oil prices in a record losing streak; natural gas prices jump 13% on forecast cold; rig count at a 44 month high

oil prices were again lower every day this past week, ​& ​hence extend​ed the number of consecutive daily losses to ten, the longest streak of lower oil prices in records going back to November 1984...after falling daily last week to a 6.6% loss at $63.14 a barrel, contracts for December delivery of US crude oil initially moved 64 cents higher on Monday as US sanctions on Iran began, but then eased after the U.S. granted waivers to eight countries to continue buying Iranian crude and ended the day with a loss of 4 cents at $63.10 a barrel...oil prices continued falling on Tuesday, tumbling to as low as $61.31 a barrel on the Iran sanctions waivers, and then ending the day down 89 cents at $62.21 a barrel on worries that ​the global ​economic slowdown ​would reduce demand...oil prices then extended their losses ​on Wednesday, ​after the EIA reported a surprisingly large increase in US crude inventories as US oil production spiked to a record high, ​with WTI ​finishing down another 54 cents at $61.67 a barrel...US crude prices dropped for a ninth consecutive session on Thursday, falling into what traders consider a bear market, ending the day down a dollar at $61.67 a barrel, as traders seemed fixated on the new weekly record high in U.S. crude production cited by the EIA...U.S. crude prices fell then fell for a record 10th consecutive session on Friday, wiping out the contract's gains for the entire year and falling below $60 a barrel for the first time since February, before rallying at the close to end the day down 48 cents at $60.19 a barrel...US crude prices thus ended 4.7% lower for the week and are now down 21.2% from the 4-year high of $76.41 a barrel set on October 3rd, at which time contracts for November oil were being quoted..

since we now have a record setting series of decreases in oil prices on our hands, we'll include a graph of US oil prices over the past five months, so you can see what the past month's price drop looks like...

the above graph is an early Saturday afternoon screenshot of the interactive US oil price graph at Daily FX, an online platform that provides trading news, charts, indicators and analysis of the markets...each bar on the above graph represents oil prices for a day of oil trading between June 25, 2018 and Friday of this week, wherein the green bars represent the days when the price of oil went up, and red bars represent the days when the price of oil went down...for green bars, the starting oil price at the beginning of the day is at the bottom of the bar and the price at the end of the day is at the top of the bar, while for red or down days, the starting price is at the top of the bar and the price at the end of the day is at the bottom of the bar...also visible on this "candlestick" style graph are the faint grey "wicks" above and below each bar, to indicate trading prices during the day that were above or below the opening to closing price range for that day...outside of 4 days in February, oil prices are now at the lowest they've been all year....note that since this graph includes off market and after hours trading, the prices shown above do not correspond exactly to the NYMEX exchange prices we have been quoting.. 

meanwhile, natural gas prices for December delivery spiked by more than 13% this week to end at their highest level this year, largely on the Climate Prediction Center​'s​ forecasts for colder than normal temperatures over most of the country...the initial jump in prices came on Monday, when December natural gas contracts rose 28.3 cents or 8.6% to $3.567 per mmBTU, when the new 6 to 10 day outlook indicated temperatures much below normal for an area from Maine to the Dakotas and down to Texas...natural gas prices changed little over the next three days, ignoring a larger than expected storage increase, and then jumped another 17.6 cents to $3.719 per mmBTU on Friday, despite indications of a warming trend in the 3 to 4 week outlook...

since natural gas prices also made an unusual move to their high for this year, we'll include a graph of those here too...

like the oil graph above, this is a screenshot of the live interactive US natural gas price graph at Daily FX, covering natural gas prices daily between April 23rd, 2018 and Friday of this week, wherein the green bars represent the days when the price of oil went up, and red bars represent the days when the price of oil went down...you can clearly see that natural gas prices spiked much higher to begin this week, after first moving out of a narrow range ​generally below $3 per mmBTU ​at the beginning of October...we​ should men​tion that natural gas prices for January ​2018 ​saw a similar price spike last December, but by January the February contract was already trading lower, and the same could happen this year if the warmer than normal El Nino winter develops as forecast​ and fears of a shortage are alleviated​...

the natural gas storage report for the week ending November 2nd from the EIA indicated that natural gas in storage in the US rose by 65 billion cubic feet to 3,208 billion cubic feet during that week, which left our gas supplies 580 billion cubic feet, or 15.3% below the 3,788 billion cubic feet that were in storage on November 3rd of last year, and 621 billion cubic feet, or 16.2% below the five-year average of 3,829 billion cubic feet of natural gas that are typically in storage on the first weekend of November....this week's 65 billion cubic feet increase in natural gas supplies was more than the 55 billion cubic feet increase in stocks that was called for by a S&P Global Platts survey of analysts , and was also much above the average of 48 billion cubic feet of natural gas that have been added to storage during the bridge week between October and November in recent years, but was still just the 6th average or below average inventory increase over the past eighteen weeks...natural gas storage facilities in the Midwest saw a 24 billion cubic feet increase over the week, which reduced their supply deficit to 10.3% below normal, but natural gas supplies in the East only increased by 5 billion cubic feet and their supply deficit ticked up to 9.6% below normal for this time of year...on the other hand, the South Central region saw a 30 billion cubic feet increase in their supplies, as their natural gas storage deficit decreased to 23.8% below their five-year average for the first weekend of November...meanwhile, the natural gas pipeline rupture in British Columbia has been repaired, but flows to the US remained limited, so only 2 billion cubic feet were added to supplies in the Mountain region, as their deficit from normal still fell to 16.9%, while the 3 billion cubic feet were added to gas in storage in the Pacific region also lowered their natural gas supply deficit to 24.5% below normal for this time of year....

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration for the week ending November 2nd indicated a large upward adjustment to our crude oil production while most other crude supply and demand metrics were relatively little changed, and hence there was another addition to our commercial crude supplies for ​the seventh week in a row...our imports of crude oil rose by an average of 195,000 barrels per day to an average of 7,539,000 barrels per day, after falling by an average of 334,000 barrels per day the prior week, while our exports of crude oil fell by an average of 80,000 barrels per day to an average of 2,405,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 5,134,000 barrels of per day during the week ending November 2nd, 275,000 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 400,000 barrels per day higher at 11,600,000 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 16,734,000 barrels per day during this reporting week... 

meanwhile, US oil refineries were using 16,408,000 barrels of crude per day during the week ending November 2nd, 9,000 barrels per day less than the amount of oil they used during the prior week, while over the same period a net of 793,000 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 467,000 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 or new storage of it, the EIA inserted a (+467,000) 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"...again, with an "unaccounted for crude" figure that large, one or more of this week's oil metrics must still be off by a statistically significant amount (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) indicate that the 4 week average of our oil imports rose to an average of 7,544,000 barrels per day, still 1.2% less than the 7,639,000 barrel per day average that we were importing over the same four-week period last year....the net 793,000 barrel per day increase in our total crude inventories included a 826,000 barrel per day increase in our commercially available stocks of crude oil, which was slightly offset by a 34,000 barrel per day decrease in the amount of oil in our Strategic Petroleum Reserve, likely part of a sale of 11 million barrels from those reserves to Exxon et al that closed two months ago....this week's crude oil production was reported up by 400,000 barrels per day to 11,600,000 barrels per day as a result of a rounded 400,000 barrels per day upward adjustment to 11,100,000 barrels per day output from wells in the lower 48 states in light of last week's confirmed production figures, while oil output from Alaska remained at 488,000 barrels per day​, giving us a rounded total of 11,600,000 barrel per day​...last year's US crude oil production for the week ending November 3rd was at 9,620,000 barrels per day, so this week's rounded oil production figure was 20.6% above that of a year ago, and 37.6% 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 90.0% of their capacity in using 16,408,000 barrels of crude per day during the week ending November 2nd, up from 89.4% of capacity the prior week, but still a normal utilization rate for the end of the fall refinery maintenance season....the 16,408,000 barrels per day of oil that were refined this week were once again at a seasonal high, for the 21st out of the past 23 weeks, but only fractionally higher than the 16,305,000 barrels of crude per day that were processed during the week ending November 3rd, 2017, when US refineries were operating at 89.6% of capacity...

even with  little change​ in ​the amount of oil being refined this week, gasoline output from our refineries was quite a bit lower, decreasing by 650,000 barrels per day to 9,714,000 barrels per day during the week ending November 2nd, after our refineries' gasoline output had increased by 336,000 barrels per day during the week ending October 26th...as a result of that drop in our gasoline output, our gasoline production during the week was 4.5% lower than the 10,167,000 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) decreased by 20,000 barrels per day to 4,963,000 barrels per day, after that output had increased by 23,000 barrels per day the prior week....and like gasoline, this week's distillates production was also 4.5% lower than the 5,199,000 barrels of distillates per day that were being produced during the week ending October 27th 2017.... 

however, even with that big drop in our gasoline production, our supply of gasoline in storage at the end of the week still rose by 1,852,000 barrels to 228,021,000 barrels by November 2nd, the 16th increase in the past 37 weeks, after our gasoline supplies had fallen by 7,987,000 barrels over the prior two weeks....our gasoline supplies rose despite lower production because our imports of gasoline rose by 228,000 barrels per day to 591,000 barrels per day, while our exports of gasoline fell by 318,000 barrels per day to 694,000 barrels per day, and because the amount of gasoline supplied to US markets fell by 163,000 barrels per day to 9,099,000 barrels per day...so even after falling most of the fall, our gasoline inventories are still at a seasonal high, 8.8% higher than last November 3rd's level of 209,537,000 barrels, and roughly 8.6% above the 10 year average of our gasoline supplies for this time of the year...

meanwhile, with our distillates production little changed, our supplies of distillate fuels fell for the 7th week in a row, decreasing by 3,465,000 barrels to 122,857,000 barrels during the week ending November 2nd, after our distillates suppliies had fallen by 4,052,000 barrels the prior week...our distillates supplies fell even as the amount of distillates supplied to US markets, a proxy for our domestic demand, decreased by 108,000 barrels per day to 4,318,000 barrels per day, while our exports of distillates rose by 29,000 barrels per day to 1,306,000 barrels per day, and while our imports of distillates rose by 25,000 barrels per day to 166,000 barrels per day....after this week's decrease, our distillate supplies ended the week 2.2% below the 125,562,000 barrels that we had stored on November 3rd, 2017, and fell to roughly 8.5% below the 10 year average of distillates stocks for this time of the year...     

finally, with higher oil production and somewhat higher oil imports, our commercial supplies of crude oil increased for the 7th week in a row and for the 23rd time in 2018, rising by 5,783,000 barrels during the week, from 426,004,000 barrels on October 26th to 431,787,000 barrels on November 2nd...that increase means that our crude oil inventories continue to be more than 3% above the five-year average of crude oil supplies for this time of year, and roughly 23.4% above the 10 year average of crude oil stocks for the first weekend in November, with the disparity between those figures arising because it wasn't until early 2015 that our oil inventories first rose above 400 million barrels...however, since our crude oil inventories had been falling through most of the past year and a half until just recently, our oil supplies as of November 2nd were still 5.5% below the 457,143,000 barrels of oil we had stored on November 3rd of 2017, 11.0% below the 485,010,000 barrels of oil that we had in storage on November 4th of 2016, and 5.1% below the 454,822,000 barrels of oil we had in storage on November 6th of 2015...       

This Week's Rig Count

US drilling rig activity increased for the fifth time in 7 weeks during the week ending November 7th, and thereby pushed to a 44 month high....Baker Hughes reported that the total count of rotary rigs running in the US increased by 14 rigs to 1081 rigs over the week ending on Friday, which was also 174 more rigs than the 907 rigs that were in use as of the November 10th report of 2017, but 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 increased by 12 rig​s​ to 886 rigs this week, which was the largest weekly rise in the oil rig count since May and 148 more oil rigs than were running a year ago, while it remained 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 increased by 2 to 195 rigs, which was also 26 more than the 169 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...

offshore drilling in the Gulf of Mexico increased by 3 rigs to 21 rigs this week, which was also 3 rigs more than the 18 Gulf of Mexico rigs active a year ago​; since there is now no other offshore drilling elsewhere, this week's Gulf of Mexico totals are equal to the national offshore rig count​....​ ​meanwhile, the count of active horizontal drilling rigs increased by 6 rigs to 935 horizontal rigs this week, which was also 159 more horizontal rigs than the 776 horizontal rigs that were in use in the US on November 10th of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...at the same time, the directional rig count increased by 1 to 74 directional rigs this week, which is the same number of directional rigs that were in use during the same week of last year....in addition, the vertical rig count was up by 7 rigs to 72 vertical rigs this week, which was also up from the 57 vertical rigs that were operating on November 10th 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 November 9th, the second column shows the change in the number of working rigs between last week's count (November 2nd) and this week's (November 9th) count, the third column shows last week's November 2nd active rig count, the 4th column shows the change between the number of rigs running on Friday and those running 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 10th of November, 2017...     

you might notice that the basin count does not add up to the 6 horizontal rig count that we​ just​ reported, and you might also notice a nine rig decrease in Oklahoma's Cana Woodford that appears to coincide with and contradict ​the 4 rig increase in Oklahoma's count...i don't have an explanation for that, but i would speculate that it's possible that a number of the rigs that were previously indicated as targeting the Cana Woodford might have been reclassified to another Anadarko basin which Baker Hughes doesn't list...the national totals in the basin by basin spreadsheet add up, because they show an increase of 15 oil rigs and 2 natural gas rigs in "other basins" not tracked separately by Baker Hughes, so for some reason around a dozen rigs that might have previously been included in the Cana Woodford were shifted to that catch all "other" category...elsewhere, the Permian basin shows a 5 rig increase because there was a net increase of one rig in the Texas basins (+3 in the Delaware and -2 in the Midland) and an increase of 4​ rigs​ in Delaware on the New Mexico side of the state line...as we noted, the natural gas rig increase can be accounted for by the 2 rig increase in the "other basins" category, as the two natural rigs that were added in Pennsylvania's Marcellus were offset by natural gas rigs that were shut down in Ohio's Utica and the Eagle Ford of south Texas, which also dropped two oil rigs and now shows a deployment of 68 oil rigs and 8 natural gas rigs....

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Eight Permits Issued in Ohio's Utica Shale – The Ohio Department of Natural Resources last week issued eight new permits to oil and gas companies exploring the Utica shale, the agency reported. Two companies – Eclipse Resources and Chesapeake Exploration LLC – each received four permits for new horizontal wells for the week ended Nov. 3, ODNR said. Eclipse was awarded permits for new wells in Guernsey County and Chesapeake received permits for wells in Harrison County. As of Nov. 3, ODNR reports that it has issued 2,913 horizontal well permits in the Utica and 2,446 of those wells are drilled. There are 2,072 horizontal wells in production across Ohio’s Utica, the agency said. The number of oil and gas rigs operating in the Utica on Nov. 3 stood at 17, ODNR reported. There were no permits issued for wells in Columbiana, Mahoning, or Trumbull counties in the northern section of the Utica, according to ODNR. There were no new permits issued in nearby Lawrence or Mercer counties in western Pennsylvania, according to the Pennsylvania Department of Environmental Protection.

Anti-fracking failing for eighth time - - With 57.55 percent of Mahoning County’s votes reporting the Youngstown anti-fracking charter amendment appears as if it’s going to fail for an eighth time. The vote is 55.4 percent against the proposal and 44.6 in support of it.

Enbridge request to start more of Nexus nat gas pipeline approved by FERC -- The Federal Energy Regulatory Committee approves Enbridge's (ENB +2.4%) request to place into service more of its $2.6B Nexus natural gas pipeline from Ohio to Michigan.The FERC says it OK'd the company’s request to place the Wadsworth compressor in Medina County, Ohio, into service; ENB had sought permission to put the compressor into service on Oct. 19.During October, FERC allowed ENB to place facilities into service that would enable Nexus to transport 970M cf/day; once the 255-mile project is fully in service, it will be able to carry up to 1.5B cf/day of gas from the Marcellus and Utica shale fields to the U.S. Midwest and Gulf Coast and to Ontario. Nexus is a partnership between ENB and DTE Energy

US says Enbridge can start more of Ohio-Michigan Nexus natgas pipeline (Reuters) - U.S. energy regulators on Tuesday approved Canadian energy company Enbridge Inc’s request to put more of its $2.6 billion Nexus natural gas pipeline from Ohio to Michigan into service. In a filing, the U.S. Federal Energy Regulatory Commission (FERC) said it approved the company’s request to put the Wadsworth compressor in Medina County, Ohio, into service. Enbridge sought FERC permission to put the compressor into service on Oct. 19. Nexus is one of several gas pipelines designed to connect growing output from the Marcellus and Utica shale basins in Pennsylvania, West Virginia and Ohio with customers in other parts of the United States and Canada. Earlier in October, FERC allowed Enbridge to put facilities into service that would enable Nexus to transport about 0.97 billion cubic feet per day (bcfd). One billion cubic feet of gas is enough to fuel about 5 million homes for a day. Once the 255-mile (410-km) Nexus project is fully in service, it will be able to carry up to 1.5 bcfd of gas from the Marcellus and Utica shale fields to the U.S. Midwest and Gulf Coast and to Ontario in Canada. Nexus is a partnership between Enbridge and Michigan energy company DTE Energy Inc (DTE.N). When it began construction of Nexus in late 2017, Enbridge estimated it would be able to complete the project in the third quarter of 2018. Enbridge said it completed Nexus in September when it asked FERC for permission to put part of the pipeline into service. New pipelines built to carry gas from Appalachia have enabled shale drillers there to boost output to an estimated record high of around 29.8 bcfd in November from 26.1 bcfd during the same month a year ago. That represents about 36 percent of the nation’s total dry gas output of 83.2 bcfd expected on average in 2018. The Appalachia region produced just 1.6 bcfd, or 3 percent of the country’s total production, in 2008.

Ohio's Utica Shale Country May See a Boost from Chesapeake Energy Leaving the Play- WKSU - There is a new leading player in the development of Ohio’s oil and natural gas drilling industry. ENCINO Energy just bought all of the Utica shale holdings of Chesapeake Energy and says it plans to invest in those, and to keep the former Chesapeake Utica headquarters in Louisville in Stark County. ENCINO was formed a year ago by long-time Texas-based energy executives and the Canadian Pension Plan Investment Board. It’s paying $2 billion dollars for nearly one million acres of drilling rights held by Chesapeake and the five story headquarters in Louisville. Stark Development Board President Ray Hexamer says ENCINO’s entry into the Utica is encouraging for both Louisville and the region. “For a community, you’d rather be someone’s first and biggest asset than one of five hundred assets. And they’re all very skilled in this industry so if they paid the amount money that they did, they see the potential.” Chesapeake sold its Utica assets to help pay down debt it took on while expanding in shale plays across the country.

Final two laterals on Rover Pipeline enter service -- The final two laterals of the Rover Pipeline project, along with the associated compression and metering facilities, recently entered service, Energy Transfer LP said recently. The Federal Energy Regulatory Commission (FERC) issued approvals last week to commence natural gas service on the Sherwood Lateral and the CGT Lateral in West Virginia.Rover has been operational since Aug. 31, 2017, but the final approval enables the pipeline to add an additional receipt point and delivery point for natural gas production. The 713-mile pipeline transports up to 3.25 billion cubic feet per day of natural gas from the Marcellus and Utica Shale production areas. It transports natural gas from processing plants in West Virginia, Eastern Ohio and Western Pennsylvania to the Midwest Hub near Defiance, Ohio, for delivery to markets across the U.S., as well as to the Union Gas Dawn Storage Hub in Ontario, Canada.

Judge weighs other courts’ pro-pipeline rulings before Penneast decision - Pipeline foes say last-minute request for comments signals court will allow surveying on private land. More than seven months after hearing arguments in his Trenton courtroom over whether to allow the company to use eminent domain to build the pipeline on the properties of uncooperative New Jersey landowners, the judge is expected to rule soon on the hotly contested issue. In a recent note to attorneys, the judge said he had planned to issue the long-awaited decision last Friday, November 2, but put it off to allow a bit more time for the parties to respond to two recent pro-pipeline decisions by other judges that could influence his decision. He cited a ruling by the Third Circuit Court of Appeals that upheld the right of another pipeline company, Transco, to take, or “condemn” private land to build its Atlantic Sunrise pipeline through Pennsylvania and states to the south. Inviting comments And he invited attorneys to comment on the ruling by another New Jersey federal judge, Freda Wolfson, who rejected arguments by the New Jersey Conservation Foundation that a federal permit allowing the eminent domain process to begin was unconstitutional. “In light of the third circuit opinion and Judge Wolfson's opinion, both of which may impact my decision, I will (reluctantly) permit counsel to supplement the record, with a memorandum of law, not more than five (5) pages, commenting on the impact, if any, these decisions have on the issue(s) pending before me,” Judge Martinotti wrote, setting a deadline of last Friday. 

TransCanada's Columbia System Set To Boost Gulf-Bound Gas Flows - U.S. Northeast natural gas producers will soon get another boost of pipeline capacity with direct access to Gulf Coast demand. TransCanada’s Columbia Gas and Columbia Gulf transmission systems are gearing up to place into service their tandem Mountaineer Xpress and Gulf Xpress expansions, which will allow another 1 Bcf/d of Marcellus/Utica gas to flow south as far as Louisiana. The new capacity should further ease takeaway constraints for moving gas out of the Northeast, potentially redistributing outflows across the various takeaway routes, while also allowing Appalachian gas supply to grow. The duo of expansions is also the last of the southbound expansions from the Northeast, at least until late 2019, when the embattled Atlantic Coast and Mountain Valley projects are due online. Today, we detail the upcoming expansions. In this series, we have been providing the updates on the latest round of Northeast takeaway projects that have either come online over the past couple of months or are due to come online in short order. The incremental takeaway capacity from these projects will affect the regional as well as the U.S. gas supply-demand balance this winter and beyond. As we detailed in our recent Drill-Down Report, the capacity that’s been phased in this year — first from ETP’s Rover Pipeline this summer and more recently from Williams/Transco’s Atlantic Sunrise and Enbridge/DTE Energy’s NEXUS pipelines — has finally allowed Northeast takeaway constraints to ease and catapulted Marcellus/Utica basis (local outright prices minus the Henry Hub prices) to the strongest levels we’ve seen for this time of year since 2013.

Whole Truth About the Atlantic Coast Pipeline is Unfolding - Dominion CEO Tom Farrell is trying to hide the ball when it comes to the ACP. His Op-Ed column, “Powering Virginia’s future with clean, affordable, and reliable energy,” leaves out the most important part of the story — that the Federal Energy Regulatory Commission allows Dominion shareholders to recover their investment in full and collect a guaranteed 15 percent return on the pipeline, while shouldering none of the risk. That risk falls on the backs of Dominion’s utility customers, who will pay billions in project costs in their power bills.Farrell has a lot on the line. He has to make sure landowners, local governments, property rights advocates, communities, conservationists, and climate change opponents don’t get in the way of his shareholders’ profits. So he’ll say anything he needs to publicly. But what his company tells federal and state agencies is the real story.The demand for new gas-fired power plants isn’t growing in Virginia. But year after year, Dominion submits plans to the Virginia State Corporation Commission that depict aggressive demand growth to justify new infrastructure. And each year, the actual power needs of Virginia fall far short of the company’s predictions. This September, the SCC staff finally said it has “no confidence” in Dominion’s story. We don’t need the ACP.Dominion customers are going to pay for the ACP. At that same September hearing, an expert testified that the pipeline would increase customer costs by as much as $3 billion. Dominion had no response or rebuttal. The ACP has never been about what is best for Virginia, it’s about Farrell getting that 15 percent return for his shareholders.

Virginia has a pipeline problem - – by Ken Cuccinelli, former Virginia attorney general --In Shipman, Va., a family that has held its homestead for generations, tending graves of ancestors and buildings erected by great-great grandfathers, struggles to understand why it must give its land to Dominion Energy. In Lyndhurst, Va., an aging mother who owns 125 acres filled with creeks and springs fights back as the land she has tended for decades to pass on to her daughter is prepped for bulldozing.They are paying a price for Dominion’s Atlantic Coast Pipeline, but they, like every other Dominion customer in Virginia, will also pay hard cash for this unneeded project when the utility bill shows up, thanks to a poorly regulated monopoly scheme that Dominion and its political cronies have constructed.The federal agency that approves these projects and authorizes eminent domain does not analyze whether the project is necessary. Instead, the government simply asks whether anyone has signed a contract to use the pipeline. If so, the federal government deems the project “needed,” completely ignoring the fact that, for the Atlantic Coast Pipeline, about 90 percent of the “contracted” capacity has been sold to sister companies. Dominion Energy is on both sides of this deal. On one side, a Dominion company is building the pipeline. On the other side, Dominion acts as the electric utility for millions of Virginians who have no choice in the matter. Dominion’s utility has signed a 20-year contract with Dominion’s pipeline developer to allegedly provide the natural gas for Dominion’s natural gas power plants. Yet only two of Dominion’s 35 natural gas units in Virginia will connect to the Atlantic Coast Pipeline, and neither of these will use the pipeline as a primary fuel source.  I am not opposed to natural-gas pipelines, and I’m not opposed to eminent domain for appropriate and necessary projects. But I am opposed to captive monopoly customers shouldering the cost and risk of Dominion projects that are rubber-stamped without anyone at any level asking whether the pipeline provides value to Virginians.Dominion Energy testified before the Virginia State Corporation Commission in September that the company has not analyzed how much the Atlantic Coast Pipeline will cost its customers. That answer is, frankly, shocking, especially after a non-Dominion expert testified that the pipeline would raise power bills by $2.5 billion over the next 20 years. Dominion intends to charge its customers for all of its Atlantic Coast Pipeline contract costs, regardless of whether it actually uses the pipeline.

4th Circuit orders temporary halt to Atlantic Coast Pipeline - A federal appeals court ordered a temporary halt Wednesday afternoon to a water-crossing permit needed to build the Atlantic Coast Pipeline. The order came one week after a group of environmental and citizen groups asked the court to stay the so-called “Nationwide Permit 12” needed to build the 600-mile-long natural gas pipeline. The pipeline is primarily being built by Dominion Energy, and will run from northern West Virginia into North Carolina. The court shouldn’t allow the reinstatement of the project’s Nationwide 12 permit because it can’t meet two separate conditions, particularly when building the pipeline across the Greenbrier River, lawyers for the environmental and citizen groups wrote. The two conditions, inserted by the West Virginia Department of Environmental Protection to protect the state’s water quality, stipulate that stream crossings must be completed in 72 hours, and that structures authorized by the permit cannot impede fish from swimming upstream or downstream. The Army Corps of Engineers originally issued the permit before the 4th Circuit Court suspended that verification in July. During that time, Atlantic Coast Pipeline changed its Greenbrier River crossing plan and instead decided to use a method that lawyers for the environmental groups say violates those conditions. The Corps issued a reinstatement of the permit in October. Atlantic Coast Pipeline said it intended to start construction again as soon as Thursday. Last week, the environmental group asked the court for a stay to pause construction. The 4th U.S. Circuit Court of Appeals issued the two-page order from Chief Judge Roger Gregory, with the concurrence of Judge James Wynn and Judge Stephanie Thacker Wednesday. In a statement, Aaron Ruby, a spokesman for the pipeline, said the project would temporarily suspend waterbody crossings in the Corps’ Huntington District of West Virginia.

Mountain Valley submits application for N Carolina pipeline   (AP) — Mountain Valley Pipeline developers have submitted a request to extend the natural gas pipeline project into North Carolina. The Roanoke Times reports the application filed Tuesday asks for a 73-mile extension for the 300-mile pipeline that is being constructed in West Virginia and Virginia. Mountain Valley proposed the $468 million project called MVP Southgate in April. The Federal Energy Regulatory Commission application says the project would start at the current project's endpoint in Pittsylvania County, Virginia. It would run to Alamance County, North Carolina and provide gas to local distribution company PSNC Energy. Opponents fear environmental damage, object to the pipeline's use of eminent domain to obtain private land and question if the pipeline is needed. Mountain Valley says it hopes to start construction on the new project in 2020.

API report questions Perry's pipeline criticism - - A new report by the American Petroleum Institute pushes back against claims by Energy Secretary Rick Perry that the U.S.natural gas pipelines network is especially vulnerable to cyber attack.The report argues not only that cyber threat are a risk "across the energy system, including at coal and nuclear plants," but that pipeline companies maintain multiple levels of security "to protect against cascading failure.""Cybersecurity is a top priority," said API President Mike Sommers. "Natural gas and oil pipeline systems are purpose-built to be highly resilient and our members are leaders in cybersecurity." The report follows statements earlier this year by Perry and top officials at the Department of Energy that the power grid was becoming overly reliant on gas, as demand for coal wanes, presenting an opportunity for hackers."You have a greater reliance on natural gas than you've ever had before," Assistant Secretary of Electricity and Energy Reliability Bruce Walker said in an interview in June. "Because of the interdependence on the gas infrastructure, if you take out a pipeline you can also take out 10 to 15 [power] generators." That analysis came as President Donald Trump increased pressure on the Energy Department to stop coal and nuclear power plants from closing, as power companies shift to gas and renewable energy.

How leaky is natural gas production? One puzzle solved - In the US, the effort to slash the CO₂ emissions of our electrical grid has actually gotten an early bump from the low price of natural gas. New natural gas plants can produce electricity with about half the emissions of the older, dirtier (and now more expensive) coal plants they’re replacing. But there has been a lot of debate over a drawback that eats into that gain: some of the natural gas leaks into the atmosphere during production and transportation. Precisely how much methane (a greenhouse gas) leaks is important—leak enough and natural gas isn’t actually better than coal.Some estimates have suggested that leaks were a serious problem, while others produced much lower numbers. Now, a new study figures out why the different analyses produced a range of numbers: it depends on the time of day people were looking for leaks. Studies estimating real-world leakage have come in two primary flavors. The first type of study uses what is referred to as a “bottom-up” approach. This involves walking around gas wells and pipeline equipment while measuring leakage. With estimates for each process or type of equipment, you scale up to the big picture based on an inventory of equipment and records of the amount of natural gas produced. The second approach is to go “top-down.” Here, researchers fly research planes upwind and downwind of a natural gas field, measuring the difference in methane concentrations. While you have to subtract the influence of other methane sources—like wetlands and livestock operations—this has the advantage of directly measuring the total leakage rather than adding up a complex estimate.Top-down studies have typically estimated leakage to be around 50 percent higher than bottom-up work, reaching rates that some have argued challenge the benefit of natural gas. A number of explanations have been proposed for this difference, including the idea that bottom-up studies may miss the occasional piece of malfunctioning equipment that accounts for an outsized share of the total leakage. A new study led by Colorado State’s Timothy Vaughn tests a different hypothesis: top-down measurements just happen to be made at a leakier-than-average time of day.  Some of the manual interventions by workers—like clearing liquid from sputtering wells—cause extra leakage that obviously occurs during workday hours. Considering the time it takes for the workers to get to a site and set up, this means that leakage tends to peak in the afternoon.

Pipeline peril: Natural gas explosions reveal silent danger lurking in old cast iron pipes - The cast iron natural gas main that served Richard Williams' turn-of-the-century home was built during Shreveport's first gas-fueled boom in 1911. When that pipeline cracked in 2016, the gas built up slowly and silently in a shed behind Williams' home. All it took was an ignition source – a lit cigar – to spark the gaseous fireball that would take his life. The 65-year-old psychiatrist was one of at least 264 people killed in natural gas leaks, fires and explosions since 1990, a USA TODAY analysis of federal data shows. More than 1,600 people have been injured.  The natural gas industry and its government regulators have known of the dangers of leaking gas pipelines for decades. After a fatal gas explosion in Allentown, Pennsylvania, in 1990, the National Transportation Safety Board recommended utilities replace their cast iron pipes "in a planned, timely manner." Twenty-eight years later, the utilities still haven't finished the job.  The work is expensive, often difficult, and sometimes perilous. Gas crews upgrading cast iron pipe in Massachusetts in September inadvertently ignited fires and explosions that destroyed 131 buildings,killing one person, injuring 21 and leaving hundreds homeless. State utility commissions are under pressure from consumer groups to keep energy rates down. Grassroots groups oppose new pipelines in their neighborhoods. And often there aren't enough qualified pipeline workers to do the work safely. Utilities replacing leaking gas pipes receive only spotty oversight from a fractured system of state and federal safety regulations. Government regulators have largely left it to the utilities to determine for themselves what their biggest safety vulnerabilities are.

US LNG exports dip on week - Liquefied natural gas (LNG) exports from the United States slipped back after rising for three consecutive weeks previously. For the week ending November 7, five liquefied natural gas carriers with a total carrying capacity of 18.2 Bcf departed the United States, compared to 7 cargoes in the previous week, data from the United States Energy Information Administration shows.Four cargoes departed Cheniere’s Sabine Pass LNG facility in Louisianna with one cargo departing Dominion’s Cove Point facility in Maryland. One LNG tanker with the carrying capacity of 3.5 Bcf was loading at Sabine Pass on Wednesday, the data shows.  EIA noted in its weekly natural gas report that the natural gas feedstock to US LNG terminals averaged 4.0 Bcf/d during the week under review, compared to 3.7 Bcf/d last week. Cheniere noted in its latest quarterly report that it has already achieved production from its fifth train that is 98.5 percent through the commissioning process. Two more facilities are currently undergoing commissioning, Cheniere’s Corpus Christi plant in Texas as well as Sempra Energy’s Cameron LNG facility in Louisianna that kicked off the commissioning of its support facilities and first liquefaction train of Phase 1. Phase 1 of the Cameron LNG liquefaction-export project, which includes the first three liquefaction trains, is a $10 billion facility with a projected export capability of 12 million tonnes per annum of LNG, or approximately 1.7 billion cubic feet per day. All three trains are expected to be producing LNG in 2019, Sempra Energy said.

Kinder Morgan fires up Sabine Pass pipeline - U.S. energy company Kinder Morgan said it has placed into service part of its Louisiana natural gas pipeline that supplies the fuel to Cheniere’s Sabine Pass liquefied natural gas (LNG) export terminal. Kinder Morgan submitted a notification of the partial pipeline project in-service to the US Federal Energy Regulatory Commission on Tuesday. The $122 million pipeline will provide 0.6 billion cubic feet per day (bcfd) of gas to the fifth train at the Sabine Pass terminal. Cheniere is currently commissioning the fifth unit at the Sabine Pass terminal, first such facility to ship US shale gas-sourced LNG overseas. It is expected to enter commercial service in the first quarter of 2019. Cheniere is developing up to six trains at the Sabine Pass site, each capable of producing 4.5 million tonnes per year of the chilled fuel.

Poland signs deal for long-term deliveries of US gas - Poland’s main gas company signed a long-term contract Thursday to receive deliveries of liquefied natural gas from the United States as part of a larger effort to reduce its energy dependence on Russia. The state company PGNiG signed the 24-year deal with American supplier Cheniere during a ceremony in Warsaw attended by U.S. Energy Secretary Rick Perry and Polish President Andrzej Duda. Piotr Wozniak, the president of PGNiG’s management board, said the price is 20-30 percent lower than what Poland pays its current supplier in Russia. Under the deal, Poland will receive some 700 million cubic meters of gas from 2019 through 2022, and 39 billion cubic meters from 2023 through 2042. Poland’s annual consumption of gas is almost 16 billion cubic meters, 25 percent of which is covered from Poland’s own deposits.

Toshiba sheds U.S. LNG business at $800 million loss -- Japanese conglomerate Toshiba Corporation has decided to withdraw from the US LNG business transferring all the outstanding shares of Toshiba America LNG Corporation to a third-party buyer. While the buyer will pay $15 million for the transfer, under the arrangement, Toshiba, through its unit Toshiba Energy Systems & Solutions Corporation, will pay 93 billion Japanese yen ($821 million) to the buyer, the company said in its statement on Thursday.Under the transfer agreement, all contracts related to the sale of U.S. LNG entered into by the Toshiba Group, including those between Toshiba and customers will either be transferred or canceled.The transfer finalization is scheduled for March 2019, marking complete withdrawal from the LNG business.  Toshiba further noted the name of the third-party buyer will be unveiled as soon as the contract is completed.The Japanese conglomerate decided to part with its U.S. LNG assets following the inability to find buyers for the 2.2 million tons of LNG booked at the Freeport LNG terminal in Texas, under a 20-year deal. Toshiba has already booked an $818 million charge for exiting the LNG business and said the move is to avoid further losses."

Tellurian to tie Driftwood LNG partners by year end - US LNG Export project developer, Tellurian, continued making strides forward with its Driftwood LNG project expecting to name project partners soon. During the third quarter of the year, Tellurian received a draft environmental impact statement (EIS) from the United States Federal Energy Regulatory Commission (FERC) for the Driftwood LNG terminal facility and the associated Driftwood pipeline. The company has also secured financing for certain drilling and development activities and advanced the sale of LNG and Driftwood Holdings’ partnership interests, with approximately 35 customer/partners conducting due diligence. President and CEO Meg Gentle said, “Completing the draft EIS is a significant milestone in the LNG terminal regulatory process and reflects FERC’s commitment to deliver the final EIS in January.” She added that company expects to announce partners for the Driftwood LNG project by the end of 2018, with the construction set to start in the first half of 2019 and production of LNG to start by 2023. Tellurian ended its third quarter of 2018 with approximately $172.3 million of cash and cash equivalents. Tellurian reported a net loss of approximately $33.2 million for the three months ended September 30, 2018.

New Gulf of Mexico projects expected to reverse natural gas production declines -Natural gas production in the U.S. Federal Gulf of Mexico (GOM) has been declining for almost two decades. EIA expects nine new natural gas production projects to start in 2018 and another seven to start in 2019. These 16 projects have a combined estimated natural gas resource of about 800 billion cubic feet and may reverse some of the declines in GOM production.The GOM marketed natural gas production has been mostly declining on an annual basis since 1997, when EIA first recorded this data. In 1997, production stood at 14.3 billion cubic feet per day (Bcf/d), accounting for 26% of the United States’ total annual marketed natural gas production. By 2017, natural gas production in GOM declined to 2.9 Bcf/d and accounted for only 4% of the total U.S. annual marketed production.This decline occurred for several reasons. The number of producing natural gas wells in the GOM declined by 73% between 2001 and 2017—from 3,271 to 875. The technology and expertise required to produce oil and natural gas from the seabed is expensive and specialized, and costs of production platforms often exceed a billion dollars. With the growth in exploration and production activities in shale gas and tight oil formations, it became more economic to drill onshore in these basins.In addition, most of the natural gas produced in the GOM is associated-dissolved (AD) natural gas produced from oil fields, and although older oil wells in the GOM tend to have higher natural gas content, newer wells are more oil-rich, resulting in less AD natural gas per well. According EIA’s Natural Gas Annual, 59% of gross withdrawals of natural gas in the GOM were from oil wells in 2017. In 1997, however, only 13% of gross withdrawals were of AD gas co-produced with oil. In 2016, all new projects in the GOM occurred in the Mississippi Canyon and Green Canyon protraction areas, located in the Central GOM planning area, and had an average depth of 4,283 feet and total resource level of 1,429 Bcf. Based on the data provided to the Bureau of Safety and Environmental Enforcement, no new GOM projects started up in 2017. For 2018–19, 9 of the 16 projects are located in Mississippi Canyon and Green Canyon protraction areas. Three projects in Garden Banks, West Cameron, and Keathley Canyon are also part of the Central GOM planning area. Two of the projects in Viosca Knoll and Desoto Canyon are in the Eastern GOM planning area. Alaminos Canyon and Sigsbee Escarpment are in the Western GOM planning area. Average project depth is expected to be 4,544 feet in 2018 and 5,585 feet in 2019.

Prices Rise Despite Record Production As The Storage Deficits Grow - Highlights of the Natural Gas Summary and Outlook for the week ending November 2, 2018 follow. The full report is available at the link below.

• Price Action: The December contract rose 5.9 cents (1.8%) to $3.284 on a 18.5 cent range ($3.318/$3.313).
• Price Outlook: Due largely to the November expiration, prices established both a new high and low. Of the 983 weeks since 2000, there have 112 instances where both a new high and low were established compared to only 92 where neither a new high or low was established. Physical data remains bearish as the non-linear impact moderate temperatures reduced demand at the same time pipeline data suggested US production reached a new record level. However, pipeline data also indicated flows to US LNG export facilities reached a new record as well, partially mitigating rising US production. CFTC data indicated a (4,069)contract reduction in the managed money net long position as longs liquidated and shorts added Total open interest fell (253,607)to 3.799 million as of October 30. Aggregated CME futures open interest fell to 1.517 million as of November 02. This is the lowest open interest since July 30, 2018. The current weather forecast is now cooler than 7 of the last 10 years. Pipeline data indicates total flows to Cheniere’s Sabine Pass export facility were at 3.3 bcf. This flow volume suggests feed gas is entering Train 5. Cove Point is net exporting 0.8 bcf.
• Weekly Storage: US working gas storage for the week ending October 26 indicated an injection of +48 bcf. Working gas inventories rose to 3,143 bcf. Current inventories fall (632) bcf (-16.7%) below last year and fall (632) bcf (-16.7%) below the 5-year average.
• Supply Trends: Total supply rose 0.2 bcf/d to 81.4 bcf/d. US production rose. Canadian imports fell. LNG imports fell. LNG exports rose. Mexican exports rose. The US Baker Hughes rig count fell (1). Oil activity decreased (1). Natural gas activity was unchanged +0. The total US rig count now stands at 1,067 .The Canadian rig count fell (2) to 198. Thus, the total North American rig count fell (3) to 1,265 and now exceeds last year by +175. The higher efficiency US horizontal rig count rose +2 to 929 and rises +165 above last year.
• Demand Trends: Total demand rose +0.9 bcf/d to +73.7 bcf/d. Power demand fell. Industrial demand rose. Res/Comm demand rose. Electricity demand fell (829) gigawatt-hrs to 68,635 which exceeds last year by +1 (0.0%) and trails the 5- year average by (143)(-0.2%%).
• Nuclear Generation: Nuclear generation fell (665)MW in the reference week to 76,458 MW. This is (9,003) MW lower than last year and (3,531) MW lower than the 5-year average. Recent output was at 78,906 MW.
• The heating season has begun. With a forecast through November 16 the 2018/19 total cooling index is at (186) compared to (238) for 2017/18, (83) for 2016/17, (117) for 2015/16, (249) for 2014/15, (258) for 2013/14, (283) for 2012/13 and (237) for 2011/12. Attachments:  Natural Gas Summary and Outlook for the week ending November 2, 2018

Natural Gas Prices Spike On Colder US Forecast -- Natural gas prices spiked Monday after a new long-term North American weather forecast found much higher heating demand than previously expected. The latest forecast from Bespoke Weather Services suggests above-average gas demand extending from Nov. 9 through Nov. 18. “Our sentiment has ticked slightly bullish in that weekend weather models were some of the most dramatic in recent memory, with all guidance adding an incredible amount of heating demand against the odds,” Bespoke said. Start building your wealth. Signup to build your successful investment portfolio. Bespoke said near-term heating demand will likely peak Nov. 14 and that warmer weather trends will likely return in the second half of the month. According to AccuWeather, the U.S. will see a return of the El Nino weather pattern this winter, resulting in much colder-than-average temperatures in much of the Northeast, mid-Atlantic, Great Lakes and Ohio Valley of the country, particularly in January and February. “New York City and Philadelphia may wind up 4 to 8 degrees colder this February compared to last February,” senior meteorologist Paul Pastelok said in October. The Southwest could experience a dry winter with temperatures 2 to 4 degrees warmer than usual, but Americans in the Southeast, Tennessee Valley and Gulf Coast region should not expect a repeat of the above-normal February temperatures experienced in February 2018, the meteorologist said. The Price Action Natural gas prices traded higher by 7.5 percent to $3.53 MMBtu on Monday and are now up 18 percent year-to-date. The huge price spike also drove extreme volatility in some popular natural gas ETFs as well:

Major Mid-November Cold Shot Sends Natural Gas Flying - One of the largest weekend heating demand expectation additions in recent memory shot the front of the natural gas futures curve far higher this morning, with the December contract gapping massively up last evening and settling up over 8.5% on the day.  Our Morning Update for clients showed a massive increase in Gas Weighted Degree Days over the weekend.  This led us to hold a Slightly Bullish sentiment on the day even with the December contract already up 6.7% on the day.  Sure enough, prices shot higher from there through the morning on significant strength in the physical market as well.  Climate Prediction Center forecasts have been trending colder in an effort to catch up with some of the very significant cold shown on model guidance.  This comes after weaker cold has already been resulting in some storage draws across the East. Columbia Gas Transmission (TCO) reported a small draw of .64 bcf this past week, which was just a touch below the draw seen the week prior.  The intensity of this cold certainly caught many by surprise. Though we were not forecasting cold of this intensity, we closed our Pre-Close Update on Friday by highlighting huge uncertainties and risks into the weekend, "...confidence is very low due to this extreme model volatility...[w]ith risks that early Week 2 cold trends even stronger and that models still struggle to identify the pattern we expect, our sentiment is temporarily back neutral, as prices can temporarily run early next week on any colder trends before reversing once expected warmth arrives." As seen this morning, those cold trends easily outweighed any warm risks.   Now traders are attempting to determine how long any cold will last and just how intense it will be.

Natural gas prices surge on surprise forecast for cold weather across US - Natural gas prices are surging after a dramatic change to U.S. weather forecasts indicates that winter-like temperatures will grip much of the country in the coming days. The surprise forecast comes on the heels of a two-month rally that pushed natural gas futures up 12 percent through last week. Prices have lately been trading at highs going back to January as U.S. stockpiles of the fuel sit near the lowest levels in over a decade going into the winter season. On Monday, natural gas prices rocketed another 8.6 percent higher. Prices hit a session peak of $3.58 per million British thermal units on Tuesday, the highest level since Jan. 29. "There was a big change in the weather forecast. Not only did it turn colder but it turned much colder in some key heating regions," said Jen Snyder, director of RS Energy's gas market practice. Over the last few days, warm weather patterns broke down, giving way to forecasts that showed colder-than-normal temperatures taking hold throughout much of the country. Forecasts are now pointing to temperatures in mid-November that are more typical of the middle of December, with cold bursts expected in the Midwest, across Texas and the South and throughout New England. "This is one of the largest weekend changes we've seen," said Jacob Meisel, chief weather analyst at Bespoke Weather Services. "The order of magnitude of cold change caught everyone off guard." Analysts say the run-up reflects concerns that natural gas held in underground storage throughout the country will run low toward the end of the winter, making it harder to deliver the commodity in some regions. To keep natural gas storage levels adequate during a cold winter, prices need to rise enough to incentivize drillers to increase production or force some consumers to turn to other fuel sources.

U.S. natural gas prices surge on cold weather forecast- Kemp (Reuters) - U.S. natural gas prices have jumped to their highest in nine months as forecast cold weather across much of the country has reminded traders of the risks posed by low gas inventories going into winter. Gas stocks have fallen well below the five-year range since the summer and are now at the lowest level for the time of year since 2003, according to data compiled by the U.S. Energy Information Administration. Until the past few days, traders appeared unconcerned about low inventories because output is growing rapidly and the development of El Nino over the Pacific should lead to a warm winter over the northern part of the country. But the much colder than normal temperatures forecast across much of the United States in the next fortnight are a reminder that El Niño is not the only influence on weather and heating demand. Even if the coming winter proves warmer than average, there is still scope for extensive and extended cold periods that could put further pressure on gas stocks. Natural gas futures prices for gas delivered in December have jumped to almost $3.57 per million British thermal units from just $3.19 on Oct. 30 and just $3.00 on Sept. 28. Higher gas prices will encourage owners of gas-fired power generators to run them for fewer hours in the next few weeks to conserve scarce gas stocks, while coal-fired power plants are likely to run more.  Heating demand has been running close to or slightly below the long-term seasonal average so far during the current heating season which started on July 1 (https://tmsnrt.rs/2D6UVBd).But the forecasts for much colder than normal weather over the next two weeks will push cumulative heating demand far above the seasonal norm.Almost the entire United States, except California and southern Florida, as well as Alaska and Hawaii, will experience colder than normal temperatures in the middle of November. Colder than normal temperatures are expected to persist over much of the country through at least the next two weeks, according to the U.S. government's Climate Prediction Center.

Natural Gas Settles Down As Forecasts Stabilize - It was a much slower day in the natural gas market, as we saw the December contract settle down a bit less than half a percent with strength further out along the curve. In what was a new development for the market the February contract ended up taking the lead today. The result was a quick reversal in the Z/F December/January spread today after a spike higher yesterday. A slower trading day was not particularly surprising, as in our Morning Update for clients we noted a slight tick lower in forecast GWDDs that could help keep prices in check. We did outline ..."risk up to $3.6 on any cash strength" but also that "long-range warm risks have ticked up from yesterday" which would prevent much more of a run-up in prices. The December contract got up to around $3.58 before pulling back later in the day, though afternoon model guidance did increase medium-term cold intensity, as seen on recent Climate Prediction Center probabilistic forecasts. For clients today we released our updated Seasonal Trader Report, which puts into context this November cold shot and outlines how long we expect this cold to last, how temperatures should trend into December, and how temperature risk is skewed through early 2019. In it we looked at the latest CFSv2 forecast for weak El Nino conditions through the coming winter, putting it in context of other model forecasts and our expectations. We also held our subscriber-only live chat on the Enelyst platform, where we looked at the latest natural gas balances, 3-week and 5-month weather forecasts, and outlined our price expectations moving forward. One data point was a recent dip in LNG exports following near-record levels over the past weekend. 

Model Craziness Stuns Natural Gas - It was another slower day for natural gas as traders struggled to read into recent weather model trends that have been bouncing around. On the day, the December natural gas contract settled perfectly flat to yesterday.  There was further weakness out along the winter natural gas strip, though. As a result the December/January natural gas spread narrowed decently on the day, though is still off its narrows set back on Monday.  Our Morning Update highlighted that we held "neutral" natural gas sentiment due to significant weather model volatility and only minor overnight GWDD losses.  This ended up verifying well with the December natural gas contract settling flat on the day, and we saw some factors on the balance side of the equation that would likely provide some support for prices today that we highlighted in our Note of the Day. Now, traders are preparing for an EIA announcement tomorrow that should show a slightly larger storage build than we saw last week thanks to a bit less weather-driven demand.  This will obviously be weighed against the latest overnight weather model forecasts, with the Climate Prediction Center showing more mixed risks now in the long-range.   We highlighted these mixed risks in our Afternoon Update and broke down where we saw weather models trending and accordingly how natural gas risk appeared skewed moving forward. We also outlined our estimate for the natural gas EIA print tomorrow, updating our market sentiment and looking into the latest S/D balance trends of the day.

US natural gas storage volume rises 65 Bcf to 3.208 Tcf- EIA — The amount of natural gas in US storage facilities increased 65 Bcf to 3.208 Tcf in the week that ended November 2, the US Energy Information Administration reported Thursday. An S&P Global Platts survey of analysts called for a 55 Bcf build in stocks. The injection was nearly triple the 22 Bcf build reported in the corresponding week in 2017 as well as 35.4% higher than the five-year average addition of 48 Bcf, according to EIA data, and same amount larger than the build in the week prior.As a result, stocks were 580 Bcf or 15% below the year-ago level of 3.788 Tcf and 621 Bcf or 16% under the five-year average of 3.829 Tcf.The NYMEX December gas futures contract fell 3.7 cents to $3.518/MMBtu following the 10:30 am EST (1530 GMT) storage data announcement.The EIA reported a 5 Bcf injection in the East to raise stocks to 831 Bcf, compared with 925 Bcf a year ago; a 24 Bcf build in the Midwest to lift inventories to 980 Bcf, compared with 1.111 Tcf a year ago; a 2 Bcf addition in the Mountain region to boost stocks to 182 Bcf, compared with 224 Bcf a year ago; a 3 Bcf build in the Pacific to nudge inventories up to 265 Bcf, compared with 317 Bcf a year ago; and a 30 Bcf injection in the South Central region to hoist stocks to 949 Bcf, compared with 1.210 Tcf a year ago.Total inventories are now 88 Bcf under the five-year average of 919 Bcf in the East, 113 Bcf below the five-year average of 1.093 Tcf in the Midwest, 37 Bcf beneath the five-year average of 219 Bcf in the Mountain region, 86 Bcf less than the five-year average of 351 Bcf in the Pacific, and 297 Bcf under the five-year average of 1.246 Tcf in the South Central region.

Natural gas prices spike on cold weather and lowest early season supply in 15 years - Forecasts of a more extended November cold snap across the U.S. sent natural gas prices to a near two-year high, as investors worry about rising demand at a time when supplies are at the lowest level to start the winter heating season in 15 years. Natural gas futures for December spiked more than 6 percent to $3.76 per mmbtu, the highest price since December, 2016.  "We added a lot of heating demand over the last week," said Jacob Meisel, chief weather analyst at Bespoke Weather Services. "This morning, there are more risks that the cold is going to linger a bit longer through November, not at the same intensity but it's enough to scare a market that has low storage levels and already has strong physical prices."   Meisel said colder than average weather is expected from the Midwest into parts of the Northeast and East Coast. "It looks like around November 16 to 17 we finally see the cold move out, but now there's one more system that could keep cold weather on the East Coast. There's still disagreement on the long range," he said. Weekly government data Thursday showed the amount of natural gas in U.S. storage facilities rose by 65 billion cubic feet to 3.208 trillion cubic feet in the week ended Nov. 2, but that is still 15 percent below the year-ago level of 3.788 tcf, and 16 percent below the five-year average."I think we're looking at the potential for shortages towards the end of the season, depending on how the winter goes," said John Kilduff, partner with Again Capital. In recent years, the U.S. has started the heating season with record supplies that were largely depleted by the end of the season. Kilduff said, however, the amount of gas in storage this year at the Nov. 1 start of the winter heating season is unusually low. The last time supplies were this low in the first week of November was in 2003, and that year natural gas prices hit $12 per mmbtu.

Cash Strength And More Cold Risks Sends Gas Another Leg Up -- The December natural gas contract shot another 5% higher today as physical prices soared off an incoming cold shot and overnight models once again increased medium-range cold risks. Like yesterday, the largest gains were all at the front of the strip, with cash an initial catalyst to break through a number of resistance levels. This cash strength was not particularly surprising, as in our Afternoon Update yesterday we highlighted that, "This recent range from $3.45-$3.6 is much of the reason our sentiment has remained neutral all week as we have not seen a clear catalyst to break out of it. That may be changing, however, as tomorrow we are looking for even stronger cash prices out of Henry Hub and any sustained medium-range HDD additions to potentially move the front of the strip at least into if not briefly above the $3.6 level. We had looked for this earlier in the week as well but cash prices did not exude enough strength to make it possible; stronger cash today and very significant cold this weekend make a morning bounce tomorrow off cash strength more likely." At the time we were looking for that bounce to fail, but did predict a morning bounce.  Then our Morning Update turned our sentiment "Slightly Bullish" as we expected the front of the natural gas strip to run towards the $3.7 level with colder overnight weather model trends. Admittedly we were not quite bullish enough, with prices shooting higher over $3.28, though they did come back down to settle near that $3.27 level as well. The market is clearly very sensitive to weather, and we can see that GWDDs near the highest levels of the past 35 years into mid-November are clearly spooking traders. Yet some long-range warm risks did persist that helped reversed prices later in the day today. These are seen on the latest 8-14 Day Climate Prediction Center forecast. Their Week 3-4 forecast featured even more warmth.

Midwest propane inventories enter winter higher than previous five-year average -- Propane inventories (including propylene produced at refineries) in the Midwest United States had been lower than the previous five-year average for much of 2018, but in recent weeks, net additions to inventories increased Midwest propane to levels higher than the previous five-year average. For the week ending October 19, propane inventories in the Midwest, or Petroleum Administration for Defense District (PADD) 2, were 27.8 million barrels, or 792,000 barrels higher than the previous five-year average. The Midwest accounts for about 21% of propane consumption in the United States and typically holds about 30% of U.S. propane inventories. The Midwest has the highest percentage of homes heated by propane in the United States. In addition to being used for space heating, propane is used as a feedstock for petrochemical plants and for drying agricultural crops before storage. On Wednesdays during the winter heating season (October through March), EIA releases the Weekly Propane Market Update, which includes sub-PADD breakouts of propane inventories at refineries, terminals, and natural gas plants. These inventory values exclude any propane already in the pipeline distribution network. EIA only tracks propane inventories in the primary supply chain, so propane inventories held at many local storage and distribution terminals are not included in EIA’s data. Inventories of propane in Kansas and Michigan, the two Midwest states with the largest propane inventories, were both slightly higher than the previous five-year average as of October 19.   In EIA’s most recent Winter Fuels Outlook, winter heating expenditures for Midwest households using propane as their primary heating source are expected to decline because, unlike the rest of the country, the Midwest is expected to have warmer weather this winter relative to the 2017–2018 heating season, according to forecasts from the National Oceanic and Atmospheric Administration.

Permian natural gas: more production, infrastructure and demand. - Right now, pipeline capacity out of the Permian is constrained, and consequently some producers have cut back on well completions, more gas is getting flared, and ethane recovery is being driven more by bottlenecks than by gas plant economics.  But even with these issues, there are still 487 rigs drilling for oil in the basin (according to Baker Hughes), and all will come along with sizable quantities of natural gas.    Not only does this production need to be moved out of the Permian, the volumes need to find a home — either in the domestic market or overseas. These were all issues that were considered by our speakers, panelists and RBN analysts last month at PermiCon, our industry conference designed to bridge the gap between fundamentals analysis and boots-on-the-ground market intelligence.  In today’s blog, we continue our review of some of the key points discussed during the conference proceedings.PermiCon was held on October 10 and about 750 industry leaders joined us for the conference. Our content combined six presentations by RBN alongside the views of 14 CEOs and senior executives with significant operations in the Permian. In Part 1 of this series, we discussed the driver of all action in the Permian — production growth, with crude oil growing from 900 Mb/d ten years ago, doubling by 2014, never dropping off after the crude price crash that year, and now up by double again, to 3.5 MMb/d (left graph, Figure 1). We covered the implications of this growth for current crude oil pipeline takeaway capacity (regularly maxed out), Permian crude price differentials (wide, though a little narrower in the near term due to the rush to bring on new capacity), new crude oil pipeline projects designed to relieve the bottlenecks, and the strategies that infrastructure companies are taking to position themselves to be able to ride out any possible overbuild cycle in the crude pipeline capacity market. We also considered the implications for natural gas and NGLs, also up on the very same trajectory as crude oil, because these hydrocarbon streams come right along with crude oil from the wellhead. So Permian gas production is up to nearly 8.7 Bcf/d (middle graph, Figure 1) and NGL production is at about 1.3 MMb/d (right graph, Figure 1).

Halliburton Expects Permian Bottlenecks Gone By End of 2019-- Halliburton Co. expects bottlenecks in America’s busiest oil field to be relieved by the end of next year. A series of catalysts will drive drilling and fracking activity in the Permian Basin of West Texas and New Mexico throughout the next year, Jeff Miller, chief executive officer of the world’s biggest fracker, said during a Bloomberg TV interview on Monday. Explorers’ budgets will reload as the calendar flips to next year, and a host of new pipelines will open in the second half of 2019 to create more takeaway capacity. “It will be a series of events throughout 2019 that occur,” Miller said. “But it’d be easy to see, as we finish the year, things being perfectly normal.” It was a slightly nuanced comment from Miller, who said last month that he was trying to stay “less prescriptive on the timing of those catalysts.” 

Houston plant's owner enters multimillion-dollar settlement with EPA - Ohio-based natural gas processor MPLX LP agreed to a settlement worth millions of dollars to resolve purported violations of federal and state clean-air laws, including at the MarkWest Houston plant in Chartiers Township.   MPLX – a subsidiary of Marathon Petroleum Corp. which bought MarkWest Energy three years ago – and various subsidiaries entered a consent decree Thursday with the U.S. Environmental Protection Agency to pay a $925,000 fine and spend millions of dollars more to install new emissions monitoring equipment and upgrade pollution controls at 20 of its processing plants. The agreement concerns violations the agency accused the company of committing at the Houston plant and a facility in Evans City, Butler County, plus others in Ohio, West Virginia, Kentucky, Texas and Oklahoma. All of the plants were part of MPLX's purchase of MarkWest. EPA officials said the problems at issue in the settlement included "control of emissions from equipment leaks, pressure relief devices, storage tanks, truck and railcar loading, combustion devices, and process heaters."Documents filed with the consent decree show that environmental officials who made a 2015 visit to the Houston site said the company failed to properly monitor some equipment, so that leak rates were greater than those MarkWest had reported itself. Other violations the inspectors' visit turned up were deficiencies in monitoring and record-keeping. Aside from the fine, MPLX consented to spend about $2.78 million on additions and upgrades to its equipment for controlling emissions of volatile organic compounds at its processing plants. “This agreement will eliminate harmful air pollutants and create cleaner air for communities in six states,” said Susan Bodine, EPA assistant administrator for enforcement and compliance. “By improving air pollution control at 20 of their gas processing facilities, MPLX will reduce VOC emissions by more than 1,500 tons a year.”

New Pipeline Would Link Cushing to Houston, Possibly Corpus - Magellan Midstream Partners, L.P. (MMP) and Navigator Energy Services have launched a binding open season to gauge customer interest in a pipeline project to ship light crudes and condensate from Cushing, Okla., to Houston, MMP announced Monday. According to MMP, the proposed Voyager pipeline would comprise nearly 500 miles of new 20-inch diameter pipe linking the company’s terminals in Cushing and East Houston. At Cushing, Voyager would link to the Rockies and Bakken via the MMP-operated Saddlehorn pipeline and to Mid-Continent basins by way of Navigator’s Glass Mountain pipeline, MMP stated. Once it reaches Houston, the pipeline reportedly could link to refineries in the region as well as crude oil export export facilities, the company added. The open season documentation states that a new entity called “Magellan Navigator” would operate Voyager, which would have an initial capacity of at least 250,000 barrels per day and would handle up to four light crude and condensate grades. MMP also stated Monday that it is evaluating a potential crude oil pipeline from Houston to Corpus Christi as well as a crude export terminal on Harbor Island in Corpus Christi. The terminal would be capable of loading very large crude carriers (VLCCs), the company stated. The open season ends Jan. 31, 2019. Pending a successful open season and regulatory process, MMP stated that the pipeline could begin service by the end of 2020. 

Earthquake prompts shutdown of fracking wastewater well in Oklahoma - — State oil and gas regulators in Oklahoma have ordered the indefinite shutdown of a disposal well after an earthquake struck nearby.  The 3.3 magnitude quake was reported Sunday night near Bridge Creek, about 20 miles southwest of Oklahoma City. There are no reports of damage or injuries.Thousands of earthquakes have been recorded in Oklahoma in recent years, with many linked to the underground injection of wastewater from oil and natural gas production. Scientists have also linked earthquakes in other states, including Ohio, to wastewater injection. Late Sunday, the Oklahoma Corporation Commission issued a directive calling for the shutdown of the well near Bridge Creek, pending further investigation.

New Mexico, Oklahoma lead big rig count spike - The number of active drilling rigs jumped in the U.S. jumped by 14 from last week, courtesy of New Mexico and Oklahoma each gaining four net rigs.  Pennsylvania, Colorado and the offshore waters of Louisiana all saw increases of multiple rigs as well. Texas lost one net rig because South Texas' Eagle Ford Shale declined by three active rigs. The U.S. is up to 1,081 active rigs with nearly half of them -- 532 rigs -- operating in Texas, according to weekly data collected by Baker Hughes, a GE company. Of the total, 886 of the rigs are drilling for oil with the remained seeking natural gas. The booming Permian Basin in West Texas and New Mexico counts 492 rigs, which is more than 55 percent of all the nation's oil rigs.Because of pipeline shortages in West Texas, many companies are continuing to drill Permian wells while leaving more of them uncompleted for the time being until new pipelines come online. The total count is up from an all-time low of 404 rigs in May 2016. With this week's jump, the oil rig count is down 45 percent from its peak of 1,609 in October 2014, before oil prices began plummeting. However, rigs today are able to drill more wells than before and to deeper depths to produce more oil and gas. That's largely why the U.S. is producing record volumes of crude oil and natural gas.

Well Setback Measure Fails in Colorado - A controversial proposal on the ballot in Colorado that would have dramatically limited new oil and gas development in the state failed at the polls Tuesday. According to returns from the Colorado Secretary of State’s office, Proposition 112 failed to gain majority support from voters. The measure, which would have required any new oil and natural gas development in the state to be at least 2,500 feet away from occupied structures, water sources and areas deemed “vulnerable,” lost by an approximately 57- to 43-percent margin. A July 2018 Colorado Oil and Gas Conservation Commission analysis of the proposal – known at the time as “initiative #97” while supporters were still collecting signatures to get it on the November ballot – concluded that:The measure would put approximately 54 percent of Colorado’s total land surface off-limits to new oil and gas development. Eighty-five percent of the state’s non-federal land would be inaccessible. Among Colorado’s top five oil and gas-producing counties, a combined 61 percent of the surface acreage – 94 percent of non-federal land – would be unavailable for new development.  The head of the American Petroleum Institute’s Colorado affiliate expressed relief that Proposition 112 failed.  “Colorado plays a leading role in America’s energy revolution, and our state has spoken loud and clear that we recognize the importance of the industry to the state’s economic well-being,” Colorado Petroleum Council Executive Director Tracee Bentley said in written statement sent to Rigzone late Tuesday.  “Proposition 112 would have hurt more than just the natural gas and oil industry, as 77 percent of the 43,000 jobs it would have eliminated in year one would have come from outside the energy sector.” “Proposition 112 was the single-worst ballot measure I have seen in all my years as a Coloradan,” Amy Oliver Cooke, director of Spirit of Colorado, said in a written statement. “A handful of Boulder-based activists, funded by Washington, D.C. fracktivist cash who hate our Colorado spirit and way of life, tried to destroy our state’s economic future with one fell swoop. We are thrilled that Colorado voters recognized the dangers of Proposition 112 and soundly defeated this measure.”

Colorado voters reject stricter rules on new oil, gas wells - Colorado voters rejected a proposal Tuesday that would have tightly restricted where new oil and gas wells could be drilled across the state — the latest development in a contentious debate about how much control state and local governments can exert over the powerful fossil fuels industry. Proposition 112 would have required that new wells be at least 2,500 feet (750 meters) from occupied buildings and "vulnerable areas" such as parks, creeks and irrigation canals. It also would have allowed local governments to require even bigger buffer zones.The state currently requires that wells be 500 feet (150 meters) from homes and 1,000 feet (300 meters) from schools. Opponents warned that the measure would ruin the oil and gas industry and drag down other economic sectors in Colorado, which ranks seventh in the nation in domestic oil production and fifth in natural gas production. "We appreciate Colorado voters who realized what a devastating impact this measure would have had on our state's economy, school funding, public safety and other local services," said Karen Crummy, a spokeswoman for the industry-funded group Protect Colorado. She pointed to a state analysis that determined the measure would have put 85 percent of non-federal land in Colorado off-limits to drilling. The proposal did not apply to federal land, which makes up about 36 percent of the state. According to the analysis by the Colorado Oil and Gas Conservation Commission, which regulates the industry, the measure also would have prevented drilling on large swaths of land along the Front Range urban corridor, including in Weld County where houses and other developments sit atop the expansive Denver-Julesburg Basin. A consortium of business groups released a study in July concluding that by 2030, there would be up to 147,800 fewer jobs in Colorado, up to $1.1 billion in lost tax revenue for state and local governments and up to $141 billion in lost oil and gas production if the measure passed. But the dire warnings didn't stop backers from collecting an estimated 123,000 valid signatures to put the proposal on the ballot. Voters also rejected an industry-backed companion measure that would have made it easier for property owners to seek compensation from the government for actions that diminish their property's value.

Oil drilling stocks surge after Colorado voters reject restrictions on industry --Oil and gas companies with operations in Colorado are seeing their shares jump after voters rejected a ballot proposal that would have placed tough restrictions on drilling in the Centennial State.Colorado's proposition 112 would have prohibited energy companies from drilling within about half a mile from homes, schools, businesses and water sources. The measure would have cut the state's projected oil and gas output roughly in half by 2023, according to an estimate by S&P Global Platts Analytics.Shares of Bonanza Creek Energy and Extraction Oil & Gas, two drillers that produce solely from Colorado's Wattenberg Field, surged about 9.5 percent and 13.5 percent, respectively. Shares of PDC Energy, another Wattenberg player, were up nearly 8 percent shortly after the opening bell on Wednesday.Shares of more diversified drillers with a footprint in Colorado were also higher. Anadarko Petroleum's shares rose 6.5 percent in premarket trading, while Noble Energy's stock price jumped nearly 4 percent. While Colorado voters rejected Proposition 112, they made Democratic Jared Polis their new governor. Polis campaigned on generating 100 percent of Colorado's electric power from renewable energy sources by 2040.

Highland to resume fracking operations at East Denver project this week - Natural resources company Highland said Wednesday it would resume hydraulic fracturing operations for the six new wells at its East Denver project this week. Flowback from the new wells was expected in late December 2018 or early January 2019, the company said. In a positive step for the Colorado oil and gas industry, proposition 112 – which would have increased well set-back limits for occupied buildings and school structures – was not passed in the State of Colorado following the 6 November 2018 election results, the company said. Highland said talks were ongoing with potential partners to develop its West Denver project.

Shale oil producers are stuck with serious cash flow -- Companies in the shale oil exploration business have been staring down the barrel for quite some time now, as their operating cash flow remains lower than capital expenditure incurred. Only nine out of 33 shale oil exploration and production companies have shown positive cash flow this year till date, and this is concerning as companies have failed to show profit even with oil prices climbing steadily from 2016.    The increased debts being accrued by the shale companies mean that they do not have the bandwidth to invest in future production or well acquisitions, which would further dampen its prospects on showing positive numbers in its quarterly sheets. Add to this, the shockingly decremental rates of oil production in shale wells, which unlike other oil production sites, see a 70 to 90% fall in production within three years from production start.   These factors put together would mean rapidly declining investor trust, which might turn catastrophic unless shale oil production companies figure out a way to keep production levels high, while turning in positive cash flow.  In a postelection news conference Wednesday, the president said he and Democrats "have a lot of things in common on infrastructure." Ever since launching his White House bid, the real estate billionaire had lambasted what he's categorized as "horrible infrastructure problems" throughout the United States.  Newly energized Democrats are ready to pass a "pretty big, bold bill" and help pay for it by raising the federal gasoline tax for the first time in 25 years, LaHood said. The federal gas tax has been 18.4 cents, 24.4 cents for diesel, since it was last raised in 1993.

Two years after Standing Rock, another oil pipeline faces tribal opposition --  Since 1993, Dawson County Sheriff Ross Canen has dealt with small town stuff like drunk drivers, domestic violence and meth use.  But now that developers say the controversial Keystone XL pipeline will be constructed in his backyard, Canen is preparing for a potential Standing Rock-style protest. His rural county has never seen any kind of protest before. “We’re not looking forward to it,” he said. “But we’re preparing for it. And we’re going to handle whatever comes up.”  If built, Keystone XL would carry oil over 1,000 miles from the Alberta tar sands to Nebraska. Developers of the pipeline say it’s safe and could pump billions of dollars into the U.S. economy. Though the project was killed by the Obama administration, it was recently revived under Trump. In Montana, the pipeline would cross the Missouri River, an important source of water for the nearby Fort Peck Indian Reservation. Katie Thunderchild lives there and is worried the pipeline could leak. “And where does that leak go? It goes into the water,” she said. “And we drink that water, and we get sick, and it just goes on down the line,” Thunderchild said.Keystone XL developer TransCanada said the pipeline will be buried more than 50 feet below the river. Federal regulations require a pipeline is buried four feet beneath a major river crossing. TransCanada has state-of-the-art monitoring systems that can register pressure drops and can shutdown the pipeline within minutes. But Thunderchild said she’s also worried about the kind of people pipeline construction could bring. This is an isolated place — everyone knows everyone — but Keystone’s developers are building temporary housing near the Fort Peck Indian Reservation for a surge of out-of-state workers. “What is their background? Did they commit a crime, does it involve children, guns, all of that other stuff. Drugs?” she said. Thunderchild has two young daughters, so the pipeline project scares her. She isn’t alone.In at least six other states, tribes are opposing energy infrastructure projects like Keystone XL. Since Standing Rock, there’s been a lot more scrutiny over oil pipelines. Lawsuits against them have ramped up. Here in the northern Great Plains, the Rosebud Sioux and the Fort Belknap Indian Community have already sued in an effort to stop Keystone XL.  They say the Trump administration ignored environmental impacts and treaty rights .

US court halts construction of Keystone XL oil pipeline - A federal judge on Thursday halted construction of the Keystone XL oil pipeline, arguing that President Donald Trump’s administration had failed to adequately explain why it had lifted a ban on the project. The ruling by Judge Brian Morris of the US District Court for the District of Montana dealt a stinging setback to Trump and the oil industry and served up a big win for conservationists and indigenous groups. Trump granted a permit for the $8 billion conduit meant to stretch from Canada to Texas just days after taking office last year.In doing so the administration overturned a ruling by then president Barack Obama in 2015 that denied a permit for the pipeline, largely on environmental grounds, in particular the US contribution to climate change. “An agency cannot simply disregard contrary or inconvenient factual determinations that it made in the past, any more than it can ignore inconvenient facts when it writes on a blank slate,” Morris wrote.

Federal judge blocks Keystone XL pipeline, saying Trump administration review ignored ‘inconvenient’ climate change facts - A federal judge temporarily blocked construction of the controversial Keystone XL pipeline, ruling late Thursday that the Trump administration had failed to justify its decision granting a permit for the 1,200-mile long project designed to connect Canada’s oil sands fields with Texas’s Gulf Coast refineries.The judge, Brian Morris of the U.S. District Court in Montana, said the State Department ignored crucial issues of climate change to further the president’s goal of letting the pipeline be built. In doing so, the administration ran afoul of the Administrative Procedure Act, which requires “reasoned” explanations for government decisions, particularly when they represent reversals of well-studied actions.It was a major defeat for President Trump, who attacked the Obama administration for stopping the project in the face of protests and an environmental impact study. Trump signed an executive order two days into his presidency setting in motion a course reversal on the Keystone XL pipeline, as well as another major pipeline, Dakota Access.The ruling highlights a broader legal vulnerability in the Trump administration’s push to roll back Obama-era environmental protections. Since Trump took office, federal courts have found repeatedly that his agencies have short-circuited the regulatory process in areas ranging from water protections to chemical plant safety operations. Robust environmental and administrative procedure laws, many dating back to the 1970s, have given the administration’s opponents plenty of legal ammunition.Thursday’s decision does not permanently block a federal permit for Keystone XL, a project of the Calgary-based firm TransCanada. It requires the administration to conduct a more complete review of potential adverse impacts related to climate change, cultural resources and endangered species. The court basically ordered a do-over.In a 54-page opinion, Morris hit the administration with a familiar charge that it disregarded facts, facts established by experts during the Obama administration about “climate-related impacts” from Keystone XL. The Trump administration claimed, with no supporting information, that those impacts “would prove inconsequential,” Morris wrote. The State Department “simply discarded prior factual findings related to climate change to support its course reversal.” It also used “outdated information” about the impact of potential oil spills on endangered species, he said, rather than “'the best scientific and commercial data available.'”  The lawsuit prompting Thursday’s order was brought by a collection of opponents, including the indigenous Environmental Network and the Northern Plains Resource Council, a conservation coalition based in Montana.

2018 Was a Rough Election Year for Climate and Anti-fracking Measures - DeSmog (blog) Around the U.S., many states and municipalities were voting in the U.S. midterms on races with implications for limiting the environmental and public health impacts of fossil fuels, particularly drilling and hydraulic fracturing (fracking). On cue, however, the oil and gas industry responded by spending massive amounts of money to defeat these initiatives and elect their preferred candidates, with plenty of success.  In just three of those states, energy and fossil fuel companies reportedly spent almost $100 million fighting a price on carbon, a ban on new fracking and drilling near homes, and a more ambitious state renewable energy requirement. In Colorado, the state-wide measure known as Proposition 112 was presented as a common-sense proposal “changing existing distance requirements to require that any new oil and gas development be located at least 2,500 feet from any structure intended for human occupancy.” Current setback requirements for drilling and fracking are 500 feet from homes and 1,000 feet from schools.  While the final vote tallies aren’t in yet, the measure definitely was voted down, with current tallies showing over 56 percent of voters deciding against it. Earthquakes caused by fracking wastewater injections were a major topic in the race for corporation commissioner in Oklahoma.  Ashley McCray, a 34 year old former activist, was running on was limiting fracking wastewater injection wells to reduce related earthquakes in Oklahoma.  While McCray only managed to gain 34 percent of the vote, the local paper The Journal Record credits her campaign with shedding more light on just what the powerful corporation commission does.  In Washington state, Initiative 1631 was a high-stakes ballot measure proposing a first-in-the-nation fee on the state's major carbon polluters, including its oil refineries. Based on mail-in ballots counted so far, the measure appears to have been voted down by over 56 percent of voters. In San Luis Obispo County, Measure G would have used the California county’s land-use powers to ban any new oil production on county land and outright ban fracking. Measure G failed with help from $8 million of spending from the oil industry. In Arizona, Proposition 127 was a ballot measure that would have required electric power companies to generate half of the state’s energy from renewable sources by 2030. A total of over $54 million was spent on the campaign, with big money on both sides of the issue. The results weren’t even close: 70 percent of voters vetoed raising the renewable energy requirement. In Nevada, Question 3 asked whether consumers should have the ability to choose their energy provider or continue only buying electricity from NV Energy, which currently holds a monopoly on the market in Nevada. Clean energy advocacy groups like the Sierra Club and Natural Resources Defense Council opposed the measure, saying it would lead to market uncertainty and slow down the significant progress Nevada currently is making with renewable energy and rooftop solar. Billionaire Warren Buffett was among those opposing Question 3, whose No campaign raised approximately $63 million to successfully defeat the amendment, compared to $21 million spent in support. Activists in Youngstown, Ohio, a former steel boom town, are nothing if not persistent in their efforts to ban fracking in an area at the nexus of the Utica and Marcellus shales. 2018 represented their sixth attempt to ban fracking via the ballot and they lost once again, as 55 percent voted down the ban.

ExxonMobil and Chevron Report Strongest 3Q Results in 4 Years - -- Exxon Mobil Corp. and Chevron Corp. delivered their strongest third-quarter results in four years, capping a week in which Big Oil enjoyed profits not seen since the days of $100 crude. Both companies reported double-digit production increases in the Permian Basin, the shale region in Texas and New Mexico that’s propelling total U.S. oil output to an all-time high. The Permian now makes up 11 percent of Chevron’s overall output and is home to Exxon’s fastest-growing large project. The two American supermajors have historically focused on multibillion engineering marvels that take years, and in some cases even decades, to build. Exxon and Chevron changed strategy after oil prices plunged in 2014 and 2015, shifting billions of dollars of investment into shale deposits where wells can be drilled in a matter of weeks. Exxon’s oil and natural gas output surpassed expectations for the first time in 10 quarters, rebounding from the decade-low reached in the second quarter. It said Friday that earnings climbed to $6.2 billion, up 57 percent from a year earlier. At Chevron, record production combined with higher crude prices to double its profit to $4 billion. After many disappointing quarters, Wall Street was pleased with Exxon. “Overall excellent cash generation,” Paul Sankey, an analyst at Mizuho Securities USA LLC, said in a note to clients. “We think the company is on the right course under new CEO Darren Woods, but it is a long turning circle.” The results show that American and European energy majors are in a sweet spot, benefiting from four hard years of belt-tightening, shale investments and now higher oil and gas prices. Royal Dutch Shell Plc posted the biggest cash haul in a decade earlier this week, obliterating analyst’s estimates, while BP Plc’s earnings also surpassed expectations.

Oil and Gas Recruiting to Rise in Coming Months -- Oil and gas recruiters across the world are expecting to recruit more in coming months, according to a recent survey by Rigzone. Rigzone’s global survey targeting oil and gas recruiters and hiring managers—administered Sept. 25 to Oct. 16—yielded 77 completed responses from those actively working as recruiters in the industry. Of the respondents, 83 percent said they recruit for upstream; 49 percent recruit for midstream and 32 percent recruit for downstream. Seventy percent of respondents indicated that they expected to recruit more in the next six months. This comes after years of recruiting activity that was muted due to the industry’s downturn. During that time, companies were focused on staying afloat while slashing capital expenditures – which often included headcount. Sixty-five percent of respondents said they recruited more in first half of 2018 than in second half of 2017. Another 21 percent said they recruited about the same in both halves 

EIA Confirms API Data -- US Crude Oil Inventories Surged (Again) This Past Week -- November 7, 2018 -- Link here. Weekly US petroleum data --

• US crude oil inventories: increased by 5.8 million bbls
• US crude oil inventories: now at 431.28 million bbls; the blog's threshold: 400 million bbls
• US crude oil inventories now 3% above the five-year average for this time of year
• refiners are working at 90% capacity; unchanged from last week (89%)
• gasoline production just below 10 million bbls/day
• distillate fuel production right on glide path at 5 million bbls/day
• total product supplied up by another 4% from the same period last year
• distillate fuel supplied is up over 6% from same period last year
• WTI: $61.89.

Ruptured pipeline near Prince George repaired, but gas supply still limited for FortisBC customers - Enbridge has completed repairs on the ruptured pipeline near Prince George, but says natural gas supply will still be limited. Although the 36-inch natural gas transmission pipeline, which ruptured on Oct. 9, was brought back into operation on Oct. 31, Enbridge says the pipeline will run at about 55 per cent of operating pressure and gradually ramp up to 80 per cent through November. In response to the still limited supply FortisBC has sent out an email to its customers asking them to continue to reduce their natural gas use. FortisBC explains the company will have a constrained supply of natural gas and its gas system will be vulnerable in periods of cold weather. “As you may know, on October 9, 2018 an Enbridge-owned natural gas transmission pipeline ruptured near Prince George, BC. Given Enbridge’s pipelines provide the majority of FortisBC’s natural gas, this has had an immediate impact on our natural gas system. Your support and positive efforts to reduce your use of natural gas during this time is immensely appreciated,” reads the Nov. 5 email FortisBC sent out to its customers. “While completion of the repairs is a positive step, the reduced capacity reported by Enbridge means natural gas supply will still be limited. As we head into colder weather, we ask that our customers continue to focus on their conservation measures to help ensure a sufficient supply of natural gas is available for customers over the winter," the email adds.

British Columbia faces lawsuit- Fracking dams exempted from environmental review- A conservation group is suing the B.C. government for exempting two oilpatch dams from environmental rules years after the dams were built. “It seems like the government was really playing catch-up,” Olivia French, the lawyer handling the lawsuit for the B.C. Sierra Club, said Monday. “Progress Energy acted with a bit of disregard for B.C.’s laws — one of those typical, ’Ask for forgiveness, not for permission’ sort of positions.” The lawsuit asks that the exemptions given the two dams be revoked. French said the issue is becoming too common in the province’s northern natural gas fields. A statement of defence has not yet been filed and none of the lawsuit’s claims has been proven in court. Progress Energy is an Alberta company owned by Malaysian oil giant Petronas. The dams were built in 2012 and 2014 to store water used by the company’s fracking operations northwest of Fort St. John, B.C. B.C. Environment Minister George Heyman said legal officials are looking into the two dams. “It’s very clear under the existing Environmental Assessment Act that proceeding with a project without undergoing an assessment is against the act,” he said. “Four months ago we referred the results of our investigation to Crown counsel and it’s now in their hands.” Both dams met legal criteria to require environmental assessments, French said. Provincial law dictates that proposed dams higher than 15 metres must be considered for review. “All the parties agreed that these are technically reviewable projects,” French said. However, neither ever was, despite being well over the 15-metre limit. The lawsuit alleges the province’s environmental assessment office “received information” in 2016 that the Progress dams may be violating the rules. It says an inspector had a look and determined the company had broken the law by building them without getting an environmental permit. “Neither the exemption requests nor the project descriptions for (the dams) provided any explanation from Progress Energy for the non-compliance with the (law),” the lawsuit says.

There will be an oil shortage in the 2020's, Goldman Sachs says - An oil shortage is coming says Goldman Sachs, because firms cannot fully invest in future production. Global oil majors are increasingly looking to invest in lower-carbon areas of the energy sector, as they react to pressure for cleaner energy, both from government policy and investors. "In the 2020's we are going to have a clear physical shortage of oil because nobody is allowed to fully invest in future oil production," Michele Della Vigna, Head of EMEA Natural Resources Research at Goldman Sachs told CNBC Friday.  "The low carbon transition will come through higher, not lower oil prices," he told CNBC's "Squawk Box Europe."  Della Vigna said "Big Oils" are starting to understand that if they want to be widely owned by investors, they need to show that they are serious about minimizing the amount of carbon in the atmosphere.The Goldman analyst said oil firms only had to look at the steep derating of coal companies over the last 5 years to understand the shift in investor sentiment.Della Vigna said until a transition to full renewables is made, the interim battle will be to own a greater market share of gas-based power. The analyst said with a huge capital cost of gas infrastructure, big state-backed companies looked best placed."We talk about the new seven sisters emerging, dominating the global oil and gas market because nobody else can finance these mega-projects," he said.  The "new Seven Sisters" of oil are considered the most influential firms from countries outside the Organisation for Economic Co-operation and Development (OECD). They have been identified as Saudi Aramco, Russia's Gazprom, NIOC of Iran, China National Petroleum Corp, Brazil's Petrobras, Venezuela's PDVSA, and Petronas of Malaysia. Della Vigna said European oil companies such as U.K. firm Shell and French company Total are also ahead of U.S. rivals in making the transition from "big oil" to become "big energy".

UK fracking: Shale gas starts flowing, Cuadrilla says - Shale gas has flowed for the first time at the UK's only fracking site currently in operation, energy firm Cuadrilla says. Operations began at the Lancashire site in October for the first time since 2011 when it was suspended because of earth tremors. There have been suspensions of the renewed underground drilling operations after further tremors in the area. Cuadrilla says the site may provide "a significant source" of gas. But local MP Rosie Cooper has said fracking at the site should be banned immediately, following a 1.1 magnitude tremor on Monday - the strongest since work began on 15 October. Since then, the share price in Cuadrilla's parent company AJ Lucas has fallen. According to the British Geological Survey, earthquakes with a magnitude of less than two are not usually felt and, if they are, it is only by people very close to the epicentre.Anti-fracking campaigners, who argue it poses environmental risks, had unsuccessfully tried to stop the process with an injunction bid. John Sauven, executive director of Greenpeace UK, criticised the fracking industry, saying it had "produced a deep hole in a muddy field with a small amount of very expensive gas at the bottom". A Cuadrilla spokeswoman said it would spend at least three months operating two horizontal exploratory wells before testing the commercial viability of the gas flow.

Fracking shale gas flows in UK, but controversy over earth tremors intensifies  --Operations began at the Lancashire site in October for the first time since 2011 when it was suspended because of earth tremorsShale gas has flowed for the first time at the UK's only fracking site currently in operation, energy firm Cuadrilla says. Operations began at the Lancashire site in October for the first time since 2011 when it was suspended because of earth tremors. There have been suspensions of the renewed underground drilling operations after further tremors in the area.Cuadrilla says the site may provide “a significant source” of gas. But local MP Rosie Cooper has said fracking at the site should be banned immediately, following a 1.1 magnitude tremor on Monday - the strongest since work began on 15 October.According to the British Geological Survey, earthquakes with a magnitude of less than two are not usually felt and, if they are, it is only by people very close to the epicenter.Anti-fracking campaigners, who argue it poses environmental risks, had unsuccessfully tried to stop the process with an injunction bid.John Sauven, executive director of Greenpeace UK, criticized the fracking industry, saying it had “produced a deep hole in a muddy field with a small amount of very expensive gas at the bottom”.“It is truly bewildering how little fossil fuel companies need to offer in order to get whole-hearted, full-throated government support,” he added.

Government faces new legal challenge over plans to speed up fracking -  The government is facing a fresh legal challenge to its proposals to fast-track new fracking sites by loosening planning regulations.Ministers said this summer they would drop the requirement for shale gas wells to obtain planning permission by designating fracking sites as national infrastructure projects.Greg Clark, the business secretary, used a written ministerial statement to tell local authorities they should abide by a definition of fracking that campaigners say is looser than the current one.Opponents say the new definition allows some companies to claim that their operations do not meet the technical definition of fracking and therefore do not have to face tougher planning decisions. On Monday a high court will decide whether to allow a legal challenge, brought by the mayor of a town in north Yorkshire against two government departments, on the grounds they should have undertaken an assessment required by EU law before Clark’s statement. The case has been brought by Paul Andrews, the mayor of Malton, which is the nearest town to the KM8 well that Third Energy intends to frack. He said Clark’s comments had completely undermined protections against fracking in North Yorkshire county council’s local minerals plan. “It’s about local democracy and also about property rights,” said Andrews, who has raised more than £23,000 through crowdfunding for the challenge. “If the whole of the area is industrialised it’ll have a disastrous effect on property values and kill the tourist trade.”   But in his statement, Clark said: “We expect mineral planning authorities [usually county councils] to recognise the fact that parliament has set out in statute the relevant definitions of hydrocarbon, natural gas and associated hydraulic fracturing.” The definition he referred to is narrower and means a company’s application could be considered not to be fracking depending on the amount of water to be used, which could mean less stringent criteria are applied by planners.

Norwegian warship at risk of sinking after collision with oil tanker -- A Norwegian warship was heavily damaged in a collision with a Maltese oil tanker in the North Sea off the coast of Norway. According to Norwegian media reports Thursday, the frigate is in danger of sinking after sustaining heavy damage. The oil tanker is reportedly undamaged.Several reports confirmed that all 137 crew on the navy ship were evacuated but seven have been treated for minor injuries."The armed forces is now reviewing all the means available in the region to assist the KNM Helge Ingstad (the damaged warship)," Lieutenant Colonel Ivar Moen told AFP.According to the website Marine Traffic, the 62,000-ton oil tanker Sola is continuing its route from Norway to a terminal in northeast England.However, one separate media report said that despite suffering only superficial damage, the tanker is now at a standstill and waiting to be towed back into a Norwegian port. Reuters reported that the Equinor Sture oil shipment terminal, from where the oil tanker left, has been closed as a precautionary measure.

Venezuela running out of fuel, PdV suspends supply (Argus) — Venezuelan state-owned PdV has nearly exhausted its motor fuel stocks, forcing up to 80pc of the country's more than 2,700 service stations nationwide to suspend sales until further notice, according to four senior officials with the federation of oil unions (FUTPV). "The national gasoline deficit is the worst it has ever been," one of the officials said. "Venezuela could be completely out of gasoline and diesel for vehicles in as little as a week." Argus witnessed hundreds of vehicles in lines stretching over a mile at six service stations in eastern Caracas yesterday and today. The station operators said PdV halted gasoline and diesel deliveries completely over the past 72 hours. Service stations in the capital region normally are resupplied up to three times per week. Station operators contacted by Argus in 12 of Venezuela's 23 states including Anzoátegui, Aragua, Barinas, Bolivar, Carabobo, Cojedes, Lara, Miranda, Portuguesa, Táchira, Yaracuy and Zulia confirmed that PdV also suspended fuel supplies to their locations since 29 October. Senior oil union officials in the capital and the states of Anzoátegui and Zulia said the fuel shortage stems from the nearly complete shutdown of PdV's refineries, the suspension of fuel imports for financial reasons and the breakdown of all but 250 of PdV's more than 1,400 tanker trucks used for local distribution. Venezuelan gasoline and diesel have long been sold for next to nothing. With PdV´s refineries largely shut down, the Opec country is increasingly dependent on imports and can no longer afford to keep supplying the local market. The government in recent months pledged to charge international prices for fuel sold to Venezuelans without a government-issued homeland identity card, as a way to rationalize consumption and curb smuggling to neighboring countries, mainly Colombia. But many Venezuelans resisted, and new card-reading systems at service stations were never properly installed. Local refineries, which have total nameplate capacity of 1.3mn b/d, are barely operating. according to oil union officials on site at some of the facilities, including the 940,000 b/d CRP refining complex, comprised of the 635,000 b/d Amuay refinery and nearby 305,000 b/d Cardón refinery. Crude that was going to the refineries is now being exported to pay debt and generate oil revenues.

Major oil spill off Australia's coast would dwarf Deepwater Horizon disaster, documents show -- A worst-case oil spill in the Great Australian Bight would be twice the scale of the Gulf of Mexico disaster, and rough seas and a lack of suitable equipment risk delaying the response effort, confidential plans show. Documents released under freedom of information laws reveal the potential dangers involved in drilling for oil in the wild, isolated seas off the South Australian coast – a move Resources Minister Matt Canavan last week said was a “national priority” that would secure Australia’s fuel supplies. Plans to drill for oil in the Great Australian Bight show a worst-case spill would be twice as big as the 2010 Deepwater Horizon disaster in the Gulf of Mexico, pictured.Credit:Reuters Norwegian energy giant Equinor plans to explore for oil in the Great Australian Bight and insists it can be done safely. Critics say the venture is too risky and an oil spill in the pristine region would damage coastal communities and devastate marine life, including endangered southern right whales. Equinor last year acquired two exploration permits from BP, and plans to drill an exploratory well by October next year. AdvertisementA plan for the well prepared by BP outlines how it would respond in the event of a blowout – an accidental, uncontrolled release of crude oil. The document was obtained by Greenpeace after a two-year freedom-of-information battle with the National Offshore Petroleum Safety and Environmental Management Authority.  It shows that in the worst-case discharge event, 7.9 million barrels of oil would spill into the ocean over 149 days – the time needed to drill a relief well to stop the flow. In 2010, BP’s Deepwater Horizon spill discharged 4 million barrels of oil into the Gulf of Mexico, of which just 810,000 was collected. It was the largest marine oil spill in history.

Inpex ships 3 Ichthys LNG cargoes, 2nd train to start in Nov - Japan’s Inpex said on Thursday it has shipped three liquefied natural gas (LNG) cargoes from its giant Ichthys project in Australia as it is also preparing to fire up the second liquefaction unit at the export facility this month.To remind, the $40 billion LNG export project sent its first LNG cargo to Japan in October just after shipping the first condensate cargo.The LNG project is “still undergoing ramp up towards achieving stable production… and we expect to reach around 60-70 percent production level in the first year and reach the plateau in 2-3 years after the start-up of LNG production,” president of Inpex, Takayuki Ueda said during an investor meeting discussing the company’s financial results.Once in full production, the Ichthys project will be able to produce about 8.9 million tons of LNG per year from its two liquefaction trains.The LNG export facility located at Blaydin Point near Darwin has in total shipped three cargoes as of November 8, Ueda said, adding that Inpex expects to fire up the second liquefaction unit this month.At peak production, the facility is expected to be able to produce about 10 cargoes per month or about 120 cargoes per year.About 70 percent of the LNG produced by the export project will be supplied to Japanese customers. The Ichthys project is also scheduled to start liquefied petroleum gas (LPG) exports this month.

LNG carrier attacked off Nigeria - Liquefied natural gas carrier, LNG River Niger fended off a pirate attack in the Gulf of Guinea, near Nigeria. Bermuda Government’s Department of Marine & Port Services said that the RCC Bermuda received an SSAS (Ship Security Alerting System) from the 141,000-cbm tanker at 2:25 am on November 6.The vessel came under attack by pirates that opened fire on the vessel, however, following evasive action and unsuccessful attempt to board the vessel, the attack was aborted, with no injuries reported onboard.“The Nigerian Navy was dispatched in an attempt to trace the source of the attack while the LNG River Niger continued under escort of a security vessel, for pilot and entry into the port of Bonny, Nigeria,” the report by the Department of Marine & Port Services said.According to the AIS data provided by VesselsValue, the vessel loaded a cargo at the Nigeria LNG facility on Bonny Island, and is currently sailing in the South Atlantic, off Gabon, heading for China.

This Oil Boom Is Going Under The Radar -- If anyone needed any further proof that Africa is shaping up as the next major hot spot in oil and gas, this year’s edition of Africa Oil Week will provide it. The event launched amid higher oil prices and booming exploration activity across the continent with supermajors and independents both upbeat about their prospects there. If we ignore the waywardness of oil prices, which served as the basis for Africa’s oil and gas recovery, and which can once again plunge local oil producers into recession should they drop, prospects are bright.A PwC reporton the state of the oil industry of Africa, released on the first day of the event, noted how local oil and gas field operators had adjusted to the lower-price environment and are now in a position to reap the benefits of higher international prices for oil while their costs remain low.“Africa’s oil & gas companies have weathered the downturns and capitalised on the upswings focusing their efforts on new ways of working, reducing costs and utilising new technology,” one of the authors of the report, PwC Africa Oil & Gas Advisory Leader Chris Bredenhann said.There is abundant evidence that the message captured in the PwC report reflects reality. None other than Exxon is looking to Africa for its next elephant find. The U.S. Geological Survey estimated that two years ago there were at least 41 billion untapped barrels of crude oil in sub-Saharan Africa alone. Exxon is focusing on western and southern Africa in its exploration work and has been amassing stakes in oil and gas prospect in Ghana, Mauritania, Namibia, and South Africa. The supermajor hopes to strike a discovery containing no less than a billion barrels of crude, also known as an elephant. BP and Shell are also expanding in Africa. Shell earlier this year announced its first exploration rights acquisition in Mauritania. BP has partnered with Kosmos Energy on a gas project in Senegal. Also in Senegal, ConocoPhillips is partners in the giant SNE block, which might contain up to 1.5 billion barrels of crude. Then there are the independents, some of them with a special focus on Africa, such as Tullow Oil and Cairn Energy.   “It’s like a new California gold rush.” The rush is far from contained to legacy oil producers such as Nigeria or Angola. On the contrary, there is a flurry of newcomers on the oil scene, from Uganda and Kenya to Madagascar, which shares a gas-rich basin with Mozambique and has proven oil reserves, which have remained largely untapped until now. African governments have also sensed which way the wind is blowing. Sudan and South Sudan recently said they had settled their differences and will work together to bring South Sudanese oil to export markets via the single pipeline through Sudan. Ethiopia struck a deal with rebels active in a gas-rich province, improving greatly its chances of getting developed.

Abu Dhabi to boost oil output capacity to 4 mil b/d by end-2020, 5 mil b/d by 2030  — Abu Dhabi intends to boost its oil production capacity to 4 million b/d by the end of 2020 and to 5 million b/d by 2030 under plans approved Sunday by the Supreme Petroleum Council, which also announced new discoveries totaling 1 billion barrels of oil, Abu Dhabi National Oil Company said. The SPC, Abu Dhabi's highest hydrocarbon policy-making body, also approved the emirate's unprecedented gas strategy, enabling the UAE to achieve gas self-sufficiency, with the potential to be a net gas exporter, ADNOC said in a statement Sunday. At its meeting, SPC also announced new discoveries totaling 15 Tcf of gas. The announcement of Abu Dhabi's discovery of significant oil reserves follows the emirate's "historic decision" earlier this year to open six geographical oil and gas blocks for competitive bidding, ADNOC said. The first exploration and production licenses are expected to be awarded in the first quarter of 2019, ADNOC said. It added that existing data from detailed petroleum system studies, seismic surveys, log files and core samples from hundreds of appraisal well estimates suggest "these new blocks hold multiple billion barrels of oil and multiple trillion cubic feet of natural gas." Abu Dhabi's gas strategy will sustain LNG production to 2040, and allow ADNOC to seize incremental LNG and gas-to-chemicals growth opportunities, where they arise, ADNOC said. "The integrated gas strategy is the first time in ADNOC's history it has been in a position to commercially and holistically unlock its abundant new gas resources," ADNOC said. Under the new gas strategy, ADNOC said it will develop the Hail, Ghasha and Dalma project that taps into Abu Dhabi's Arab formation, which is estimated to hold multiple trillions of cubic feet of recoverable gas. The project is expected to produce more than 1.5 Bcf/day of gas, it said. ADNOC added it will also unlock other sources of gas, which include Abu Dhabi's gas caps and unconventional gas reserves, as well as new natural gas accumulations, which will continue to be appraised and developed as it pursues exploration activities.

India May Pay for Iranian Oil in Rupees Amid US Sanctions -  India and Iran are reportedly finalizing the steps New Delhi will take to pay for Iranian oil using India's national currency in order to continue transactions in the event that the Islamic Republic is cut-off from SWIFT, the international network used for bank transactions. India will revive a previous arrangement of making payments via an account in UCO bank in India, which does not have international exposure and is not connected to SWIFT, The Times of India reported. Before the US sanctions, Indian oil payments were divided: 45% of them were made in rupees from the UCO account and 55% were paid in Euros. However, India and Tehran are reportedly working on a new mechanism allowing Iran to take the full amount in India’s national currency. The funds are expected to be used for importing items from India. The mechanism would allow India to continue purchasing oil from Iran, even after the current 180-day US grace period on Iran's sale of oil abroad expires and if the Iranian banks are banned from using SWIFT payment systems. US Special Representative for Iran and Senior Policy Advisor to the Secretary of State Brian Hook told journalists on Sunday that countries which continue to import oil from Iran would set up escrow accounts, which would “deny Iran hard currency and denies Iran any revenue on oil sales,” as the money stays within the importing nation’s account.  “We strongly encourage those nations to ensure that Iran spends that money on humanitarian purchases to benefit the Iranian people,” Hook said, as cited by Times of India. He also added that the US will monitor these accounts in order to ensure that money is not spent on illicit activity. The European Union is expected to announce a special purpose vehicle (SPV) to assist Iran. However, sources told the Times of India that the European mechanism faced several complications and would only become operational by 2019. India also reportedly won't participate in the EU mechanism so there would be an alternative means of payment in case the SPV attracts the attention of the US.

Iran will defy US sanctions and sell oil, President Rouhani says -- Iran plans to defy newly reimposed U.S. sanctions and continue to sell, Iranian President Hassan Rouhani reportedly said on state TV on Monday, according to Reuters. "America wanted to cut to zero Iran's oil sales ... but we will continue to sell our oil ... to break sanctions," Rouhani reportedly told economists at a meeting that was broadcast live. On Monday, Washington reimposed sanctions on Iran in a bid to put pressure on the Islamic republic to curb its nuclear, missile and regional activities. The first round of U.S. sanctions were reimposed in August.U.S. crude oil traded 0.55 percent lower on Monday at $62.81, while the benchmark Brent crude oil slid 0.41 percent lower to trade at $72.53 at 2:25p.m. HK/SIN time. The Trump administration said on Friday it will grant special exceptions to eight jurisdictions, allowing them to temporarily carry on importing oil from Tehran even after the sanctions are reimposed, according to cabinet members.President Donald Trump gave oil importers 180 days to wind down purchases of Iranian crude when hewithdrew from the Iran nuclear deal in May. The eight waivers will allow the jurisdictions to gradually reduce their purchases after the Nov. 4 deadline. Secretary of State Mike Pompeo and Treasury Secretary Steven Mnuchin did not name the eight jurisdictions on Friday, but a South Korean official said Monday that Seoul had been granted an exception from U.S. sanctions against Iran.

Turkey's Erdogan: US sanctions on Iran wrong, will not abide by them ...Turkish President Recep Tayyip Erdogan on Tuesday hit out at new sanctions on Iran imposed by the administration of President Donald Trump, saying they were aimed at upsetting the global balance and against international law. Washington on Monday announced the sanctions on the Islamic Republic that aim to isolate the country’s banking sector and slash its oil exports. Turkey was one of eight countries exempted from the demand to stop buying Iranian oil. “We don’t find the (Iran) sanctions appropriate,” Erdogan was quoted as saying by the state-run Anadolu news agency. “Because to us, they are aimed at upsetting the global balance,” he added. “They are against international law and diplomacy. We don’t want to live in an imperial world.” Erdogan’s comments came after his Foreign Minister Mevlut Cavusoglu warned that isolating Iran was “dangerous.” “While we were asking (for) an exemption from the United States, we have also been very frank with them that cornering Iran is not wise. Isolating Iran is dangerous and punishing the Iranian people is not fair,” he told a press conference during a trip to Japan. “Turkey is against sanctions, we don’t believe any results can be achieved through the sanctions,” he added. “I think instead of sanctions, meaningful dialogue and engagement is much more useful.” Washington has imposed two sets of sanctions this year after pulling out of a nuclear pact agreed between world powers and Iran that President Donald Trump slammed as “defective”. The latest round went into effect on Monday. Washington has granted eight countries, including Turkey and Japan, waivers to allow them to continue importing Iranian oil without facing diplomatic consequences. Mainly Sunni Turkey has a complex relationship with Shiite Iran that has seen disputes notably on what Ankara has seen as moves for domination of Iraq by the majority Shia community. But the two countries are also working closely on a host of issues, notably ending the conflict in Syria even though both Ankara and Tehran are in theory on opposite sides of the civil war. Iranian oil and gas exports are also crucial for resource-poor Turkey.

Pakistan in the middle of Saudi, Iran and rival pipeline plans The US has imposed sanctions on Iranian shipping, finance and energy exports, blacklisting 700 people. They target the EU special mechanism to facilitate purchases of Iranian oil, a sort of alternative international payment system, and threats persist about cutting Iran completely off the Swift system (although several Iranian banks are already suspended). There are also “temporary waivers” related to oil exports granted mostly to China, India, Japan, South Korea, Taiwan and Turkey, plus two Italy and Greece. This means that in the real world, beyond all the bluster, there’s no way to downgrade Iranian oil imports to “zero” without causing a global energy crisis. The key exemption might as well be Chabahar port in Iran, the cornerstone of India’s own mini-New Silk Road strategy for South Asia and Central Asia, which depends on exports to and across Afghanistan. In the words of John Bolton, the US National Security Adviser, they seek to achieve a “massive change in the regime’s behavior”. But for some of us, the real star of the show was a putative, developing alliance that could turn into a crucial game-changer in Eurasia integration. Hopeful signs are on the cards. Presidents Erdogan and Rouhani have a very good relationship and are both deciders in the Astana process trying to solve the Syrian tragedy. Whatever the pressure, Turkey won’t cease to buy Iranian oil. Iranian Foreign Minister Javad Zarif was in Islamabad last week talking to Prime Minister Imran Khan. Turkey-Pakistan relations are extremely tight. On a Shanghai Cooperation Organization (SCO) level, Pakistan is a full member, Iran will soon become a full member and Ankara is very much interested – and so are powerhouses Russia and China to have them all together inside the club. Pakistan and China will start trading in yuan, as announced by Pakistani Information Minister Fawad Chaudhry, who has just extolled an expansion of the China-Pakistan Economic Corridor (CPEC) to agriculture and the construction of industrial zones.

Iran oil exports to plummet in November, then rebound as buyers use waivers (Reuters) - Iran’s oil exports have fallen sharply since U.S. President Donald Trump said at mid-year he would reimpose sanctions on Tehran, but with waivers in hand the Islamic Republic’s major buyers are already planning to scale up orders again. The original aim of the sanctions was to cut Iran’s oil exports as much as possible, to quash its nuclear and ballistic missile programs, and curb its support for militant proxies, particularly in Syria, Yemen and Lebanon. But the exemptions granted to Iran’s biggest oil clients - China, India, South Korea, Japan, Italy, Greece, Taiwan and Turkey - allow them to import at least some oil for another 180 days and could mean exports start to rise after November. This group of eight buyers imported over 80 percent of Iran’s roughly 2.6 million barrels per day (bpd) of oil exports last year, Refiniv Eikon data shows.  The decision by the U.S. (to grant waivers) represents a departure, for now, from the stated aim of reducing Iran’s oil exports to zero,” said Pat Thaker, regional director for the Middle East and Africa at the Economist Intelligence Unit. Iran’s crude exports have fallen significantly from at least 2.5 million bpd in April, before Trump in May withdrew the United States from a 2015 nuclear deal with Iran and reimposed sanctions, although estimates vary. As a result of pre-sanctions pressure by Washington, Iran’s oil exports in November may not exceed 1 million to 1.5 million bpd, according to industry estimates. Companies that monitor Iran’s shipments are already seeing a drop in tanker activity this month. “We’ve only seen 10 tankers loading at, or signaling for Iranian terminals in November so far, which is significantly lower than what we usually see at the beginning of the month,” said Kpler, a data intelligence company. According to Refinitiv Eikon data, Iranian crude exports have fallen to 1 million bpd so far in November. 

Dumping the dollar: Iran & South Korea agree cross-currency trade -- South Korea and Iran have agreed to switch to national currencies in trade exchanges as the sides aim to strengthen relations despite the US sanctions on Tehran. The agreement is of great importance to both countries, Yonhap News Agency reported, explaining that the deal indicated Korea’s concerns about relations with Iran. The countries also agreed to make payments and settle their financial and banking accounts using the South Korean national currency, the won. That will allow South Korean and Iranian companies to continue their extensive exchanges in various fields. The volume of bilateral trade surpassed the $12-billion benchmark last year, according to Iran’s ambassador to Seoul Saeid Badamchi Shabestari, who told Press TV that the Iranian and Korean economies complement one another. The fact that Tehran-Seoul relations had been founded on “reality” would keep the countries determined to deepen the ties in the face of America’s “hostile and illegal unilateral actions,” the ambassador said. Earlier, South Korean Ambassador to Tehran Ryu Jeong-hyun said that despite many European companies leaving Iran under the pressure of US sanctions, South Korean firms understand the significance of the Iranian market and have chosen to stay. 

EU struggles to find host for Iran trade mechanism (Reuters) - The European Union has so far failed to find a country to host a special mechanism to trade with Iran and beat newly reimposed U.S. sanctions, three diplomats said, as governments fear being targeted by U.S. counter measures. Voicing opposition to U.S. policy on the day Washington announced a new raft of sanctions on Iran, the European Union reissued its Nov. 2 statement on Monday saying it was still setting up the so-called special purpose vehicle (SPV). The European Union had hoped to ready its SPV, which is designed to circumvent the U.S. sanctions, by Monday’s sanctions announcement by the United States. However, no EU country has so far volunteered to host the entity, the EU diplomats said. Several states have been asked by EU foreign policy chief Federica Mogherini to consider being the headquarters, as the bloc tries to uphold the arms control accord, which U.S. President Donald Trump withdrew from in May. While the European Commission declined to comment on Monday, European Economic Affairs Commissioner Pierre Moscovici said “the European Union does not approve of” the reimposition of U.S. sanctions lifted under the 2015 nuclear deal. Brian Hook, Washington’s special representative for Iran, underscored the risks for European companies, warning that any EU country hosting the SPV could potentially be sanctioned. “The United States will not hesitate to sanction any sanctionable activity in connection with our Iran sanctions regime,” Hook told a telephone call with European reporters when asked about the vehicle. The SPV, which could incorporate a barter system, aims to sidestep the U.S. financial system by using an EU intermediary to handle trade with Iran. It could ensure, for example, that Iranian oil bought by Europeans could be paid for with EU goods and services of the same value. A senior French diplomat said Paris was confident the mechanism would be legally in place soon, but things needed to be fully cemented first. 

SWIFT Caves To US Pressure, Defies EU By Cutting Off Iranian Banks - Shortly after Trump reimposed nuclear sanctions on Tehran on November 5, the international financial messaging system SWIFT announced the suspension of several Iranian banks from its service. “In keeping with our mission of supporting the resilience and integrity of the global financial system as a global and neutral service provider, SWIFT is suspending certain Iranian banks’ access to the messaging system,” SWIFT said.The Belgium-based financial messaging service added:“This step, while regrettable, has been taken in the interest of the stability and integrity of the wider global financial system.”SWIFT’s decision has further undermined EU efforts to maintain trade with Iran and save an international deal with Tehran to curtail its nuclear program, after President Donald Trump pulled the US out in May. Being cut off from SWIFT makes it difficult for Iran to get paid for exports and to pay for imports, mostly of oil.As a further note, the EU was one of the few entities not to receive a sanctions waiver from the US earlier this week.The European Commission was understandably displeased, and on Wednesday said it found the SWIFT decision "regrettable" “We find this decision rather ... regrettable,” Commission foreign affairs spokeswoman Maja Kocijancic told a briefing.As we reported over the weekend, last Friday Treasury Secretary Steven Mnuchin warned SWIFT it could be penalized if it doesn’t cut off financial services to entities and individuals doing business with Iran. However, by complying with Washington, SWIFT now faces the threat of punitive action from Brussels.Washington has been pressuring SWIFT to cut off Iran from the financial system as it did in 2012 before the nuclear deal. Six years, ago the EU imposed sanctions on Iranian banks, forcing SWIFT, which is subject to EU laws, to cut financial transactions with at least 30 of Iran’s financial institutions, including the central bank. Iranian banks were reconnected to the network in 2016 after the Iran nuclear deal came into force, allowing much needed foreign cash to flow into Tehran’s coffers.

France Vows to Protect Iran Against US Acting as World’s “Trade Policeman”  — France has vowed to fulfill plans to defy the US’ sanctions on Iran while increasing the international role of the euro in order to prevent Washington from acting as the world’s “trade policeman”. After President Donald Trump pulled out of the Iranian nuclear in May, the European Union – along with Russia and China – remained committed to the agreement, and has insisted on defying the sanctions and facilitating trade with Tehran.

France Takes The Lead In Protecting Iran Oil Trade From U.S. Sanctions - France aims to lead the European Union (EU) efforts in defying U.S. sanctions on Iran, by supporting the creation of a payment mechanism to keep trade with Iran and making the euro more powerful, France’s Economy Minister Bruno Le Maire said in an interview with the Financial Times. “Europe refuses to allow the US to be the trade policeman of the world,” Le Maire told FT, adding that the EU needs to "affirm its sovereignty" in the rift between the EU and the United States over the sanctions on Iran. The EU has been trying to create a special purpose vehicle (SPV) that would allow the bloc to continue buying Iranian oil and keep trade in other products with Iran after the U.S. sanctions on Tehran return. The idea behind the SPV is to have it act as a clearing house into which buyers of Iranian oil would pay, allowing the EU to trade oil with Iran without having to directly pay the Islamic Republic. As the U.S. sanctions on Iran snapped back on Monday, the SPV hasn’t been operational and reports have had it that the undertaking is very complicated and politically sensitive. The bloc is also said to be struggling with the set-up, because no EU member is willing to host it for fear of angering the United States, the Financial Times reported recently, citing EU diplomats. On Monday, the Belgium-based international financial messaging system SWIFT said that it would comply with the U.S. sanctions on Iran and would cut off sanctioned Iranian banks from its network. This was a blow to the EU’s attempts to defy the U.S. sanctions. The decision by SWIFT highlights the need for an SPV, France’s Le Maire told FT, but he refused to name countries that could host such a special vehicle. Yet, there have been expressions of interest, he told FT.

Iran Shuts Off Oil Tanker Tracking System As US Sanctions Start - The US on Monday (Nov 5) is reimposing disciplinary measures targeting Iran's oil, shipping, insurance, and banking sectors in what US Secretary of State Mike Pompeo called "the toughest sanctions ever placed" against Iran. In response, Tehran has reportedly turned off all oil tanker tracking systems as the sanctions take effect today. Analysts at TankerTrackers.com, a watchdog that monitors production, refinement, shipping, and trading of crude oil on a global scale, revealed in late October all Iranian tanker vessels turned off their transponders to avoid international tracking for the first time since 2016. “It’s the first time I’ve seen a blanket black-out. It’s very unique,” TankerTrackers co-founder Samir Madani told Sputnik News.Madani said with the transponders turned off, the vessels can only be monitored using private satellite imagery. He believes that such a shift to lesser transparency is a ploy by Iran’s leadership to keep the international supply chains open amid US sanctions.“Iran has around 30 vessels in the Gulf area, so the past 10 days have been very tricky, but it hasn’t slowed us down. We are keeping watch visually,” said co-founder Lisa Ward.The analysts suggested that going dark could pose significant problems in pinpointing the date when a tanker loaded its crude cargo. Between 2010 and 2015, when Iran was slapped with international sanctions, its oil industry discovered that it could keep crude on tankers off the Gulf coast to avoid supply chain disruptions.

Iran Is Preparing For A Long Siege As The Global Squeeze Begins - On Monday the harshest and highest level economic and energy sanctions that can be imposed on any country have been imposed unilaterally on Iran. The US establishment will try its best to bring the Islamic Republic to its knees and Tehran will do its best to cross the US minefield. Whatever the outcome, Iran will never submit to Washington’s twelve conditions. Iran is not a fledgling country ready to collapse at the imposition of the first tight sanctions, nor will Iran allow its oil exports to be frozen without reacting. In fact, US and UN sanctions against Iran date to the beginning of the Islamic Revolution and the fall of the Shah in 1979. No doubt the Iranian economy will be affected. Nevertheless, Iranian unity today has reached new heights. President Trump has managed to bring reformists and radicals together under the same umbrella! Iranian General Qassem Soleimani has said to President Hassan Rouhani: “You walk and we stand ahead of you. Don’t respond to Trump’s provocations because he is insolent and not at your level. I shall face him myself”.   Rouhani believes “US policy and its new conspiracy will fail”. All responsible figures in the Iranian regime are now united under the leadership of Imam Ali Khamenei against the US policy whose aim is to curb the regime. Under the previous worldwide sanctions regime, Iran began developing missile technology and precision weapons. Iran has never yielded in support of its allies because these alliances are an integral part of its ideology.  Today, Tehran is not standing alone against the US and is waiting to see what course global sanctions will take before reacting. Officials in Tehran, convinced that Trump will win a second term, are preparing for a long siege. Sayyed Ali Khamenei said his country will never strike any deal with the US and won’t be a party to any future agreement because the US is fundamentally untrustworthy. Iran relies on the unity of its own citizens and on the support of its partners in the Middle East, Europe (a crucial strategic ally), and Asia. Europe, notably, is trying to disengage itself from the US sanctions, but so far with little success. Its leaders are begging in vain for an exemption for trade in food and medicine to reduce the population’s suffering.

South Korea buyers heading to Iran for talks on resuming oil imports: sources (Reuters) - A South Korean delegation including oil buyers is expected to head to Iran next week to discuss resuming Iranian oil imports after a three-month halt, three sources with knowledge of the matter said. South Korea is one of eight countries that received waivers from the United States to continue importing Iranian oil for 180 days. It can import up to 200,000 barrels per day (bpd) of Iranian oil, mostly condensate, the sources said, without invoking U.S. economic sanctions re-imposed on Iran on Nov. 5. The North Asian country was the third-biggest buyer of Iranian oil and also the largest importer of its condensate before it stopped imports in September ahead of U.S. sanctions. South Korea’s condensate imports from Iran stood at 159,770 bpd in January-August, down about 49 percent from 311,885 bpd in the same period last year, according to Reuters calculations based on the Korea National Oil Corp (KNOC) data. Condensate is an ultra light oil processed at splitters, typically to produce naphtha for petrochemicals. While the waiver has given South Korea the green light to resume Iranian oil imports, the sources said issues such as payment, shipping and insurance needed to be worked out. “The actual (import) volume will depend on next week’s negotiations,” one of the sources said, adding that the oil’s price will be a key factor. The U.S. sanctions waivers have eased pressure on Iran to further discount its oil against Saudi Arabia’s. 

How US Sanctions on Iran Could Herald a Profound Global Power Shift --In the medium term, the US will lose influence as Iran gains confidence; in the worst case scenario, there will be a war whose consequences will be incalculable.  — On Monday, the US will ratchet up its brutal and merciless economic war against Iran, raising sanctions to a new level. The Trump administration has said its goal is to reduce Iranian oil exports to zero, although waivers were being negotiated with some countries.Such a move could bankrupt Iran and destroy the government’s ability to deliver public services, fomenting popular rebellion.John Bolton, President Donald Trump’s national security adviser, has been clear about the logic behind this: he wants to install a new government friendly to the US. He spelled out these plans to the opposition group Mujahedin-e-Khalq (MEK) at a Paris conference last year, although he has subsequently backtracked, saying regime change is “not American policy”. The US is not simply intent on waging an economic war, but also wants to build up a military and strategic coalition against Iran. This seems to have been the most important item on the agenda of last week’s Manama dialogue in Bahrain, where US Defence Secretary James Mattis took aim at Iran. Mattis is keen on the creation of a what amounts to an Arab NATO built around a regional network of Sunni Arab states in the shape of the emerging Middle East Strategic Alliance, potentially including Benjamin Netanyahu’s Israel. The primary outside backers would be the US, France and Britain.   But this twin-pronged military-economic strategy is doomed to failure, and will likely end in humiliation for the US. In the medium term, it will backfire; the US and its allies will lose influence, while Iran will gain confidence and power. In the worst case scenario, it will result in a war whose consequences will be incalculable.For starters, Trump’s sanctions policy is beset by contradictions. It will not and cannot work, because the US will be unable to isolate Iran in the way it hopes to. The problem was set out clearly in an excellent article by Gardiner Harris in the New York Times earlier this week, which noted that China and India, the largest buyers of Iranian oil, will continue to make substantial purchases. Turkey and Russia are likely to do the same, which is not much of a surprise.

Russia clashes with Western oil buyers over new deals as sanctions loom (Reuters) - Russian energy majors are putting pressure on Western oil buyers to use euros instead of dollars for payments and introducing penalty clauses in contracts as Moscow seeks protection against possible new U.S. sanctions. Seven industry sources told Reuters that Western oil majors and trading houses have clashed with Russia’s third and fourth biggest producers, Gazprom Neft and Surgutneftegaz, over 2019 oil sales contract terms during unusually tough annual renegotiation in recent weeks. The development mirrors a similar stand-off between Western buyers and Russia’s top oil producer, Rosneft. Earlier this week, trading sources told Reuters that Rosneft wants Western oil buyers to pay penalties from 2019 if they fail to pay for supplies in the event that new U.S. sanctions disrupt sales. Now sources have told Reuters that Surgutneftegaz and Gazprom Neft have also clashed with their buyers over penalties and the use of euros and other currencies to replace the dollar in contracts. “It is part of the same trend - the Russian oil industry is working on mitigating new sanctions risks. The buyers in turn argue they cannot carry those risks so we are trying to find compromises,” said one source with a Western buyer involved in negotiations, asking not to be named as the talks are confidential. Russia has been under U.S. and EU sanctions since 2014 when it invaded Ukraine’s Crimean peninsula. The sanctions have been repeatedly widened to include new companies and sectors, making it tough for Russian oil firms to borrow money abroad, raise new capital or develop Arctic and unconventional deposits. President Vladimir Putin’s administration has been hoping for a thaw in relations with the United States since President Donald Trump came to power but Washington has imposed new sanctions instead, 

Russian Oil Output Nears All-Time High With October Ramp-Up -  Russian oil production moved closer to an all-time high before the nation meets with OPEC partners to discuss future supply.The country’s crude and condensate output averaged 11.412 million barrels a day last month, according to data from the Energy Ministry’s CDU-TEK unit released Friday. That’s about 160,000 barrels a day more than two years ago, before Russia agreed to cut supply with OPEC. It’s a post-Soviet record, and not far off the highest-ever output.The production boom comes amid mixed signals from global oil producers. Russia suggested last Saturday it could push output to a fresh record, just days after a committee representing the Organization of Petroleum Exporting Countries and its allies signaled the group could cap supply again in 2019.Crude prices are down by more than 15 percent since hitting a four-year high last month. The market is beset by bearish forces: rising oil inventories; higher production from Russia, OPEC and the U.S.; there’s also great uncertainty about the impact of American sanctions on Iran’s exportsand concerns over global demand.Russia, which relies on energy for almost half its budget revenue, has repeatedly said that its plans for future output will depend on cooperation with OPEC. The cartel’s production in October climbed to the highest level since 2016 as increases by Saudi Arabia and Libya offset losses from Iran, according to a Bloomberg survey. ussian oil output peaked during the Soviet era, averaging 11.416 million barrels a day in 1987, according to BP Plc data. No monthly numbers are available, and the figures account differently for some liquids derived from natural gas. This would make it hard to pinpoint when exactly the country may set a new historic peak.  Maintaining current production levels is also not a given, especially since volumes can dip in the freezing winter months, and during summer-season maintenance.

Russian Oil May Gain a Lot by Giving a Little on OPEC U-Turn -- Russia’s oil industry is feeling the pressure of a possible return of production caps. In fact, by sacrificing a fraction of output, the companies could see their stocks rise. Fresh output curbs may push crude prices up, benefiting Russian producers just as they did during the cuts that began last year. The Moscow Oil & Gas Index has gained about 40 percent since the initial output pact between OPEC and Russia was reached almost two years ago. The Organization of Petroleum Exporting Countries has signaled it will consider a return to cutting supply next year as oil prices wilt in the face of another surge in U.S. shale production. A new deal would come just as Russia’s production climbs to a post-Soviet high -- following its June agreement with OPEC to ease supply caps -- and its oil companies generate record cash. “History shows that we are able to turn production cuts to our advantage,” said Alexander Kornilov, an Aton LLC analyst in Moscow. “If we look at how the Russian oil and gas index has moved since 2016 -- when the country first agreed on production cuts with OPEC -- everything becomes clear.” Russian oil executives met with Energy Minister Alexander Novak Thursday to share their views as they put together investment plans for next year. It was a surprisingly low-level meeting, with only one chief executive in attendance, and addressed general cooperation with OPEC rather than specific output figures, according to Lukoil PJSC. “We haven’t discussed yet” whether further cooperation means output cuts in 2019, Lukoil First Vice President Ravil Maganov said after the meeting in Moscow, adding “I can’t rule out” production curbs.  OPEC and its allies, including Russia, are scheduled to meet for talks this weekend in Abu Dhabi. While Novak and Saudi Energy Minister Khalid Al-Falih have discussed the agenda, Russia isn’t yet ready to take any decision on renewed supply curbs, an official familiar with the matter said. Any OPEC+ agreement that can stabilize crude prices above current levels will benefit Russian oil companies, according to Alexander Losev, chief executive officer of Sputnik Asset Management. “Producing less at $80 per barrel is better than producing at current levels and at $70 per barrel,” he said. “A certain output decline will also help the companies to reduce operating costs and further improve their financials, including free cash flow.”

Russia and Saudi Arabia's oil-market management challenge: Kemp (Reuters) - Russia and Saudi Arabia have started to discuss cutting production next year following steep falls in oil prices in the last month, according to a report by Russia's TASS news agency. The report has not been confirmed but has arrested the rapid decline in prices, at least temporarily, and should not come as a surprise given the altered dynamics in the oil market. The oil market is best thought of as a complex adaptive system, characterised by long lags and positive feedback mechanisms, which exaggerate the impact of even small changes in production and consumption. OPEC, led by Saudi Arabia, and its non-OPEC allies, led by Russia, have stated that their objective is to keep the market as close as possible to balance and minimise damaging price swings. But in the history of the oil market, production and consumption have rarely been balanced except accidentally and not usually for very long. The market's natural state is one of imbalance, with deep and prolonged cycles in spot prices and inventories as it alternatives between periods of under- and over-supply. In this context, the best market management strategy for OPEC+ involves timely, frequent and small adjustments in production in response to changing estimates of production and consumption. Prompt action in response to incoming information about potential future market imbalances may be able to forestall the need for much larger adjustments later. Other members of OPEC+ have no spare production capacity and are not needed to show much production flexibility to keep the market close to balance. 

Return to oil production cuts in 2019 cannot be ruled out: OPEC sources (Reuters) - A return to oil production cuts by OPEC and its allies next year cannot be ruled out, two OPEC sources said on Wednesday, to avert a possible supply glut that could weigh on prices. The sources were responding to a report by Russia’s TASS news agency that Russia and Saudi Arabia had started bilateral discussions over possible curbs to output in 2019. Saudi-led OPEC and its allies including Russia decided in June to relax output curbs in place since 2017, after pressure from U.S. President Donald Trump to reduce oil prices and make up for supply losses from Iran. Asked whether discussions pointed to a return to supply cuts in 2019, one of the two sources, who are delegates from the Organization of the Petroleum Exporting Countries, said: “Certainly not the other way around.” Oil prices have come under downward pressure from rising supplies, even though Iranian exports are expected to fall because of new U.S. sanctions. Forecasts of a 2019 supply surplus and slowing demand have also dented the market. Brent crude had dropped from a four-year high in October above $86 a barrel to $71 on Tuesday. Prices rallied back above $73 on Wednesday, supported by the TASS report. Separately, a top OPEC official from Iran, which has been angered by higher production in Saudi Arabia and Russia in response to Trump’s calls, said Riyadh and Moscow needed to cut output by 1 million barrels per day. “There is no other way for Saudi Arabia and Russia,” Hossein Kazempour Ardebili, who represents Iran on OPEC’s board of governors, told Reuters when asked whether producers needed to trim output in 2019. The extra supply has caused a drop in crude prices, hurting income for other oil producers while helping Iran’s foe Trump in the U.S. midterm elections, Kazempour said. “They pushed the prices $15 a barrel lower in one month and only made U.S. gasoline cheaper for Trump. They lost billions on revenue and caused losses to poor producers in Africa and South America,” he said. A ministerial committee of some OPEC members and allies meets on Sunday in Abu Dhabi to discuss the market and outlook for 2019. Iran is not a member of this committee, which it wants scrapped. This group, called the JMMC, could make a recommendation on 2019 output policy to the next decision-making meeting of OPEC and non-OPEC oil ministers, a third OPEC source said. That meeting takes place on Dec. 6-7 in Vienna. 

Hedge funds turn negative on oil  (Reuters) - Hedge fund managers were net sellers of petroleum-linked futures and options for a fifth week running last week as concerns about sanctions on Iran evaporated and investors refocused on economic worries. The net long position in the six most important petroleum-linked futures and options contracts was cut by a further 73 million barrels in the week to Oct. 30. Portfolio managers have been net sellers of 371 million barrels since the end of September, taking their net long position to the lowest level for 15 months, according to records published by regulators and exchanges. The sharpest sell-offs last week were in Brent (-54 million barrels) and U.S. gasoline (-11 million) with smaller reductions in NYMEX and ICE WTI (-2 million), U.S. heating oil (-4 million) and European gasoil (-2 million). Position changes are no longer confined to long liquidation. Fund managers have started to establish short positions betting on further price falls (https://tmsnrt.rs/2P8LQ1S). Short positions across all six contracts have doubled over the past five weeks to 192 million barrels, the highest level for more than 10 months. Fund managers still favour bullish long positions over bearish short ones by a ratio of almost 5:1, but the ratio has sunk from more than 12:1 only five weeks ago. The hedge fund community’s bullish bias is the lowest for a year and positioning now looks far less stretched than it did a month ago. With hedge fund positions concentrated in near-dated futures and options contracts, the sell-off has hit the front-end of the curve especially hard and accelerated the shift from backwardation to level or contango.

The Rapid Acceleration Towards Peak Oil Demand - The drumbeat towards peak oil demand is accelerating, but since much of the acceleration is happening outside of the United States, its cadence is muted. To be clear, the developed world passed peak oil demand a decade ago and has for years been forecast to continue reducing its demand. Increasing demand in industrializing countries, particularly China and India, each with a population tantamount to that of the OECD, slightly overpowers declines in the developed world, and as a result, global demand continues to increase. In its 2015 World Energy Outlook, the IEA forecast 1.5% y/y increase outside the OECD, -1.2% y/y in the OECD, and an overall growth of 0.5%. Global peak demand will likely occur while developing world demand is still growing. Increased decline in the first world could crest demand, but merely slowing the growth in the rest of the world is the more likely to tip the global balance to plateau then decline. Demand for oil is dominated by transportation (cars, trucks/trains, planes and boats) and industry (plastics, fertilizers, steam/heat). Passenger vehicles comprise about 25% of global oil demand and thus are the number one target for major emissions reductions. When the IEA released its 2015 World Energy Outlook mentioned above, not a country on the planet had stated plans to ban new sales of oil-fueled cars. Only Japan and Portugal had even created incentives for electric vehicles. In 2016, three European countries outlined plans to end sales of new gasoline and diesel engines. Before the year was over, IEA revised its OECD forecast downward to -1.3% per year. In 2017 a rash of targets to constrain fossil fuels for cars led Forbes to declare it to be “The Year Europe Got Serious about Killing the Internal Combustion Engine.” In 2018, even more European countries have joined the list, stating their intent to end the sale of new petroleum vehicles at some point between 2030 to 2040. Also this year, the trend has expanded out of Europe to Israel, Costa Rica, and Taiwan, with targets as early as 2021. Over the same three years, 2016 to present, 20 metropolitan areas from these and other countries announced their own plans to end the use (not just sale) of gasoline and/or diesel vehicles, and mostly before or by 2030.

Oil prices rise as US sanctions on Iran begin, Tehran defiant --Oil prices rose on Monday as U.S. sanctions against Iran's fuel exports began but were softened by waivers allowing major buyers to import Iranian crude for a while, as Tehran said it would defy Washington and continue to sell. Brent crude oil was up 98 cents a barrel, or 1.4 percent, at $73.81 by 9:30 (1440 GMT). U.S. light crude was 64 cents, or 1 percent, higher at $63.78 a barrel. "Oil bulls have long pinned their hopes on the Iran factor and today's dearth of upside potential will be a major source of concern," said Stephen Brennock, analyst at brokerage PVM Oil. Both oil price benchmarks have lost more than 15 percent since hitting four-year highs in early October, as hedge funds have cut bullish bets on crude to a one-year low, data show. Washington imposed sanctions against Iran on Monday, restoring measures lifted under a 2015 nuclear deal negotiated by the administration of former U.S. president Barack Obama, and adding 300 new designations including Iran's oil, shipping, insurance and banking sectors.In response, Iranian President Hassan Rouhani said in speech broadcast on state TV that Iran would break the sanctions and continue to sell oil.And Washington said on Friday it will temporarily allow eight importers to keep buying Iranian oil."U.S. sanctions against Iran ... created serious concerns with traders earlier in September. But they are turning into a damp squib," said Fiona Cincotta, market analyst at City Index.On Monday, the Trump administration identified the eight jurisdictions that will receive waivers: China, India, Italy, Greece, Japan, South Korea, Taiwan and Turkey.South Korea said earlier on Monday it had been granted a waiver, at least temporarily, to import condensate, a super-light form of crude oil, from Iran. It was also allowed the continue financial transactions with the Middle East country, it said. Chinese foreign ministry spokeswoman Hula Chunking expressed regret at the U.S. decision, but would not directly say if China had or had not been granted an exemption.

Oil mixed as U.S. imposes sanctions on Iran, Tehran defiant (Reuters) - Oil prices were mixed on Monday after a steep five-day fall, as the United States formally imposed punitive sanctions on Iran but granted eight countries temporary waivers allowing them to keep buying oil from the Islamic Republic. The sanctions are part of U.S. President Donald Trump’s effort to curb Iran’s missile and nuclear programs and diminish its influence in the Middle East. Oil markets have been anticipating the sanctions for months. Prices have been under pressure as major producers, including Saudi Arabia and Russia, have ramped up output to near-record levels, while weak economic figures in China have cast doubt on the demand outlook. News of waivers on the sanctions weighed on prices, analysts said. “There’s some doubt that the sanctions are going to have the bite the market originally thought.” Brent crude futures rose 34 cents to settle at $73.17 a barrel. U.S. West Texas Intermediate (WTI) crude futures fell 4 cents to settle at $63.10 a barrel. Both oil benchmarks have slid more than 15 percent since hitting four-year highs in early October. Hedge funds have cut bullish bets on crude to a one-year low. The United States has granted exemptions to China, India, Greece, Italy, Taiwan, Japan, Turkey and South Korea, allowing them to continue buying Iranian oil temporarily, Secretary of State Mike Pompeo said on Monday. Some of the countries are OPEC member Iran’s top customers. Trump on Monday said he wants to impose sanctions on Iran’s oil gradually, citing concerns about shocking energy markets and causing global price spikes. U.S. officials have said the aim of the sanctions is eventually to stop all Iran’s oil exports. Pompeo said more than 20 countries have already cut oil imports from Iran, reducing purchases by more than 1 million barrels per day. Sanctions have already cost Iran billions of dollars in oil revenue since May, U.S. Special Representative for Iran Brian Hook told reporters on a call on Monday. Iran said on Monday it would break the sanctions and continue to sell oil abroad.

Oil Trades Near 7-Month Low -- Oil held near the lowest level in seven months as concerns over a supply crunch eased after the U.S. granted waivers to eight governments to continue buying some Iranian crude. Futures in New York slid as much as 0.6 percent after declining 6.6 percent in the past six sessions. While American sanctions targeting Iranian oil sales formally kicked in on Monday, Secretary of State Michael Pompeo confirmed that China, India, Italy, Greece, Japan, South Korea, Taiwan and Turkey have been given temporary exemptions from the restrictions. Meanwhile, U.S. crude inventories are forecast to have risen a seventh week. Crude has fallen more than 17 percent from a four-year high last month as American crude inventories continued to expand at a time when chances grew of the Trump administration granting waivers to lower gasoline prices ahead of the U.S. midterm elections. Meanwhile, a trade dispute between Washington and Beijing stoked concerns over slowing global growth that underpins energy consumption.   West Texas Intermediate crude for December delivery dropped as much as 40 cents to $62.70 a barrel on the New York Mercantile Exchange, and traded at $62.85 on the New York Mercantile Exchange at 7:48 a.m. in London. Futures settled at $63.10 on Monday, down 4 cents. Total volume traded was in line with the 100-day average. Brent futures for January settlement slid 49 cents, or 0.7 percent, to $72.68 a barrel on the London-based ICE Futures Europe exchange. Prices gained 34 cents to $73.17 on Monday. The global benchmark crude traded at a $9.73 premium to WTI for the same month. As criticism increased from some U.S. conservatives who didn’t think Donald Trump should have issued any waivers, the U.S. President defended the move by saying he didn’t want to shock energy markets by forcing all buyers to halt Iranian oil purchases. The exemptions were only temporary measures to ease buyers’ transition and avoid destabilizing the market, Pompeo also reiterated. Meanwhile, U.S. crude stockpiles are forecast to have risen by 2 million barrels last week, according to a Bloomberg survey before Energy Information Administration releases data Wednesday. That would be the longest streak of increases since March 2017. 

Brent Crude, Natural Gas Post Gains - Crude oil futures posted mixed results Monday. The December West Texas Intermediate (WTI) crude oil price slipped by four cents Monday to settle at $63.10 a barrel. The WTI traded from a high of $64.14 down to $62.52. The January Brent, meanwhile, posted a 34-cent increase to settle at $73.17 a barrel. Monday also marked an occasion that oil traders have anticipated for months: the Trump administration’s re-imposition of economic sanctions on OPEC member Iran to constrain its nuclear program. In a press conference Monday, U.S. Secretary of State Mike Pompeo noted that eight countries – China, India, Italy, Greece, Japan, South Korea, Taiwan and Turkey – will be allowed to continue importing Iranian crude on a temporary basis to “ensure a well-supplied oil market.” Despite the waivers, however, an analyst with Wood Mackenzie pointed out that the downward trend in Iran’s exports of crude oil and condensate should continue. “Beyond November 5, we expect crude exports to fall to 1 million barrels per day, though it could vary month to month; and condensate to 100,000 barrels per day. Crude sales will be concentrated around a core of supportive state buyers, China, India and Turkey.” In contrast, Iran’s exports peaked at 2.8 million barrels per day in April 2018, noted Falakshahi. He added that Iran faces difficulty maximizing its exports when virtually all trade in crude oil is cleared in U.S. dollars. That puts international oil companies, many national oil companies, traders and banks off limits, he explained. “Crude exports contribute one-third of government revenues, so there’s a huge incentive for Iran to use every conceivable lever,” . “We’ve seen Iranian crudes discounted by US$1 per barrel compared with similar Middle East grades, the biggest for a decade. Iran is hoping the EU’s barter proposal – goods as indirect payment for oil – opens doors, though we doubt any big oil traders will leap at the opportunity.” Front-month reformulated gasoline (RBOB) settled at $1.69 a gallon, losing two cents for the day. December RBOB peaked at $1.72 and bottomed out at $1.68. Compared to Friday’s settlement price, December Henry Hub natural gas futures posted an impressive 8.5-percent gain on Monday. The benchmark rose by 28 cents to settle at $3.57. 

Oil slips on worries that economic slowdown could weigh on fuel demand --Oil prices slipped on Tuesday, weighed down by exemptions from Washington that will allow Iran's biggest oil customers to keep buying from Tehran, as well as concerns that an economic slowdown may curb fuel demand growth. U.S. West Texas Intermediate (WTI) crude futures were at $62.95 a barrel at 0355 GMT, down 15 cents, or 0.2 percent, from their last settlement. International Brent crude oil futures were down 28 cents, or 0.4 percent, at $72.89 a barrel. Analysts said expectations of an economic slowdown in coming months were weighing on the fuel demand outlook, while concerns eased on the supply-side after Washington granted eight importers of Iranian oil sanctions waivers that will allow them to continue purchases. Washington gave 180-day exemptions to eight importers - China, India, South Korea, Japan, Italy, Greece, Taiwan and Turkey. These are Iran's biggest buyers, meaning Iran will be allowed to still export some oil for now.  Currency weakness is putting pressure on key growth economies in Asia, including India and Indonesia.  At the same time, the trade dispute between the United States and China is threatening growth in the world's two biggest economies.

Oil Prices Tumble On Iran Uncertainty – Oil prices rose a bit on Monday, but fell hard in early trading on Tuesday. The market is looking for some direction now that Iran sanctions are in place. The U.S. confirmed that it granted waivers to eight countries, allowing them to continue to import oil from Iran for the next six months. The countries include South Korea, Japan, India, China, Turkey, Taiwan, Italy and Greece. That ensures that Iran will continue to import oil, although there is a great deal of disagreement among analysts over how much Iran’s exports will fall. “This is bad news for oil prices, as it means that the supply situation on the oil market is set to ease further,” Commerzbank said in a note. The investment bank predicts that Iran’s oil exports will stabilize at around 1 million barrels per day, and “could even increase again in the coming months because Japan and South Korea have hardly been buying any Iranian oil,” and they were given waivers to allow them to continue buying. To be sure, not everyone agrees on this point, and some see the hawkish government in Washington tightening the screws in the months ahead.   The U.S. agreed to grant waivers to eight countries importing Iranian oil, seemingly backtracking a policy to cut Iran’s oil exports to zero. However, Secretary of State Mike Pompeo said that the “maximum pressure” campaign will continue and that the administration hopes to get to zero. The waivers were granted to countries that “need a little bit more time,” he said.  . Hedge funds and other money managers continued to reduce their bullish bets on crude oil last week. As it became clear that the U.S. would be offering waivers on secondary sanctions last week, investors turned bearish. The net-length in the six months important oil futures contracts declined for the fifth consecutive time in the last week of October. The recent price correction for oil leaves a lot of room for a rebound, and Citigroup said that because refineries will end maintenance season and begin ramping up operations again, oil prices are “biased to the upside” for the rest of 2018. Brent could average $80 per barrel in the fourth quarter, Citi’s Ed Morse said, and might even temporarily spike as high as $90 or $100 per barrel. Iran will be central to this scenario, while outages are possible in Nigeria as elections loom.

Oil prices drop over 2 percent on Iran sanctions waivers (Reuters) - Oil prices fell on Tuesday, with U.S. crude futures hitting an eight-month low, a day after Washington granted sanction waivers to top buyers of Iranian oil and as Iran said it has so far been able to sell as much oil as it needs to. Brent crude LCOc1 futures fell $1.04 to settle at $72.13 a barrel, down 1.42 percent. The global benchmark hit a session low of $71.18 a barrel, the lowest price since Aug. 16. U.S. West Texas Intermediate (WTI) crude CLc1 futures fell 89 cents, or 1.41 percent, to settle at $62.21 a barrel. The session low was $61.31 a barrel, the weakest price since March 16. Iran said it has so far been able to sell as much oil as it needs and urged European countries opposed to U.S. sanctions to do more to shield Iran. The United States on Monday restored sanctions targeting Iran’s oil, banking and transport sectors and threatened more action. Treasury Secretary Steven Mnuchin said Washington aimed to bring Iranian oil exports to zero, but 180-day exemptions were granted to eight importers: China, India, South Korea, Japan, Italy, Greece, Taiwan and Turkey. This group takes as much as three-quarters of Iran’s seaborne oil exports, trade data shows, meaning the Islamic Republic will still be allowed to export some oil for now. Industry estimates suggest Iran’s oil exports have fallen 40 to 60 percent since Trump said in May he would reimpose sanctions. However, exemptions could allow exports to rise again after November. Turkish President Tayyip Erdogan said the country, a top importer of Iranian oil, would not abide by the sanctions, which he said were aimed at “unbalancing the world.” “While the Iranian sanctions should still be viewed as a latent bullish consideration capable of limiting much additional price slippage, it would appear that the Iranian factor alone will not be capable of spurring higher prices without major assistance from a renewed strengthening in the equities, sustainable weakening in the U.S. dollar or a significant cut back in OPEC production,”

WTI Extends Losses After Big Surprise Crude Build - WTI plunged to a $61 handle, and 7-month lows, ahead of tonight's API inventory data as trade war anxiety raised global demand fears and Iran sanctions exemptions lifted supply concerns.“Oil prices don’t have any real reason to rally significantly,” said Phil Streible, senior market strategist at R.J. O’Brien & Associates LLC in Chicago.   And things got worse as WTI extended its losses after API reported. API:

• Crude +7.831mm (+2mm exp)
• Cushing +3.073mm (+2.1mm exp)
• Gasoline -1.195mm
• Distillates -3.638mm

The seventh weekly build in Crude and Cushing inventory levels (both considerably higher than expected)...WTI was hovering around $62.20 ahead of the API print but kneejerked lower “The U.S. has for now given a lifeline to Iran,” . “The end result of the sanctions is softer than expected. The final outcome of the sanctions also confirms the political fear of high gasoline prices.”And finally, Bloomberg's Javier Blas highlights perfectly why oil prices are sliding...  #Oil Watch: @EIAgov is painting a quite difficult year for #OPEC+ group, with crude stock-builds in every quarter until 4Q 2019 | #OOTT pic.twitter.com/GnXfR7P3Ce

Oil prices rise on report of Russia, Saudi output cut talks - Oil rebounded towards $73 a barrel on Wednesday after falling to its lowest since August, supported by a report that Russia and Saudi Arabia are discussing oil output cuts in 2019. Russia's TASS news agency, citing an unnamed source, reported that the two countries, the biggest producers in an OPEC-led alliance that has been limiting supply since 2017, have started bilateral talks on the issue. "I think this is a little bit of verbal intervention, trying to get some speculative length back into the market," said analyst Olivier Jakob of Petromatrix. "The global supply and demand balance does not look very tight next year." Brent crude, the global benchmark, rose 80 cents, or 1.1 percent, to $72.93 a barrel by 8:41 a.m. ET (1341 GMT). The contract hit $71.18 on Tuesday, its lowest since Aug. 16. U.S. West Texas Intermediate crude rose 54 cents to $62.75. WTI touched a nearly eight-month low at $61.31 on Tuesday, falling more than 20-percent from its recent high and briefly trading in bear market territory. While Iranian oil exports are expected to fall because of U.S. sanctions that took effect on Monday, reports from OPEC and other forecasters have indicated that the global market could see a 2019 supply surplus as demand slows. A ministerial committee of some Organization of the Petroleum Exporting Countries members and allies, including Russia and Saudi Arabia, is due to meet on Sunday in Abu Dhabi to discuss the market and outlook for 2019. Any return to limiting supply would follow a June decision by the OPEC-led group to relax output curbs in place since 2017, after pressure from U.S. President Donald Trump to cool prices and make up for losses from Iran.

Oil Could Hit $100 If Supply Crunch Worsens -- Oil prices are likely to be “biased to the upside” for the rest of the year as demand from refineries rises in November and December, according to Citigroup Inc. An average price of $80 a barrel for this quarter is “realistic,” with spikes to $90 or even $100 possible if further disruptions worsen a supply crunch amid rising consumption, Citi’s Global Head of Commodities Research Ed Morse said Tuesday. Benchmark Brent crude topped $85 early last month on concern U.S. sanctions on Iran would create a shortage. Prices have since dropped back. The outlook comes as the Organization of Petroleum Exporting Countries and its allies send mixed supply signals to the market, with Russia suggesting it could push output to a record and an OPEC committee signaling the group could cap supply again in 2019. Central to the uncertainty is Iran, where the U.S. imposed sanctions this week while granting waivers to eight buyers of its crude. Iran is likely to continue sales of about 1 million barrels a day, Morse said in a Bloomberg Television interview, adding that the waivers don’t allow unlimited purchases. “How much oil is being granted from Iran to each of those eight countries? We can only surmise until we get a tweet from somebody in the government.” Supply disruptions can also be expected elsewhere, including in OPEC nations Nigeria, Libya and Venezuela, according to Morse. In Nigeria, where elections are coming up, “there are always disruptions and they average about half a million barrels a day,” he said. 

Oil Poised for Longest Losing Run Since 2014-- Crude’s poised for the longest losing streak since 2014 as concerns of a supply crunch eased on a forecast for rising U.S. production and waivers for eight countries allowing temporary import of Iranian oil. Futures in New York fell as much as 0.9 percent and headed for an 8.5 percent drop in eight straight sessions. The U.S. government forecast the nation’s oil output will increase at a record pace this year, while industry data signaled American crude inventories rose last week. Meanwhile, the waivers will allow Iran to continue some exports to its top customers for another six months. Supply concerns that drove crude to a four-year high last month faded on speculation the U.S. would soften the blow of its sanctions on Iran to lower pump prices at home. The Organization of Petroleum Exporting Countries also pledged to offset any supply gaps. The group led by Saudi Arabia will gather in Abu Dhabi this weekend as they face a fresh surge of U.S. shale oil threatening to unleash a new surplus in 2019. “The focus for now remains on the waivers issued to eight countries, allowing them to continue the purchase of Iranian barrels temporarily,” said Stephen Innes, Singapore-based head of trading for Asia Pacific at Oanda Corp. “There were more bearish overtones in terms of supply with the American crude output seen rising this year by the most ever, coupled with the call on OPEC to ramp up even higher.” West Texas Intermediate crude for December delivery dropped as much 54 cents to $61.67 a barrel on the New York Mercantile Exchange and traded at $61.82 on the New York Mercantile Exchange at 3:34 p.m. in Singapore. Total volume traded was almost double the 100-day average. Biggest Yearly GainBrent futures for January settlement slid 30 cents to $71.83 on the London-based ICE Futures Europe exchange. The contract fell 1.4 percent to close at $72.13 on Tuesday. The global benchmark crude traded at a $9.85 premium to WTI for the same month. In the U.S., the government is estimating the biggest yearly increase in domestic crude production. The output will average 10.9 million barrels a day this year, up from 9.35 million in 2017, the biggest gain on record, according to the Energy Information Administration. At the same time, industry data was said to show that nationwide oil inventories rose by 7.83 million barrels last week, while a median estimate in a Bloomberg survey of analysts expected a 2-million-barrel increase ahead of government data Wednesday. 

WTI Tumbles After US Production Spikes To Record High -  Despite sliding after last night's API-reported big Crude and Cushing build, WTI has rebounded overnight amid a post-midterms tumbling dollar, but a larger crude build than expected from DOE, combined with a smaller gasoline draw, could lead to WTI “set to test $60 easily,” Tariq Zahir, a commodity fund manager at Tyche Capital Advisors, says Additionally, Oil rose on the back of headlines that OPEC and its allies were said to plan talks on fresh production cuts next year, responding to recent increases in crude inventories amid surging U.S. supply. “The Saudis want to stop the price decay,” said Giovanni Staunovo, an analyst at UBS Group AG in Zurich. “There are many moving variables until the OPEC meeting in December, like Iran and U.S. production growth. But as the Saudis say they aim for market stability, if the data suggests an oversupplied market next year the probability of a cut is high.”However, as Bloomberg notes, if OPEC, led by Saudi Arabia, does ultimately decide fresh cutbacks are necessary, it will confront a number of challenges. It will need to once again secure the support of rival-turned-partner Russia, which has less need for high oil prices. There’s also the risk of antagonizing the kingdom’s key geopolitical ally, President Trump.  DOE

• Crude +5.78mm (+2mm exp)
• Cushing +2.419mm (+2.1mm exp)
• Gasoline +1.85mm (-1.7mm exp)
• Distillates -3.465mm

Crude and Cushing inventories rose for the seventh straight week (considerably more than expected) and a surprise gasoline build, sent WTI prices back below pre-API levels from last night and back to a $61 handle...  And as inventories rose, production surged a huge 400k b/d to a new record high...  WTI's overnight gains sagged back to pre-API levels ahead of the DOE print and dropped below it as the data confirmed the builds...  And finally, Bloomberg's Javier Blas highlights perfectly why oil prices are sliding... #Oil Watch: @EIAgov is painting a quite difficult year for #OPEC+ group, with crude stock-builds in every quarter until 4Q 2019 | #OOTT pic.twitter.com/GnXfR7P3Ce — Javier Blas (@JavierBlas) November 6, 2018

Oil slips after U.S. output hits record, crude stocks rise (Reuters) - Oil prices slipped on Wednesday, continuing a recent slide after surging U.S. crude output hit another record and domestic inventories rose more than expected. The U.S. Energy Information Administration (EIA) said domestic crude inventories rose 5.8 million barrels in the latest week, more than double analysts' expectations. Crude output hit 11.6 million bpd, a weekly record, though weekly figures can be volatile. Most recent monthly data for August showed overall production at more than 11.3 million bpd. U.S. crude futures fell 54 cents to settle at $61.67 a barrel, nearly 20 percent below a peak close of $76.41 a barrel in early October. "The market has yet to prove that it can hold onto a rally, so the short-term mood is still very negative," said Phil Flynn, analyst at Price Futures Group in Chicago. Brent crude, the global benchmark, settled down 6 cents to $72.07 a barrel, bouncing off its post-EIA session low on support from earlier reports that Russia and Saudi Arabia are discussing whether to cut crude output next year. While Iranian oil exports are expected to fall after U.S. sanctions took effect on Monday, reports from OPEC and other forecasters have indicated the global oil market could have a surplus in 2019 as demand slows. Also, the United States granted waivers on Iranian sanctions to eight countries who import that country's crude. "The market is now going to look to OPEC and non-OPEC producers to rein in production as the U.S. has granted eight countries waivers from sanction, which in essence adds to supply," said Andrew Lipow, president of Lipow Oil Associates in Houston. Russia and Saudi Arabia, top producers in an OPEC-led alliance, started bilateral talks on a return to production cuts next year, Russia's TASS news agency reported, citing an unnamed source. In June, the producer group decided to relax output curbs in place since 2017, after pressure from U.S. President Donald Trump. Analysts said those countries may be more willing to cut output now that the U.S. midterm elections are over. Trump, whose Republican party was fighting to retain control of congress, had complained of higher gasoline prices.

Oil Hits 8-Month Low on U.S. Crude Build, Output - The OPEC vs. U.S. shale oil battle is back, injecting fresh uncertainty into crude markets amid 8-month lows in crude prices and sanctions on Iranian exports. Barely a day after the U.S. midterm elections, where President Donald Trump had counted on major oil-producing allies of the United States keeping crude prices low to appeal to his conservative base of voters, OPEC suggested it was ready to cut output in a bid to shore up a market that had lost 20% of its value in the past five weeks. The producers' cartel is scheduled to meet next on Dec. 6. U.S. shale production, meanwhile, reached new record highs, with the Energy Information Administration announcing on Wednesday a weekly crude output of 11.6 million barrels per day. The EIA also cited a seventh-straight weekly rise in U.S. crude inventories, with stockpiles growing by 5.8 million barrels last week vs forecasts for a 2.4 million increase. Six of the past seven weeks have seen outsize builds. The conflicting picture of OPEC wanting to cut production vs U.S. output bursting at the seams pitched crude oil markets into new uncertain ground. U.S. WTI settled down 54 cents, or 1%, at $61.67 per barrel, after hitting a March low of $61.20. Earlier in the session, the U.S. crude market had risen nearly $1 earlier. Since early October, WTI has lost about 20%, falling into bear market territory, after hitting four-year highs of nearly $77. U.K. Brent crude, the international benchmark for oil, was off 2 cents, or 0.03%, to $72.11 per barrel. That was about 17% off Brent's four-year highs above $86 hit last month. Earlier on Wednesday, Brent was down as much as 76 cents. Oil prices jumped 20% over a five-month period after Trump canceled in May an Obama-era deal with Iran that let Tehran export oil in exchange for curbs on its nuclear program. But after hitting four-year highs, the market tanked over the past five weeks on OPEC kingpin Saudi Arabia's initial assurance that it will pump as much crude as necessary to make up for the lost Iranian exports, estimated at anywhere between 1.5 million and 2.5 million bpd. This week, as the sanctions on Tehran officially began, the Trump administration issued waivers to eight countries to continue importing from the Islamic Republic over the next six months. That depressed crude prices further. But OPEC sources told Reuters Wednesday the cartel could return to production cuts by next year, which seemed to suggest a change in the Saudi stance.

Trump on falling oil prices: 'That's because of me' --President Donald Trump on Wednesday claimed credit for falling oil prices, glossing over market forces that knocked crude futures from four-year highs last month.Trump also appeared to hint that his administration may not tighten sanctions on Iran's oil exports if crude prices start rallying again, saying the measures will "maybe" get tougher.The president did not clearly elaborate on why he deserves credit for the pullback in oil markets, but he linked falling prices to his disdain for the 15-nation OPEC cartel and his administration's Iran policy.The Trump administration on Friday announced it would grant sanctions waivers to eight countries, which allow them to continue importing Iranian crude for 180 days without fear of reprisal from the United States. The Trump administration restored sanctions on Iran, OPEC's third-biggest oil producer, on Monday."I gave some countries a break on the oil," Trump said during a lengthy, wide-ranging press conference the day after Republicans lost control of the House of Representatives in the midterm elections. "I did it a little bit because they really asked for some help, but I really did it because I don't want to drive oil prices up to $100 a barrel or $150 a barrel, because I'm driving them down.""If you look at oil prices they've come down very substantially over the last couple of months," Trump said. "That's because of me. Because you have a monopoly called OPEC, and I don't like that monopoly."Oil prices have tumbled as much as 20 percent from four-year highs on Oct. 3. However, the decline since Trump officials first announced the waivers on Friday has been significantly smaller — about 1 percent for international benchmark Brent crude and 3 percent for U.S. crude.

Why Oil Prices Will Fall In 2019 And Beyond   The decision by the U.S. to grant waivers to eight countries, allowing them to continue to import oil from Iran, has helped ease the tension in the oil market. No longer are oil traders talking about $100 oil.  Iran’s oil exports stood at 1.7 million barrels per day in October and won’t fall to zero anytime soon. But that may not be the end of the story. “While consistent with our expectations, the granting of waivers does not imply that Iran exports will stabilize near current levels,” Goldman Sachs said in a research note on November 1. As more Iranian supply goes offline, the market will continue to tighten. Iran could lose nearly 600,000 bpd of exports by the end of the year, relative to October levels, the bank predicts.“As a result, we still expect that the global oil market will be in deficit in 4Q18, leading to a strengthening in Brent timespreads,”Goldman said.In fact, while everyone focuses on the short-term movements in oil prices, Goldman says it’s important to look at the futures curve.“In our view, the most interesting takeaway from today’s oil price sell-off is the parallel shift in the crude forward curve. This is consistent with a move down on the oil cost curve as recent supply news (less Iran losses, more US and Saudi production) point to fewer high-cost marginal barrels needed in 2019,” the bank said.That’s a bit of financial jargon, but the gist is that traders are suddenly less concerned that high-cost producers will be needed to supply the marginal barrel. Earlier this year, when Iran sanctions were announced and fears about Permian bottlenecks permeated into the market, oil futures prices rose sharply, with Brent five-year prices rising from $57 per barrel in May to $68 per barrel in September. This can be boiled down to investors believing that the oil market will need high-cost production in the years ahead to supply the marginal barrel, as low-cost producers are at their maximum levels.However, over the last few weeks, the five-year Brent price fell back.“The retracing of this last move higher reflects the realization that such high cost marginal barrels may no longer be needed,” Goldman Sachs analysts wrote.

Oil Market Faces Precarious Few Months - The oil market faces a precarious few months. That’s according to Wood Mackenzie’s (WoodMac) latest edition of the Edge, a regular column penned by the company’s chairman and chief analyst Simon Flowers. “The biggest risk is this winter. Losing another 1 million barrels per day or more from Iran comes on top of a similar loss in supply from Venezuela over the last couple of years,” Flowers stated in the column. “Saudi Arabia, UAE and Kuwait have stepped up production since July to minimize the increase in price as the market tightens. We think there’s just enough growth in supply from elsewhere to muddle through the next few months, meet winter demand and avert a price spike. Brent should hold around U.S.$78 a barrel, but it’s a very fine line,” he added. “OPEC spare capacity was an ample four million to five million barrels per day two years ago. There’s only 700,000 barrels per day of additional available within 30 days right now. That means the market is vulnerable to strong demand in a cold winter or any new supply outage,” Flowers continued. The WoodMac representative said the situation “may look better” once the northern winter is over, “but only up to a point”. “We forecast that Brent will ease and average U.S.$74 a barrel in 2019. We expect supply to grow 1.6 million barrels per day in 2019, with U.S. tight oil driving this. That’s well ahead of 1.2 million barrels per day of demand growth and should lead to a healthy inventory build during the year,” Flowers stated. “But with Iran in the full grip of sanctions and Venezuela continuing to decline, that limited OPEC spare capacity will cast a shadow over the market for some time,” he added. Earlier this month, the November OPEC Bulletin commentary piece stated that “there will no doubt be hard times to come in the oil industry,” listing geopolitical storms, disruptive weather events, speculation and transportation issues as examples of drivers. The commentary piece added, however, that the platform for dialogue created through the group’s Declaration of Cooperation “can help calm stormy waters and provide the ship that is our industry safe passage”. 

OPEC is now talking about moves to support oil prices - OPEC is enduring one of the most head-spinning years in its history, swerving from cutting oil production to boosting it as quickly as possible. Now it's talking about reversing course again. Ministers from the group gathering in Abu Dhabi this weekend will discuss the possibility of cutting production again next year, according to delegates, a move that would mark an abrupt end to six months of supply increases. The group is responding to a worrying prospect: Even though US sanctions on Iran are removing significant amounts of crude from world markets, a fresh surge of American shale oil threatens to unleash a new surplus in 2019. Some members are concerned that inventories are rising, said the delegates, who asked not to be named as the discussions are private. Crude prices already reflect this. Brent for January delivery has retreated about 15 per cent from a four-year high reached in early October. The Organisation of Petroleum Exporting Countries and its allies are showing they're worried, signalling last month that they might need to dial back near-record output levels. .

Saudi Arabia, Russia should cut ‘at least 1 mil b/d instantly’ - Saudi Arabia and Russia, both of whom have boosted their crude output in recent months, were responsible for a $15/b drop in the price of oil and “should cut at least 1 million b/d instantly”, an OPEC delegate told S&P Global Platts. The two countries, the largest producers in the OPEC/non-OPEC coalition, needed to “get back [to] OPEC the $15/b loss that they caused”, the delegate said on condition of anonymity. The comments come as Saudi Arabia and Russia were reportedly discussing a production cut in 2019, Russian news agency Tass reported earlier Wednesday. Saudi officials could not be reached for comment. ICE Brent futures were trading at $73.03/b at 1307 GMT Wednesday, after hitting a four-year high October 3 at $86.29/b. A six-country OPEC/non-OPEC Joint Ministerial Monitoring Committee co-chaired by Saudi Arabia and Russia meets Sunday in Abu Dhabi to assess market conditions. The next full OPEC meeting is December 6 in Vienna. The coalition on June 23 agreed to raise production by a combined 1 million b/d from May levels by reducing overcompliance with production cuts, in order to offset expected losses by sanctions-hit Iran and Venezuela. Saudi energy minister Khalid al-Falih said last month the kingdom was producing about 10.7 million b/d, near its record high and almost 700,000 b/d more than it was producing in May. Russia, meanwhile, reported Friday that it hit an all-time high of 11.41 million b/d, up about 440,000 b/d from May.

US crude falls into bear market as growing oil output points to oversupply - U.S. crude prices dropped for a ninth consecutive session on Thursday, falling into a bear market, on further signs of growing supply and data showing record Chinese oil imports.   U.S. West Texas Intermediate crude futures fell 68 cents, or 1.1 percent, to $60.99 by 9:58 a.m. ET. That is down 20.7 percent from last month's four-year high at $76.90, putting WTI in bear market territory.   Brent crude futures was down 74 cents, or 1 percent, at $71.33 a barrel. The international benchmark is down nearly 18 percent since Oct. 3, when Brent hit $86.74, its highest level since late 2014.The U.S. Energy Information Administration forecast this week that U.S. oil production will average 12.1 million barrels per day in 2019, marking an upward revision from its last projection.  U.S. crude production hit an all-time high at 11.6 million barrels per day last week, according to preliminary figures released by EIA on Wednesday. If confirmed during revisions, it would more firmly establish the United States as the world's top oil producer.The other producers in the top three, Saudi Arabia and Russia, have been dialing up production since June."All three of them are continuing to pump at record levels, that's been ... part of what's causing oil to move into a bear market," Tamar Essner, director of energy and utilities at Nasdaq Corporate Solutions, told CNBC's "Worldwide Exchange."China's crude imports rose 32 percent in October compared with a year earlier to 9.61 million barrels per day (bpd), customs data showed on Thursday. "Crude oil imports rose ... as uncertainty around tariffs on U.S. imports and sanctions on Iran eased," ANZ bank said.

Oil Ends Down for 9th-Straight Day; $60 Support Looks Fragile - Is $60 oil on its last legs before OPEC comes to save the day for the bulls? The front-month contract in U.S. West Texas Intermediate came less than $1 to breaking the $60 per barrel support in Thursday's session as the tumble in crude futures continued a ninth-straight day for the market's worst losing streak in more than four years. Brent, the international benchmark for oil, was similarly at risk with losing its $70 per barrel support. Technically in a bear market after losing more than 20% from the highs of early October, the selloff in oil seems unstoppable despite OPEC's rumblings on Wednesday that it might join Russia to cut output as early as next month to put a floor beneath the market. Instead, traders seemed fixated on the new weekly record high of 11.6 million barrels per day in U.S. crude production cited by the Energy Information Administration. The EIA, which delivered that data on Wednesday, also announced a seventh-straight weekly rise in U.S. crude stockpiles, of which six have been outsize builds. Compounding the bearish mood, market intelligence firm Genscape reported on Thursday a 2.2-million-barrel weekly build at the Cushing, Okla. delivery base for WTI, traders who saw the data said. Any weekly Cushing build above 1 million barrels is typically bearish for oil prices. "The market is almost daring OPEC to do something now," said John Kilduff, oil trader and partner at New York energy hedge fund Again Capital. "We have an OPEC meeting this weekend and I find it hard to believe they are not going to get together and try and talk this market back up." The Joint OPEC-Non-OPEC Ministerial Monitoring Committee, which includes Saudi Arabia and other major Middle Eastern oil producers along with Russia, will be meeting this weekend in Abu Dhabi. That will be followed by OPEC's monthly meeting in Vienna on Dec. 6, where production quotas are usually finalized. Russia will be meeting with OPEC a day after that, in line with the cooperation that has existed since 2015 between the cartel and Moscow to intervene in any collapse in global oil prices. U.S. WTI settled $1 down, or 1.8%, at $60.67 per barrel, after hitting an 8-month low at $60.56. WTI is down 21% since hitting four-year highs of nearly $77 in early October. With Thursday's slide, WTI has settled down without a pause since Oct 29. The last time it experienced such a losing streak was between June 26 and July 9 2014, when it fell 10 sessions in a row. Brent crude was down $1.37, or almost 2%, to $70.70 per barrel by 2:55 PM ET (19:55 GMT). That was almost 20% off Brent's four-year highs of nearly $87 hit last month.

Cramer predicts oil prices as low as $40 a barrel as US crude falls into bear market --U.S. oil prices are in a "ferocious" bear market, and crude could fall to as low as $40 per barrel, CNBC's Jim Cramer said Thursday."Oil is collapsing guys. It's collapsing," Cramer said on "Squawk on the Street."Asked if prices could fall to $50 per barrel, Cramer said, "I could make a case for the $40s here. I'm not kidding."The "Mad Money" host did not provide a timeline for his case.Oil was lingering near multimonth lows on Thursday morning, with the American benchmark West Texas Intermediate crude dropping to around $61 per barrel.Record U.S. crude production and signals from Iraq, the United Arab Emiratesand Indonesia that output will grow more quickly than expected in 2019 were pressuring oil prices."Demand is slowing for oil and we're pumping like mad," Cramer said Thursday.Oil demand is still expected to rise next year, but forecasters now expect less robust growth in global crude consumption due to economic concerns fueled by trade tensions and currency weakness in emerging markets. Cramer said Monday that rosy outlooks from major oil companies Exxon Mobil, Chevron and BP do not reflect the economic reality. He said investors betting on those companies may be making a "bad call."

Crude oil futures contango grows as market eyes supply glut; NYMEX WTI down to $61.19/b, ICE Brent $71.63/b  — Contango in WTI and Brent crude futures widened in midmorning trading Thursday as the market eyed a growing global supply glut. Prompt-month NYMEX WTI futures were trading a around 18 cents/b below second-month levels Thursday morning, but at a steep 2.12/b discount compared to month 12 prices. Prompt ICE Brent contracts were also holding around 18 cents/b below second-month levels and 19 cents/b under 12-month prices. US inventory builds, especially at the delivery point of the NYMEX crude contract in Cushing, Oklahoma, has pushed the forward curve into contango since mid October. But the collapse in the one-year spread has been acute. The prompt-month/12-month WTI spread settled at a 22 cent/b backwardation as recently as October 26. This backwardation was as wide as $1.90/b this time last month. "Simply put, abundant supplies of crude, both foreign and domestic, are now bidding for storage space. This is a complete and total reversal of what was happening and there seems to be, at this point, nothing that shall reverse this trend," NYMEX December WTI was down 48 cents at $61.19/b and ICE January Brent was 44 cents lower at $71.63/b. US commercial crude supply expanded for a seventh consecutive week, growing 5.78 million barrels to 431.79 million barrels during the week ended November 2, US Energy Information Administration reported. This week EIA revised its US production forecasts higher to 10.9 million b/d in 2018 and 12.06 million b/d for 2019. Last week US production rose to a fresh all-time high of 11.6 million b/d, EIA data showed. Saudi Arabia production tested all-time highs at 10.7 million b/d in October, a 700,000 b/d increase from May levels, and Russia reported Friday that it hit an all-time high of 11.41 million b/d, up about 440,000 b/d from May. Concurrently with the build out in global supply, this week Washington issued sanctions waivers to eight importers of Iranian crude, further mitigating the impact of the re-imposed sanctions on oil prices. Products futures were mixed as the market pulled back from yesterday's reactionary positions in the wake of the EIA data release. NYMEX December RBOB was up 1.32 cents at $1.6606/gal. RBOB settled 4.66 cents lower on Wednesday following a surprise 1.85 million barrel EIA-reported build in inventories last week. But NYMEX December ULSD gave back most of yesterday's gains and was 4.66 cents lower at $2.1905/gal. 

Crude Oil Has Another Down Day - West Texas Intermediate (WTI) crude oil for December delivery lost nearly 2 percent Thursday, falling $1.00 to settle at $60.67 a barrel (bbl). The WTI did manage to clear the $62 mark, reaching an intraday high of $62.42, but Thursday’s settlement price was much closer to the $60.42 intraday low. The January Brent contract price settled at $70.65 a barrel, translating into a $1.42 decline for the day. Traders on Thursday digested the weekly U.S. crude oil inventories report from the Energy Information Administration (EIA). On Wednesday, EIA stated that crude stocks rose to 431.8 million barrels (bbl) for the week ending November 2, translating into a 5.8 million-bbl build for the week. On Wednesday, EIA also revealed that it has lowered its predictions for the average WTI and Brent prices for next year by 7 percent and 4 percent, respectively. EIA stated that it expects the WTI to average $65 per bbl in 2019; previously, it had projected a $70 average for the benchmark. For the Brent, EIA anticipates a $72-per-bbl average, down $3 from its earlier forecast. EIA reported that it attributes the price forecast adjustments in part to higher-than-expected U.S. crude oil production during the second half of 2018 and in 2019. It now anticipates that domestic crude output for 2018 will average 10.9 million bpd – up 160,000 bpd from its earlier projection. Moreover, EIA increased its 2019 average daily production forecast by 300,000 bpd to 12.1 million bpd. “The increased U.S. crude oil production is expected to contribute to global crude oil inventory growth and put downward pressure on crude oil prices,” EIA stated. December reformulated gasoline (RBOB) posted a slight loss Thursday, declining less than a penny to settle at $1.64 a gallon. Front-month Henry Hub natural gas futures also ended the day lower, falling approximately one cent to $3.54. 

Oil Teeters Near Record Losing Streak  -- Oil’s set for its longest stretch of declines on record after entering a bear market, with investors awaiting a weekend meeting of OPEC and its allies to discuss output strategy. Futures in New York are slipping for a 10th day, extending a dramatic plunge that’s dragged prices down over 20 percent from a 2014-high just five weeks ago. The slump has rattled producers, and the Organization of Petroleum Exporting Countries has signaled it may cut output next year -- an option that’ll be part of talks when the group meets with partners in Abu Dhabi on Sunday. Oil’s slump has been exacerbated by a U.S. decision to allow eight countries to continue importing from Iran even after it hits the OPEC member with sanctions. That revived concerns of a supply glut, in contrast to earlier fears over a crude crunch due to shrinking exports from the Persian Gulf state. Pledges by other producers such as Saudi Arabia to pump more and record American supply as well as rising stockpiles also weighed on prices.  West Texas Intermediate for December delivery traded 6 cents lower at $60.61 a barrel on the New York Mercantile Exchange at 3:20 p.m. in Singapore. The contract fell 1.6 percent to $60.67 on Thursday, and is headed for a 4 percent decline on the week -- its fifth consecutive decrease. Total volume traded was 35 percent above the 100-day average. Brent futures for January settlement edged up 9 cents to $70.74 a barrel on the London-based ICE Futures Europe exchange. Prices are also on course for a fifth weekly drop, down 2.9 percent. The global benchmark crude traded at a $9.93 premium to WTI for the same month. A potential decision to return to output cuts by OPEC would mark the second production U-turn this year for the group, some members of which are said to be concerned that inventories are rising. For Saudi Arabia -- the world’s biggest crude exporter -- a reduction would mark the third time in recent years the kingdom has delivered a supply surge only to quickly reverse it. In the U.S., crude production increased to 11.6 million barrels per day last week, the highest level on record, according to Energy Information Administration data. At the same time, nationwide stockpiles rose 5.8 million barrels last week, compared to a 2-million-barrel gain expected in a Bloomberg survey. 

Baker Hughes data show biggest weekly rise in U.S. oil-rig count since May - Baker Hughes on Friday reported that the number of active U.S. rigs drilling for oil climbed by 12 to 886 this week. That was the biggest weekly oil-rig rise since the week ended May 25, when the number rose by 15. The total active U.S. rig count, which includes oil and natural-gas rigs, was up 14 at 1,081, according to Baker Hughes. December West Texas Intermediate  was down 68 cents, or 1.1%, at $59.99 a barrel from Thursday's finish, unchanged from before the rig data Friday.

Oil prices down 20 percent in a month as fundamentals weaken --U.S. crude prices fell for a 10th consecutive session on Friday, sinking U.S. crude futures deeper into bear market territory and wiping out the benchmark's gains for the year. The 10-day decline is the longest losing streak on record for U.S. crude, according to FactSet data going back to November 1984. Crude futures are poised for their fifth straight week of losses as growing output from key producers and a deteriorating outlook for oil demand deepen a sell-off spurred by October's broader market sell-off. The drop marks a stunning reversal from last month, when oil prices hit nearly four-year highs as the market braced for potential shortages once U.S. sanctions on Iran, OPEC's third biggest oil producer, snapped back into place.   "The reality is that we're still in a world where we're overproducing and we've got surplus."U.S. West Texas Intermediate crude fell 82 cents, or 1.4 percent, to $59.85 by 9:03 a.m. ET (1403 GMT). The contract is now down nearly 1 percent since the start of the year. It fell as low $59.28 on Friday, its weakest level in nearly nine months. WTI fell into a bear market in the previous session, tumbling more than 20 percent from a nearly four-year high last month at $76.90.International benchmark Brent crude was trading 67 cents lower at $69.98, down 1 percent for the day and more than 19 percent from its recent high. The contract touched a seven-month low at $69.13 on Friday. Brent has fallen in nine of the last 10 sessions, but is still up more than 4 percent this year.

What’s Behind The Oil Price Crash? - Oil prices fell to multi-month lows at the end of the week, as a confluence of factors all point in a bearish direction.  The EIA reported that U.S. oil production skyrocketed to 11.6 million barrels per day (mb/d) for the week ending on November 2. Despite fears that shale output would plateau because of pipeline constraints, the shale industry is firing on all cylinders. The figures also help explain the recent downturn in prices. . Russia’s oil production is at a post-Soviet record high, but a cut in output may actually work to the benefit of Russian producers. “Producing less at $80 per barrel is better than producing at current levels and at $70 per barrel,” Alexander Losev, chief executive officer of Sputnik Asset Management, told Bloomberg. “A certain output decline will also help the companies to reduce operating costs and further improve their financials, including free cash flow.” Saudi Arabia increased production in 2015, 2016 and again this year. The first two times, the kingdom backtracked as oil prices sank amid swelling inventories. The potential third production cut in four years suggests Saudi Arabia once again ramped up too quickly, Bloomberg argues. A technical committee for OPEC+ is set to meet this weekend to consider options for 2019, including a possible production cut.  Chevron is one of a handful of oil majors that have stuck it out in Venezuela even as the country continues to fall apart. The oil major’s assets are no longer profitable, and the Wall Street Journal reports that the company is growing weary of the problems. In response to the article, Chevron denied the potential exit. “We’re committed to Venezuela and we plan to be there for many years to come,” Clay Neff, Chevron’s president for Africa and Latin America, said in an interview late Thursday with Bloomberg. The reporting that Chevron might pack up and leave “is not accurate.”

WTI drops for a 10th straight day, dipping below US$60 to a near nine-month low - – Crude oil prices dipped to near a nine-month low as they fell for a tenth consecutive day, potentially having an impact on the Bank of Canada interest rate decision next month. West Texas Intermediate dipped to a low of US$59.26 before closing off 83 cents or 1.4 per cent to US$59.84. Since its peak last month, WTI is down about 22 per cent as it experienced a fifth consecutive weekly drop. And the December crude contract was down 48 cents at US$60.19 per barrel to the lowest level since February. A glut of oil production is the main cause of the declines in prices of WTI and Brent crude. The United States has taken the crown as the world’s leading oil producer after output increased by two million barrels per day over the last year to reach 11.6 million bpd. At the same time, OPEC is over-producing and sanctions have been watered down against Iran as the U.S. granted waivers on the sanctions to eight countries over concerns that a complete end of Iranian imports would cause economic disruptions. “But sentiment has also driven down the prices with fears on global growth weakening and therefore slowing oil demand,” says Cavan Yie, a portfolio manager at Manulife Asset Management. The situation is compounded in Canada where the price differential with the Western Canadian Select has widened considerably because of the lack of pipelines to carry crude out of Alberta. And a Montana judge’s ruling that the Keystone XL project needs further work is another black mark for Canadian energy investors, he said. “It’s been a challenging year so far for the energy patch,” Yie said in an interview. Low Canadian oil prices are having a negative impact on government tax revenues and the Alberta economy, which will likely impact the Bank of Canada’s rate hike decision next month, he said. “I think for sure it should be incrementally negative for their stance on future interest rate hikes,” he said. “I think the probabilities are probably a little lower.” 

Saudi Arabia considering breaking up OPEC — report - Saudi Arabia's top government-funded think tank is researching, on behalf of the oil-rich kingdom, the possible effects an OPEC breakup would have on global oil markets. A report in The Wall Street Journal, which quotes an unnamed "senior Saudi adviser" at length, says that while the ongoing research does not reflect an active debate inside the government over whether the country should leave OPEC or not, it is part of a wider rethinking about Saudi Arabia's near 60-year membership of the cartel. Founded in 1960, OPEC currently has 15 members — six in the Middle East, seven in Africa and two in South America. Saudi Arabia has long been the dominant force within the group, accounting for around one-third of the organization's total oil production.However, with US oil production rising sharply over the last decade, and with increased political pressure on Saudi Arabia following the murder of journalist Jamal Khashoggi after he entered the Saudi Consulate in Istanbul, the Middle Eastern country is apparently reviewing the status quo in global oil production.For years, OPEC has regulated oil production in order to control global prices. OPEC members such as Saudi Arabia have long argued that the organization helps prevent oil prices from getting too high or too low, but critics say OPEC takes advantage of big oil-consuming nations, such as the United States. US President Donald Trump is a persistent critic.

Saudi Arabia Is Evaluating A Break Up Of OPEC - In potentially groundbreaking news - which failed to generate a market response as it hit at the same time as the FOMC statement - Saudi Arabia’s top government-funded think tank is said to be studying the possible effects on oil markets of a breakup of OPEC, a research effort which the WSJ called "remarkable" for a country that has dominated the oil cartel for nearly 60 years.The OPEC study aims to “assess the short/medium-term consequences of a dissolution of OPEC,” according to an overview reviewed by The Wall Street Journal. It is intended to determine how the global oil market, and Saudi finances, would look “if coordination between oil producing countries disappear,” according to the overview.The overview describes two scenarios to investigate, if OPEC isn’t in the picture:

1. All big oil producers, including Saudi Arabia, act competitively—fighting each other for market share;
2. Saudi Arabia, instead, attempts to leverage its massive oil output alone to help balance global supply and demand in an attempt to keep oil prices steady—similar to the role that members say OPEC plays today.

The timing of the report, which is hardly a arbitrary, coincides with rising pressures on the Saudi government, including from the U.S., where President Trump has accused the cartel of pushing up oil prices, and from investors who distanced themselves from the kingdom after the brutal killing of a U.S.-based Saudi journalist.Just as remarkably, while the think tank’s president, Adam Sieminski told the WSJ that the study "hadn’t been triggered by Mr. Trump’s statements", a senior adviser familiar with the project said it provided an opportunity to take into account the criticism from Washington. Depending on the findings, the study could offer a defense of the cartel and the Saudi role in it; alternatively it could potentially advocate for a repeat of November 2014, when the cartel was effectively dissolved for a period of time.

Saudi Arabia Post the Khashoggi Tragedy | Arabia Foundation  – The killing of Washington Post columnist Jamal Khashoggi has left the Kingdom of Saudi Arabia in its weakest diplomatic position since the horrific terror attacks of September 11. Khashoggi’s murder followed a series of Saudi missteps that had already left many questioning the country’s trajectory, including the arrests of women activists, the Saudi-German and Saudi-Canadian diplomatic crises, and the imbroglio surrounding Lebanese prime minister Saad Hariri. Additionally, the kingdom’s critical failure to clearly communicate the rationale behind and the objectives for both the Qatar boycott and the Yemen war—the latter of which has exacted a catastrophic humanitarian toll—has vastly compounded these errors in the eyes of the global community.  Talk about diplomatically isolating Saudi Arabia, along with the presumptuous call to remove Crown Prince Mohammed bin Salman (MBS), however, is neither realistic nor prudent. As a member of the G20 and one of the world’s leading oil producers, the kingdom is a linchpin in the global economy and energy market. Washington’s ongoing efforts to maximize the economic pressure placed on Iran are contingent on Riyadh’s maximizing its oil output. And politically, the kingdom represents one of the last bastions of stability in an anarchic Middle East. Saudi Arabia is also, as CENTCOM commander General Joseph Votel reiterated earlier this week, “an extraordinarily important security partner.” It is also a vital intelligence asset in the wars against al-Qaeda and ISIS and a key buffer in the effort to contain the Islamic Republic’s policy of revolutionary expansionism. Revisiting the royal succession not only would upend an appointment that has finally put to rest years of political uncertainty over the generational transfer of power within the royal family but also may place at risk the essential reforms that MBS has successfully pushed through, because any successor would likely overturn many of these reforms to gain support from the clerical class and other disgruntled elements of society.

Saudi campaign to abduct and silence rivals abroad goes back decades - WaPo- The killing of journalist Jamal Khashoggi in Istanbul last month by a team of Saudi agents dispatched from Riyadh has prompted fresh scrutiny of the kingdom’s pursuit of Saudi nationals abroad, from ordinary dissidents to defectors from the tight ranks of the royal family. The effort to silence Saudi critics abroad stretches back decades and over the tenure of several monarchs. But Crown Prince ­Mohammed bin Salman, the kingdom’s de facto ruler, has pursued the practice with an especially ruthless zeal since gaining his position last year, analysts said, even making the return of dissenters abroad a formal policy of the state, according to a Saudi official, who insisted such returns were to be negotiated rather than coerced. To repatriate its critics, the Saudi government has tried to lure them back or enlisted friendly regional governments to arrest them or even carried out brazen kidnappings in Europe. Saudi nationals have vanished from hotel rooms, been snatched from cars or had planes they were flying on diverted. One Saudi dissident prince said in a court filing that he was injected in the neck and spirited away on a private jet from Geneva to Saudi Arabia. Years later, after he managed to leave the kingdom, he disappeared again and has not been heard from since. “We know they can kill you; they can destroy your family or use them against you,” said one Saudi women’s rights activist who applied for political asylum in the United States last year. “It’s always been like this,” she said, adding that Mohammed’s aggressive pursuit of critics had further rattled an already paranoid community of Saudi expatriates. A Saudi government media office did not immediately respond to an email requesting comment on the abductions. Jarba was not a dissident, but he may have been wanted because of his association with a branch of the royal family that had fallen out of favor with the Saudi leadership, according to the two people familiar with the circumstances of his capture. He was a longtime friend and confidant of Prince Turki bin Abdullah, a son of the late King Abdullah. Turki was arrested last November as Saudi authorities detained hundreds of people, including royal family members, business executives and government officials, in what was billed as an anti-corruption operation.

After Brother's Sudden Release From Detention, Alwaleed Says MbS Will Be 100% Vindicated In Khashoggi's Murder - Billionaire Saudi Prince Alwaleed bin Talal - who was reportedly strung up and beaten by US mercenaries during the Saudi Arabian "purge" exactly one year ago Sunday - said on Sunday that an official investigation into the death of journalist Jamal Khashoggi will exonerate the Crown Prince, Mohammed bin Salman (MbS) "100%". Speaking with Fox News's Maria Bartiromo, Alwaleed said "I ask Saudi Arabia now publicly, through your program, to have the investigation made public as soon as possible," adding "I believe the Saudi crown prince will be 100 percent vindicated and exonerated."  Regarding last year's purge during which dozens of princes and senior Saudi figures were rounded up and detained at the Ritz Carlton in Riyadh in an "anti-corruption" crackdown - only to be freed after giving up a majority of their wealth, Alwaleed chalked his imprisonment up to a "misunderstanding," which has been "forgiven and forgotten." before touting MbS as "for real," and that the Crown Prince is "changing Saudi Arabia in a very revolutionary manner."

Saudi Journalist Tortured to Death in Prison — Saudi journalist and writer Turki Bin Abdul Aziz Al-Jasser has died after being tortured while in detention,the New Khaleej reported yesterday.  Authorities believe that the writer Turki bin Abdul Aziz al-Jasser (TurkialjasserJ) is the Twitterati KASHKOOL (coluche_ar), private #Saudi security sources asserted to us. The source confirmed what ALQST tweeted about using personal information in Jasser's PC to blackmail himpic.twitter.com/qkNmZe0e2w  — Prisoners of Conscie (@m3takl_en) March 18, 2018

Saudi Arabia Grilled Over Human Rights Record at UN Meeting in Geneva  — Saudi Arabia has insisted that its investigation into the killing of journalist Jamal Khashoggi will be “fair”, amid a barrage of criticism at a United Nations meeting on Monday.The half-day public debate at the UN Human Rights Council in Geneva came just over than a month after the Saudi insider-turned-critic was murdered in the Saudi consulate in Istanbul.Turkish officials said last week that Khashoggi was strangled as soon as he entered the consulate on 2 October in a planned hit, and his body was then dismembered and dissolved in acid.The head of the Saudi Human Rights Commission, Bandar Al Aiban, stressed that the “country is committed to carry out a fair investigation”.“All persons involved in that crime will be prosecuted,” he said.The so-called Universal Periodic Review – which all 193 UN-member countries must undergo approximately every four years – came as a Turkish official charged on Monday that Saudi Arabia sent experts to Turkey to cover up the journalist’s murder before allowing Turkish police to search the consulate.The murder has placed huge strains on Saudi Arabia’s relationship with the United States and other allies and has tarnished the image of powerful Crown Prince Mohammed bin Salman.  During Monday’s review, several Western countries voiced outrage at the killing, with many calling for a “credible” and “transparent” investigation, and some, like Iceland and Costa Rica, went further and demanded an international probe. The British ambassador to the UN, Julian Braithwaite, told the council his country was “gravely concerned about the deteriorating human rights situation in Saudi Arabia”, pointing to women’s rights, mass arrests of rights defenders and the extensive use of the death penalty.

Why Benjamin Netanyahu Defends the Crown Prince of Saudi Arabia  — For the past month, while governments and media outlet around the world sounded a drumbeat of shock and dismay over the murder of Saudi journalist Jamal Khashoggi, all that could be heard on the subject from Israel was the sound of crickets. Israeli columnist Ben Caspit said his country’s leadership was avoiding the subject “like the plague.” It appears no Israeli politician wants to say anything for fear of offending that country’s latest Arab bromantic partner, Crown Prince Mohammed bin Salman. Bin Salman, according to many analysts, would have had to have ordered the murder of a figure as prominent as Khashoggi. Then on Friday Israeli Prime Minister Benjamin Netanyahu finally gave his view on the Khashoggi case, saying it had to be “dealt with” but not at the cost of the stability of Saudi Arabia and the fight against Iran. “What happened in the Istanbul consulate was horrendous and it should be duly dealt with,” he said. “Yet at the same time it is very important, for the stability of the world and the region, that Saudi Arabia remain stable.” MBS, as he’s known, is the key Arab linchpin of the Trump-Netanyahu deal of the century, which is supposed to finally resolve the Israel-Palestine conflict. The details of the delayed proposal, which Trump and his Middle East appointees continue to promote, has been widely reported in various media outlets. Leaked parts of the deal, many analysts say, suggest it is highly favorable to Israeli interests and largely disregards Palestinian rights. Despite the one-sided nature of the plan, MBS has dutifully attempted to sell it to the Palestinian leadership. In a command performance, in which the Saudi crown prince summoned Palestinian Authority President Mahmoud Abbas to his royal palace, MBS told a reluctant Abbas that if he didn’t acquiesce, he should resign. The implication was that the Saudis would find another Palestinian leader who would agree to such a deal. So far, Abbas has resisted this Saudi offer and not lost his head – or his job.  A peace agreement that is favorable to the Israelis is something that comes along once in a lifetime. So, Netanyahu realizes that stepping into the Khashoggi imbroglio is the last thing he wants to do. If there is even a slight chance the Saudi prince can come through, he doesn’t want to upset this apple cart.

The Unraveling of the Netanyahu Project for the Middle East - Alastair Crooke - Nahum Barnea, a leading Israeli commentator, writing in Yedioth Ahronoth in May (in Hebrew), set out, unambiguously, the ‘deal’ behind Trump’s Middle East policy: In the wake of the US exit from JCPOA [which occurred on 8 May], Trump, Barnea wrote, will threaten a rain of ‘fire and fury’ onto Tehran … whilst Putin is expected to restrain Iran from attacking Israel using Syrian territory, thus leaving Netanyahu free to set new ‘rules of the game’ by which the Israel may attack and destroy Iranian forces anywhere in Syria (and not just in the border area, as earlier agreed) when it wishes, without fear of retaliation.This represented one level to the Netanyahu strategy: Iranian restraint, plus Russian acquiescence to coordinated Israeli air operations over Syria. “There is only one thing that isn’t clear [concerning this deal]”, a senior Israeli Defence official closest to Netanyahu, told Ben Caspit, “that is, who works for whom? Does Netanyahu work for Trump, or is President Trump at the service of Netanyahu ... From the outside … it looks like the two men are perfectly in sync. From the inside, this seems even more so: This kind of cooperation … sometimes makes it seem as if they are actually just one single, large office”.There has been, from the outset, a second level, too: This entire ‘inverted pyramid’ of Middle East engineering had, as its single point of departure, Mohammed bin Salman (MbS). It was Jared Kushner, the Washington Post reports, who “championed Mohammed as a reformer poised to usher the ultraconservative, oil-rich monarchy into modernity. Kushner privately argued for months, last year, that Mohammed would be key to crafting a Middle East peace plan, and that with the prince’s blessing, much of the Arab world would follow”. It was Kushner, the Post continued, “who pushed his father-in-law to make his first foreign trip as president to Riyadh, against objections from then-Secretary of State Rex Tillerson - and warnings from Defense Secretary Jim Mattis”. Well, now MbS has, in one form or another, been implicated in the Khashoggi murder.  Bruce Riedel of Brookings, a longtime Saudi observer and former senior CIA & US defence official, notes, “for the first time in 50 years, the kingdom has become a force for instability” (rather than stability in the region), and suggests that there is an element  of ‘buyer’s remorse’ now evident in parts of Washington.

'Treasurer' for 9/11 attackers returns to Morocco to 'hero's welcome' after release from prison - The man known as the ‘treasurer’ for the 9/11 terrorists has returned to his home country to a ‘hero’s welcome’, it has been reported.  Mounir el-Motassadeq is one of only two men jailed over the 9/11 terror attacks and has served less than 15 years in prison.He was deported from Germany back to his home country of Morocco after being released early. According to the Daily Mail, el-Motassadeq is now living in his family home in a suburb of Marrakech with his wife and children and has been greeted by well-wishers since his return.The newspaper said people had described the ‘jubilant’ reaction of friends, family and neighbours when the 44-year-old returned, with people coming from all over Morocco to see him.  El-Motassadeq, who was described during his trial as the ‘treasurer’ for the 9/11 hijackers, served less than 15 years in prison for his part in the attacks on the World Trade Center and Pentagon in September 2001.According to the Mail, El-Motassadeq grinned and said he was too busy to speak when the newspaper tracked him down in Marrakech, while his sister reportedly said ‘praise be to God’ when asked if she was happy about his release.

Saudis Launch Nuclear Research Reactor Amid Competition With Iran -  Saudi Crown Prince Muhammad bin Salman has launched the kingdom's first nuclear research reactor as part of a plan to diversify the kingdom's energy mix and acquire nuclear capabilities, state media reported. The reactor launched on November 5 is among 16 that Saudi officials, citing archrival Iran's continued development of nuclear energy, have said they plan to build over the next two decades at a cost of $80 billion. While Riyadh insists its goal is to diversify away from oil and gas, the main drivers of the kingdom's economy, the nuclear plans have raised concerns in the West about the possibility of a nuclear race between the two Middle Eastern rivals. Like Iran, Riyadh insists its only goal is the development of peaceful nuclear technologies. But Prince Muhammad warned in March that if Iran develops a nuclear weapon, Riyadh will do so as well. Since that time, the United States has pulled out of Iran's 2015 nuclear agreement with world powers, while Iran has said it will continue to honor the accord as long as it continues to reap economic benefits from the lifting of international sanctions in exchange for curbs on its nuclear activities under the deal. But top Iranian officials also have threatened to quit the agreement if U.S. sanctions on Iran's economy, which went fully into effect on November 5, squelch the benefit of its trade with the rest of the world. Riyadh expressed deep reservations about the Iranian nuclear deal and applauded U.S. President Donald Trump's move to abandon it and reimpose sanctions on Iran. The U.S. sanctions are aimed at forcing Iran to renegotiate the nuclear deal and curb its involvement in the wars in Syria and Yemen, where Tehran and Riyadh support opposing sides in the conflict. The Saudi reactor project launched on November 5 was among seven projects officially started by the crown prince during a visit to Riyadh's King Abdulaziz City for Science and Technology, the official Saudi Press Agency reported.

Civilians Trapped as Saudi Airstrikes and Warships Pound Yemeni City of Hodeidah  — Saudi airstrikes and warships continue to pound the Yemeni port city of Hodeidah on Monday, with escalating strikes coinciding with Saudi-backed ground forces advancing closer to the city, just three miles from the port itself, according to officials.This further limits the movement of aid into and out of the vital port, which before the Saudi offensive was the lone source of food imports for 80% of Yemen. Saudi forces control the supply lines, and promises of an aid corridor haven’t panned out so far.Heavy fighting and Saudi-led encroachment into the area, has aid groups warning that thousands of civilians left in Hodeidah are effectively trapped now. Everyone who lives between the airport and university is effectively trapped inside, and the fighting has almost reached the city’s main hospital, increasing the humanitarian crisis. The UN reiterated calls for urgent peace talks to prevent the fall of the city, and the famine threatening millions of lives expected to follow. The US called for an immediate ceasefire last week, and there is no sign the Saudi offensive is slowing down.

Battle rages in Yemen's vital port as showdown looms - Instead of bringing calm to the besieged Yemeni city, calls for a ceasefire in Hodeidah have brought some of the worst violence the vital port has yet faced in the three-year war. Baseem al-Janani, who lives in the city, said: “The clashes are absolutely crazy right now. I have a headache from the shelling and bombing in the east. People are trapped in their houses for hours at a time because of shrapnel and gunfire. But their houses are not safe either.” In the past few days, more than 100 airstrikes have hit civilian neighbourhoods – five times as many as in the whole of the first week of October, according to Save the Children staff in Hodeidah. One of their malnutrition clinics was attacked on Wednesday.Pro-government militias are trying to seize as much ground as possible before fighting is supposed to stop at the end of November, when it is hoped UN-sponsored peace talks will restart in Sweden. Saudi Arabia and United Arab Emirates coalition-backed troops are inching closer to the city’s Houthi rebel-held centre from their current stalemate positions in the southern suburbs and at the airport in a three-pronged attack. On Wednesday, an Emirati-trained group known as the Giants, with the help of Apache attack helicopters, secured a key road leading to Hodeidah’s port.  The Houthis, too, have stepped up operations, resorting to burning tyres to obscure gunships’ view of the city and laying an estimated hundreds of thousands of landmines in anticipation of the coalition attack, codenamed Operation Golden Victory. On Tuesday, fighters raided the city’s May 22 hospital – named for Yemen’s national day – and set up sniper positions on the building’s roof, Janani said.“We don’t have enough hospitals anyway. The patients and staff are now terrified they will be an airstrike target,” he said. Hodeidah is Yemen’s lifeline. Before the war broke out in 2015, it handled most imports in a country where 90% of food had to be imported. The port has been blockaded by the Saudi-led coalition for the past three years, a decision aid organisations say has been the main contributing factor to the famine that threatens to engulf half of Yemen’s 28 million population.

Saudi Arabia Stealing Yemen's Oil in Collaboration with Total - "63% of Yemen's crude production is being stolen by Saudi Arabia in cooperation with Mansour Hadi, the fugitive Yemeni president, and his mercenaries," Mohammad Abdolrahman Sharafeddin told FNA on Tuesday. "Saudi Arabia has set up an oil base in collaboration with the French Total company in the Southern parts of Kharkhir region near the Saudi border province of Najran and is exploiting oil from the wells in the region," he added. Sharafeddin said that Riyadh is purchasing arms and weapons with the petro dollars stolen from the Yemeni people and supplies them to its mercenaries to kill the Yemenis. Late in last year, another economic expert said Washington and Riyadh had bribed the former Yemeni government to refrain from oil drilling and exploration activities, adding that Yemen has more oil reserves than the entire Persian Gulf region. "Saudi Arabia has signed a secret agreement with the US to prevent Yemen from utilizing its oil reserves over the past 30 years," Hassan Ali al-Sanaeri told FNA."The scientific research and assessments conducted by international drilling companies show that Yemen's oil reserves are more than the combined reserves of all the Persian Gulf states," he added. Al-Sanaeri added that Yemen has abundant oil reserves in Ma'rib, al-Jawf, Shabwah and Hadhramaut regions. 

Iran's Powerful Hardline Cleric Threatens To Instantly Create $400 Oil By Seizing Tankers - Just ahead of U.S. sanctions on Iran set to snap back on Monday targeting primarily the energy, shipbuilding, shipping, and banking sectors, Iran's most prominent conservative cleric has announced that if oil exports are halted, Saudi tankers will be confiscated and Gulf countries attacked. Powerful Shia cleric Ayatollah Ahmad Alamolhoda is the Friday Prayer leader in Mashhad, considered Iran's spiritual capital and among the holiest places in Shia Islam, and sits on the government's "Assembly of Experts" but has no formal government role or decision-making ability. However, he's a powerful leader and chief spiritual force behind Iran's conservative faction who has long been at odds with President Hassan Rouhani. Iranian opposition sources report that Alamolhoda told his followers during his Friday prayer sermon: If we reach a point that our oil is not exported, the Strait of Hormuz will be mined. Saudi oil tankers will be seized and regional countries will be leveled with Iranian missiles.   The cleric is further reported to have declared that Iran has the power to "instantly" create conditions for $400 a barrel oil prices if it decides to act in the Persian Gulf. He said as reported in regional opposition media:  If Iran decides, a single drop of this region's oil will not be exported and in 90 minutes all Persian Gulf countries will be destroyed. The UAE and Saudi Arabia will be destroyed in 60 minutes. After 90 minutes the U.S. will have nothing in this country. And we haven't even started with Israel. Beware of the day we go after Israel, too. That's why they want us to round up our missiles.

Iran starts mass-producing locally designed Kowsar fighter jet - Iran has started mass-producing its locally designed Kowsar fighter plane, state television reported. "Soon the needed number of this plane will be produced and put at the service of the Air Force," Defence Minister Amir Hatami said on Saturday at a ceremony launching the plane's production, which was shown on television. Iran unveiled the Kowsar domestic fighter jet in August with President Hassan Rouhani saying Tehran's military strength was only designed to deter enemies and aimed at creating "lasting peace". State media said the new jet had "advanced avionics" and multipurpose radar, and it was "100-percent indigenously made" for the first time. Footage of the Kowsar's test flights was circulated by various official media. But live footage of the plane taxiing along a runway at the defence show was cut before it took off. Iran unveiled the jet at a defence show in the capital Tehran in August [Iranian Presidency/AFP] At its inauguration in August, Hatami said the aircraft programme was motivated by memories of air raids Iran suffered during its eight-year war with Iraq in the 1980s, and by repeated threats from Israel and the United States that "all options are on the table" in dealing with Iran. "We have learned in the [Iran-Iraq] war that we cannot rely on anyone but ourselves. Our resources are limited and we are committed to establishing security at a minimum cost," he said in a televised interview. The US has sold hundreds of millions of dollars of weapons to Iran's regional rivals, but has demanded that Tehran curb its defence programmes, and is in the process of reimposing crippling sanctions in a bid to force its capitulation.

Operation 'Enduring Defeat'? DoD Admits US May Need To "Stay In Iraq For Decades" -- Despite reports that the Islamic State terrorist group has lost 99 percent of its territory and shifted to insurgent tactics in Iraq and Syria, a recent report said an enduring defeatof the organization could take “years, if not decades.”  This, according to Department of Defense information provided to investigators with the DoD Inspector General, is in large part due to what is still needed to make Iraqi security forces “self-reliant.”“Systemic weaknesses remain, many of which are the same deficiencies that enabled the rise of ISIS in 2014,” according to the quarterly IG report on Operation Inherent Resolve, the counter-ISIS operation that spans Iraq and Syria. Though top military officials recognized the gaps in capabilities among the Iraqi forces and that a “resurgence” of ISIS in the region is likely without sustained support and attention, congressional support for the fight against ISIS has decreased in the new fiscal year and an estimated $230 million in U.S. stabilization funds earmarked for Syria has been shifted to other countries. The quarterly report on OIR noted that while security in cities such as the capital Baghdad has improved to such a degree that security forces have removed about 300 police and security checkpoints and 1,000 barriers that divided and walled off the city. As violence in the cities has decreased, ISIS mass casualty attacks and killings have increased in the rural areas where ISF has less control. Ninety-two percent of the reported 285 violent attacks occurred in the crescent of provinces north of Baghdad, including Anbar, Ninewa, Salah ad Din, Kirkuk and Diyala. ISIS fighters have killed three to four tribal leaders and village elders per week over the past six months, according to reports. Iraqis still lack the ability to conduct basic intelligence gathering and have no qualified drone pilots, instead relying almost entirely on coalition forces to gather, analyze and disseminate intelligence. “In effect, this means that the Iraqi senior leadership is dependent on the Coalition for information about their own military’s operations,” according to the report. “This strategy risks an enduring coalition presence in Iraq for years to come.”

US 'war on terror' has killed over half a million people- study - Hundreds of thousands of people in Afghanistan, Iraq and Pakistan have been killed due to the so-called "war on terror" launched by the United States in the wake of the September 11, 2001 attack, according to a new study.The report, which was published on Saturday by the Brown University's Watson Institute for International and Public Affairs, put the death toll between 480,000 and 507,000.The toll includes civilians, armed fighters, local police and security forces, as well as US and allied troops.The report states that between 182,272 and 204,575 civilians have been killed in Iraq; 38,480 in Afghanistan; and 23,372 in Pakistan. Nearly 7,000 US troops were killed in Iraq and Afghanistan in the same period. IThe paper, however, acknowledged that the number of people killed is an "undercount" due to limitations in reporting and "great uncertainty in any count of killing in war".  "We may never know the total direct death toll in these wars," wrote Nera Crawford, the author of the report titled "Human Cost of the Post-9/11 Wars: Lethality and the Need for Transparency". "For example, tens of thousands of civilians may have died in retaking Mosul and other cities from ISIS [also known as ISIL] but their bodies have likely not been recovered."

In Shocking Interview, Top Commander Admits US Cannot Win War in Afghanistan— Historians of the now seventeen-year old U.S. war in Afghanistan will take note of this past week when the newly-appointed American general in charge of US and NATO operations in the country made a bombshell, historic admission. He conceded that the United States cannot win in Afghanistan.Speaking to NBC News last week, Gen. Austin Scott Miller made his first public statements after taking charge of American operations, and shocked with his frank assessment that that the Afghan war cannot be won militarily and peace will only be achieved through direct engagement and negotiations with the Taliban — the very ‘terror’ group which US forces sought to defeat when it first invaded in 2001.“This is not going to be won militarily,” Gen. Miller said. “This is going to a political solution.”Miller explained to NBC: My assessment is the Taliban also realizes they cannot win militarily. So if you realize you can’t win militarily at some point, fighting is just, people start asking why. So you do not necessarily wait us out, but I think now is the time to start working through the political piece of this conflict. He gave the interview from the Resolute Support headquarters building in Kabul. “We are more in an offensive mindset and don’t wait for the Taliban to come and hit [us],” he said. “So that was an adjustment that we made early on. We needed to because of the amount of casualties that were being absorbed.” Starting last summer it was revealed that US State Department officials began meeting with Taliban leaders in Qatar to discuss local and regional ceasefires and an end to the war. It was reported at the time that the request of the Taliban, the US-backed Afghan government was not invited; however, there doesn’t appear to have been any significant fruit out of the talks as the Taliban now controls more territory than ever before in recent years. Such controversial and shaky negotiations come as in total the United States has spent well over $840 billion fighting the Taliban insurgency while also paying for relief and reconstruction in a seventeen-year long war that has become more expensive, in current dollars, than the Marshall Plan, which was the reconstruction effort to rebuild Europe after World War II.

White Phosphorus - America's Weapon of Choice? -- Since the beginning of the Syrian civil war in 2011, Washington has made it its aim to vilify the Assad government by repeatedly informing the world that the pro-regime side in this conflict has used chemical weapons against its own civilian population.  Recent news from Syria would suggest that the United States has behaved in a manner that flaunts international conventions with the use of certain banned weapons.According to the Syrian Arab News Agency or SANA, we find this recent news:  While you might say or think that this is just pro-Assad propaganda, in fact, it is little different than the American allegations that the Assad government is using chemical weapons.This news was followed by this update in which Russia has requested an investigation into the use of internationally banned weapons: According to Protocol III of the Convention on the Prohibition or Restrictions on the Use of Certain Conventional Weapons Which May be Deemed to be Excessively Injurious or That Have Indiscriminate Effects better known as the Convention on Certain Weapons (CCW), the use of white phosphorus is banned as part of the ban on incendiary weapons against either permanent or temporary civilian population concentrations:  Incendiary weapons are defined as any weapon or munition which is primarily designed to set fire to objects or to cause burn injuries to persons.There are 125 high contracting parties to the entire Convention on Certain Weapons with an additional four signatories.  The aforementioned Protocol III has 115 high contracting parties with the following nations that are part of the 125 high contracting parties not contracting under Protocol III: Burundi, Cameroon, Cote D'Ivoire, Dominican Republic, Israel, Monaco, Morocco, the Republic of Korea, Turkey and Turkmenistan.  According to the Federation of American Scientists Fact Sheet on white phosphorus, we find the following: Not only do U.S. forces use white phosphorus, according to research by several human rights organizations, Israel (a non-signatory to Protocol III) appears to have used white phosphorus in Operation Cast Lead against densely populated regions of Gaza between December 2008 and January 2009. 

Israel to demolish Palestinian homes, school in West Bank -  Israeli occupation authorities distributed demolition orders for Palestinian homes and a primary school in the village of Musafer Yatta to the south of the occupied West Bank city of Hebron, Quds Press reported yesterday.National Committee to Resist the Wall and Settlements in southern Hebron, Ratib Al-Jbour, told Quds Press that the Israeli occupation forces handed the demolition and stop-work orders to the Palestinians in the areas of Al-Mafqara, Saroura and Khelet Al-Dabee in Musafer Yatta.Al-Jbour said that the Israeli occupation authorities planned to demolish the Palestinian facilities under claims that they were built without the necessary licenses.  He also said that the Israeli occupation also included Khelet Al-Dabee Primary School, which was inaugurated two weeks ago, in the demolitions.The Palestinian activist also noted that Israeli occupation forces fixed the school’s demolition order at a wall after the headmaster and teachers refused to accept it. Palestinians have one week to empty their properties, Al-Jbour said.However, this is only half of the story, as violent Jewish settlers are always on the lookout for Palestinian kids. These settlers, who “also set up their own checkpoints”, engage in regular violence as well, by “throwing stones” at children, or “physically pushing (Palestinian children) around.” “UNICEF’s protective presence teams have reported that their volunteers have been subjected to physical attacks, harassment, arrest and detention, and death threats,” according to the same UN report.

‘A cruel choice’- Why Israel targets Palestinian schools - Several Palestinian students, along with teachers and officials, were wounded in the Israeli army attack on a school south of Nablus in the West Bank on 15 October. The students of Al- Sawiya Al-Lebban Mixed School were challenging an Israeli military order to shut down their school based on the ever-versatile accusation of the school being a “site of popular terror and rioting”.“Popular terror” is an Israeli army code for protests. The students, of course, have every right to protest, not just the Israeli military occupation but also the encroaching colonisation of the settlements of Alie and Ma’ale Levona. These two illegal Jewish settlements have unlawfully confiscated thousands of dunams of land belonging to the villages of As-Sawiya and Al-Lebban.“The Israeli citizens” that the occupation army is set to protect by shutting down the school, are, in fact, the very armed Jewish settlers who have been terrorising this West Bank region for years. According to a 2016 study commissioned by the United Nations, at least 2,500 Palestinian students from 35 West Bank communities must cross through Israeli military checkpoints to reach their schools every day. About half of these students have reported army harassment and violence for merely attempting to get to their classes or back home.

Watch the Leaked Documentary the Israel Lobby Didn’t Want You to See — A leaked Al Jazeera documentary detailing the tactics of the Israeli lobby in the United States and elsewhere has revealed that pro-Israel groups regularly invented smears, including false accusations of sexual assault, to discredit professors and students on U.S. university campuses that support equal rights for Palestinians and the Boycott, Divest and Sanctions (BDS) movement. BDS is a non-violent movement that seeks to use economic pressure on Israel’s government so that it complies with international law, ends the military occupation of the West Bank, and halts the decades-long blockade of the Gaza Strip. In the third episode of the Al Jazeera documentary “The Lobby”, which was leaked online by the website Electronic Intifada, focus is given to the efforts of pro-Israel advocacy groups on U.S. universities, particularly the efforts of these groups to use aggressive information warfare tactics to discredit and smear activists. The documentary further reveals that these smear campaigns are incredibly well-funded – to the tune of millions of dollars – and involve coordination with the Israeli government’s Ministry of Strategic Affairs. In one instance, Bill Mullen – a professor of American Studies at Purdue University and a well-known supporter of Palestinian rights and BDS – was accused of sexual harassment, supporting terrorism and other misdeeds by nearly two dozen anonymous web pages purporting to have been created by Mullen’s former students in 2016. Mullen told Al Jazeera that within 48 hours of learning of the smear sites, he discovered that they had been created within moments of each other and appeared to be operated by the same individual or group. After the websites used the name of his daughter and were anonymously sent to his wife, Mullen told Al Jazeera that “these people will do anything, they’re capable of doing anything” to discredit pro-Palestinian solidarity activists. The documentary further revealed that this tactic is promoted by pro-Israel campus organizations including the Israel on Campus Coalition (ICC). For instance, ICC executive director Jacob Baime discussed how “the anti-Israel people” are targeted by groups like the ICC who put “up some anonymous websites” and targeted Facebook ads that make false sexual harassment claims and other personal attacks as part of an effort to discredit them and their activism.

US, Turkey risk direct military clash as they escalate war in Syria -  As it pursues its war with US-backed Kurdish-nationalist organizations, the Turkish government is threatening an outright military occupation of large parts of Syria that could provoke war with Syria and a direct clash with US forces.  On Tuesday, Turkish President Recep Tayyip Erdogan denounced joint patrols by US forces and Kurdish-led militias as “unacceptable.” Speaking to reporters in Ankara, he said: “Not only can we not accept (the joint patrols), such a development will cause serious problems at the border.” This came after Turkey shelled positions of the US-backed Syrian Democratic Forces (SDF) in the Zor Magar region east of the Euphrates River and the town of Tal Abyad starting on October 28, killing at least 10 Kurdish fighters. Two days earlier, Erdogan had delivered a “final warning” to Syrian Kurdish fighters to retreat. He also warned that Turkey’s next target would be positions of the People’s Protection Units (YPG, a Kurdish force that is the key component of the SDF) east of the Euphrates. On October 30, as shelling continued, Erdogan stepped up threats to invade Syria to attack the US-backed Kurdish forces: “We are going to destroy the terrorist organization… preparations and plans have been completed. We’ve made our plans and programs, and initiated it in the previous days. We will come down on the terrorist organization’s neck with more extensive, effective operations. We could arrive suddenly one night.” This provoked an angry warning from Washington on October 31. State Department deputy spokesman Robert Palladino said: “Unilateral military strikes into northwest Syria by any party, particularly as American personnel may be present or in the vicinity, are of great concern to us … Coordination and consultation between the United States and Turkey on issues of security concern is a better approach.”  Ankara, however, is determined to crush the YPG, which it views as an affiliate of the Kurdistan Workers’ Party (PKK), the Turkish Kurdish separatist movement against which it has waged a bloody counter insurgency campaign for more than 30 years. Ankara also fears Kurdish autonomy in Syria, worried it will provoke demands for Kurdish autonomy in eastern Turkey.

Turkey Vows To Make Sea Bandits Drilling Gas Off Cyprus Pay Like Terrorists In Syria Did -  Ankara will not allow any “sea bandits” to roam free and tap the disputed natural gas reserves off Cyprus, Turkey’s president has vowed, while commissioning a new warship to challenge competitors militarily, should the need arise.“We will not accept attempts to seize natural resources in the Eastern Mediterranean through the exclusion of Turkey and the Turkish Republic of Northern Cyprus (TRNC),” Erdogan said Sunday, according to Daily Sabah. While claiming that Turkey has no ambitions to annex any “territories,” Ankara promised to protect “the rights of our country and of our brothers."Those who thought that they could take steps in the Eastern Mediterranean or the Aegean despite [this] have begun to understand the magnitude of their mistake. We will not allow bandits in the seas to roam free just like we made the terrorists in Syria pay,” Erdogan said at a ceremony transferring the TCG Burgazada corvette to the Turkish Navy.The exploration of hydrocarbon resources off the coast of the Republic of Cyprus has become a sensitive issue for the international community, ever since the first gas deposit discoveries were made off the coast in 2011. While the Republic of Cyprus belongs to the EU community and is recognized by the UN, TRNC, the northern third of the island, has been occupied by Turkey since 1974. As a result, Ankara continues to claim jurisdiction for offshore research in the East Mediterranean, an area thought to be rich with natural resources. The region has recently witnessed an escalation in tensions, after the Turkish Navy intercepted a Greek frigate which tried to interfere with a Turkish research vessel’s seabed exploration on October 18. The incident prompted a diplomatic row with Greece, which traditionally supports the ethnically Greek government of the Republic of Cyprus. While Greece denied interfering with the Turkish research vessel, Ankara has cautioned its neighbor and longtime opponent not to stir trouble in the region.

China October crude imports rise to all-time high on record teapot buying (Reuters) - China’s crude oil imports rose to all-time high on a daily basis in October, supported by record demand from private refiners and healthy margins, customs data showed Thursday. Imports in October surged 32 percent from a year earlier to 40.80 million tonnes, or 9.61 million barrels per day (bpd), data from the General Administration of Customs showed, climbing from 9.05 million bpd in September. The previous daily record of 9.60 million bpd was touched in April 2018. The imports rose 8.1 percent for the first 10 months of the year from the same period last year to 377.16 million tonnes, or 9.06 million bpd, on track for another record year of shipments. The record volumes were a result of strong imports from China’s private refiners, often known as “teapots”. These oil processors bought 8.22 million tonnes of crude during the month, the highest monthly amount ever since Beijing began issuing import quotas to them in 2015, according to Emma Li, an analyst with Refinitiv Oil Research and Forecasts. “Independents bought record amounts of crude in October as they ramped up utilization rates to meet pent-up demand for gasoline and diesel,” Li said. “Many teapots also started stockpiling for January and February next year in a rush to use up their quota this year.”  China’s overall import volumes for October were in line with Refinitiv Oil Forecast’s expectations of 40.95 million tonnes. The imports might have been higher except CNOOC Ltd’s Huizhou oil plant started a two-month long turnaround in October, curbing purchases from one of China’s largest refineries.  Total natural gas imports in October via both pipeline and as liquefied natural gas (LNG) were at 7.3 million tonnes, up 25.6 percent from the same month last year, but easing from 7.62 million tonnes in September.

The Clock Is Ticking For China's Oil Independence - China is pulling out all stops in order to increase its oil and gas production, but at the end of the day it will likely not be enough to stop the world’s second largest economy from becoming over reliant on geopolitically charged crude oil and natural gas imports. On Monday, state-run Chinese oil majors CNPC and Sinopec, also Asia’s largest refinery, said they were speeding up drilling and exploration from major tight oil and shale gas formations in the country’s western regions. CNPC also said that new exploration in shale gas, tight oil and tight gas will lead to growth in production for the country’s largest oil and gas producer.The company added that the drilling cycle at the Mahu field in Xinjiang, one of CNPC’s largest findings in recent years, fell around 40 percent the previous year. A Reuters report said this implies that oil wells are being completed and produced at a faster rate. China’s ambitions to develop more of its own oil and gas reserves is a race against a ticking clock. The middle kingdom has already bypassed the U.S. to become the world’s top oil importer, with much of those oil imports having geopolitical strings attached. China is the largest importer of Iranian oil, and that resource is being jeopardized by fresh U.S. sanctions against Iran’s oil sector that went onto effect on November 5. China is also reliant on both Russia and Saudi Arabian crude and just recently pared back crude imports from the U.S. amid ongoing trade tensions between Washington and Beijing. China’s dilemma in its gas sector is just as perplexing. The country bypassed South Korea late last year to become the world’s second largest liquefied natural gas (LNG) importer, with projection that it will even pass Japan as the top LNG importer at the beginning to mid part of the next decade, a development unimaginable just two years ago. China's insatiable gas demand comes as the government mandates that gas, amid record air pollution levels, particularly in its major urban centers, make up at least 10 percent of its energy mix needed for power generation by 2020, with more earmarks set for 2030. Yet, China's growing oil dependency will create the most problems for Beijing as it is forced to continue to rely on the U.S. to safeguard global shipping lanes.   What China needs to offset both its growing oil and gas dependency is more domestic production, but therein lies the problem. China's oil fields are maturing and it’s unlikely that significant discoveries can be found to replace depletion reserves. Around five or six years ago, Beijing pegged its hope on emulating the US shale oil and gas success story, even cutting deals with American firms to help develop China's shell formations. However, unlike most US shale formations, China's are in difficult reach, rugged terrain, indicating that shale oil and gas will not offer the solution that Beijing energy planners needs, at least in the foreseeable future.