov. 4," said Bob Yawger, director of futures at Mizuho in New York, referring to the date when U.S. sanctions take full effect.U.S. crude inventories jumped 8 million barrels last week, quadruple analysts' expectations and the biggest build since March 2017, the Energy Information Administration said on Wednesday.Both crude benchmarks briefly moved lower on the EIA report before reversing course. Global benchmark Brent crude settled up $1.49, to 1.8 percent, to $86.29, it best closing price since October 2014. U.S. West Texas Intermediate (WTI) crude futures ended Tuesday's session up $1.18, or 1.6 percent, at $76.41 a barrel, the highest closing price since November 21, 2014.Earlier in the session, crude had been pushed lower as Saudi Energy Minister Khalid al-Falih said the kingdom had raised output to 10.7 million barrels per day in October and would pump more in November. The record high for Saudi output is 10.72 million bpd in November 2016.Russia and Saudi Arabia struck a private deal in September to raise oil output to cool rising prices and informed the United States before a meeting in Algiers with other producers, four sources familiar with the plan told Reuters. Al-Falih, who is attending a Moscow energy conference with Russian President Vladimir Putin and other influential energy officials, said Saudi Arabia has successfully met additional demand.

Oil Bulls Continue Stampede -The bull market for crude oil picked up steam Wednesday as the West Texas Intermediate (WTI) and Brent futures prices posted impressive gains. The November WTI benchmark gained $1.18 to settle at $76.41 a barrel. It peaked a dime shy of $77 during the day and fell to $74.30. The front-month Brent contract price settled at $86.29, reflecting a $1.49 increase for the day.“Since our last commentary on Rigzone, we have remained bullish crude oil,” said Jerry Rafferty, president and CEO of Rockville Center, N.Y.-based Rafferty Commodities Group, Inc. “We looked for the crude oil to break out to the upside, which it has. Since breaking and closing above the major level resistance level at 7110, November Crude Oil has rallied over $5.”Rafferty’s firm provided Rigzone with a chart that highlights the recent rally for crude oil. Rafferty pointed out the bulls continue to expand the oil market and exceed new levels of resistance.“We remain bullish crude oil and want to stick with our strategy of buying pullbacks around our listed support levels and buying additional breakouts to the upside,” said Rafferty. “Until the market close below our major support levels, we will remain bullish.”Reformulated gasoline for November delivery ended Wednesday’s session a penny higher, settling just under $2.14 a gallon.Another benchmark that has been bullish is the November Henry Hub natural gas contract. Rafferty pointed out that the bull trend began when prices broke above the 3.091 level three days ago. On Wednesday, Henry Hub natural gas rose six cents to settle at $3.23.“The rally is now approaching the first major resistance seen on the weekly chart at 3.239,” said Rafferty. “This is an area of resistance we have not seen since last winter.”

The oil market 'fever' pushing prices toward $100 won't break soon --Investment banks and hedge funds say oil prices have rallied too far too fast, but the fear and uncertainty gripping the market will keep pressure on crude futures in the coming weeks. Brent crude hit a new four-year high of $86.74 on Wednesday, fueled by concerns about a shortfall in global supply as U.S. sanctions whittle away at Iranian crude exports. The market is just one month away from the Nov. 4 deadline that President Donald Trump set for oil buyers to stop purchasing Iran's crude.In May, Trump pulled the United States out of the 2015 Iran nuclear deal and restored sanctions on OPEC's third-largest oil producer. Much of the world — including the European Union, China and Russia — oppose the move, but companies around the world have curtailed their imports from Iran for fear of running afoul powerful U.S. sanctions."If you have a sustainable loss in Iran, $90 to $100 is a potential outcome here, but we don't know at this point what's going to happen to Iran" -Jeff Currie, Goldman Sachs global head of commodities researchThat has pushed oil prices higher and left some analysts saying they cannot rule out a rally to $100 a barrel. There are too many questions about how strictly the Trump administration will enforce the sanctions, how many oil importers will ignore the penalties, and how quickly a group of producers led by Saudi Arabia and Russia can turn on the taps."There's sort of a fever building in the market right now about what the landscape is going to look like in terms of supply and demand," said John Kilduff, founding partner of energy hedge fund Again Capital.That fever will persist until the market determines how many Iranian barrels will come off the market and whether Saudi Arabia is able to step up to fill the gap, Kilduff said. He believes the uncertainty could pushU.S. crude prices up another $10 a barrel to $85, until new supply potentially tamps down the cost early next year. U.S. crude ended Wednesday's trading session at $76.

Oil prices enter the danger zone for consumers – Kemp - (Reuters) - Crude oil prices continue to climb despite attempts by oil producers to reassure the market about availability and the existence of enough spare capacity to offset oil lost as a result of U.S. sanctions on Iran.Recent price moves bear a strong resemblance to previous price spikes in 2007-2008 and 2010-2012, especially if prices are expressed in euros or yen to eliminate the impact of a stronger dollar this time around.  Brent crude has risen to almost 75 euros per barrel, the same level it reached in May 2008, on its way to a peak of 93 euros in July 2008 (https://tmsnrt.rs/2OzVObC).  Front-month futures have also hit 9,800 yen per barrel, the same as in October 2007, on their way to a peak of 15,300 yen in July 2008 (https://tmsnrt.rs/2OzVRUQ). Prices in Indian rupees are already at the same level that they peaked in 2008 and on the way to the record set in 2013 (https://tmsnrt.rs/2OG5HEy).  Only the strength of the dollar against other currencies is masking how high prices have become in oil-consuming countries outside the United States (https://tmsnrt.rs/2ODp8hm and https://tmsnrt.rs/2OFSSug). Prices have already risen to a level that has contributed to a slowdown in economic growth and oil consumption in the past. "Expensive energy is back at a bad time for the global economy," the chief executive of the International Energy Agency has warned ("IEA boss urges oil producers to ease supply concerns", Reuters, Oct. 4).  "It is now high time for all the players, especially those key producers and oil exporters, to consider the situation and take the right steps to comfort the market," he added. The blame-shifting game is well underway, with the United States blaming OPEC, Russia faulting U.S. sanctions, and Saudi Arabia blaming speculators for escalating prices. In reality, U.S. sanctions, output restrictions by OPEC and its allies, strong consumption growth and position building among the hedge funds have all contributed to the price surge.

Putin Tells Trump to Blame Guy in the Mirror for High Oil Prices - Russian President Vladimir Putin said his American counterpart’s Iran sanctions are largely to blame for current high oil prices.“President Trump considers that the price is high; he’s partly right, but let’s be honest,” Putin said at the Russian Energy Week conference in Moscow on Wednesday. “Donald, if you want to find the culprit for the rise in prices, you need to look in the mirror.”The Russian leader pushed back against escalating criticism of OPEC and its allies, which Trump has blamed for Brent crude’s rise to a four-year high near $85 a barrel. Still, Putin said his country has already boosted output and has the capacity to add another 200,000 to 300,000 barrels to the market.Saudi Arabia, Russia’s closest ally within the oil-producers’ group, earlier showed signs of bowing to Trump’s pressure. The kingdom has “significantly” raised production to a near-record level of 10.7 million barrels a day, Energy Minister Khalid Al-Falih told reporters in the Moscow.Russia’s cooperation with the Organization of Petroleum Exporting Countries successfully restored the oil market to balance and a good price range of $65 to $75 a barrel, Putin said. Current prices are “largely the result of the current U.S. administration -- these expectations of sanctions against Iran, the political problems in Venezuela,” Putin said. “Look at what’s happening in Libya. The state is destroyed. It’s the result of irresponsible policies which have a direct impact on the world economy.”

US accuses OPEC of withholding 1.42 million b/d of spare capacity — As oil prices hit new four-year highs Wednesday, the US State Department accused OPEC of withholding 1.42 million b/d of spare capacity from the world market. Citing an OPEC spare capacity estimate from the US Energy Information Administration, State said that Trump administration officials are working with OPEC to produce the spare capacity they are "not deploying." State said that US was "doing its part" to meet rising global demand. "The United States continues to engage with OPEC countries and we encourage them to utilize their spare capacity to ensure world oil supply meets the demand," the State spokesperson said in a statement to S&P Global Platts on Wednesday. The spokesperson said that while OPEC and non-OPEC producers, including Russia, "continue to withhold production," the US is ramping up output, citing an EIA estimate that domestic production will increase by nearly 1 million b/d within a year. "The United States is doing its part to add to the oil supply," the spokesperson said. The statement comes as President Donald Trump has pressed Saudi Arabia to boost oil output in order to stabilize prices and continues to criticize OPEC nations for driving up prices. December ICE Brent settled at $86.29/b Wednesday, up $1.49/b from Tuesday, while November NYMEX crude settled at $76.41/b Wednesday, up $1.18/b. Both settlements were the highest since 2014. OPEC, Russia and nine other countries pledged in June to reduce overcompliance with production cuts that have been in force since January 2017, which they say will result in a 1 million b/d output rise from May levels.  Saudi Arabia and Russia stressed Wednesday in Moscow that they are boosting oil production to record levels in response to global demand, not geopolitics or pressure from the US administration. Saudi Arabia is producing an average 10.7 million b/d, with November projected to come in "slightly higher," energy minister Khalid al-Falih said at Russia Energy Week. "There is not a single customer who has requested a barrel since June that hasn't been supplied," he said. Russia reported record output of 11.356 million b/d in September but can boost production by another 200,000-300,000 b/d "within several months," energy minister Alexander Novak said at same conference.

Trump Request for Max OPEC Output May Backfire -- If OPEC is the central bank of oil, then the Trump administration is commanding it to run the printing presses at full speed. The U.S. State Department took the unusual step of issuing a statement on Wednesday asking the cartel to boost production by tapping the supply buffer it maintains in case of unexpected disruptions. It even gave a figure for how much more the group could pump -- 1.4 million barrels a day. If the Organization of Petroleum Exporting Countries were to fill this request -- and Saudi Energy Minister Khalid Al-Falih said on Thursday that it could -- the oil market would be in uncharted territory. Even during the worst crises of the past two decades, including the U.S. invasion of Iraq and Libya’s civil war, the cartel has never been forced to pump flat out. If President Donald Trump gets what he wants from OPEC, it might not bring an end to the high oil prices he’s been complaining about for months. U.S. crude futures responded on Wednesday to the news that Saudi Arabia had joined Russia in pumping at close to record levels by rising 1.6 percent to $76.41 a barrel -- the highest since 2014. The U.S. is making these demands for one reason -- Iran. The sanctions Trump imposed on the country after tearing up the international nuclear deal have had a more severe impact on its oil exports than many people in the market were expecting. Even Russian President Vladimir Putin says it’s been the main driver of higher prices, and the situation may get worse when sanctions formally start on Nov. 4. “I don’t think we’re reflecting the full impact of Iranian sanctions as yet in the price,” said Gammel. From early November “the market is probably susceptible to further upside moves in price.” Trump has made clear that he expects OPEC’s largest producer, Saudi Arabia, to fill the gap in the market created by his Iran sanctions and stop prices going too high. It’s the only nation that deliberately maintains a large supply buffer -- at a cost of about $2 billion a year according to Al-Falih -- and as a result holds almost all of the group’s spare capacity. “We’re doing everything we can, and then some,” the Saudi minister said at the Russian Energy Week conference in Moscow on Thursday. The kingdom’s production has risen from below 10 million barrels a day in the first five months of the year to about 10.7 million currently, Al-Falih said. November will probably be higher again, he said, potentially breaking the Saudi production record set in November 2016. The kingdom is willing to tap all of its spare capacity of 1.3 million barrels a day, if necessary, Al-Falih said. But promises like this don’t seem to be reassuring the market. There are echoes of 2008, when prices hit an all-time high above $140 a barrel and pledges for more supply only increased the fear of disruptions.

Oil falls as Saudi and Russia quietly agree to output rise, US stocks swell --Oil prices on Thursday fell from four-year highs reached the previous session, pressured by rising U.S. inventories and after sources said Russia and Saudi Arabia struck a private deal in September to raise crude output.Brent crude oil futures were trading at $85.85 per barrel at 0104 GMT, down 44 cents, or 0.5 percent, from their last close.Brent on Wednesday hit a four-year high of $86.74 a barrel.U.S. West Texas Intermediate (WTI) crude futures were down 30 cents, or 0.4 percent, at $76.11 a barrel."Data for last week showed a much more significant than expected ... build in U.S. commercial crude (inventories), which generally suggests that oil prices should tumble," said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore.U.S. crude oil stocks rose by nearly 8 million barrels last week to about 404 million barrels, the biggest increase since March 2017, Energy Information Administration data showed on Wednesday.U.S. weekly Midwest refinery utilization rates dropped to 78.9 percent, their lowest since October 2015, according to the data.Meanwhile, U.S. crude oil production remained at a record-high of 11.1 million barrels per day (bpd)."This on top of the other big news of the day from Riyadh that ... Saudi Arabia and Russia will boost output," Innes said.Russia and Saudi Arabia struck a private deal in September to raise oil output to cool rising prices, Reuters reported on Wednesday, before consulting with other producers, including the rest of the Organization of the Petroleum Exporting Countries (OPEC).Russia's and Saudi Arabia's actions come as markets have heated up ahead of U.S. sanctions against Iran's oil sector, which are set to kick in from Nov. 4, and which many analysts expect to knock around 1.5 million bpd of supply out of markets.

Oil Halts Gain Near 4-Year High - -- Oil halted gains near $76 a barrel on emerging concerns prices have rallied too fast as traders bracing for Iranian supply losses sent crude to a four-year high. Futures in New York fell as much as 0.6 percent on Thursday. Prices have jumped 4 percent so far this week on concerns over tightening markets, with Iran at the risk of losing another customer, the United Arab Emirates. Traders also shrugged off growing output from Saudi Arabia and Russia, as well as a gain in U.S. inventories. Still, the Relative Strength Index topped 70 earlier this week for the first time since late June, signaling to some that the rally may be overdone. Oil has rallied about 16 percent since mid-August on fears of a global supply crunch, prompting U.S. President Donald Trump to repeatedly demand the Organization of Petroleum Exporting Countries to lower prices. While Saudi Arabia and Russia could pump more, traders continue to speculate whether OPEC and allied producers can offset a supply loss in Iran and declining production in Venezuela. “Investors are betting the oil market will tighten as Saudi Arabia and Russia won’t be able to fill the gap with optimum timing,” Takayuki Nogami, chief economist at Japan Oil, Gas and Metals National Corp., said by phone from Tokyo. Still “after the recent price rally, oil is now in the overbought territory, which could lead to profit-taking.” Prices Slip West Texas Intermediate for November delivery dropped as much as 42 cents to $75.99 a barrel on the New York Mercantile Exchange, and was at $76.16 a barrel at 3:40 p.m. in Tokyo. The contract climbed $1.18 to $76.41 on Wednesday, the highest since November 2014. Total volume traded was about 31 percent below the 100-day average. Brent for December settlement fell 0.4 percent to $85.98 a barrel on the London-based ICE Futures Europe exchange. Prices rose 1.8 percent to $86.29 on Wednesday, the highest level since October 2014. The global benchmark crude traded at a $9.98 premium to WTI for the same month. With a November deadline to comply with renewed U.S. sanctions approaching, Iran’s customers are increasingly being scared away. Iranian condensate cargoes to state-owned Emirates National Oil Co. dropped by half in September, while customs officials in the United Arab Emirates are said to require oil tankers docking at Fujairah’s fuel terminal to provide a certificate attesting to the origin of their cargoes.

Oil falls from four-year highs; Wall Street weighs - (Reuters) - Oil prices fell on Thursday as the prospect of increased crude production from Saudi Arabia and Russia prompted profit-taking the day after futures hit four-year highs on a boost from imminent U.S. sanctions on OPEC’s No. 3 producer Iran. Brent crude futures fell $1.71, or 1.98 percent, to settle at $84.58 a barrel. On Wednesday, Brent rose to a late 2014 high of $86.74. U.S. West Texas Intermediate (WTI) crude futures fell $2.08 to settle at $74.33 a barrel, a 2.72 percent loss. Market participants took profits after Brent on Wednesday climbed to the most technically overbought level since February 2012. WTI was the most overbought since January. The relative strength index (RSI) for both Brent and U.S. crude rose this week to above 70, a level often regarded as signaling a market that has risen too far. On Thursday, both contracts’ RSI retreated to below 70. Weighing on oil prices, U.S. stock market indexes broadly fell, with the benchmark S&P 500 .SPX on pace for its biggest one-day drop since late June. Crude futures at times track with equity markets. Also pressuring oil prices, crude inventories at the U.S. hub of Cushing, Oklahoma, rose about 1.7 million barrels from Sept. 28 to Tuesday, traders said, citing a report from market intelligence firm Genscape. “Today’s pullback appeared heavily influenced by the sharp decline in the equities and looked like a deserved correction given the magnitude of the recent upside price acceleration,” Oil prices have risen as the market braces for sanctions on Iran that kick in on Nov. 4. Saudi Energy Minister Khalid al-Falih said on Thursday the Organization of the Petroleum Exporting Countries was able to raise output by 1.3 million barrel per day, but offered no signal that the producer group would do so. The kingdom plans to invest $20 billion to maintain and possibly expand its spare oil production capacity, and currently has a maximum sustainable capacity of 12 million bpd. Reuters reported on Wednesday that Russia and Saudi Arabia struck a private deal in September to raise output. “About the end of November, we will have a good idea as how many barrels will be lost due to the launch of the second round of the Iranian sanctions. By that time all the bullish news will be in the market

The Oil Price Rally Is Under Threat - Oil fell back sharply on Thursday, coming on the heels of a huge buildup in U.S. crude inventories. However, the stock increase was largely due to an unexpected dip in exports, so the implications of the EIA report are still unclear. Still, even as Iran outages loom, seasonal factors could offset the bullishness. “We’re now into fall refinery maintenance season, and so we’re seeing builds in inventories because refineries aren’t taking in as much crude. Those builds could continue for a while,” Mark Waggoner, president of Excel Futures, told the Wall Street Journal in an interview.  The IEA put out a new report that highlights the increasingly prominent role that the petrochemical sector is playing in driving global crude oil demand. Petrochemicals will account “for more than a third of the growth in oil demand to 2030, and nearly half to 2050, ahead of trucks, aviation and shipping.” Transportation will start to lose its prominence as an engine of demand growth in the years ahead, with electrification taking hold. But there are few major alternatives to crude oil and natural gas in the petrochemical sector.  The U.S. State Department criticized Saudi Arabia for not using its spare capacity this week. A State Department official said that the U.S. was working with Saudi Arabia to use the spare capacity that they are “not deploying,” while also insisting that the U.S. was “doing its part.” "The United States continues to engage with OPEC countries and we encourage them to utilize their spare capacity to ensure world oil supply meets the demand," the State spokesperson said in a statement to S&P Global Platts on Wednesday. The official said OPEC and non-OPEC producers including Russia “continue to withhold production.” The statement was odd given that spare capacity is very low by any standard.  . Saudi Arabian oil minister Khalid al-Falih said it will invest $20 billion to maintain and potentially grow the volume of its spare production capacity. Saudi Arabia has consistently claimed that it could produce and sustain 12 million barrels per day, a figure that has yet to be tested. Riyadh is contemplating investments to increase that threshold to 13 mb/d. “This spare capacity is not just a natural reservoir that we have. This is very expensive investments for the kingdom, and some of our partners within OPEC and OPEC+ have elected to invest to maintain (oil capacity) to have the readiness on a short notice,” he said at an energy industry event in Moscow. “The next 1 million bpd of Saudi capacity is going to cost us over $20 billion. It costs us $2 billion a year of operation expenses to staff and maintain these facilities.” . Hedge funds and other speculators have staked out bets that would pay off if WTI hit $100 per barrel by the end of 2019, a sign that the market thinks that the loss of Iranian supply, combined with IMO regulations cutting into marine fuel supply at the start of 2020, could severely tighten the oil market.

Oil steadies near 4-year highs after volatile week of trading on Iran sanctions --Oil prices steadied just below four-year highs on Friday as U.S. sanctions curbed Iran's exports, tightening global crude supply. International benchmark Brent crude oil futures was down 5 cents a barrel at $84.53 by 8:29 a.m. ET (1229 GMT). On Thursday, Brent fell by $1.34 a barrel or 1.6 percent, but the contract remained on course for a gain of around 2 percent for the week.U.S. West Texas Intermediate (WTI) crude futures was up 22 cents at $74.55, a gain of nearly 2 percent since last Friday.  "The market mood is exceptionally bullish, with fears growing that the U.S. demands for an Iran oil embargo could cause a significant supply shortfall,"  Both benchmarks retreated on Thursday following a rise in U.S. oil inventories and after Saudi Arabia and Russia said they would raise output to at least partly make up for expected disruptions from Iran, OPEC's third-largest producer. But the pull-back did little to dent a 15-20 percent rise in oil prices since mid-August, which has pushed them to their highest since 2014. Washington wants governments and companies around the world to stop buying Iranian oil from Nov. 4 to put pressure on Tehran to renegotiate a nuclear deal. India will buy 9 million barrels of Iranian oil in November, an industry source told Reuters, indicating that the world's third biggest oil importer would continue to buy crude from the Islamic republic despite U.S. sanctions coming into force on Nov. 4.Many analysts say they expect Iranian exports to drop by around 1 million barrels per day (bpd).  "It now appears that only China and Turkey may be willing to risk U.S. retaliation by transacting with Iran." Speculators have accumulated bullish long positions, betting on a further rise in prices, amounting to almost 1.2 billion barrels of oil.  Meanwhile, the number of short positions in the six most important petroleum futures and options contracts has fallen to the lowest level since before 2013, creating a near-record imbalance between bullish and bearish positions in financial crude markets.

Oil Poised for Fourth Weekly Gain -- Oil headed for the longest run of weekly gains since the start of 2018 amid concern that Saudi Arabia and Russia may not pump enough crude to prevent a supply crunch as Iranian cargoes disappear from world markets. Futures climbed as much as 0.9 percent in New York on Friday. Prices may hit $100 this autumn as U.S. pressure stymies exports from Iran, OPEC’s No. 3 producer, according to Russian Energy Minister Alexander Novak. Saudi Arabian Energy Minister Khalid Al-Falih said the kingdom is boosting production and will supply needy refiners. “We’re just seeing a lot of fear about future supply,” said Ashley Petersen, senior oil market analyst at Stratas Advisors LLC. Saudi Arabia is juggling intense pressure from U.S. President Donald Trump to boost output and ease high prices. The kingdom has lifted production almost to a record and may raise it again next month, although doing so will infringe on available spare capacity, limiting Saudi Arabia’s ability to react to other supply shocks. “The Saudis won’t flood the market and they don’t want to see it oversupplied,” said Giovanni Staunovo, an analyst at UBS Group AG. “Their demand is picking up because Iran volumes are falling. But the price for the Saudi strategy to cover those supply losses are extreme low spare capacity, and that worries the market.” West Texas Intermediate for November delivery rose 47 cents to $74.80 a barrel at 10:13 a.m. on the New York Mercantile Exchange. Prices have advanced 2.2 percent for the week, capping the longest streak of weekly increases since January. Brent for December settlement was little changed at $84.50 on the London-based ICE Futures Europe exchange. The contract was up 2.2 percent this week. The global benchmark crude traded at a $9.96 premium to WTI for the same month. Russia’s Novak was not alone in predicting a return to three-digit price levels last seen in 2014. As Iran’s customers cut purchases and Venezuela’s industry struggled, trading giant Mercuria Energy Group Ltd. said last month Brent may spike over $100 in the fourth quarter and Trafigura Group expects it in early 2019. While Goldman Sachs Group Inc. isn’t that bullish, the Wall Street bank sees a risk of oil holding above $80 toward the end of the year. 

Baker Hughes data show U.S. oil-rig count down for a third straight week - Baker Hughes on Friday reported that the number of active U.S. rigs drilling for oil fell by 2 to 861 this week. The oil-rig count had edged down by 3 last week. The total active U.S. rig count, which includes oil and natural-gas rigs, was also lower by 2 at 1,052, according to Baker Hughes. November West Texas Intermediate crude was up 40 cents, or 0.5%, to $74.73 a barrel from Thursday's finish, compared with $74.90 before the rig data Friday.

Rig Count Inches Lower As Oil Prices Stabilize | OilPrice.com --Baker Hughes reported a dip of two in the oil and gas rig count in the United States this week, bringing the total number of active oil and gas rigs to 1,052 according to the report, with the number of active oil rigs decreasing by 2 to reach 861 and the number of gas rigs holding steady at 189.The oil and gas rig count is now 116 up from this time last year.At 12:30pm. EDT on Friday, WTI Crude was trading up 0.35 percent at $74.59—up more than $1 from last week and at highs not seen since near the end of 2014. Brent Crude was trading up on the day by 0.17 percent at $84.72 up over $2 per barrel from this time last week.Prices climbed on persistent fears that US sanctions on Iran will take off more barrels of oil than other suppliers can make up for, although analysts are insistent that the fears are overblown, and numerous bearish signals in the industry have been insufficient to keep prices from rising ever higher. Bearish events in the industry include India’s reports that it is thinking about ditching the dollar for oil trades, which would allow the second largest importer of crude oil the ability to continue to purchase oil from Iran. If India pulls this off, it would ease the “tight market” that is causing the oil prices to remain high. Other bearish signs, also related to India, were reports that India has plans to purchase 9 million barrels of oil from Iran in November, contrary to earlier reports that led the market to believe India had no plans to do so.Canada’s oil and gas rigs for the week gained 4 rigs this week after losing 19 rigs last week, bringing its total oil and gas rig count to 182, which is 27 fewer rigs than this time last year, with a 3-rig decrease for oil rigs, and a 7-rig increase for gas rigs.  On the production side, the EIA’s estimates for US production for the week ending September 28 were for an average of 11.10 million bpd for the second week in a row.

Oil prices mark weekly gain ahead of Iran sanctions (Reuters) - Crude futures steadied on Friday after climbing to four-year highs earlier this week, and both  Brent and U.S. crude marked weekly gains ahead of U.S. sanctions on Iranian oil exports. U.S. West Texas Intermediate (WTI) crude CLc1 futures rose 1 cent to settle at $74.34 a barrel. Global benchmark Brent crude LCOc1 futures for December delivery fell 42 cents to settle at $84.16 a barrel. On Wednesday, Brent hit its highest price since late 2014, at $86.74. “They’re taking a pause after yesterday’s sell-off,” said Andrew Lipow, president of Lipow Oil Associates. Price gains this week were limited by Saudi Arabia and Russia’s saying they would raise output to at least partly make up for expected disruptions from Iran, OPEC’s No. 3 producer, due to the U.S. sanctions that take effect on Nov. 4. Oil prices are up 15-20 since mid-August, at their highest levels since late 2014. Washington wants governments and companies around the world to stop buying Iranian oil to pressure Tehran into renegotiating a nuclear deal. Saudi Arabian Crown Prince Mohammed bin Salman insisted the kingdom is fulfilling promises to make up for lost Iranian crude supplies, Bloomberg reported. Saudi Arabia is now pumping about 10.7 million barrels per day (bpd) and can add a further 1.3 million “if the market needs that,” he said. India will buy 9 million barrels of Iranian oil in November, two industry sources said, indicating that the world’s third-biggest oil importer will keep purchasing crude from the Islamic republic. Many analysts said they expected Iranian exports to drop by around 1 million barrels per day. U.S. bank Jefferies said there was enough oil to meet demand, but “global spare capacity is dwindling to the lowest level that we can document.” 

OPEC compliance 110% in Sep for 12 members with quotas — OPEC's 15 countries boosted crude oil output in September to 33.07 million b/d, a 180,000 b/d rise from August, according to an S&P Global Platts survey of analysts, industry officials and shipping data released Friday, as the producer group seeks to instill confidence in its ability to keep the market well-supplied. That is the most OPEC has pumped since July 2017, if the Republic of Congo, which joined the organization in June, is not included.The survey indicates that OPEC and its 10 non-OPEC partners, led by Russia, have surpassed their stated aim of raising production by a combined 1 million b/d from May levels. OPEC's September output was 850,000 b/d above where it was in May, not including Congo, according to Platts survey data, while Russia on Tuesday reported a record high in its September output of 11.356 million b/d, up 390,000 b/d from May.OPEC has been under fire by the US for not pumping more to bring down oil prices, which have hit four-year highs in recent days over apprehension that the producer bloc would be unable or unwilling to make up for expected output losses from sanctions-hit Iran and economically careening Venezuela.Platts reported Wednesday that the US State Department accused OPEC of withholding some 1.42 million b/d of spare capacity from the market, a charge denied by Saudi energy minister Khalid al-Falih, who said at the Russia Energy Week forum Thursday that there was adequate supply and that the price rise was due to geopolitics and speculators.Indeed, Saudi Arabia, OPEC's largest producer and the world's largest crude exporter, pumped 10.60 million b/d in September, according to the Platts survey, a 110,000 b/d increase from August. That more than offset Iran's 100,000 b/d month-on-month decline to 3.50 million b/d in September, while Venezuelan production held steady at 1.22 million b/d, the survey found. But many analysts expect Iran, whose exports are plummeting as its customers cut their purchases, to lose a further 1 million b/d or more after the sanctions go into effect November 5, and Venezuelan production to fall below 1 million b/d by year's end. Iranian production is down 330,000 b/d since May, while Venezuela is down 140,000 b/d, according to the Platts survey. Falih, who said Saudi Arabia's October production is expected to average 10.7 million b/d, said the kingdom was capable of pumping 1.3 million b/d above that, if there was the market demand to justify it. Saudi Arabia holds the bulk of global spare capacity.

Saudi spare oil capacity ready to be used when demand materializes: Falih — Saudi oil minister Khalid al-Falih Thursday said geopolitical tensions and speculators were behind the recent rise in oil prices to four-year highs, not collusion by OPEC and its allies. OPEC has been increasing its oil production since June and inventories are rising counter-cyclically, Falih said at the Russia Energy Week forum in Moscow. "That proves the point that fundamentals are not behind it," said the minister, who oversees oil production in the world's largest crude exporter. "The market has a strong influence. The true elephant in the room is geopolitics. This has all combined to feed the market frenzy." He reiterated that Saudi Arabia has ample spare production capacity which it is ready to use if the market needs it. With the kingdom producing 10.7 million b/d, it has some 1.3 million b/d of spare capacity available, he said. "It's not going to be popular for me to say this, but the market is well supplied. Some would even say oversupplied." S&P Global Platts reported Wednesday that the US State  Department was accusing OPEC of withholding 1.42 million b/d of spare capacity from the market.   "The United States continues to engage with OPEC countries and we encourage them to utilize their spare capacity to ensure world oil supply meets the demand," a State Department spokesperson said in a statement to Platts. Once the US sanctions on Iran go into effect November 5, Platts Analytics expects Iranian crude and condensate exports to fall to 1.1 million b/d, and to 800,000 b/d by the fourth quarter of 2019, down from 2.91 million b/d in April. Falih said the market was too fixated on the Iran sanctions and that OPEC and its allies were prepared to keep supplies healthy.  "You have to remember that oil is fungible," Falih said. "It doesn't matter to global supply and demand who's going up and who's going down."

Exclusive: Saudi Arabia, Russia agreed in September to lift oil output, told U.S. (Reuters) - Russia and Saudi Arabia struck a private deal in September to raise oil output to cool rising prices and informed the United States before a meeting in Algiers with other producers, four sources familiar with the plan said. U.S. President Donald Trump has blamed the Organization of the Petroleum Exporting Countries (OPEC) for high crude prices and called on it to boost output to bring down fuel costs before the U.S. congressional elections on Nov. 6. The deal underlines how Russia and Saudi Arabia are increasingly deciding oil output policies bilaterally, before consulting with the rest of OPEC. The sources said Saudi Energy Minister Khalid al-Falih and his Russian counterpart Alexander Novak agreed during a series of meetings to lift output from September through December as crude headed toward $80 a barrel. It is now over $85. “The Russians and the Saudis agreed to add barrels to the market quietly with a view not to look like they are acting on Trump’s order to pump more,” one source said. “The Saudi minister told (U.S. Energy Secretary Rick) Perry that Saudi Arabia will raise output if its customers asked for more oil,” another source said. Originally, the two countries had hoped to announce an overall increase of 500,000 barrels per day (bpd) from Saudi-led OPEC and non-OPEC Russia at a gathering of oil ministers in Algiers at the end of September. But with opposition from some in OPEC, including Iran which is subject to U.S. sanctions, they decided to defer any formal decision until a full OPEC meeting in December. “Saudi is trying to thread a needle with a rope by satisfying customer concerns about higher oil prices, but also wanting to keep prices from falling and sending the wrong price signal to industry which absolutely needs to continue to invest to prevent a supply crunch,” 

Saudi Energy Minister Confirms- 'November Output Will Be Slightly Higher Than October' - Saudi Arabian Energy Minister Khalid al-Falih has once again articulated concerns about a potentially oversupplied global oil market (concerns that are, of course, directed at the US shale industry), echoing comments he made last month about the dangers of a "potentially oversupplied" market. He also hinted that the recent runup in oil prices is more of a reflection of the market's anxieties about impending US sanctions on Iran than it is a measure of physical oil flows. Rumors that Saudi Arabia might raise oil production spread across financial media last week, prompting representatives of the Kingdom to eventually step in and confirm that the Kingdom planned to ramp up production to try and compensate for the expected hole in global supply left by Iranian exports once US sanctions are reimposed. And as it turns out, Saudi may not be the only major exporter preparing to ramp up production. With oil prices reaching ever-greater highs this week, angering President Trump, who again lashed out at Saudi Arabia during a rally Tuesday night (he reminded the kingdom that it wouldn't last two weeks without US protection), crude dropped from the highs following reports that Saudi Arabia and Russia had told the US earlier this year that they had planned to boost production through December. What's more, they had reportedly informed the US of their plans before the OPEC+ meeting in Algiers.

The Saudis Purchase A Colony- Bahrain's $10 Billion Bailout By Gulf Neighbors -Bahrain's slumping economy and mushrooming public debt have been given a fresh lifeline as Saudi Arabia and other Gulf Cooperation Council (GCC) allies have agreed to inject billions in order to stabilize the tiny island gulf nation and prevent a looming financial crisis.In a move designed to keep Bahrain's currency from collapsing and to avoid a potential credit crunch, Saudi Arabia, Kuwait, and the United Arab Emirates have pledged to give Bahrain $10 billion enough to meet its funding requirements as it attempts to eliminate its budget deficit by 2022.Bahrain had faced the likelihood of defaulting on a $750 million Islamic bond repayment due on Nov. 22. and the IMF last spring warned its public debt represents 89 percent of its gross domestic product, while reserves are low. Bahrain was severely impacted by a slump in global oil prices in 2014 and has experienced sporadic political unrest going back to the so-called "Arab Spring" protests of 2011Beyond wanting to stave off financial collapse and any associated contagion or dwindling confidence in the region from spreading, its GCC partners have a pressing geopolitical interest in protecting the ruling Khalifa monarchy as well.  The last time Bahrain needed an urgent "bail out" from its Saudi older brother - a New York Times headline from 2011: Saudi Troops Enter Bahrain to Help Put Down Unrest The tanks poured across the King Fahd Causeway bridge, which connects Saudi Arabia and Bahrain  When widespread protests among Bahrain's Shia-dominant population first broke out against the longtime Sunni rule of King Hamad bin Isa Al Khalifa and his family a dynasty which has held power since 1783 the Saudis immediately sent tanks and over 1000 troops across the King Fahd causeway to suppress the Shia rebellion, with the UAE sending a further 500 of its own police and security personnel.  Thus Bahrain's Sunni "big brothers" in the region fear that any deep financial turmoil could quickly lead to internal political unrest among the majority Shia population. 

Saudi agents install secret phone spyware to track critics abroad- Citizen Lab - Saudi agents are reportedly secretly installing spyware on people's smartphones to crack down on critics living abroad.At least one critic of the kingdom had his smartphone targeted by Israeli cyberintelligence firm NSO Group's Pegasus spyware software, which enables hackers to gain access to messages, photos, emails, microphone, and camera, according to a new report from Citizen Lab, a Toronto information and technology lab.The report's authors assessed with "high confidence" that outspoken Saudi critic and YouTuber Omar Abdulaziz was targeted with the spyware in June.Abdulaziz's device got infected after he clicked on a link purportedly sent from the courier company DHL, the report said. He had made a purchase on Amazon earlier and later received a text message from DHL explaining that a package was due to be shipped, the report said. But the message instead linked to a website that, according to Citizen Lab, had been identified as a known Pegasus exploit domain, and clicking on the link resulted in the infection of the software onto his phone. Citizen Lab concluded the Abdulaziz was a target because someone using a consumer and university Internet Service Provider (ISP) in Quebec, Canada, found an infection by the Saudi-linked agent. By corroborating his movements and the suspicious DHL message on his phone, the lab concluded with "high confidence" that he was likely the target of the malicious attack.

Saudi military colonialism sparks protest movement in Yemen’s east - In recent weeks, al-Mahrah has witnessed protests against a Saudi military presence that its detractors say is tantamount to extortion and colonialism. The Saudis, who intervened in Yemen’s war on behalf of the internationally recognized government against the Houthi rebels in 2015, first began setting military bases up in the province late last year. Yet from the moment the Saudis set up their first base in the province, its residents began pushing back, staging protests and asking why Riyadh’s military needs to have a presence in a largely peaceful area that has been mostly spared by the three-year conflict. Huge protest/sit-in being reported in Yemen's eastern province of al-Mahrah, with residents (waving Yemeni and Mehri flags) demanding Saudi forces leave immediately. https://t.co/bTsGXDOTTu   Since early August however, when Yemeni President Abd Rabbuh Mansour Hadi visited the province and backed the Saudi presence, the tense atmosphere has worsened considerably. Now stepping up their protest movement, al-Mahrah’s residents are appealing to the outside world, telling the international community that their province is already safe and they do not need foreign soldiers cementing a presence in their home. Osamah, a 35-year-old resident of al-Mahrah, has participated in several protests against the Saudi presence – the most recent being 17 September. He said he will not stop protesting until the Saudis leave his home. According to Osamah, the Saudis have total control of the border crossings between al-Mahrah and neighbouring Oman, as well as Nishtawan port and Ghaida airport. Their forces have set up checkpoints across the province, and have positioned significant numbers in the coastal town of Sayhut. The bases residents describe are of varying size, some little more than a dozen soldiers enclosed by fencing, others far more substantial. In key positions such as Nishtawan port and Ghaida airport, Yemeni soldiers have been completely replaced by Saudi ones.

Hillary Said So - Iran Quotes WikiLeaks At U.N. To Prove Saudis Are State Sponsors Of Terror --Iranian Ambassador to the UN Gholamali Khoshroo gave a fiery speech during the final days of the UN General Assembly meeting in New York wherein he responded to specific charges of Saudi Arabia that Iran sponsors terrorism and is waging proxy wars on Riyadh throughout the Middle East, saying that global terrorism actually originates with the Saudis.The Iranian ambassador supported his case by appealing to a specific WikiLeaks email: “Everybody knows that Saudi Arabia supports terrorism in a very blatant and widespread manner,” he said. In a shock statement before his UN audience, he added, “in the framework of WikiLeaks in 2009, Hillary Clinton is said to have stated that Saudi Arabia is the greatest donor to terrorist groups around the world.” Interestingly Khoshroo delivered his speech in Arabic, instead of his native Farsi, in order “to make sure that our position is rendered clear” to Riyadh.He was referencing a 2009 intelligence memo released as part of Clinton's emails which said that “donors in Saudi Arabia constitute the most significant source of funding to Sunni terrorist groups worldwide" — though she herself was not the author. The memo continued with "Saudi Arabia remains a critical financial support base for Al-Qaida, the Taliban… and other terrorist groups.”The Iranian diplomat may have also been referencing another Wikileaks file which shows that in a private speech Hillary Clinton made in 2013, she said: “The Saudis and others are shipping large amounts of weapons – and pretty indiscriminately – not at all targeted toward the people that we think would be the more moderate, least likely, to cause problems in the future.” And further, a 2014 WikiLeaks released Hillary Clinton memo spells it out clearer, saying “We need to use our diplomatic and more traditional intelligence assets to bring pressure on the governments of Qatar and Saudi Arabia, which are providing clandestine financial and logistic support to Isis and other radical groups in the region.”

New WikiLeaks Release Exposes Corruption In UAE Arms Deal Fueling War On Yemen - The transparency organization WikiLeaks just released a new document that sheds light on the corruption behind a lucrative French-German arms deal with the United Arab Emirates (UAE), weapons that are currently being used to wage a disastrous and genocidal war against the people of Yemen.The document details a court case from the International Chamber of Commerce (ICC) International Court of Arbitration regarding a dispute over a “commission payment” made to Abbas Ibrahim Yousef Al-Yousef, an Emirati businessman, as part of a $3.6 billion arms deal between France’s state-owned weapons company Nexter Systems (then GIAT Industries SA) and the UAE. Per the deal, which was signed in 1993 and set to conclude in 2008, the UAE purchased 388 Leclerc combat tanks, 46 armored vehicles, 2 training tanks, and spare parts, as well as ammunition.Those weapons have been an important part of the UAE and Saudi coalition’s war in Yemen since it began in 2015. The war has killed over ten thousand civilians, largely the result of the Saudi/UAE bombing campaign, which has targeted and crippled the country’s civilian infrastructure. The result of those b ombings, as well as of the UAE/Saudi blockade of Yemen, has been over 17 million people near starvation – including 5.2 million children – and preventable disease epidemics that have claimed tens of thousands of additional lives.The court case described in the leaked document resulted from a claim made by Al-Yousef that Nexter Systems had failed to honor its commitment to pay him a 6.5 percent commission fee on the arms deal, amounting to a $235 million dollars. Nexter Systems made payments regularly for a period of time to the Emirati businessman, totalling over $195 million, through Al-Yousef’s company, Kenoza Consulting & Management Inc. Al-Yousef demanded that the company pay him the nearly $40 million that remained outstanding.However, subsequent arguments from Nexter Systems’ lawyers asserted that payments stopped because of French anti-corruption legislation enacted in 2000, and that Al-Yousef’s business “intended to commit and indeed committed corruption acts.” Nexter Systems effectively claimed in court that the exorbitant “commission fee” given to Al-Yousef was for the use of bribing government officials of the UAE and apparently other countries so that Nexter Systems could secure the $3.6 billion weapons contract. However, the ICC tribunal did not rule on this point, as they claimed that Nexter’s proof for this allegation lacked sufficient evidence.Yet, the tribunal did seek to determine why Al-Yousef had been able to justify the excessive commission fee, especially considering that he did not play an important role in the development of the Leclerc tanks. In investigating this point, the tribunal found that Al-Yousef had convinced German officials to waive Germany’s then-ban on providing German-made weapons to Middle Eastern nations like the UAE — a necessary step, as the Leclerc tanks were fitted with German engines.

Iran Airs Video Of US Carrier Chased By Iranian Speedboats In Straits Of Hormuz -- As was widely expected, Iranian President Hassan Rouhani's pleas for the US to "honor its international commitments" and "return to the negotiating table" during a speech at the UN General Assembly last week were promptly ignored. And with the full implementation of US oil sanctions in November rapidly approaching, Iran is already antagonizing the US as the regime hopes to spin the inevitable economic toll into a propaganda victory - if only to stave off another round of disruptive street protests that shook the country during the first weeks of 2018.As tensions between the US and North Korea flared last summer, the media largely ignored several confrontations between Iranian Revolutionary Guard troops and US carriers, including a USS Nimitz-class carrier. The Trump Administration, of course, was eager to play down these incidents because they ran counter to its preferred narrative that the president's tough rhetoric had cowed the Iranians into reducing their ballistic missile tests and rolling back other generally disruptive behavior. But in the Iranian regime's latest attempt to undercut this idea, a domestic television station has aired footage of an until-now unreported incident that occurred in March - a time when the Trump administration had insisted that these encounters had ceased - depicting IRGC ships and drones menacing a US carrier group centered around the USS Theodore Roosevelt in the all-important Strait of Hormuz. The footage was intended to be part of a documentary about the encounter set to air on Iranian television.

US shuts down consulate in Iraq's Basra citing Iranian 'threats' - The United States has announced it is closing its consulate in the Iraqi city of Basra and evacuating its diplomats from there after increasing threats and rocket fire from Iran and Iran-backed fighters.The decision adds to mounting tension between the US and Iran, which is the target of increasing economic sanctions imposed by Washington.US Secretary of State Mike Pompeo, explaining the move, renewed a warning that his country would hold Iran responsible for any attacks on US diplomatic facilities and citizens. The move follows recent rocket attacks that Pompeo said were directed at the consulate in Basra. US officials said the rockets, however, had not impacted the consulate, which is located in the Basra airport compound. "I have made clear that Iran should understand that the United States will respond promptly and appropriately to any such attacks," Pompeo said in a statement.

Iran fires missiles at militants in Syria over Ahvaz attack -Iran's Revolutionary Guards say they have fired missiles at eastern Syria targeting the ringleaders of the deadly attack on a military parade in Ahvaz. A statement said "many terrorists" were killed or injured in the strikes. Iranian state television suggested that the missiles hit an area close to the border town of Albu Kamal where Islamic State militants are known to operate. IS and ethnic Arab separatists from Ahvaz both claimed the 22 September parade attack, in which 25 people died. The Iranian government has alleged that the assailants were jihadist separatists supported by Gulf Arab allies of the United States. US Defence Secretary Jim Mattis has dismissed the allegation as "ludicrous". The Revolutionary Guards announced that its aerospace forces' missile unit had "targeted a base of the ringleaders of Ahvaz terrorist crimes to the east of the Euphrates [river] in Syria with a number of surface-to-surface ballistic missiles" at 02:00 on Monday (22:30 GMT on Sunday). In addition to causing casualties among the militants, the strikes also reportedly destroyed infrastructure and ammunition stockpiles. "Our iron fist is prepared to deliver a decisive and crushing response to any wickedness and mischief of the enemies," the statement added. The Revolutionary Guards did not say where in western Iran the six missiles were launched, but revealed that they travelled a distance of 570km (354 miles).

Iran fires missiles at Islamist “rebels” as US vows to remain in Syria -- Iran’s Islamic Revolutionary Guard Corps (IRGC) early Monday morning carried out missile strikes against targets inside Syria, claiming that it had killed and wounded a significant number of Islamist militia members that it charged with responsibility for a terrorist attack against an Iranian military parade last month. The six missiles fired from the western Iranian province of Kermanshah flew 355 miles over Iraqi territory to hit their targets in Syria’s eastern Deir Ezzor province. Tehran said that the missiles, Iranian-made Qiam and Zolfaghar models capable of carrying over 1,500 pounds of explosives, were followed up with drone strikes.The Pentagon reported that the missiles hit just three miles from where US troops are based in the Al Bukamal district of Deir Ezzor.“Iranian forces did conduct no-notice strikes last night and we see open source reports stating that they were targeting militants it blamed for the recent attack on an Iranian military parade in the Middle Euphrates River Valley,” US military spokesman Col. Sean Ryan said in a statement.  Iranian media reported that some of the missiles were inscribed with the slogans “death to America,” “death to Israel” and “death to the house of Saud.”Tehran has blamed Washington, Tel Aviv and Riyadh, as well as the United Arab Emirates for supporting “foreign mercenaries” responsible for the September 22 terrorist attack on a military parade in Iran’s southwestern city of Ahvaz that killed 29 people and wounded 70 others. The Iranian missile strike coincides with a ratcheting up of tensions between Washington and Tehran, with US President Donald Trump and other top administration officials using last week’s opening of the United Nations General Assembly to demonize Iran as the source of all problems in the Middle East and to issue a series of bellicose threats.

US says it will stay in Syria until it spends $1 trillion defeating ISIS  — U.S. military officials have assured worried allies that the fight in Syria will continue until it spends at least $1 trillion defeating ISIS and a corrupt, democratically-elected government beholden to the U.S. can be instituted, sources confirmed today. Defense Secretary Jim Mattis told reporters this week that the primary mission for the U.S. has not changed in Syria, which is to defeat remnants of the ISIS terrorist group. Still, he added that the situation was “complex” and the military would also remain in Syria to guard against Iranian influence, work to end the Syrian civil war, deal with humanitarian issues, play geo-strategic chess with Russia, support and defend against its ally Turkey, and ensure girls can attend school. Mattis downplayed the idea of “mission creep” in Syria to reporters, reiterating the mission of the Defense Department has been to take care of every problem in the world since the country’s founding.

3 years of Russia strikes on Syria kill 18000, says monitor group - More than 18,000 people, nearly half of them civilians, have been killed in Russian air strikes on Syria since Moscow began its game-changing intervention exactly three years ago, a monitor said Sunday. Russia, for its part, said its “accurate” strikes had killed 85,000 “terrorists”. A steadfast ally of Syria’s ruling regime, Russia began carrying out bombing raids in the country on September 30, 2015 – more than four years into the devastating conflict. Since then, they have killed 18,096 people, according to the Syrian Observatory for Human Rights. “That number includes 7,988 civilians, or nearly half of the total,” said Observatory chief Rami Abdel Rahman. Another 5,233 Islamic State fighters were also killed in Russian strikes, with the rest of the dead including other rebels, Islamists and jihadists, the Britain-based monitor said. Russia’s defence commission published drastically different figures on Sunday. “All of the air strikes have targeted and are still accurately targeting terrorist targets,” said commission chief Viktor Bondarev. Human rights groups and Western governments have criticised Russia’s air war in Syria, saying it bombs indiscriminately and targets civilian infrastructure including hospitals. The White Helmets, a Syrian rescue force that works in opposition areas, said in a report released Sunday that it had responded to dozens of strikes by Russia on buildings used by civilians since 2015. They included Russian bombing raids on 19 schools, 12 public markets and 20 medical facilities over the past three years, as well as 21 of its own rescue centres

Russian officials confirm: S-300 surface-to-air missile system reached Syria - Russia has delivered an S-300 surface-to-air missile system to Syria, Defence Minister Sergei Shoigu told President Vladimir Putin during a meeting broadcasted by Rossiya 24 TV on Tuesday. "The work was finished a day ago," Shoigu said. On Saturday, Russian Foreign Minister Sergey Lavrov said Moscow had already started delivering the S-300 air defense systems to Syria's government. He added that "the measures we will take will be devoted to ensure 100  percent safety and security of our men in Syria, and we will do this."   Russia announced last week that it would supply the anti-aircraft missiles after Syrian forces responding to an Israeli airstrike on September 17 mistakenly shot down a Russian military reconnaissance plane, killing all 15 people on board.  The friendly fire incident sparked regional tensions. Israel's Prime Minister Benjamin Netanyahu called Russian President Vladimir Putin to express sorrow at the loss of life and sent a high-level military delegation to Moscow.  Last week, an  Israeli official said that the S-300 anti-aircraft missiles are "a complicated challenge" for Israel. he official added: "We're dealing with it in different ways, not necessarily by preventing the delivery." According to the official, Russian President Vladimir Putin updated Prime Minister Benjamin Netanyahu on the fact that he intends to send the missiles to Syria within two weeks, and then acted accordingly.Israel has meanwhile clarified to Putin that it will continue to act within Syrian territory and U.S. President Donald Trump has stated that his country fully supports Israel's actions as well as its right to defend itself. "Putin made a move, but it's a big playing field and he understands that," the official said.

The US Military-Industrial Complex’s Worst Nightmare: The S-300 May Destroy and Expose the F-35 - The tragic episode that caused the death of 15 Russian air force personnel has had immediate repercussions on the situation in Syria and the Middle East. On September 24, Russian Defense Minister Sergei Shoigu informed allies and opponents that the delivery of the S-300 air-defense systems to the Syrian Arab Republic had been approved by President Vladimir Putin. The delivery had been delayed and then suspended as a result of Israeli pressure back in 2013. In one sense, the delivery of S-300 batteries to Syria is cause for concern more for Washington than for Tel Aviv. Israel has several F-35 and has claimed to have used them in Syria to strike alleged Iranian weapons transfers to Hezbollah. With the S-300 systems deployed in an updated version and incorporated into the Russian command, control and communications (C3) system, there is a serious risk (for Washington) that Israel, now incapable of changing the course of events in Syria, could attempt a desperate maneuver. It is no secret that Greece purchased S-300s from Russia years ago, and that NATO and Israel have trained numerous times against the Russian air-defense system. Senior IDF officials have often insisted that they are capable taking out the S-300s, having apparently discovered their weaknesses. But Greece’s S-300s are old, out of maintenance, and have not had their electronics updated. Tel Aviv’s warning that it will attack and destroy the S-300 battery should not be taken as an idle threat. It is enough to look at the recent downing of Russia’s Il-20 surveillance aircraft to understand how reckless a desperate Israel is prepared to be. Moreover, more than one IDF commander has over the years reiterated that a Syrian S-300 would be considered a legitimate target if threatening Israeli aircraft.

Beijing ready to contribute to Syria reconstruction China - On the sidelines of the UN General Assembly Session in New York, Chinese Foreign Minister announced at a meeting with his Syrian counterpart that his country is ready to do its share of Syria's reconstruction, IRNA reports. In the meeting Wang Yi said China respects Syria's sovereignty and independence. He expressed satisfaction with the improvement in Syrian peoples' lives and security and said China will spare no effort to contribute to the economic and social development of Syria. Wang Yi went on to say Beijing believes there is a political solution to the Syria crisis and the problem must be resolved through diplomatic and political means. Chinese Foreign Minister stated sovereignty, independence and territorial integrity of Syria should be respected and the people and the leaders of the country should be allowed to decide their own destiny. Wang Yi described as important the relationship between the two countries and said China's economic growth and social development can be of use in reconstructing Syria. Syrian Foreign Minister, Wahid Muallem also considered China's help in reconstructing Syria important and said Syria appreciates Beijing's humanitarian assistance. He also called for boosting cooperation between the two countries. While supporting Syria's participation in the New Silk Road Initiative, the two sides also expressed satisfaction with its important role in the plan.  

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