oil prices see largest drop in ​9 months on demand concerns, glut fears; US oil production at a record high

oil prices were down every day the past week in the largest weekly price drop since ​early ​February, and ended more than 17% below the 4 year high they set ​just ​one month ago...after falling 2.4% to $67.59 a barrel in a global market selloff last week, prices for US oil contract​s for December delivery fell 55 cents to $67.04 a barrel on Monday, as Russia signaled its oil output would remain high and concerns over the global trade slowdown deepened...oil prices then fell more than 1% on Tuesday, on rising global oil output and on concern that global economic growth and demand for fuel would fall ​due to the U.S.-China trade war, closing down 86 cents at $66.18 a barrel...Wednesday saw another 87 cent drop to $65.31 a barrel, as further signs of rising global supply emerged with US and Russian output hitting records, as oil prices finished October with their largest monthly drop in more than 2 years...US crude prices then tumbled $1.62, or 2.5%, to a 7-month low of $63.69 a barrel, as surging output from the US, Russia, and OPEC was met by slowing demand from emerging market economies hit by the US-China trade war...oil prices fell almost ​another percent again on Friday, closing at $63.14 a barrel, after the US said it would temporarily allow eight allies to buy crude from Iran, alleviating fears of a sanction-related supply crunch... the December US oil contract thus ​registered a weekly drop of 6.6%, as US oil prices suffered their fourth straight weekly loss, while the contract for January Brent, the international benchmark, settled at $72.83 a barrel ​with a loss of 6.2%​ for the week​..

on the other hand, natural gas prices for December rose 5.9 cents to $3.284 per mmBTU this week, whipsawed midweek by changing 8 to 14 day forecasts from the Climate Prediction Center, and boosted on Friday by the report of a smaller than expected injection of natural gas into storage...this week's natural gas storage report from the EIA for the week ending October 26th indicated that natural gas in storage in the US rose by 48 billion cubic feet to 3,143 billion cubic feet during that week, which left our gas supplies 623 billion cubic feet, or 16.5% below the 3,766 billion cubic feet that were in storage on October 27th of last year, and 638 billion cubic feet, or 16.9% below the five-year average of 3,781 billion cubic feet of natural gas that are typically in storage after the fourth week of October....this week's 48 billion cubic feet increase in natural gas supplies was below expectations of an inventory increase in the 51 to 53 billion cubic foot range, and was also below the average of 62 billion cubic feet of natural gas that have been added to storage during the fourth week of October in recent years, the 13th average or below average inventory increase over the past seventeen weeks...natural gas storage facilities in the Midwest saw a 22 billion cubic feet increase over the week, which reduced their supply deficit to 11.6% below normal, but natural gas supplies in the East only increased by 1 billion cubic feet and saw their supplies deficit rise to 9.5% below normal for this time of year...on the other hand, the South Central region saw a 26 billion cubic feet increase in their supplies, as their natural gas storage deficit decreased to 24.9% below their five-year average for the 4th week in October...meanwhile, while the natural gas pipeline rupture in Canada has been repaired, flows south had not resumed as of this report; as a result, only 3 billion cubic feet were added to supplies in the Mountain region, where their deficit from normal fell to 17.4%, while there no change of gas in storage in the Pacific region, where the natural gas supply deficit rose to 24.9% below normal for this time of year.... 

the primary reason for this week's much smaller than average addition to storage was the outbreak of cold weather in the populated eastern half of the country that we saw during the period; natural gas production continued at near record levels...this can be clearly seen in the map of weekly average temperature abnormalities below taken from the EIA's natural gas storage dashboard:

again, this map came from the EIA's natural gas storage dashboard, an EIA website with dozens of interactive graphics tracking various facets and factors influencing US natural gas supplies, which is updated with the most recent data on Thursday of each week...the above map shows how much the temperatures in each geographical area of the 48 states varied from normal during the week ending October 25th, with those areas that were cooler than normal in a shade of blue, while those areas that were warmer than normal are shown in a shade of tan or brown....from the legend underneath this map, we can see that most of the eastern US saw temperatures below normal during the cited week, with a broad swath running from Texas northeast through Maine showing temperatures 5 to 9 degrees below normal...for the fourth week in October, below normal would mean that most of that area, probably with the exception of southern Texas, saw heating demand closer to what one would expect in early to mid November, and hence less natural gas than normal was left to be added to winter supplies... 

however, temperatures ​have since ​moderated during the week through November 1st, which you can see if you go to the natural gas storage dashboard and run the ​daily ​animation that goes with that map...all three of those regions saw a mix of days both above and below normal, with average temperatures thus a few degrees warmer than they were during this reporting week...thus we'd expect that this coming week's natural gas storage report will show additions of gas ​to storage ​much closer to the norm, likely in a range from 55 to 60 billion cubic feet...after that, the forecast is for temperatures to turn colder, so further additions will be minimal if at all..

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration for the week ending October 26th indicated yet another addition to our commercial crude supplies for a sixth week in a row, despite a decrease in our oil imports, an increase in our oil exports, and a modest pickup in refining...our imports of crude oil fell by an average of 334,000 barrels per day to an average of 7,344,000 barrels per day, after rising an average of 63,000 barrels per day the prior week, while our exports of crude oil rose by an average of 352,000 barrels per day to an average of 2,485,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 4,859,000 barrels of per day during the week ending October 26th, 639,000 fewer 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 300,000 barrels per day higher at 11,200,000 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 16,059,000 barrels per day during this reporting week... 

meanwhile, US oil refineries were using 16,417,000 barrels of crude per day during the week ending October 26th, 149,000 barrels per day more than the amount of oil they used during the prior week, while over the same period a net of 239,000 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 597,000 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 (+597,000) 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"...once again, with an "unaccounted for crude" figure that large, one or more of this week's oil metrics must 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 slipped to an average of 7,509,000 barrels per day, now 2.5% less than the 7,699,000 barrel per day average that we were importing over the same four-week period last year....the net 239,000 barrel per day increase in our total crude inventories included a 460,000 barrel per day increase in our commercially available stocks of crude oil, which was partially offset by a 220,000 barrel per day decrease in the amount of oil in our Strategic Petroleum Reserve, likely because of a sale of 11 million barrels from those reserves to Exxon et al that closed eight weeks ago....this week's crude oil production was reported up by 300,000 barrels per day to 11,200,000 barrels per day due to a rounded 300,000 barrels per day rebound to 10,700,000 barrels per day output from wells in the lower 48 states after Hurricane Michael, while a 15,000 barrels per day increase to 488,000 barrels per day in oil output from Alaska was not enough to impact the reported national total, which is now being rounded to the nearest 100,000 barrels per day....last year's US crude oil production for the week ending October 27th was at 9,553,000 barrels per day, so this week's rounded oil production figure was 17.2% above that of a year ago, and 32.9% 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...

while we report the preliminary US oil production estimates that are released weekly, the EIA also releases confirmed monthly oil production figures a few months later, ​after they ​have ​collect​ed​ the accurate production reports that aren't available on a weekly basis....since this week's release of that monthly report shows a significant divergence from the ​weekly ​figures we've been reporting, we'll include a graphic showing both, so we can see what that divergence looks like...

the above graph, from this week's OilPrice Intelligence Report, shows the history of confirmed oil production data monthly from January 2016 to August 2018 in blue, and then the weekly estimates of US oil production up until the current week in yellow after that period, with both metrics in thousands of barrels per day....as we've pointed out on several previous occasions, the weekly oil data from the EIA that we cover each week is preliminary, and it is typically more than 2 months before the final confirmed figures, published monthly, are released...we follow the weekly data because it's what the oil traders follow, and hence it moves oil prices and ultimately the decisions on the part of exploitation companies to start drilling for oil...however, the confirmed oil production figures for August were released this week and showed our crude production at a much higher than expected 11,346,000 barrels per day​ average​ during that month, up from 10,964,000 barrels per day in July...the weekly production estimates for August, on the other hand, had ranged from 10,800​,000​ barrels per day to 11,000​,000​ barrels per day, and thus averaged more than 400,000 barrels per day lower than the confirmed figures...if the reason for the inaccuracies in the weekly report persisted to the current week, and we have no reason to believe they haven't, the 400,000 barrels per day error in the weekly oil production figures would go a long way toward explaining the large "unaccounted for crude" figures we've been seeing in recent weeks...

meanwhile, ​this week's report indicates that ​US oil refineries were operating at 89.4% of their capacity in using 16,417,000 barrels of crude per day during the week ending October 26th, up from 89.2% of capacity the prior week, a fairly normal utilization rate for during the fall refinery maintenance season....the 16,417,000 barrels per day of oil that were refined this week were once again at a seasonal high, for the 20th out of the past 22 weeks, 2.5% higher than the 16,015,000 barrels of crude per day that were processed during the week ending October 27th, 2017, when US refineries were operating at 88.1% of capacity...

with the increase in the amount of oil being refined this week, gasoline output from our refineries was also higher, increasing by 336,000 barrels per day to 10,364,000 barrels per day during the week ending October 26th, after our refineries' gasoline output had decreased by 402,000 barrels per day during the week ending October 19th...with that rebound in our gasoline output, our gasoline production during the week was 1.7% higher than the 10,187,000 barrels of gasoline that were being produced daily during the same week last year...meanwhile, our refineries' production of distillate fuels (diesel fuel and heat oil) increased by 23,000 barrels per day to 4,983,000 barrels per day, after that output had increased by 145,000 barrels per day the prior week....however, this week's distillates production was still 1.1% lower than the 5,036,000 barrels of distillates per day that were being produced during the week ending October 27th 2017.... 

even with the increase in our gasoline production, our supply of gasoline in storage at the end of the week fell by 3,161,000 barrels to 226,169,000 barrels by October 26th, the 21st decrease in the past 36 weeks, after our gasoline supplies had dropped by 4,826,000 barrels the prior week....our supplies fell even as the amount of gasoline supplied to US markets fell by 62,000 barrels per day to 9,262,000 barrels per day, and as our imports of gasoline rose by 32,000 barrels per day to 363,000 barrels per day, while our exports of gasoline rose by 43,000 barrels per day to 1,012,000 barrels per day...but even after two big decreases, our gasoline inventories are still at a seasonal high, 6.3% higher than last October 27th's level of 212,849,000 barrels, and roughly 7.1% above the 10 year average of our gasoline supplies for this time of the year...

meanwhile, even with our distillates production a bit higher higher, our supplies of distillate fuels also fell again, decreasing by 4,052,000 barrels to 126,322,000 barrels during the week ending October 26th, their sixth straight decrease after 8 straight weeks of increases, and the largest drop since March 9th...our distillates supplies fell by much more than last week's decrease because the amount of distillates supplied to US markets, a proxy for our domestic demand, increased by 420,000 barrels per day to 4,426,000 barrels per day, while our exports of distillates fell by 163,000 barrels per day to 1,277,000 barrels per day, and while our imports of distillates fell by 22,000 barrels per day to 141,000 barrels per day....after this week's decrease, our distillate supplies ended the week 2.0% below the 128,921,000 barrels that we had stored on October 27th, 2017, and remained roughly 6.7% below the 10 year average of distillates stocks for this time of the year...     

finally, despite higher oil exports​,​ lower ​oil ​imports​,​ and an increase in oil being refined, our commercial supplies of crude oil increased for the 6th week in a row and for the 22nd time in 2018, rising by 3,217,000 barrels during the week, from 422,787,000 barrels on October 19th to 426,004,000 barrels on October 26th to ...that increase means that our crude oil inventories continue to be more than 2% above the five-year average of crude oil supplies for this time of year, and roughly 22.4% above the 10 year average of crude oil stocks for the last weekend in October, 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 October 26th were still 6.4% below the 454,906,000 barrels of oil we had stored on October 27th of 2017, 11.7% below the 482,578,000 barrels of oil that we had in storage on October 28th of 2016, and 5.5% below the 450,841,000 barrels of oil we had in storage on October 30th of 2015...      

This Week's Rig Count

US drilling rig activity slowed for the second time in 6 weeks during the week ending November 2nd, but just by a bit....Baker Hughes reported that the total count of rotary rigs running in the US decreased by 1 rig to 1067 rigs over the week ending on Friday, which was still 169 more rigs than the 898 rigs that were in use as of the November 3rd 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 decreased by 1 rig to 874 rigs this week, which was still 145 more oil rigs than were running a year ago, while it was well below the recent high of 1609 rigs that were drilling for oil on October 10, 2014...at the same time, the number of drilling rigs targeting natural gas formations remained unchanged at 193 rigs, which was still 24 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...in addition, a year ago we had a rig categorized as "miscellaneous" deployed, while there are no such "miscellaneous" rigs drilling at this time this year...

offshore drilling in the Gulf of Mexico was unchanged at 18 rigs this week, which was also unchanged from the 18 Gulf of Mexico rigs active a year ago...meanwhile, the only rig that had  been drilling offshore from Alaska was shut down this week, so the total national offshore count is now down to 18 rigs, also the same as a year ago...

the count of active horizontal drilling rigs was up by 2 rigs to 929 horizontal rigs this week, which was also 165 more horizontal rigs than the 764 horizontal rigs that were in use in the US on November 3rd of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...meanwhile, the directional rig count was unchanged at 73 directional rigs this week, which ​is ​the same number of directional rigs that were in use during the same week of last year....on the other hand, the vertical rig count was down by 3 rigs to 65 vertical rigs this week, which was still up from the 61 vertical rigs that were operating on November 3rd 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 2nd, the second column shows the change in the number of working rigs between last week's count (October 26th) and this week's (November 2nd) count, the third column shows last week's October 26th 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 3rd of November, 2017...        

this week's modest 2 rig decrease in the Permian masks significant other changes within its component basins; while just a single rig was shut down in Texas Oil District 8, which would correspond to the core Delaware basin, there were 4 rigs shut down in Texas Oil District 8A, which would correspond to the central platform and Midland Basins; at the same time, 2 rigs were added in Texas Oil District 7C, which could be Midland rigs or southern shelf, and another rig was added in Texas Oil District 7B, which could also be a Midland rig, or outside the basin altogether (Texas oil districts are political boundaries and hence don't correspond directly with the geological basins underlying them)...based on that, our best guess, without digging through the individual well logs in the Rig Count Pivot Table (xls), is that Texas shed a net of 3 Permian rigs, while New Mexico picked one up....natural gas rigs, meanwhile, remained unchanged despite the loss of two in the Marcellus (one each in PA and WV) and the natural gas rig that was shut down in Oklahoma's Arkoma Woodford because a natural gas rig was added to those working Ohio's Utica, and two others were set up in basins not tracked separately by Baker Hughes...

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DOE comments show little support for FirstEnergy bailout request - Most stakeholders weighing in on FirstEnergy Solutions Corp.’s plea in March for federal intervention to support its financially struggling coal-fired and nuclear power plants in the PJM Interconnection were opposed to the request, according to documents obtained from the U.S. Department of Energy.Out of 152 responses on the request the DOE received through May 24, the vast majority urged the department not to grant FirstEnergy Solutions’, or FES’s, application, according to documents S&P Global Market Intelligence received through a Freedom of Information Act request. The DOE has yet to announce a decision on the company’s petition or other agency efforts to prop up vulnerable coal and nuclear units.The DOE did not open a formal comment period on the request but said in April that it would accept stakeholder input on the agency’s ability to declare an emergency under FPA 202(c), including in response to the FES application. The DOE has invoked its 202(c) authority sparingly in the past, mostly in response to temporary energy shortfalls following hurricanes and other emergency events.As a result, several gas and power industry groups said the statute should not be used to provide the market relief FES sought in its 202(c) application. More fundamentally, most stakeholders backed PJM’s assertion that no grid emergency existed in the region to justify subsidizing FES’s at-risk plants. “The proposed actions would tilt the table and not only undermine, but potentially destroy, new private competitive investment, and perhaps more importantly, substantially add to the cost of power to consumers in the region,” independent power producer Calpine Corp. said in comments to the DOE.

U.S. OKs wider startup of Enbridge Ohio-Michigan NEXUS natgas pipe (Reuters) - U.S. energy regulators on Friday approved part of 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 Clyde compressor station in Sandusky County, Ohio, into service, but not the Wadsworth compressor in Medina County, Ohio. FERC said once NEXUS demonstrates restoration progress at Wadsworth, it would reconsider the company’s request to put that facility in service. Enbridge sought FERC permission to put both compressors into service on Oct. 19. NEXUS is one of several gas pipelines designed to connect growing output in the Marcellus and Utica shale basins in Pennsylvania, West Virginia and Ohio with customers in other parts of the United States and Canada. 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 Ontario in Canada. NEXUS is a partnership between Enbridge and Michigan energy company DTE Energy Inc. Separately, Enbridge said it put part of its $200 million Texas Eastern Appalachian Lease (TEAL) gas pipeline project into service earlier in October. TEAL is an expansion of Enbridge’s Texas Eastern system designed to deliver 0.95 bcfd to NEXUS. When it started construction of NEXUS in late 2017, Enbridge estimated it would be able to complete TEAL and NEXUS 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 remove 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 81.1 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.

Chesapeake completes $2B Utica asset sale; closes quarter with profit - The company that pioneered Utica Shale drilling in Ohio has completed the sale of its holdings in the state. Chesapeake Energy announced Tuesday morning during a conference call with investors it closed its $2 billion sale to Encino Acquisition Partners on Monday. EAP is a partnership between the Canada Pension Plan Investment Board and Encino Energy, a private oil and gas company based in Houston. When announcing the sale in July, the companies said the deal included 900,000 acres and approximately 900 wells, with related equipment and property. On Tuesday, Chesapeake said it was running two rigs in the Utica and placed 11 wells into production during the third quarter. The Oklahoma City-based company’s Utica wells averaged daily production of 10,000 barrels of oil, 488 million cubic feet of natural gas and 28,000 barrels of natural gas liquids during the quarter. Chesapeake’s earnings were originally scheduled for release Wednesday, but the company moved up the date to announce its nearly $4 billion deal to buy Houston-based WildHorse Resource Development, a company with operations in the Eagle Ford Shale and Austin Chalk formations in Texas. Chesapeake closed the quarter with a profit of $60 million or 7 cents per diluted share for common stockholders.

Eclipse Resources Encouraged By First Pennsylvania Utica Well - Eclipse Resources Corp. said Thursday that its first Utica Shale well in north-central Pennsylvania came online at 32 MMcf/d and has continued to perform at that rate for more than 30 days, exceeding the company’s expectations in an underdeveloped part of the play.   “After initial cleanup, the well’s production quickly achieved our target rate of approximately 32 MMcf/d, which was expected to continue for an initial flat period of 30 days,” said CEO Benjamin Hulburt. “The well’s production continued at this level after reaching the 30-day period, which is encouraging to us and we will be continuing to monitor this well’s performance closely.”The Painter 2H is the latest Utica well to come online in Tioga County, hundreds of miles east of the Utica core in southeast Ohio. Eclipse brought the well online during the third quarter, nearly a year after it announced the 44,500 net acre acquisition of its Flat Castle area in Tioga and Potter counties. The well was completed with a lateral length of 13,800 feet.Hulburt also said the company’s all-stock merger with Blue Ridge Mountain Resources Inc. (BRMR) remains on track to close by the end of this year. BRMR would become an Eclipse subsidiary under the deal.Earlier this week, BRMR, which operates in southeast Ohio and northern West Virginia, updated full-year guidance and is now calling for 187-212 MMcfe/d of production. As a result, Eclipse said the combined company is forecast to produce 560-600 MMcfe/d of production in the fourth quarter instead of the previously forecast range of 500-560 MMcfe/d.During the third quarter, Eclipse produced 346.4 MMcfe/d, a decline from 353 MMcfe/d in the year-ago period, but up from 305.5 MMcfe/d in 2Q2018. The company cut spendingearlier this year and lowered its annual guidance as a result.The company reported record revenue of $130.1 million in the third quarter, a 42% increase from the year-ago quarter, as prices increased on more takeaway in the Appalachian Basin. Including cash settled derivatives and firm transportation, Eclipse earned $3.34/Mcfe during the period, compared to $2.59/Mcfe a year ago.Eclipse reported net income of $4 million (1 cent/share) for the third quarter, versus a net loss of $16.7 million (minus 6 cents) in 3Q2017.

Energy Transfer completes last segments of Rover natgas pipe in W Virginia - (Reuters) - U.S. pipeline company Energy Transfer LP said on Friday that federal energy regulators approved the company’s request to put the last two segments of its $4.2 billion Rover natural gas pipeline into service:

• * The U.S. Federal Energy Regulatory Commission (FERC) allowed Energy Transfer to put its Sherwood and CGT laterals in West Virginia into service.
• * Energy Transfer originally planned to complete Rover in November 2017, but since starting construction in March 2017, has been delayed by numerous notices of violation in Ohio and other states, some of which led to temporary stop work orders from state and federal regulators.
• * The 713-mile (1,148-kilometer) Rover is designed to carry up to 3.25 billion cubic feet per day (bcfd) of gas from Pennsylvania, West Virginia and Ohio to Michigan.
• * One billion cubic feet is enough gas to supply about five million U.S. homes for a day.
• * Rover has been entering service in phases since August 2017 as Energy Transfer completed each section.
• * Major producers signed up to use Rover include units of privately held Ascent Resources, Antero Resources Corp, Range Resources Corp, Southwestern Energy Co, Eclipse Resources Corp and EQT Corp.
• * Rover is one of several pipelines under construction this year to connect growing output from the Marcellus and Utica shale basins in Pennsylvania, West Virginia and Ohio to customers in other parts of the United States and Canada.
• * New pipelines built to remove gas from the Appalachia region will enable shale drillers there to boost output in to a projected record high of around 29.8 bcfd in November from 26.1 bcfd during the same month a year ago, according to federal energy data.
• * That represents about 36 percent of the nation’s total dry gas output of 81.1 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.

Appalachian producers boost natural gas output in Q3 - — Increased takeaway capacity combined with higher prices for natural gas liquids continues to drive gas production increases in the Northeastern US. "This quarter's cash flow was more than 40% higher than the same period last year," said Southwestern Energy CEO Bill Way during an earning's call Friday morning. "Results benefited from our returns-focused growth of liquids as prices improved, from our leading low cost gas transportation portfolio as regional basis tightened and from operational achievements made by our leading operational team." Northeast producers have been readying themselves to take advantage of incremental production takeaway capacity from pipeline projects that are now being placed in-service at long last. In tandem with Energy Transfer Partners' Rover Pipeline and Williams' Transco Atlantic Sunrise expansion placing facilities in-service over the past two months, large drawdowns in well inventory materialized in Ohio and Western Pennsylvania, while rig releases in Northeast Pennsylvania have also strengthened. Southwestern, which was the fourth-largest gas producer in the US during the second quarter, according to the Natural Gas Supple Association, increased its Appalachian production during the third quarter by 22%. Fellow Northeast producer Cabot Oil and Gas, which was the fifth-largest US gas producer during the second quarter, increased its average daily production during the third quarter by 10% to 2.02 Bcf/d on average, according to the company's latest earning's report released Friday. As a result of incremental pipeline takeaway capacity becoming available, forward basis pricing at the Dominion South supply hub has strengthened and could encourage continued production growth. Operators in the Northeast have long-awaited the full in-service of ETP's Rover Pipeline, which is designed to transport 3.25 Bcf/d of Appalachian gas in Ohio, West Virginia and Pennsylvania to the US Midwest and the Dawn Hub in Ontario, Canada. While roughly 1.5 Bcf/d of capacity has been available since September 2017 from Phase I of the project, the lion's share of capacity, coming from Phase II, was delayed into August 2018 due to unforeseen regulatory and construction delays. As most Phase II facilities have received FERC approval and been placed in-service, flows on Rover have reached as high as 3 Bcf/d in recent days, according to S&P Global Platts Analytics. Thus far, a majority of the volumes hitting the pipeline likely were the result of rerouted volumes from other regional pipelines, including Texas Eastern and Columbia Gas, rather than incremental Northeast production.

CNX Expecting Appalachian Output to Rebound By Year’s End - CNX Resources Corp. expects production to peak in the fourth quarter now that the operational issues it faced earlier in the year have been resolved. The company has reported sequential production declines since early this year on asset sales and issues at well pads, such as retrieving downhole equipment and production casing problems, that have forced it to adjust its turn-in-line (TIL) schedule. The company still remains on track to bring 68 wells online by the end of the year, COO Tim Dugan said this week during a call to discuss third quarter results, and expects production to peak after a number of wells were placed to sales late in the third quarter. CNX produced 119 Bcfe during the period, up from 101 Bcfe at the same time last year. Third quarter volumes declined slightly from 122.6 Bcfe in 2Q2018, but the company had guided for the decline on the cadence of its TIL schedule following the operational issues earlier in the year. The company also completed the sale of its Utica Shale joint venture assets to Ascent Resources LLC in August and lost some production. While the midpoint of its guidance remains unchanged, CNX lowered it slightly at the high end. Full-year production now is forecast at 497.5-507.5 Bcfe, compared to the previous range of 490-515 Bcfe. While the Marcellus Shale accounted for the bulk of the company’s third quarter production at 70.6 Bcfe, Utica Shale volumes from Monroe County, OH, and Pennsylvania continued climbing. CNX said it produced 33.6 Bcfe in the play during the third quarter, up 67% from a year ago. As most other Appalachian operators have, CNX said its average quarterly realized prices increased. The company said it earned $2.92/Mcfe during the third quarter, up from $2.50/Mcfe a year ago. Revenue also increased to $397 million from $287 million over the same time. CNX reported third quarter net income of $125 million (59 cents/share), compared with a net loss of $26 million (minus 11 cents) in 3Q2017.

Why Plans to Turn America's Rust Belt into a New Plastics Belt Are Bad News for the Climate - DeSmog (blog) --The petrochemical industry anticipates spending a total of over $200 billion on factories, pipelines, and other infrastructure in the U.S. that will rely on shale gas, the American Chemistry Council announced in September. Construction is already underway at many sites. This building spree would dramatically expand the Gulf Coast’s petrochemical corridor (known locally as“Cancer Alley”) — and establish a new plastics and petrochemical belt across states like Ohio, Pennsylvania, and West Virginia. If those projects are completed, analysts predict the U.S. would flip from one of the world’s highest-cost producers of plastics and chemicals to one of the cheapest, using raw materials and energy from fracked gas wells in states like Texas, West Virginia, and Pennsylvania.Those petrochemical plans could have profound consequences for a planet already showing signs of dangerous warming and a cascade of other impacts from climate change. Some of the largest and most expensive petrochemical projects in the U.S. are planned in the Rust Belt states of Ohio, West Virginia, Pennsylvania, and New York, a region that has suffered for decades from the collapse of the domestic steel industry but that has relatively little experience with the kind of petrochemical complexes that are now primarily found on the Gulf Coast.In November 2017, the China Energy Investment Corp., signed a Memorandum of Understanding with West Virginia that would result in the construction of $83.7 billion in plastics and petrochemicals projects over the next 20 years in that state alone — a huge slice of the $202.4 billion U.S. total. Those plans have run into snags due to trade disputes between the U.S. and China and a corruption probe, though Chinese officials said in late August that investment was moving forward. The petrochemical industry’s interest is spurred by the fact that the region’s Marcellus and Utica shales contain significant supplies of so-called “wet gas.” This wet gas often is treated as a footnote in discussions of fracking, which tend to focus on the methane gas, called “dry gas” by industry — and not the ethane, propane, butane, and other hydrocarbons that also come from those same wells.

Work stopped on pipeline that exploded in Beaver County, after Pa. regulators find environmental violations -  Energy Transfer LP, the operator of the Revolution Pipeline that exploded near Monaca last month, has been ordered by state regulators to stop all work on that pipeline because of subsequent environmental violations. The Pennsylvania Department of Environmental Protection issued an order to the Texas-based pipeline company on Monday alleging that its construction practices are failing to control erosion and soil movement and have impacted several streams in the area.The company must stop all earth moving activities, temporarily stabilize its work sites and submit a series of plans before it can continue with its work to get the pipeline back up and running again.Soil movement, specifically a landslide, is believed to be the cause of the early morning rupture on Sept. 10 which burned down a house at the end of a suburban street in Beaver County. The Revolution pipeline, a 45-mile natural gas line that runs through Washington, Allegheny, Beaver and Butler counties, was activated just a week prior to the burst, which burned down a house at the end of a suburban street in Beaver County.According to the Beaver County Conservation District, the construction of the Revolution pipeline was marked by land slips — in part because of the unusually wet conditions in the region, including at the site of the explosion.Jim Shaner, executive director of the Beaver County agency, told the Post-Gazette last month that the company had installed the erosion controls as designed “but they were not working.”The Pennsylvania Public Utility Commission is leading the ongoing investigation into the failure. “The line will remain out of service until (Energy Transfer) can provide documentation that demonstrates that they are compliant with the federal and state codes and can operate the pipeline safely,” PUC spokesman Nils Hagen-Frederiksen said. The DEP, meanwhile, inspected the pipeline work over the course of four days last week and found that poor erosion control practices persisted, causing sediment pollution to flow into Raccoon Creek, Service Creek, Elk Horn Run, and tributaries to Raccoon Creek, Brush Run and Moon Run. Energy Transfer also hasn’t provided the DEP with its inspection reports and failed to report instances of non-compliance, the agency charged.It ordered the company to produce a plan to come into compliance with its permits by Nov. 9. By Dec. 3, Energy Transfer is to outline how it will manage storm water along the pipeline corridor once construction is complete.

A Pipeline, a Protest, and the Battle for Pennsylvania's Political Soul - Mariner East isn’t a typical suburban line, carrying gas to heat people’s homes. When completed, the pipeline will carry highly explosive natural-gas liquids—compressed ethane, butane, and propane—three hundred and fifty miles from the Marcellus shale gas fields in western Pennsylvania to a port in Philadelphia. From there, the chemicals will be transported to Scotland, formed into pellets called nurdles, and made into plastic. The project is owned by Energy Transfer Partners—the parent company of Sunoco, which also owns the Dakota Access Pipeline—and it is part of an ongoing multibillion-dollar effort to monetize the state’s natural-gas resources. The company claims that the pipeline will create nine thousand jobs, and will have an economic impact in the state of more than nine billion dollars.  The company also has a dismal safety record: its pipelines experience a leak or accident every eleven days, on average. In Pennsylvania, there is no state agency tasked with deciding where pipelines carrying hazardous liquids can be placed. As a result, E.T.P. can lay the line wherever it wants, without constraints, including through people’s property. If there’s a leak, the company instructs residents to “leave the area by foot immediately and attempt to stay upwind,” but there’s no guidance for people to determine whether they are in a safe area. Within the blast zone, ringing a doorbell, making a phone call, opening a garage door, turning lights on, or running an engine could ignite a fatal explosion. “It makes it hard to imagine how the forty-one schools that sit within the blast zone would manage with small children,” Friel Otten told me. The company did not respond to requests for comment, but it claims that it has recently reduced its rate of accidents per thousand miles by thirty per cent, bringing it into alignment with the rest of the industry.

Mariner East & Atlantic Sunrise Pipeline Contractor Now in Bankruptcy - The main contractor on the Atlantic Sunrise and Mariner East 2 gas pipelines that run through Lancaster County has declared bankruptcy. Ohio-based Welded Construction LP was sued in Oklahoma by Atlantic Sunrise owner Williams Partners. Williams alleges Welded overcharged the company and had accounting failures and other contract breaches.Williams has withheld $23 million from the company. The nearly 300-mile, $3 billion Atlantic Sunrise natural gas project — which goes through 37 miles of Lancaster County — began moving gas on October 6th. Sunoco, owner of the 300-mile Mariner East 2 natural gas liquids pipeline, terminated its contract with Welded, alleging the company failed to comply with environmental requirements.The pipeline, which goes through 8 miles of northeastern Lancaster County, has been beset with spills and fines that have delayed the project. After the legal actions by the two pipeline builders, Welded filed for Chapter 11 bankruptcy.

Residents Speak Out Against Mountaineer Gas Pipeline and Rockwool at Public Hearing in Shepherdstown - The West Virginia Public Service Commission traveled to Shepherdstown this week for a public hearing to address concerns about a pipeline expansion project in the Eastern Panhandle. About a hundred people showed up to rally before the event. Dozens went on to speak during the hearing – and many took the opportunity to mention the controversial Rockwool manufacturing company.Martinsburg resident Stewart Acuff was one of several people who spoke against the pipeline and Rockwool at the PSC’s hearing Wednesday night.“The people of the Eastern Panhandle of West Virginia have said over and over and over again in huge numbers, we don’t want this damn pipeline, and we don’t want Rockwool,” Acuff said.  Many attendees asked the PSC commissioners not to approve Mountaineer Gas’ expansion pipeline into the Eastern Panhandle. That pipeline is being built between Berkeley Springs and Martinsburg, and construction began in March. It will be more than 22 miles long.Project developers Mountaineer Gas and TransCanada say the pipeline will bring natural gas to Jefferson and Morgan Counties. Mountaineer Gas has proposed to invest nearly $120 million for infrastructure replacements and system upgrades from 2019 through 2023, including roughly $16.5 million for ongoing investments to expand and enhance service in Morgan, Berkeley and Jefferson counties. But several residents at the hearing shared concerns about the pipeline’s impact on the Panhandle's karst geology of sinkholes, springs and caves. Speakers also mentioned a controversial insulation manufacturing plant being built in Ranson just a few miles from public schools and homes. The plant, Denmark-based Rockwool, will make stone wool insulation. The Ranson facility would feature two, 21-story smokestacks releasing chemicals like formaldehyde. Rockwool has said the gas pipeline would be crucial for its operation.

Dominion Energy 3Q18: Atlantic Coast Pipeline Delayed to 2020 - Dominion Energy shared two bits of big news yesterday during their third quarter 2018 update. The first is that they’ve agreed to sell their 50% stake in Blue Racer Midstream (see Dominion Sells Its 50% Share in Blue Racer Midstream for $1.5B). The second bit of news, big news (for us), is that Atlantic Coast Pipeline (ACP) is now officially delayed–from late 2019 to “mid-2020” for a full startup. The price tag for ACP is going up too: $7 billion (up from $6.5 billion). But it’s not all bad news for ACP. Some pieces of the project will still go online in 2019, just not all of it. Dominion is taking a “phased in-service approach” to bringing the project online. The delays are due to the “FERC stop work order and delays obtaining permits necessary for construction.” We put it this way: The delays due to a myriad of frivolous lawsuits from Big Green groups means everyone will now pay more. Thanks Big Green.  Details from the official 3Q18 update about ACP and the related Supply Header Project:  The FERC stop work order and delays obtaining permits necessary for construction have impacted the cost and schedule for the project. As a result, project cost estimates have increased from a range of $6.0 to $6.5 billion to a range of $6.5 to $7.0 billion, excluding financing costs.Atlantic Coast Pipeline is pursuing a phased in-service approach with its customers, whereby we maintain a late 2019 in-service for key segments of the project to meet peak winter demand in critically constrained regions served by the project. ACP will be pursuing a mid-2020 in-service date for the remaining segments of the project. Abnormal weather and/or work delays (including delays due to judicial or regulatory action) may result in cost or schedule modifications in the future.The Supply Header project target in-service remains late 2019. “We have been constructing ACP in West Virginia and North Carolina and on October 19 we received the final Virginia permit required to petition FERC to be underway with full mainline construction in all three states,” Farrell said. “Following approval from FERC of our Notice to Proceed filing, we will begin mainline construction in Virginia.”“We continue to achieve key milestones toward the successful completion of this critical energy infrastructure project and look forward to delivering safe, reliable, and affordable energy to our customers in time to meet peak demand for the 2019/20 winter season,” Farrell added. (1) Below are excerpts from CEO Tom Farrell’s prepared remarks on the quarterly analyst conference call. Of note:

• The $1.3 billion Greensville Power Station (Greensville County, VA), Virginia’s largest natgas-fired power station, is 98% done now and will be online producing electricity “in early December.”
• ACP is currently under construction in both West Virginia and North Carolina, and with the recent permits from Virginia, will soon be under construction there too.
• They remain committed to buying South Carolina’s SCANA Corporation and aim to complete it by the end of this year.

Why a Democratic candidate opposing offshore drilling is getting Republican support in Trump country - In his third ad of this year’s midterm elections, a wetsuit-clad Joe Cunningham bobs off the South Carolina coast. Treading water, the ocean engineer-turned Democratic candidate for Congress explains that he’s always opposed offshore drilling and that if elected, he’ll “make sure we never do” drill along South Carolina’s coast.The ad reflects what’s among the biggest issues facing South Carolina’s First District, which is home to the majority of the state’s 2,876 miles of serpentine coastline and barrier islands. Tourists flock to the shores for the sandy beaches and unobstructed views of gently curling waves, driving the region’s economy. But a sweeping offshore drilling plan unveiled earlier this year by the Trump administration threatens to upend all that. And local opposition might just be enough to flip the district blue for the first time in nearly 40 years. When the Trump administration first announced its plan to open 90 percent of U.S. waters in the outer continental shelf to oil and gas extraction, Mark Sanford, the Republican representative for the district, announced that he was against it. But Sanford lost his primary to Katie Arrington, a local state representative who campaigned on supporting Trump’s offshore drilling plan. Though she has since flipped on the issue, her stance presented a contrast for Cunningham who is now challenging her in a tight race for the general election.

Oil industry woos SC African-Americans to support offshore drilling - The oil interest lobbying organization American Petroleum Institute has launched a campaign targeting minority communities, including African-Americans, to promote offshore exploration and drilling for natural gas and oil. The pitch is it’s a job creator.The effort is gauged to counter massive opposition to the offshore alternative that numbers in the millions of individuals and groups.That opposition is largely people who are white — one of its acknowledged weak points.But the institute’s Explore Offshore campaign has sparked some outrage. “I’m not surprised in this political climate,” said Marquetta Goodwine, a Beaufort County resident who goes by Queen Quet. She has been dubbed chieftess of the Gullah/Geechee Nation.She is among the more prominent drilling opponents who are African-American. “Those things make me highly irate,” she said.But the campaign has won some support.“Quite frankly, what I was concerned about was there were a whole lot of white people (at a public meeting on the issue) and not a whole lot of black people,” said Stephen Gilchrist, chairman of the South Carolina African American Chamber of Commerce and the Explore Offshore effort in South Carolina.“African-Americans are economically disenfranchised on the coast,” he said.The campaign has been taken up by the African-American chamber as well as at least 68 other businesses, pro-business groups and anti-tax groups in the Southeast, from Virginia to Florida. In South Carolina, they include thePalmetto Promise Institute and S.C. Association of Taxpayers.Industry analyst Offshore Technology reported the campaign specifically focuses on minority communities and that its support reflects the focus.  “These groups include a large representation from black, Hispanic and minority communities, which historically have shown less support for offshore oil and gas exploration than others — something the API is keen to change,” the report said.

Listen: Speculation continues as US Strategic Petroleum Reserve faces uncertain future –Podcast  - On this week's Platts Capitol Crude, Ken Vincent, the chief of staff with the DOE's Office of Fossil Energy, talks exclusively about the Strategic Petroleum Reserve as speculation ramps up that the Trump administration may be considering a release from government oil stocks. Listen now...

Entergy investigators: Company knew or should have known about paid actors at council meetings - Executives at Entergy New Orleans “knew or should have known” that actors were hired to appear at City Council meetings and voice support for the company’s proposed eastern New Orleans power plant, a City Council-commissioned investigation concluded.The results of the investigation were released Monday night, and the council will hold a special meeting on Wednesday at 1 p.m. to formally receive it and hear a presentation from the investigators. The council, which regulates  Entergy New Orleans, is considering levying a fine of up to $5 million against the company.The council called for the investigation of the so-called “astroturfing” campaign after The Lens reported that dozens of people, including professional actors, were paid between $60 and $200 to come to City Council meetings in October 2017 and February 2018 in support of a proposed power plant in eastern New Orleans. The council hired a team of lawyers from the firm of Sher, Garner, Cahill, Richter, Klein & Hilbert, led by former federal prosecutor Matt Coman. Retired Judge Calvin Johnson was also part of the team.  In May, Entergy released the results of an internal investigation, denying that its employees knew anything about the scheme and blaming its public relations contractor, The Hawthorn Group, for hiring a third company, Crowds on Demand, which ultimately recruited the actors.  “Even after the revelation that came as a result of the investigative report by The Lens and there was no question that people were paid by Hawthorn or Crowds on Demand, ENO continued to deny it had any knowledge of the payments and maintained it did nothing wrong,” investigators wrote.  But the evidence indicates otherwise, the report says.

$10B LNG Facility Starts Commissioning Phase - Cameron LNG has begun the commissioning process for the support facilities and first liquefaction train of Phase 1 of its liquefaction-export project in Hackberry, La., Sempra Energy reported Friday.“All major construction activities have been completed to begin the commissioning and start-up process to produce LNG from the first liquefaction train,” Joseph A. Householder, Sempra’s president and chief operating officer, said in a written statement. “This is a significant milestone for this landmark U.S. energy infrastructure facility – an important step forward in advancing our strategic vision to become North America’s premier energy infrastructure company.” Sempra, which indirectly owns a 50.2-percent stake in Cameron LNG, noted that the commissioning process includes:

• Testing all support systems, combustion turbines and compressors
• Delivery of feed gas from the transmission pipeline
• Production of the first LNG

Once the Federal Energy Regulatory Commission (FERC) approves all of the commissioning steps and all steps are successfully completed for the first train, LNG production will begin and ramp up to fully production for delivery to global markets, Sempra stated. Other Cameron LNG owners include Total, Mitsui & Co., Ltd. and Japan LNG Investment, LLC, which is owned by Mitsubishi Corp. and Nippon Yusen Kabushiki Kaisha (NYK). Phase 1 of the $10 billion Cameron LNG project comprises the facility’s first three liquefaction trains. Sempra stated that all three trains should be producing LNG next year. The company that the facility is projected to export 12 million tonnes per annum (mtpa) – or approximately 1.7 billion cubic feet per day (Bcfd) – of LNG. According to the Cameron LNG website, the second-phase expansion would add two liquefaction trains with an LNG production capacity of 9.97 mtpa (1.41 Bcfd) as well as up to two additional full-containment LNG storage tanks. The full five-train facility would be capable of exporting up to 24.92 mtpa (3.53 Bcfd) of LNG, the website also states.

Brownsville LNG Project Advances - The U.S. Federal Energy Regulatory Commission (FERC) has issued the draft environmental impact statement (DEIS) for Texas LNG’s proposed LNG export facility in the Port of Brownsville, Texas LNG reported Sunday.“Texas LNG is committed to show how our project protects the environment and generates significant benefits for the local community and the Port of Brownsville,” Langtry Meyer, Texas LNG’s founder and chief operating officer, said in a written statement emailed to Rigzone. “This project will bring jobs and investment to Cameron County and deliver clean, safe, abundant Texas natural gas energy to the world.”According to Texas LNG, receiving the DEIS represents a key milestone toward its final investment decision (FID) for the first 2-million-tonne-per-annum (MTA) phase of the proposed two-train, 4-MTA project. “The DEIS further de-risks the project and adds confidence to the dates of remaining milestones in the permitting process,” the company said in its written statement. The company noted that remaining anticipated milestones include:

• Receipt of the final environmental impact statement by March 15, 2019
• A federal authorization decision deadline of June 13,2019
• A FID in late 2019
• Phase 1 production of 2 MTA of LNG to start in early 2023

According to Houston-based Texas LNG, the LNG export facility will be built on a 625-acre site on the Port of Brownsville’s deepwater ship channel near natural gas supplies and pipelines. The project fact sheet on the company’s website notes that the Port of Brownsville is one of the closest U.S. ports to the Panama Canal, which facilitates access to LNG customers in Asia. The facility would receive natural gas from the Agua Dulce trading hub in South Texas, and the company has stated that the Permian Basin associated gas it would liquefy is cheaper than the Henry Hub-indexed gas that would be fed into other Gulf Coast terminals.  Samsung Engineering Co., Ltd. owns a minority equity stake in Texas LNG and will oversee engineering, construction and procurement.Texas LNG is the second Gulf Coast LNG project to receive a DEIS from FERC this month. On October 12, NextDecade Corp. reported that FERC had granted the document for its Rio Grande LNG project and associated Rio Bravo Pipeline. Additionally, Venture Global LNG announced last week that FERC had issued the final environmental impact statement for its Calcasieu Pass LNG export facility in Louisiana.

Next-wave LNG race hits hurdles in U.S.-China trade war (Reuters) - The delay of a U.S. Gulf Coast liquefied natural gas (LNG) export project has crystallized fears that the U.S. trade battle with China is hampering efforts to line up buyers needed to move ahead with multi-billion-dollar builds. The United States is positioning itself as the dominant provider of the supercooled fuel as Asian nations shift away from dirtier power sources like coal, and this month’s approval of a giant Canadian project led by Royal Dutch Shell bolstered enthusiasm for the sector overall in North America. That optimism took a hit on Monday, when Australia’s LNG Ltd delayed until next year a planned decision on whether to build its Louisiana-based Magnolia LNG plant due to problems lining up Chinese customers. And it comes when bankers and analysts in the sector had already questioned whether the next wave of projects in the pipeline would pass muster with investors. “Chinese LNG demand growth is the largest piece of demand growth out there, and Chinese buyers have got to feel reluctant to commit to U.S. capacity when the U.S. government sees trade as a means of exerting political leverage,” said Bob Ineson, managing director of North American natural gas at IHS Markit. China set a 10 percent tariff on U.S. LNG imports last month, extending a trade scuffle in which U.S. President Donald Trump imposed tariffs on $250 billion worth of imported Chinese goods and China retaliated with duties on $110 billion worth of U.S. goods. China’s LNG demand has skyrocketed in recent years on Beijing’s pollution crackdown, with imports nearly tripling since 2015. Last year it overtook South Korea as the world’s No. 2 importer of LNG. That boom, along with rising demand from other Asian nations, has helped gobble up an anticipated LNG glut and boosted spot prices to near four-year highs, breaking a multi-year freeze on new project investment. By the mid-2020s, global LNG demand is forecast to range from 360 million to 450 million tonnes, up from about 290 million tonnes in 2017. With China leading that growth, signing deals with its companies is viewed as imperative to get larger projects done. But the tariffs are having a chilling effect, according to two U.S. industry sources. China is not signing any long-term deals with U.S. projects until the spat is resolved, they said. 

Rising U.S. crude output sparks race to build export terminals (Reuters) - A high-stakes competition is emerging among energy exporters proposing multi-million-dollar crude terminals along the U.S. Gulf Coast to handle a gusher of shale oil coming from West Texas oilfields. On Monday, private equity firm Carlyle Group became the latest to place a bet, proposing with the Port of Corpus Christi what it said would be the first onshore U.S. export facility able to load the world’s largest crude tankers. The winners of the export terminal race likely will be those best able to navigate a regulatory process that includes multiple government approvals and overcome labor and supply shortages that have already frustrating some early projects to expand export infrastructure. The contest comes as the shale revolution is expected to send the nation’s oil production to 11.8 million barrels per day by the end of 2019, from 9.35 million bpd in 2017, according to the U.S. Energy Information Administration. Existing coastal terminals could be overwhelmed by late next year as a flurry of new pipelines come into operation and move 2 million barrels of oil landlocked in West Texas to the Gulf Coast, say oil companies and analysts. Carlyle’s facility, which aims to begin operations by late 2020, will compete with other Texas and Louisiana projects proposed by Swiss-trader Trafigura AG and pipeline operators’ Enterprise Products Partners LP and Tallgrass Energy LP. Enterprise and Trafigura have not provided timelines, noting permits must be secured first. Each aims to fully load very large crude carriers (VLCCs)tankers able to carry up to 2 million barrels of oil to markets in Asia, Latin America and Europe. Most would require running pipelines away from ports and into the deeper parts of the ocean to allow loading of the larger ships. All of these proposals face significant licensing and other hurdles. Like others, the Carlyle-Port of Corpus Christi project, must pass lengthy state and federal approvals. It also must await completion of an Army Corps of Engineers project that has been delayed about a year, said Sean Strawbridge, chief executive officer of the Port of Corpus Christi Authority. Although shale production is expected to rise substantially, it will not fill all the proposed projects, said John Coleman, an oil market analyst at research firm Wood Mackenzie. “Everyone is racing to throw their hat in the ring and get their project done before everyone else,” he said. Only one or two of the five proposed offshore ports likely will be needed. “There’s simply not enough oil volumes to go around.” 

$10B LNG Facility Starts Commissioning Phase - Cameron LNG has begun the commissioning process for the support facilities and first liquefaction train of Phase 1 of its liquefaction-export project in Hackberry, La., Sempra Energy reported Friday. “All major construction activities have been completed to begin the commissioning and start-up process to produce LNG from the first liquefaction train,” Joseph A. Householder, Sempra’s president and chief operating officer, said in a written statement. “This is a significant milestone for this landmark U.S. energy infrastructure facility – an important step forward in advancing our strategic vision to become North America’s premier energy infrastructure company.” Sempra, which indirectly owns a 50.2-percent stake in Cameron LNG, noted that the commissioning process includes:

• Testing all support systems, combustion turbines and compressors
• Delivery of feed gas from the transmission pipeline
• Production of the first LNG

Once the Federal Energy Regulatory Commission (FERC) approves all of the commissioning steps and all steps are successfully completed for the first train, LNG production will begin and ramp up to fully production for delivery to global markets, Sempra stated. Other Cameron LNG owners include Total, Mitsui & Co., Ltd. and Japan LNG Investment, LLC, which is owned by Mitsubishi Corp. and Nippon Yusen Kabushiki Kaisha (NYK). Phase 1 of the $10 billion Cameron LNG project comprises the facility’s first three liquefaction trains. Sempra stated that all three trains should be producing LNG next year. The company that the facility is projected to export 12 million tonnes per annum (mtpa) – or approximately 1.7 billion cubic feet per day (Bcfd) – of LNG. According to the Cameron LNG website, the second-phase expansion would add two liquefaction trains with an LNG production capacity of 9.97 mtpa (1.41 Bcfd) as well as up to two additional full-containment LNG storage tanks. The full five-train facility would be capable of exporting up to 24.92 mtpa (3.53 Bcfd) of LNG, the website also states. 

China's tariff on US natural gas delays Louisiana LNG project - An LNG (liquified natural gas) container of CNPC (China National Petroleum Corporation) is under construction next to others at the Yangkou Port in Rudong county, Nantong city, east China's Jiangsu province.A company behind a multibillion-dollar project to export liquefied natural gas from Louisiana is delaying its investment decision due to problems lining up Chinese buyers amid the ongoing U.S.-China trade dispute.The announcement shows the trade tensions are beginning to have a negative impact on an industry that President Donald Trump has championed. Trump has pitched U.S. LNG — natural gas chilled to liquid form — to trade partners from China to Poland.Australia's LNG Limited on Monday said it will not make a final investment decision this year on its Magnolia LNG terminal near Lake Charles, Louisiana. The company previously told investors it expected to announce a decision by year-end."We made that statement prior to the trade tensions that have manifested over the past months, which have caused headwinds for LNG transactions," LNG Limited CEO Greg Vesey said in a letter to shareholders. "We remain hopeful in our ability to bring a final investment decision for Magnolia LNG to the Board of Directors in the first part of 2019." China slapped a 10 percent tariff on American LNG exports in September after the Trump administration imposed an equal levy on $200 billion in Chinese goods. The White House is reportedly preparing to place tariffs on all remaining Chinese imports — about $257 billion in products — if trade talks between Trump and Chinese President Xi Jinping fail to deliver a breakthrough. Vesey, a former natural gas and power executive at Chevron, held out hope that the world's two biggest economies would settle their dispute before Magnolia finds buyers beyond China for its supplies.

Trade War Could Be ‘Pivotal’ For U.S. LNG - Donald Trump’s trade war with China is starting to scare away oil and gas investments, as new trade barriers clouds the long-term outlook on exports. Australia LNG announced that it would delay a final investment decision on its Magnolia LNG plant in Louisiana until next year, citing trouble securing enough buyers in China. “We remain confident in our ability to reach (final investment decision) on Magnolia whether or not China participates,” CEO Greg Vesey said in a tweet, before arguing that “multiple opportunities with customers in Europe and Asia exist, and our discussions with them are proceeding well.”His company might still move forward, but will need to find buyers elsewhere because the U.S.-China trade war shows no signs of abating, at least as of now. The Trump administration has implemented two rounds of tariffs on China. The first round consisted of about $50 billion in tariffs on Chinese goods, which was followed by a much more dramatic 10 percent tariff on $200 billion in imports from China. That 10 percent tariff is set to jump to 25 percent at the end of the year.A possible third and even more dramatic round is still in the cards, which would hit an additional $257 billion in Chinese goods. That would be even more significant because it would amount to just about the entirety of U.S. imports from China and would hit a broader set of consumer goods, and its effects would be felt across U.S. society as everyday items would likely see price increases. However, as it relates to the oil and gas market, the effects of the trade war are already evident. China retaliated to U.S. tariffs a few months ago by slapping a tariff on U.S. LNG. Without a clear path towards resolution, LNG developers cannot move forward with investment in new export terminals.

Cheniere to commission 1st Corpus Christi LNG cargo on Nov 15 - port (Reuters) - Cheniere Energy will commission the first liquefied natural gas (LNG) cargo from its new Corpus Christi export terminal on Nov. 15, the Texas port’s chief executive said on Tuesday. The commissioning of the cargo, months ahead of schedule, will mark the start of operations at Cheniere’s second LNG export facility and only the third major export facility in the United States. The Corpus Christi terminal had been undergoing commissioning work since the summer and while it was scheduled to come onstream in the first half of next year, Cheniere had said previously first LNG would come before the end of the year. Sean Strawbridge, CEO of the Port of Corpus Christi, where the terminal is located, told a London LNG conference that an event to mark the commissioning of the cargo would take place at the port on Nov. 15. LNG supplies from the United States are expected to soar in the coming years, turning the country into the third largest global exporter by 2020 according to some forecasts, as new facilities are built opening the tap for LNG exports. Around 50 million tonnes’ worth of export capacity is currently under construction in the United States, mostly on the Gulf Coast, adding to the 20 million tonnes in operation. Some 290 million tonnes of LNG was traded globally last year. Commissioning cargoes tend to be sold on the small, murky spot market so the timing of their arrivals is anticipated by traders. Analysts estimate between 1.0 and 2.5 million tonnes of LNG will hit the spot market in the first quarter of next year due to start-ups at new U.S. facilities, a significant amount in an industry still dominated by rigid multi-year supply contracts.

First USGC onshore VLCC terminal to be developed on Harbor Island by end-2020 -- The Port of Corpus Christi and global alternative asset manager Carlyle Group have agreed to develop the first onshore VLCC loading terminal at Harbor Island, Texas, by the end of 2020, the companies announced Monday. The terminal project includes the development of at least two loading docks at Harbor Island as well as inland crude oil tank storage across Redfish Bay on land secured by Carlyle. Dredging of the 36-mile main access channel from the Gulf of Mexico to Harbor Island to at least 75 feet from the current depth of 47 feet will be funded privately, the companies said. "Major construction begins in 2019, but civil work and engineering and design have started," Carlyle spokeswoman Christa Zipf told S&P Global Platts. Cost of the project is about $1 billion, she said, adding Carlyle expects about 20 VLCC loads per month. Construction and dredging will require no capital outlay from taxpayers, as Carlyle agreed to arrange for a private funding solution through its global infrastructure fund in addition to the port's realization of regular rental payments, volume-based tariff income and land grants, the companies said. The Harbor Island onshore terminal could come online close to the same time as Trafigura's offshore VLCC crude export terminal, located 12.7 miles off of the coast of North Padre Island and 15 miles from of Corpus Christi in 93 feet of water. Trafigura's Texas Gulf Terminals VLCC loading facility will have the capacity to handle an average 500,000 b/d of crude and fully load one VLCC in 48 hours, or eight VLCCs per month, according to the permit application to the US Maritime Administration and the US Army Corps of Engineers. The company has not set a startup date for the offshore facility.

BP closes $10.5bn BHP US onshore assets acquisition - BP has concluded the acquisition of Australian company BHP’s unconventional onshore assets in the US for $10.5bn to boost its US onshore oil and gas portfolio, as well as pursue long-term growth.BP signed the agreement for the acquisition of BHP’s assets in July in a deal that is set to give the company a significant position in the liquids-rich regions of the Permian and Eagle Ford basins in Texas, in addition to the Haynesville natural gas basin in East Texas and Louisiana.The acquisition comprises oil and gas production of 190,000 barrels of oil equivalent per day (boe/d) and 4.6 billion barrels of oil equivalent of discovered resources.UK-based BP expects the transaction to deliver more than $350m of annual pre-tax synergies and boost upstream pre-tax free cash flow by $1bn, increasing it to $14bn-15bn in 2021. BP Upstream chief executive Bernard Looney said: “By every measure, this is a transformational deal for our Lower 48 business. It is an important step in our strategy of growing value in upstream and a world-class addition to BP’s global portfolio. The company’s existing onshore oil and gas business in the US currently produces around 315,000boe/d with resources of 8.1 billion barrels of oil equivalent.

Chevron shares jump 2% as quarterly profit doubles, oil and gas output hits record - Chevron reported quarterly earnings that beat analysts' expectations on Friday, as record-setting oil and gas production boosted the company's bottom line. Shares of the oil major were rose more than 2 percent on Friday. Chevron posted a profit of $4.05 billion for the quarter, more than double its earnings from a year ago. That came out to a profit of $2.11 per share, slightly beating Wall Street's expectations for $2.06 per share, according to Refinitiv.. The company pumped nearly 3 million barrels per day of oil equivalent, the most it's ever produced in a single quarter. The gains came as Chevron ramped up production from its Wheatstone liquefied natural gas project in Australia and as output continued to surge from its wells in the Permian Basin underlying Texas and New Mexico. That helped drive a nearly seven-fold jump from third-quarter 2017 earnings in Chevron's oil and gas exploration and production business, where profits hit $3.38 billion this quarter. Chevron's other major business line, refining and marketing fuels like gasoline and diesel, saw profits drop 24 percent. The decline was largely due to Chevron's international refining business, where profit margins were lower and the company sold fewer assets compared with a year ago.

Houston driller WildHorse acquired by shale pioneer Chesapeake - Houston Chronicle -The shale drilling pioneer Chesapeake Energy said Tuesday it is acquiring Houston’s WildHorse Resource Development for $3 billion in cash and stock in a consolidation of players in South Texas’ Eagle Ford shale. Chesapeake, of Oklahomas City, is scooping up WildHorse, which exclusively focused on exploration and production in the emerging northeastern corner of the Eagle Ford west of College Station. In addition to its 420,000 acres in the region, WildHorse is about to open a sand mine in the area to service its hydraulic fracturing, or fracking, of wells.The deal combines two top Eagle Ford production companies, diversifying the holdings of Chesapeake, which is primarily focused in the southwestern portion of the shale play south of San Antonio. Chesapeake also is growing in Wyoming’s Power River Basin along with its lrgacy Marcellus shale position in Pennsylvania.Historically a natural gas company, Chesapeake has aimed to expand into higher-value crude oil assets that are ripe for development, and WildHorse proved a prime acquisition target as a pure-play Eagle Ford company with a large block of mostly contiguous acreage. The northeastern Eagle Ford, which is underdeveloped, holds more oil as opposed to natural gas, said David Heikkinen, chief executive and analyst with Heikkinen Energy Advisors in Houston.“I’d call it an emerging region,” Heikkinen said. “WildHorse has gone out and pioneered this region.”Eagle Ford oil arguably sells at the highest prices in the country because of its proximity to refining and port hubs in Houston and Corpus Christi, while the booming Permian Basin in West Texas is facing pricing discounts because of pipeline shortages.Chesapeake Executive Vice President Frank Patterson said the WildHorse acreage is more than 80 percent undeveloped, providing lots of room for growth. Chesapeake will use larger rigs than those deployed by WildHorse to drill longer horizontal wells and to do so more quickly. “It’s a very quick transition to a full field development plan,” Patterson said. “We’ll hit the ground running.”

Having Gone 'Through Hell,' Chesapeake Energy CEO Has 'No Doubt' It's Time To Grow Again –   Chesapeake Energy surprised investors Tuesday with the unexpected acquisition of WildHorse Resource Development for $4 billion. The prize here is 420,000 net acres of unconventional oil and gas fields, already producing 47,000 barrels a day, most of it from the oil zone of the Eagle Ford shale of southeast Texas, with an additional gas play in the Terryville field of North Louisiana. It works out to about $7,000 per undeveloped acre and $900,000 per undrilled location.  Chesapeake is buying WildHorse, which has a thin public float, mostly from a cadre of private equity backers led by Natural Gas Partners and Carlyle Group, with KKR holding a small piece. Capital owns about 70%, Carlyle Group 24% and KKR about 5%, according to SEC filings. No surprise Chesapeake shares were down 15% on the day. When the deal closes, Wildhorse investors will own a whopping 45% of Chesapeake’s equity.  The WildHorse Eagle Ford position is largely contiguous, only 20% developed, and it is in the oil zone of the Eagle Ford, with 80% of its revenues from oil. This asset will enable Chesapeake to more than double its oil production by 2020 to 165,000 bbls/d. “It is absolutely a turning point,” Lawler says. Because he’s buying Wildhorse mostly with stock, the deal will help further deleverage Chesapeake’s balance sheet, while being immediately accretive to cash flow.   The geology of the acquired acreage is very similar to that of Chesapeake’s existing position in the Eagle Ford, where it has drilled 2,400 wells, commonly engineering horizontal completions 10,000 feet long. “It’s similar to what we have done, a close fit,” he said. And in a neat twist, WildHorse bought a chunk of its Eagle Ford position from Lawler’s previous employer, Anadarko Petroleum, in 2017 for $600 million. One of his top lieutenants at Chesapeake, Jason Pigott, used to run Anadarko’s Eagle Ford division.

Keystone XL pipeline fight heads to Nebraska Supreme Court - Attorneys for opponents of the Keystone XL pipeline and TransCanada will square off Thursday morning before the Nebraska Supreme Court in a lawsuit that could erect a new roadblock to construction of the $8 billion project.Landowners who oppose the pipeline, as well as environmental groups and Indian tribes, are seeking to nullify the Nebraska Public Service Commission’s 3-2 approval a year ago of a pipeline route across Nebraska.The lawsuit claims, among other things, that TransCanada didn’t formally seek approval of the “mainline alternative” route that was approved, and didn’t prove that the pipeline is in the public interest of the state. The lawsuit maintains that the company should reapply for a pipeline route, which would delay the much-delayed project for several more months.Attorneys for the Canadian pipeline developer have argued that even though the PSC didn’t OK the “preferred route” suggested by the corporation, it followed all state laws in approving the alternative. That route, TransCanada attorneys have said, is a superior route because it affects fewer water wells and passes through 84.6 fewer miles of the migratory path of the endangered whooping crane.It could take the State Supreme Court several weeks to rule after hearing oral arguments.Nebraska has become ground zero in the national environmental debate over the Keystone XL pipeline. The 36-inch pipeline would carry up to 830,000 barrels a day of thick tar sands crude oil from Canada to refineries on the U.S. Gulf Coast that are specially set up to refine such oil. TransCanada officials have said they have sufficient commitments from shippers to use the Keystone XL, but the company has not yet made the final financial commitment to build it.

Living on the Front Lines with Silica Sand Mines --   The horror of fracking damages to life and land remain in the minds of most people who live near the massive land destruction from silica sand mining for what the unconventional oil and gas industry lovingly calls “proppant”. Very often, we in the Midwest wonder if the rest of the country knows that this specialized form of silica sand mining destroys our rolling hills, woodlands, and water sources in order for silica sand to feed the fracking industry’s insatiable proppant demand.. The largest sand mine in Bridge Creek Town lies one mile north of our tree farm. Two years ago, 40 acres of trees were culled for the installation of high intensity power lines to feed anticipated silica sand mine expansion under the legal provision of “Right-of-Way.” That document was signed by a previous land owner in 1948. No specific amount of land was specified on the original right-of-way, thus allowing significant legal destruction and permanent loss against the farm. The adjacent silica Hi-Crush sand mine depletes the hillsides and woodlots in its path.  The weekly blasting away of the hillsides sends shock waves – shaking homes and outbuildings weekly, along with our nerves. Visible cracks appear in the walls of buildings, and private wells are monitored for collapse and contamination.  The sand mine only guarantees repair to property lying within a half-mile of the mine. The mine blasts the land near Amish schools and has had a noticeable effect on the psyche of countless farm animals. The invisible silica is breathed by every living thing much to the mine’s denial, with deadly silicosis appearing up to 15 years after initial exposure. Our community is left to wonder who will manifest the health effects first. Blasting unearths arsenic, lead, and other contaminants into private wells and into the remaining soil. There has been no successful reclamation of the land after it is mined, with most residents wondering what the actual point is of developing a reclamation plan is if timely implementation and stringent reclamation metrics are not enforced.  All useful topsoil has been stripped away and is dead with the land only able to support sedge grasses and very few of them at best. No farming on this mined land can occur even though these mining companies promise farm owners that when they are done mining, soil productivity will meet or exceed pre-mining conditions and much milder slopes than the pre-mining bluffs that contained the silica sand. Needless to say, land values of homes, farms, and property decrease as the mines creeps closer.

Driven by Trump Policy Changes, Fracking Booms on Public Lands - NYT - Reversing a trend in the final years of the Obama presidency, the Trump administration is auctioning off millions of acres of drilling rights to oil and gas developers, a central component of the White House’s plan to work hand in glove with the industry to promote more domestic energy production. Seeing growth and profit opportunities at a time of rising oil prices and a pro-business administration, big energy companies like Chesapeake Energy, Chevron, and Anschutz Exploration are seizing on the federal lands free-for-all, as they collectively buy up tens of thousands of acres of new leases and apply for thousands of permits to drill. In total, more than 12.8 million acres of federally controlled oil and gas parcels were offered for lease in the fiscal year that ended on Sept. 30, triple the average offered during President Barack Obama’s second term, according to an analysis by The New York Times of Interior Department data compiled by Taxpayers for Common Sense, a nonpartisan group that advocates budget discipline. Like the acreage offered for lease, the acreage actually leased by energy companies on federal lands hit its highest level last year since 2012, the height of the initial fracking boom in the United States. After 2012, a combination of Obama administration policy decisions and lower oil prices slowed demand for new drilling rights, a trend reversed since President Trump took office. That reversal has been propelled in part by the Interior Department’s willingness to go along with industry pressure to weaken rules that govern how these federal lands can be used, as regulators follow detailed industry scripts for rollbacks in protections for wildlife, air quality and groundwater supplies, documents show. The push amounts to one of Mr. Trump’s most comprehensive and controversial policy initiatives. It underscores the administration’s eagerness to reshape regulation at the behest of industry, and is playing out more immediately and visibly across big parts of the country than many of the other changes he is making to federal management of the environment.

New Mexico Communities Hand-Deliver Protest Comments On Expanded Fracking In Greater Chaco ― Community groups and advocates hand-delivered more than 10,000 citizen protest comments to the Bureau of Land Management’s New Mexico state office in snowy Santa Fe Wednesday in opposition to an oil and gas lease sale scheduled for December that would auction off close to 100,000 acres of public lands in New Mexico for industrialized fracking. In spite of the serious negative impacts that expanded fracking already has on local communities, the BLM has rolled back opportunities for the public to weigh in on this process, shortening “protest” or appeal periods from 30 days to just 10 days and refusing to hold any public hearings, even near impacted communities. Protest comments must be submitted by mail or hand-delivered, as the New Mexico agency no longer accepts emailed or faxed comments.  More than 10,000 individual and unique protest comments were collected by dozens of tribal, community, and environmental organizations. Technical protest comments were submitted by Western Environmental Law Center, along with the Center for Biological Diversity, Chaco Alliance, Counselor Chapter House, Counselor Chapter Health Impact Assessment and Hozhóógó ná adá Committee, Diné Citizens Against Ruining Our Environment, Food & Water Watch, San Juan Citizens Alliance, Sierra Club and WildEarth Guardians. The New Mexico BLM plans to sell more than 84,000 acres of the Land of Enchantment to the oil and gas industry in a Dec. 6 online auction. This includes more than 43,000 acres in the Greater Chaco region of northwest New Mexico and 41,000 acres in southeast New Mexico’s Greater Carlsbad Caverns region. The sale also includes more than 5,000 acres in Oklahoma and Texas.  Despite the fact that no additional study or tribal consultation has occurred, the BLM now plans to auction off 43,268 acres of public and tribal land in the area, including an additional 11,000 acres slated for sale in March of next year.

Colorado Proposition 112 Would Require 2500 ft. Setbacks for Human Safety. - The fight over Prop. 112 has lured big money and clashes over interpretation of health studies. “The OEHHA chronic benzene REL considers several studies published after USEPA’s 2002 benzene assessment, which found increased efficiency of benzene metabolism at low doses, decreased peripheral blood cell counts at low doses (800−1860 μg/m3)…” It takes another 20 words — with terms like “metabolic enzymes” and “benzene detoxification” — to close out this sentence from a recent University of Colorado study that looked at the potential health impacts of Front Range oil and gas operations. Thousands of equally abstruse passages fill hundreds of other studies from around the world examining the effects of drilling and hydraulic fracturing on human health. Welcome to the science behind Proposition 112, the oil and gas setbacks measure that will likely be among the most complex ballot issues to ever go before Colorado voters. The initiative aims to increase the required distance of any newly drilled wells from homes, schools and water sources to 2,500 feet. The current setback is 500 feet from homes and 1,000 feet from densely occupied buildings, like hospitals and schools. Opponents say the measure will block off so much acreage to drill rigs — it’s estimated that 85 percent of non-federal land in Colorado would be off-limits — that the $31 billion industry in Colorado would virtually collapse. Backers of 112 say without bigger buffers, Coloradans will continue to be exposed to noxious emissions from well sites, like toluene, formaldehyde, xylene, and cancer-causing benzene, to say nothing of the environmental harm from potent greenhouse gases, like methane.  “It’s hard when we ask voters to vote on technical issues like this,” said Tanya Heikkila, a professor at CU Denver’s School of Public Affairs who focuses on environmental policy, management and law. She said few voters have the time, patience or expertise to navigate through the copious scientific research that has been done on energy extraction. As such, she said, they’ll likely turn to the people they know for advice on which box to check on the ballot — their friends, their neighbors, their doctor.

Energy Giants Choose Nuclear Option in Election’s Biggest Fight Over Fossil Fuel - “We have five oil and gas companies that want to amend our Constitution, our controlling document,” says Mark Foote, a dark-haired 45-year-old father of two who has been one of the legislature’s most outspoken critics of oil and gas companies. “They’re putting a lot of money into it, millions and millions of dollars. They may win, and they may buy a portion of our constitution that controls everything that we do.” Foote concedes that the ballot measure’s folksy artifice of frontier fairness seems compelling. On its face, it does not appear to be part of the now-familiar power-grab by Texas energy barons trying to install noxious fracking rigs next to idyllic neighborhoods in Colorado’s fast-growing suburbs. Instead, the amendment taps into fever-dream fears about Gestapo government. “The commercials typically show some salt-of-the-earth guy with a baseball cap that’s driving around a tractor on his farm. Supposedly he’s saying, ‘Well if government takes your property, then they should pay you,’ which sounds good, right?” Foote says as a few heads nod and an affirmative murmur ripples through the white-haired crowd. But, then, eminent domain folklore isn’t necessarily reality — and as its opponents tell it, Amendment 74 is not some good old grassroots common sense spontaneously crafted by hardscrabble ranchers. Foote explains that strong takings laws are already on the books, and that this constitutional initiative was meticulously engineered by a team of high-powered Denver attorneys and political operatives to achieve only one objective: shielding oil and gas corporations from all public interest regulations that may emerge as population growth and energy development collide in the Rocky Mountain West.

Wyoming Watching Colorado's Anti-Fracking Ballot Issue - (AP) — Energy leaders in Wyoming are closely watching the fate of a Colorado ballot initiative that would severely limit fracking on non-federal land in that state.The Wyoming Tribune Eagle reports that Colorado-based opponents of the initiative warn it could drive jobs, capital and production northward into Wyoming.But Wyoming industry leaders say it's way too early to say what impact the initiative could have on the Equality State's economy.Colorado's Proposition 112 would require that new oil and gas wells be at least 2,500 feet (750 meters) from occupied buildings and would allow local governments to enact even greater setbacks. Current requirements are 500 feet (150 meters) from homes and 1,000 feet (300 meters) from schools.It also would increase setbacks between new energy operations and "vulnerable areas" that include parks, creeks and irrigation canals. Current law gives the state jurisdiction over setbacks.It's the latest attempt to harness drilling in Colorado's rapidly expanding Denver metropolitan area. Previous efforts have failed, despite advocates' concerns about health and drilling rigs close to schools.A state analysis suggests the initiative would rule out 85 percent of non-federal land in Colorado to development and drastically reduce property taxes paid by the $32 billion state industry.Proposition 112 is "literally a ban on new development," argued Kathleen Sgamma, president of the Western Energy Alliance, a Denver-based oil and natural gas advocacy group. "So Wyoming would probably immediately see an increase in interest in the Powder River Basin. There's already quite a lot of interest in the Powder right now."The Powder River Basin, which straddles the Wyoming-Montanaborder, which straddles the Montana-Wyoming border, is the largest coal-producing region in the U.S. and, in Wyoming, hosts oil and natural gas drilling.

Corps: No new impacts found in Dakota Access pipeline review — The U.S. Army Corps of Engineers on Friday completed more than a year of additional study of the Dakota Access oil pipeline, saying the work substantiated its earlier determination that the pipeline poses no significant environmental threats.U.S. District Judge James Boasberg in June 2017 ruled that the Corps "largely complied" with environmental law when permitting the $3.8 billion, four-state pipeline built by Texas-based Energy Transfers Partners.However, the judge also ordered more study because he said the agency didn't adequately consider how an oil spill under the Missouri River might affect the Standing Rock Sioux tribe's fishing and hunting rights, or whether it might disproportionately affect the tribal community — a concept known as environmental justice. It aims to ensure development projects aren't built in areas where minority populations might not have the resources to defend their rights. In its initial analysis of the Missouri River crossing that skirts the northern edge of the Standing Rock Reservation along the North Dakota-South Dakota border, the Corps studied the mostly white demographics in a half-mile (0.8-kilometer) radius, which the agency maintained is standard. But if the Corps had gone another 88 yards (80 meters) — not quite the length of a football field — the study would have included the reservation. The tribe accused the Corps of gerrymandering. The tribe believes an oil spill from the pipeline under the Lake Oahe reservoir on the Missouri River — from which the reservation draws its water — could have a detrimental effect on the tribal community. Standing Rock is leading a lawsuit joined by three other Dakotas tribes that seeks to shut down the pipeline.

is the Bakken facing another round of takeaway constraints? Part 2. - Pipeline capacity constraints are nothing new to producers in the Bakken. Prior to the completion of the Dakota Access Pipeline (DAPL) in mid-2017, market participants had been pushing area pipeline takeaway to the max. When DAPL finally came online following a lengthy political and legal battle, producers and traders were able to breathe a sigh of relief. But with Bakken production steadily increasing over the past 18 months — and primed for future growth — new constraints are on the horizon. Over the next year or so, Bakken output could overwhelm takeaway capacity and push producers to find new market outlets. The questions now are, which midstream companies can add incremental capacity, how much crude-by-rail will be necessary, and is there a chance a major new pipeline gets built? Today, we forecast Bakken supply and demand, discuss some upcoming projects and lay out the possible headaches for Bakken producers heading into 2019. We discussed the history and impact of DAPL in our Take My Crude Away blog, but here’s a quick recap. Prior to the commercial start-up of the new pipeline to Patoka, IL, in June 2017, Bakken producers had long battled with takeaway constraints. As far back as 2012, production (blue area in Figure 1) had outpaced the modest amount of pipeline capacity available (green line) and producers and traders resorted to moving excess production via crude-by-rail (CBR). CBR isn’t inherently bad, and does provide the ability to reach multiple markets, but it’s expensive, logistically challenging, and slow (compared to a pipeline). When DAPL came online, producers were faced with a new market dynamic — excess pipeline takeaway capacity. Bakken crude began to trade at a premium to West Texas Intermediate (WTI) at Cushing, as take-or-pay shippers were forced to compete with one another and pay up to incentivize barrels to move their way. Currently, Bakken barrels at the Clearbrook hub are trading at a $8/bbl discount to WTI at Cushing, influenced by market dynamics related to those also causing wide differentials for Canadian barrels, which we discussed in Part 1 of this blog series.

Big Oil Pours Record $30M to Sway Voters Against Nation's First Carbon Tax - If voters approve Initiative 1631 on Nov. 6, Washington state will take a significant step in climate action by becoming the first state in the nation to enact a fee on carbon emissions. That is, unless Big Oil can stop it.The U.S. oil industry has pumped a record $30 million to stop the carbon tax, which environmentalists havetried to enact for years, Reuters reported, citing state data. Meanwhile, proponents—including green groups and climate activist billionaires Bill Gates, Michael Bloomberg, Tom Steyer and Laurene Powell Jobs, the widow of Apple founder Steve Jobs—have spent $15.2 million."With Big Oil spending $30 million, that makes it a real fight," Bill Holland, state policy director for the League of Conservation Voters, told Reuters. "It has been a frightening amount of money."Washington ranks fifth in the nation in crude oil refining capacity for making gasoline and other petroleum products, according to the U.S. Energy Information Administration.Initiative 1631 imposes a starting fee of $15 per metric ton on carbon emissions, beginning in 2020. This fee rises $2 every year until the state hits its 2035 emissions reductions goals and is on track to meet its 2050 goals. If passed, the tax is expected to generate $2.3 billion in revenue for green infrastructure, clean transportation and help communities most impacted by pollution. A recent statewide Crosscut/Elway Poll among registered voters shows 50 percent approval of the measure, 36 percent opposed and 14 percent undecided.

More than 500 gallons of diesel spills after work crew hits line– Hundreds of gallons of diesel fuel was spilled near a Union Pacific track in Roseville on Friday. The Roseville Fire Department says a construction crew was out along the track near Atlantic Street and Tiger Way when they struck a four-inch diesel line. More than 500 gallons of diesel fuel spilled into the soil, Roseville Fire says. A third party clean-up crew is now at the scene Friday afternoon for mop-up work. No evacuations were ever issued for the surrounding neighborhoods, including nearby Roseville High School. Officials say the lines are owned by oil and gas line company Kinder Morgan. The lines run through the area and go into a pumping station in Rocklin.

Alaska natives call on banks to protect the Arctic national wildlife refuge from drilling -  Tiliisia Sisto, a 23-year-old mother of two, lives in Venetie, Alaska, a Gwich’in Alaska Native village, and if she wants to eat affordably while also preserving her culture, hunting is key. So are the Porcupine caribou she and her people rely on. Now, a federal proposal to open the Arctic lands on which these caribou calve to oil and gas drilling threatens the Gwich’in’s primary food source and their way of life. That’s why Sisto traveled all the way to New York City this week to ask major banks to withhold funding for projects seeking to develop the Coastal Plain of the Arctic National Wildlife Refuge (ANWR). The Trump administration has been trying to fast-track an environmental impact statement to get extraction going here since the beginning of the year. “I’m speaking up for my children’s future.” Sisto, along with Bernadette Demientieff, the executive director of the Gwich’in Steering Committee, and two representatives with the Sierra Club, met with officials from eight banks this week—JP Morgan Chase, Barclays, Goldman Sachs, Bank of America, Morgan Stanley, Credit Suisse, UBS, and Citi—to explain why this 1.5 million-acre piece of land is so sacred to them. They want these institutions to understand that drilling in the refuge is not just an environmental issue. “This is a human rights violation,” Demientieff told Earther. Ultimately, the group wants the banks to publicly declare they’re opposed to drilling in this area and pledge they won’t financially support any such efforts. No banks made any promises, but Demientieff, at least, left feeling “hopeful”, she said. Bank of America directed Earther to its environmental website outlining its environmental commitments to regions like the Arctic but offered no additional information on how it plans to proceed. Credit Suisse and UBS confirmed the meetings but offered no specific information outside their commitments to protecting the environment and respecting indigenous communities.

U.S. monthly crude oil production exceeds 11 million barrels per day in August -  EIA - U.S. crude oil production reached 11.3 million barrels per day (b/d) in August 2018, according to EIA’s latest Petroleum Supply Monthly, up from 10.9 million b/d in July. This is the first time that monthly U.S. production levels surpassed 11 million b/d. U.S. crude oil production exceeded the Russian Ministry of Energy’s estimated August production of 11.2 million b/d, making the United States the leading crude oil producer in the world. Monthly crude oil production reached a record high in several states. Texas had the highest record level at 4.6 million b/d, followed by North Dakota at 1.3 million b/d. Other states that had record-high production levels were New Mexico, Oklahoma, Colorado, and West Virginia. Production in the Federal Offshore Gulf of Mexico also hit a record high of 1.9 million b/d. The Permian region, which is located in western Texas and eastern New Mexico, accounts for about 63% of total Texas crude oil production and 95% of total New Mexico crude oil production. From January 2018 to August 2018, Texas crude oil production increased by 683,000 b/d (15%) and New Mexico production increased by 182,000 b/d (25%). The growth in Texas and New Mexico since the start of 2018 surpassed EIA’s previous expectations, which assumed that pipeline capacity constraints in the Permian region would dampen production growth in response to the increased differential between the West Texas Intermediate (WTI) crude oil price at Cushing, Oklahoma, and the WTI price at Midland, Texas. In August 2018, this differential had grown to more than $16 per barrel (b), up from $0.43/b in January. However, industry efficiencies in pipeline utilization and increased trucking and rail transport in the region have allowed crude oil production to continue to grow at a higher rate than EIA expected. From May through August, production in the Gulf of Mexico grew by an average of 130,000 b/d every month, a significant increase from the growth rate in the first four months of the year. This increase was primarily the result of a number of fields returning to full production after several months of maintenance and other infrastructure issues that arose from Hurricanes Harvey and Nate in 2017.  U.S. crude oil production has increased significantly during the past ten years, driven mainly by production from tight oil formations using horizontal drilling and hydraulic fracturing. EIA estimates of crude oil production from tight formations in August 2018 reached 6.2 million b/d, or 55% of the national total.

U.S. crude output jumps to record 11.35 million bpd in August: EIA (Reuters) - U.S. crude oil production surged by 416,000 barrels per day (bpd) to a record 11.346 million bpd in August the U.S. Energy Information Administration said in a monthly report on Wednesday. The rise came as production climbed in Texas and North Dakota to fresh peaks of 4.58 million bpd and 1.28 million bpd respectively, the data showed. The agency revised its July production figure slightly lower to 10.93 million bpd. Output from the United States has boomed thanks to a shale revolution, with production from the nation’s largest oilfield, the Permian basin that spans West Texas and New Mexico, leading the increase. Meanwhile, natural gas production in the lower 48 U.S. states rose to an all-time high of 94.7 billion cubic feet per day (bcfd) in August, up from the prior record of 92.7 bcfd in July, according to EIA’s 914 production report. In Texas, the nation’s largest gas producer, production increased to a record high 24.9 bcfd in August, up 1.7 percent from July. That compares with output of 21.8 bcfd in August 2017. In Pennsylvania, the second biggest gas producing state, production rose to a record high 17.3 bcfd in August, up 1.8 percent from July. That compares with output of 14.5 bcfd in August 2017. 

US oil output surges but growth likely to moderate in 2019- John Kemp (Reuters) - U.S. crude oil production is rising at the fastest rate on record as the increase in prices over the last year boosts drilling and completion activity and energy firms employ more horsepower to fracture larger wells. Crude and condensates output hit a record 11.35 million barrels per day in August, up from 10.93 million bpd in July, according to the U.S. Energy Information Administration (“Petroleum Supply Monthly”, EIA, Oct. 31). Crude output has increased by more than 2 million barrels per day over the past 12 months, an absolute increase that is unparalleled in the history of the U.S. oil industry (https://tmsnrt.rs/2P1FGR7 ). In percentage terms, output is up by nearly 25 percent over the last year, the fastest increase since the 1950s (excluding the recovery from hurricanes). U.S. oil production is now rising faster than at the height of the last drilling and fracking boom before prices slumped in the second half of 2014. Most of the increase is coming from onshore shale fields, where output has risen by more than 1.9 million bpd over the last year, with a smaller contribution from the Gulf of Mexico, where output is up 200,000 bpd. In the first nine months of the year, the number of wells drilled in the United States was up by 26 percent while well completions were up by 24 percent (“Drilling productivity report”, EIA, Oct. 15). Increasing U.S. output has helped alleviate earlier concerns about a possible crude shortage following the re-imposition of U.S. sanctions on Iran with effect from Nov. 5. Surging domestic output coupled with increased production from Russia, Saudi Arabia and a number of other OPEC countries has pushed oil prices lower and driven the futures markets back towards contango. Spot prices and calendar spreads for WTI have weakened rapidly since July, much further and faster than for Brent, in response to the improved availability of crude in the midcontinent of the United States. 

Baker Hughes- US rig count down 1 unit to 1,067 - Oil & Gas Journal- The US drilling rig count is down 1 unit to 1,067 rigs working for the week ended Nov. 2, according to Baker Hughes data. The count is up 169 units from the 898 rigs working this time a year ago. Rigs drilling on land remained unchanged at 1,046 units for the week. Offshore units were down a single rig to 18 units working, while those drilling in inland waters remained unchanged at 3 rigs working for the week. US oil-directed rigs were down 1 unit from last week to 874 units working, and up from the 729 rigs drilling for oil this week a year ago. Gas-directed rigs remained unchanged at 193 units, up from the 169 units drilling for gas a year ago. Among the major oil and gas-producing states, Oklahoma saw the largest increase in rigs for the week with a 3-unit gain to reach 144. New Mexico, Louisiana, and Ohio each gained a single rig with 102, 62, and 18 rigs running, respectively. Six states were unchanged this week: North Dakota, 54; Colorado, 32; Wyoming, 30; California, 15; Utah, 6; and Alaska, 5. Texas dropped the most rigs, ending the week down 4 units to 533. Dropping a single unit were Pennsylvania, 43; West Virginia, 13; and Kansas, 0. Canada lost 2 rigs for the week. With 198 rigs running, the count is higher than the 192 units drilling this week a year ago. Canada dropped 3 oil-directed rigs to reach 121 units for the week but gained a single gas-directed rig to reach 77 units.

Prices Slide On Moderating Weather Forecasts And Record US Production -- Kyle Cooper - Highlights of the Natural Gas Summary and Outlook for the week ending October 26, 2018 follow. The full report is available at the link below.

• Price Action: The November contract fell 6.5 cents (2.0%) to $3.185 on a 14.8 cent range ($3.250/$3.102).
• Price Outlook: Prices slid and established a new weekly after last week’s rare inside week. The market moved lower as weather forecasts moderated and the EIA reported a much larger than expected weekly storage change. Physical data has also turned 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.  The current weather forecast is now warmer than 7 of the last 10 years. Pipeline data indicates total flows to Cheniere’s Sabine Pass export facility were at 3.5 bcf. This flow volume suggests feed gas is entering Train 5. Cove Point is net exporting 0.7 bcf.
• Weekly Storage: US working gas storage for the week ending October 19 indicated an injection of +63 bcf. Working gas inventories rose to 3,095 bcf. Current inventories fall (615) bcf (-16.6%) below last year and fall (618) bcf (-16.6%) below the 5-year average.
• Supply Trends: Total supply fell (1.2)bcf/d to 81.3 bcf/d. US production fell. Canadian imports fell. LNG imports fell. LNG exports rose. Mexican exports fell. The US Baker Hughes rig count rose +1. Oil activity increased +2. Natural gas activity decreased (1). The total US rig count now stands at 1,068 .The Canadian rig count rose +9 to 200. Thus, the total North American rig count rose +10 to 1,268 and now exceeds last year by +168. The higher efficiency US horizontal rig count rose +1 to 927 and rises +158 above last year.
• Demand Trends: Total demand rose +2.4 bcf/d to +72.7 bcf/d. Power demand fell. Industrial demand fell. Res/Comm demand rose. Electricity demand fell (4,636) gigawatt-hrs to 69,464 which trails last year by (187) (-0.3%) and trails the 5-year average by (640)(-0.9%%).
• 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 75,871 MW.

The heating season has begun. With a forecast through November 9 the 2018/19 total cooling index is at (109) compared to (155) for 2017/18, (37) for 2016/17, (76) for 2015/16, (125) for 2014/15, (167) for 2013/14, (186) for 2012/13 and (162) for 2011/12.

Can U.S. Gas Demand Keep Up With Surging Production? - Natural gas production hit another high in the United States at approximately 87 billion cubic feet per day (Bcf/d) over the last weekend. The rise in production contributed to a total gas supply over 91 Bcf/d before we even head into the winter months.The surge in domestic natural gas production comes at the same moment as we are experiencing a shortage in storage going into the season with highest natural gas demand. Storage is vital during the winter months when demand for natural gas spikes and production is not able to keep up, causing the necessity to dip into reserves.Currently storage is at a 10-year low, coming in below 3.2 trillion cubic feet of available storage capacity. What’s more, net imports of Canadian natural gas have been low thanks to Enbridge’s pipeline rupture near Prince George, British Columbia. When the import volumes return to their normal levels, total gas supplies in the U.S. would rise even higher, potentially exceeding 92 Bcf/d.Most estimates for this week’s Energy Information Administration (EIA) weekly storage report project that there will be an injection in the low 50s Bcf, not nearly enough to make a dent in the persistent storage deficit.A Reuters poll of 18 market participants showed a range of 39 Bcf to 65 Bcf, with a median build of 51 Bcf. At this time last year, the build was 63 Bcf, and the five-year average is 77 Bcf for the corresponding period, emphasizing the shortcomings of this week’s storage injection.Natural gas demand can’t be expected to spike in early November either, with a very mild forecast for the coming weeks. We can therefore continue to expect a relatively low heating demand nationwide, despite several cold snaps in the Midwest and Northeast. In the face of this news, natural gas futures have been falling accordingly. Nymex futures settled at $3.166 for November, down 4.6 cents on the day. December plummeted 5.6 cents, ending up at $3.227, and the winter strip (November through March) went down 5.4 cents to $3.174. That being said, weather model volatility and market uncertainty means that big price swings more than likely in the near future. Meanwhile, despite depressed gas prices and major storage shortages, across the country production is natural gas production is ramping up.

NYMEX December gas rises despite warmer winter outlook - — NYMEX December natural gas futures contract rose 7.4 cents and settled at $3.261/MMBtu Wednesday, despite a warmer-than-average weather outlook The front-month contract traded between $3.207/MMBtu and $3.275/MMBtu. The National Weather Service calls for a likelihood of warmer-than-average temperatures over the next six to 10 days across much of the US. But prices were pushing up despite the expected warm start to winter, likely because the market is still indecisive about winter demand as storage stocks sit well below the five-year average. Current national stocks sit at 3.095 Tcf, a deficit of nearly 17%, or 624 Bcf, to the five-year average of 3.719 Tcf, according to the US Energy Information Administration. Bullish storage expectations are likely driving Wednesday's gains. A consensus of analysts surveyed by S&P Global Platts expects a 52-Bcf injection for the week ended October 26, significantly below the five-year average of 62 Bcf. Total US supply is set to drop by 700 MMcf day on day to 88.1 Bcf Wednesday, according to Platts Analytics. Much of the declines are likely to be driven by total dry gas production, which is estimated to drop by 600 MMcf on the day to stand at 84.7 Bcf. Over the past five days, production averaged 85.1 Bcf/d, an increase of 600 MMcf/ d from the prior five days. Output increased 600 MMcf/d month on month to average 84.0 Bcf/d for October. Average production stood at 74.5 Bcf/d in October 2017. Platts Analytics projections show output is likely to average nearly 85 Bcf/d over the next two weeks. US demand is estimated to drop nearly 1 Bcf and slide to 70.2 Bcf Wednesday, according to Platts Analytics data, likely on mild temperature expectations. Over the next seven days, demand is projected to average 70.7 Bcf/d, which is largely in line with the 71.8 Bcf/d demand seen during the same time last year.

Weather Spooks Natural Gas For Halloween - It was a spooky Halloween for natural gas bears as the December natural gas contract shot up over 2% and continued running after the settle on significantly colder afternoon weather model runs.  These bullish weather forecasts sent the December/January Z/F contract spread to new narrow levels.  This came after firmer cash prices initially spiked the front of the strip higher this morning as well.  Our Morning Update for clients did show many of these Week 2 cold risks that intensified overnight but appeared to die off into early Week 3. Though that trend held in afternoon model guidance, cold earlier in Week 2 was seen being even more intense.  The result was a forecast with solidly more cold risks for the 8-14 Day time period per the Climate Prediction Center.  Traders are now attempting to determine just how intense and long lasting any Week 2 cold shot(s) will be, weighing the latest forecasts against the EIA storage number that comes out tomorrow morning. In our Afternoon Update we broke down all the latest forecasts through the day as well as our thoughts on how intense the cold gets, when it may break, what EIA data should show tomorrow, and what that could mean for prices. To give this all a look, and see all our extensive coverage of weather and natural gas, here

Slightly Smaller Gas Injection Can't Break Prices Up - After strength early this morning, the December natural gas contract settled down a bit less than a percent as record production numbers and bearish fundamental headlines outweighed a slightly smaller than expected storage injection as announced by the EIA.  In what was a new development, it was the February contract that saw the largest losses on the day.  Prices initially found strength on firm physical prices and overnight forecasts that were still relatively supportive. This was unsurprising as we noted in our Afternoon Update yesterday there was "short-term upside above $3.3 increasingly possible if this cold signal holds overnight..." as it did. Then our Morning Update outlined that "a brief bounce over $3.3 appears likely" but "...bounces above $3.3 appear likely to fail through tomorrow" thanks in part to forecasts that did not cool all that much more overnight, and sure enough prices reversed off a high of $3.318 down to a low of $3.216.  Those forecasts did cool this afternoon, though, as we saw another slew of colder weather model guidance.  While this did provide support, gas prices were already off solidly following an EIA print that was 5 bcf below our 53 bcf estimate but just a touch below the consensus.   Of note was a meager build of just 1 bcf in the East thanks to much colder weather last week.  In our Morning Update we outlined "slight downside risks to our +53 bcf estimate today" which played out but also had outlined that the number was expected to be loose overall either way. Then in our Afternoon Update we broke down what the print seems to mean for the natural gas market as well as what next week's print would likely hold as we looked at this week's weather-adjusted balances. We concluded with our view on how current weather forecasts are likely to shift into the weekend and how that should impact natural gas prices. To give this Update a look, and begin receiving all our detailed weather and natural gas-driven analysis, try out a 10-day free trial here.

Crazy Weather Models Shake Up Nat Gas - Weather continues to push around natural gas at will, with far warmer overnight weather models pushing prices far lower before colder afternoon model guidance shot prices back up to new highs.  Weather was clearly the primary reason for the spike with the front of the strip making the largest gain on the day.
The result was another significant spike in the Z/H December/March contract spread.  Prices initially were off significantly this morning as we noted a solid dip in GWDDs in the medium and long-range in overnight forecasts.  The Climate Prediction Center noted these trends in the 8-14 Day outlook today, which warmed but did not take into account all of the colder afternoon model guidance.  Afternoon GEFS weather model guidance trended significantly colder to start things off, sending prices soaring with a significant medium-range cold shot (model images courtesy of Tropical Tidbits).  Headed into the weekend, traders were forced to decide whether these trends would hold or intensify, with clear volatility across weather models. In our Pre-Close Update we outlined how we expected weather models to trend over the weekend, while also looking at how the latest weather-adjusted balances could influence price action as we moved into next week.

Cold Snap Could Send Natural Gas To $5 - The natural gas market is looking rather tight, even as U.S. production continues to set new records. Inventories fell sharply last winter, leaving the country a little light on stocks heading into injection season. That did not concern the market much, with record-setting production expected to replenish depleted inventories. However, the past six months has not led to surging stockpiles, and inventories replenished at a much slower rate than expected. We are about to enter the winter heating season with inventories at their lowest level in 15 years. For the week ending on October 19, the U.S. held 3,095 billion cubic feet (bcf) of natural gas in storage, or 606 bcf lower than at this point last year, and 624 bcf below the five-year average. The reason for this is multifaceted, with seasonal weather playing a role, but also structural increases in demand. “Hot summer weather, LNG liquefaction demand, exports to Mexico, and the industrial sector have all mitigated the impact from a 8.7 bcf/d YoY production growth surge this summer,” Bank of America Merrill Lynch said in a recent note. Low inventories and potential deliverability risks led the investment bank to hike its price forecast for the first quarter of 2019 to $4 per MMBtu, up from a prior estimate of just $3.40/MMBtu. Peak winter demand in the early 2000s stood at around 75 to 85 billion cubic feet per day (bcf/d), according to BofAML. That figure spiked to 100 bcf/d last winter, helping to explain the rapid decline in inventories. There was a cold snap in early January, but the winter on the whole was “near normal,” BofAML argues, making the steep fall in stocks all the more remarkable. In other words, demand is structurally much higher than it used to be; the sudden tightness is not just because of a seasonal anomaly. A cold snap this upcoming winter could lead to a price spike, especially with the inventory buffer so low. “The Polar Vortex winter of 2013-2014 realized a record low salt inventory level of 54 bcf,” BofAML said. Salt inventories are those that can be called upon quickly. “Another Vortex, which on average has occurred once every 7 years in the 1950-2018 period, would be catastrophic,” Bank of America Merrill Lynch warned.

Gastar Exploration Files for Chapter 11 Bankruptcy - Gastar Exploration Inc., a pure play Mid-Continent independent energy company, has entered into a restructuring support agreement (RSA) with Ares Management LLC, the company's largest funded-debt creditor and shareholder, Gastar announced Oct. 26. After Gastar’s failed efforts to repay or refinance debt or sell the company, it decided to file Chapter 11 bankruptcy. The restructuring will eliminate more than $300 million of the company’s debt and will provide $100 million in new, committed financing to fund the Gastar’s restructuring process and ongoing business operations.“The restructuring agreement we signed today is a comprehensive plan that will ensure Gastar remains competitive in its industry,” Gastar’s interim CEO Jerry R. Schuyler said in a company statement. “We can now set our sights on facilitating a smooth, efficient in-court restructuring while continuing to meet our obligations to our employee and vendor constituencies.” Gastar anticipates it will consummate the plan and emerge from Chapter 11 before the end of the year.

Shale oil becomes shale fail (and a nice subsidy for consumers) - I'm tempted to say the following to the writers of two recent pieces (here and here) outlining the continuing negative free cash flow of companies fracking for oil in America: "Tell me something I don't already know."But apparently their message (which has been true for years) needs to be repeated. This is because investors can't seem to understand the significance of what those two pieces make abundantly clear: The shale oil industry in the United States is using investor money to subsidize oil consumers and to line the pockets of top management with no long-term plan to build value.There is no other conclusion to draw from the fact that free cash flow continues to be wildly negative for those companies most deeply dependent on U.S. shale oil deposits. For those to whom "free cash flow" is a new term, let me explain: It is operating cash flow (that is, cash generated from operations meaning the sale of oil and related products) minus capital expenditures. If this number remains negative for too long for a company or an industry, it's an indication that something is very wrong.Only nine of 33 shale oil exploration and production companies reviewed in the report cited above had positive free cash flow for the first half of 2018. This is  even though prices had risen all the way from a low of around $30 in 2016 to the mid-$70 range by the middle of this year.To get an idea of just how bad it has been even through periods when the price of oil averaged above $100 in 2011, 2012, 2013 and most of 2014, here are the annual free cash flows in dollars of those 33 companies combined since 2010 and they are all negative: -14 billion (2010), -21.9 billion (2011), -37.8 billion (2012), -16.8 billion (2013), -33 billion (2014), -34.4 billion (2015), -18.3 billion (2016), -15.5 billion (2017). Capital expenditures are what companies invest in future production—in this case, the  acquisition of new oil deposits and the drilling and completion of new wells and associated infrastructure. Because operating cash flow has not been sufficient to cover the drilling of new wells, companies must either issue new debt or new shares to raise money to do so. The former makes companies more likely to go bankrupt if oil prices turn down and the latter dilutes the value of the company for existing shareholders. Either way, it's not good news for investors.

US Shale Oil Industry- Catastrophic Failure Ahead -- While the U.S. Shale Industry produces a record amount of oil, it continues to be plagued by massive oil decline rates and debt. Moreover, even as the companies brag about lowering the break-even cost to produce shale oil, the industry still spends more than it makes. When we add up all the negative factors weighing down the shale oil industry, it should be no surprise that a catastrophic failure lies dead ahead. Of course, most Americans have no idea that the U.S. Shale Oil Industry is nothing more than a Ponzi Scheme because of the mainstream media’s inability to report FACT from FICTION. However, they don’t deserve all of the blame as the shale energy industry has done an excellent job hiding the financial distress from the public and investors by the use of highly technical jargon and BS. For example, Pioneer published this in the recent Q2 2018 Press Release: Pioneer placed 38 Version 3.0 wells on production during the second quarter of 2018. The Company also placed 29 wells on production during the second quarter of 2018 that utilized higher intensity completions compared to Version 3.0 wells. These are referred to as Version 3.0+ completions. Results from the 65 Version 3.0+ wells completed in 2017 and the first half of 2018 are outperforming production from nearby offset wells with less intense completions. Based on the success of the higher intensity completions to date, the Company is adding approximately 60 Version 3.0+ completions in the second half of 2018. Now, the information Pioneer published above wasn’t all that technical, but it was full of BS. Anytime the industry uses terms like “Version 3.0+ completions” to describe shale wells, this normally means the use of “more technology” equals “more money.” As the shale industry goes from 30 to 60 to 70 stage frack wells, this takes one hell of a lot more pipe, water, sand, fracking chemicals and of course, money. However, the majority of investors and the public are clueless in regards to the staggering costs it takes to produce shale oil because they are enamored by the “wonders of technology.” For some odd reason, they tend to overlook the simple premise that… MORE STUFF costs MORE MONEY. Of course, the shale industry doesn’t mind using MORE MONEY, especially if some other poor slob pays the bill.

Why Majors Will Take a Bigger Role in US Shale - Independent producers will forever be pioneers of the U.S. shale sector, but as the play matures, expect major oil companies to play a growing and critical role in its future development. Majors, with their financial strength and integrated solutions, are well-equipped to handle the structural challenges that the U.S. shale sector now faces, from insufficient pipeline and export infrastructure in the Permian and Gulf Coast, to excessive gas flaring in Bakken. The time also looks right for majors get more involved and “scale up” in shale. Big Oil remains very light in U.S. shale oil relative to other upstream assets in their portfolio. Majors have traditionally focused on “megaprojects,” schemes such as those in deep water or oil sands, where capital investments are massive and payback periods are long. Giants like Royal Dutch Shell plc and Total S.A. have already exited from Canada’s oil sands, where they believe breakeven costs are too high. The onset of the low-carbon energy transition also must be considered, and the fact is that oil sands emit more carbon dioxide than any other oil projects and must produce for many years—at relatively high oil prices—to deliver sufficient financial returns. U.S. shale oil, on the other hand, has proven its mettle at low prices, having stood up to OPEC in a price war. Breakeven prices for shale have been driven below $40 a barrel and are even lower for companies fracking the best rock. Shale is a “short-cycle” upstream asset, meaning new production can be brought on within months after investment decisions are made. That’s a highly attractive feature to majors, which must not only manage today’s volatile prices but also consider the long-term demand outlook for new “long-cycle” megaprojects. Would majors greenlight a $55-billion project like Kashagan again? Probably not. 

Canadian Producers Turn to Oil Trucks -- The highways of Saskatchewan show just how desperate Canadian oil producers are to get their crude to market. Tanker trucks laden with oil are journeying almost 500 miles (800 kilometers) to pipeline and rail terminals. It’s a phenomenon that Ken Boettcher, president of Three Star Trucking Ltd. in Alida, Saskatchewan, started to see three or four months ago when oil shippers around Kindersley, near the Alberta border, began requesting trucks to move their crude, in some cases, as far south as North Dakota. “Its never been a common practice before,” he said in a phone interview. “They can probably buy it cheaper and bring it down here and blend it.” Canada’s pipeline bottlenecks are pushing Canadian crude prices to the lowest in at least a decade, which has made shipping oil by truck more cost effective. At Hardisty, Alberta, heavy Western Canadian Select sold for $52.40 a barrel less than West Texas Intermediate crude futures earlier this month, the biggest discount in Bloomberg data going back to 2008. Almost 230,000 barrels of crude were exported by truck in August, the most in data going back to January 2015, according to data provided by Statistics Canada. Every month since December, more than 100,000 barrels have been exported by truck. A typical tanker truck can carry about 250 barrels of oil, Boettcher said. Hiring a truck to ship crude from the Permian basin of West Texas to Houston, a distance of almost 500 miles, costs about $15 a barrel one way, or double that if the tanker returns empty, said Sandy Fielden, director of research for the commodities group at Morningstar Inc. Pipeline constraints in Canada, combined with a surge of new oil-sands production, have created more demand for oil trucks. One export pipeline, Enbridge Inc.’s Line 3, is scheduled to be expanded by late next year, but other projects continue to face delays, including the planned expansion of the Trans Mountain pipeline to the British Columbia coast.

Repairs completed on ruptured gas pipeline near Prince George, B.C.- Enbridge - Enbridge Inc. says it has successfully completed repairs on the section of a natural gas pipeline that ruptured and burned near Prince George, B.C., three weeks ago. The company says following a comprehensive integrity assessment, it expects to begin safely returning the repaired segment to service within the next two days. It says it will gradually increase flows of natural gas through the repaired segment until it reaches 80 per cent of its normal operating pressure. A smaller pipeline nearby returned to service two days after the explosion, also at 80 per cent of its normal pressure, which the company says helps ensure the ongoing safety and integrity of the system. Once the repaired segment is returned to service, Enbridge says the system is expected to safely deliver between 23 and 25 million cubic metres of natural gas per day to B.C.’s Lower Mainland and the U.S. Pacific Northwest. The return-to-service plan has been reviewed by the National Energy Board and Enbridge says it’s conducting a comprehensive dig to help further validate the integrity of the entire system. The company says until it’s fully satisfied it is safe to operate the lines at full capacity, and subject to regulatory review, both pipelines will continue to operate at reduced pressure. It adds there are a number of assumptions, risks and uncertainties that might delay its plans for returning the pipeline to service.

TransCanada Moves Ahead with $1.5B NOVA Gas Expansion - Calgary-based pipeline company TransCanada Corporation is moving forward with its $1.5 billion NOVA Gas Transmission Ltd. (NGTL) expansion, the company announced Oct. 31.The expansion will move gas from Alberta and British Columbia to markets all over North America.The expansion plan includes about 197 kilometers (122 miles) of large diameter pipeline, three compression units, meter stations and associated facilities.“The NGTL System continues to expand as parties require and contract for greater pipeline capacity to meet the growing demand for clean-burning natural gas from domestic and export markets,” Russ Girling, TransCanada’s CEO, said in a company statement. “This new investment brings the capacity expansion programs underway on the NGTL System to more than $9 billion.”Applications for approvals to construct and operate the facilities are expected to be filed with the National Energy Board in 2Q 2019. Construction could begin as early as 3Q 2020 with most of capital investments happening in 2021 and 2022.    TransCanada just reported its third quarter profits at $928 million.

Greenland says China oil majors eyeing Arctic island's onshore blocks (Reuters) - China National Petroleum Corp (CNPC) and China National Offshore Oil Corp (CNOOC) have expressed interest in bidding for onshore oil and gas blocks in Greenland to be offered in 2021, officials from the island said on Tuesday. The Arctic island, a self-ruling part of Denmark, is shifting its oil and gas licensing strategy from offshore to onshore in an effort to generate revenues faster, they said. The next blocks to be tendered will be on the Disko Island and Nuussuaq Peninsula area of West Greenland, industry and energy minister Aqqalu Jerimiassen told Reuters on the sidelines of a Greenland Day event at the Danish embassy in Beijing. Jerimiassen, who took office in May, said he met with the two Chinese oil majors, as well as China’s National Energy Administration, on Monday. The Chinese asked for follow-up meetings to discuss technical issues, said Jorn Skov Nielsen, Jerimiassen’s deputy. “They have not been active in Greenland earlier. It’s a new approach,” he added. “We are moving the short-term strategy of licensing onshore”. CNPC and CNOOC did not immediately respond to a request for comment. In neighbouring Iceland, CNOOC has been exploring the offshore Dreki area but has not reported any finds. Nielsen said it was too early to say how many blocks would be tendered, or to give an estimate for the resources in the “highly prospective” area. The U.S. Geogological Survey puts Greenland’s offshore oil and gas resources at about 50 billion barrels of oil equivalent, he said. Greenland’s domestic energy goal is to be powered 100 percent by clean energy by 2030, Jerimiassen later told a press conference, up from the current 70 percent, which is mostly from hydropower. Greenland will set up a representative office in Beijing “within a year,” to boost trade ties with China, Nielsen said. Denmark and the United States have been concerned about China’s interest in Greenland, notably over potential Chinese involvement in the financing and construction of airports. 

Fracking in Lancashire- Second 0.8 tremor in 24 hours - A second tremor of 0.8 magnitude has been recorded within 24 hours at the UK's only active site for fracking. It was detected on Saturday after drilling for shale gas resumed in Lancashire following a 0.8 tremor on Friday. Neither was felt at surface.   Since 15 October, Little Plumpton has been the first UK shale fracking site after the process was halted in 2011 when it was linked with earthquakes. Fracking firm Cuadrilla said it aimed to resume operations on Monday.  The process restarted on Saturday morning after a 0.8 magnitude tremor on Friday, which is categorised as a "red" event by the monitoring system regulated by the Oil and Gas Authority.Saturday's tremor was detected at the firm's site in Little Plumpton after work ended for the day on Saturday, when operations finish at 13:00.Any tremor measuring 0.5 or above means fracking must be temporarily stopped while tests are carried out.  A Cuadrilla spokeswoman said that, as the operations had finished before the detection, "This is not an 'red' incident under the traffic light system operated by the Oil and Gas Authority as we were not pumping fracturing fluid as part of our hydraulic fracturing operations at the time."However we will, as always, continue to monitor the seismic activity closely and plan to resume hydraulic fracturing on Monday 29 October."She said all relevant regulators had been informed.A spokesman for the the Oil and Gas Authority said: "While the operations at the Preston New Road site have been designed to minimise any disturbance, minor events like these were expected." He added: "Provided that the event is in line with the agreed Hydraulic Fracture Plan and the risk of induced seismicity continues to be appropriately managed, then operations may resume on Monday."

Fracking stopped again in Lancashire after 'biggest earthquake so far' - Fracking has stopped at a gas exploration site in Lancashire for the third time in 15 days after the biggest earthquake recorded so far. Energy firm Cuadrilla confirmed work had stopped again as a micro-seismic event measuring 1.1 magnitude on the Richter scale was detected at about 11.30am on Monday. It’s the 27th earthquake – and biggest – since fracking began on October 15, and has officially been classed as a ‘red event.’A Cuadrilla spokesman said: ‘This is the latest micro-seismic event to be detected by the organisation’s highly sophisticated monitoring systems and verified by the British Geological Survey (BGS). ‘This will be classed as a ‘red’ event as part of the traffic light system operated by the Oil and Gas Authority, but as we have said many times, this level is way below anything that can be felt at surface and a very long way from anything that would cause damage or harm. ‘In line with regulations, hydraulic fracturing has paused for 18 hours now, during which seismicity will continue to be closely monitored by ourselves and the relevant regulators. 

Cuadrilla hails natural gas flow from Lancashire fracking operation - Gas has begun to reach the surface of the Preston New Road site, after Cuadrilla used hydraulic fracturing to free a small section of shale rock inside an exploration well. “Tthis is a good early indication of the gas potential that we have long talked about,” said chief executive Francis Egan. While the gas volume is small, Cuadrilla has been restricted by several “micro-seismic” tremors at the site, where fracking has been stopped since 2011 after being linked to two earthquakes. The most recent tremor occurred on Monday, leading the firm to pause operations for 18 hours, and marking the fifth such event in six days. However, Cuadrilla said it plans to “fully test” flow from its first two exploration wells towards the end of this year and into early 2019.    “This initial gas flow is by no means the end of the story. However it provides early encouragement that the Bowland Shale can provide a significant source of natural gas to heat Lancashire and UK homes and offices and reduce our ever growing reliance on expensive foreign imports.

Minor earthquakes emerge as major threat to UK fracking - Protests, legal challenges and planning rejections have failed to stop the return of fracking in Britain, but the government’s regulations on earthquakes are fast emerging as the biggest threat to the nascent shale gas industry. The energy company Cuadrilla has been forced to stop work at its Preston New Road site in Lancashire twice in four days – on Friday last week and on Monday – due to minor earthquakes occurring while it was fracking. The tremors breached a seismic threshold imposed after fracking caused minor earthquakes at a nearby Cuadrilla site in 2011. Francis Egan, the firm’s chief executive, told the Guardian on Monday that the limits were proving “extremely challenging” and it was time they were reconsidered. But the energy minister, Claire Perry, rejected that call, saying it would be “a very foolish politician” who relaxed standards “when we we are trying to reassure people about safety”.  Fracking firms must temporarily halt operations if a quake is triggered above 0.5-magnitude – far below anything that could be felt at the surface. If a 0.5-magnitude tremor occurred at surface-level, it would be akin to the vibrations of a passing car. The architects of the regulations are split on whether there should be a rethink. Peter Styles, one of the geologists who set the threshold, said: “We have started this frack now. If we stop now, we will never learn what happens in the UK situation. My opinion is for better or for worse they’re [Cuadrilla] going to have to tough it out unless we get earthquakes that are significant enough to be disruptive.” Styles, professor emeritus in applied and environmental geophysics at Keele University, said it was right the government rejected calls by Egan to lift the limit.“They [Cuadrilla] don’t like it because it costs them money when they stop, but that’s part of this game. It’s not the time to raise it. Let’s carry it out under these rules, observe it, and then revisit it when we have the data.”

Study suggests why fracking causes earthquakes in some places but not others - New research is digging in to why fracking causes earthquakes in some areas but not in others. A paper published Monday in Geophysical Research Letters suggests the likelihood of an artificial earthquake is heavily influenced by how stable the ground was before the energy industry showed up. "Some places appear to be particularly responsive to (artificially-)occurring earthquakes while other places aren't," said Honn Kao, a seismologist with the Geological Survey of Canada and lead author. Related Stories References to fracking, oil, birth policies removed from CAQ website N.B. Liberals question Tory leader campaigning with Alberta's Jason Kenney N.B. business groups call on province to reconsider fracking ban B.C. conducts study on effects of fracking for natural gas Scientists have known for some time that injecting fluids to dispose of wastewater or to free underground reserves of oil and gas can cause earthquakes. Regulatory records show there have been hundreds of seismic events since 2015 in a heavily fracked area of northwestern Alberta. Those earthquakes around the Fox Creek area have registered as high as 4.5 on the Richter scale -- strong enough to rattle dishes and pictures. Alberta's energy regulator has tightened restrictions on fracking in the area. Meanwhile, other regions see thousands of wells fracked while the earth remains still. While the link between fracking and earthquakes is well-established, precisely how that link works remains mysterious. Other studies have asked if it's related to local geology or particular fracking practices, but Kao said he's found a much more important contributor. "The background tectonic loading rate appear to be one of the predominant factors that control the region's response to injection-induced earthquakes," he said. In other words, the deep, underground shifting of Earth's rocky tectonic plates create zones where tension is concentrated and stored like a coiled spring, called tectonic deformation. The sudden shattering of rock through fracking or the injection of high-pressure wastewater releases that pent-up energy in the form of an earthquake. The finding could help explain why western Alberta and northeast B.C. have a high rate of fracking-induced earthquakes and places such as Saskatchewan, which has thousands of fracked wells, doesn't.

BP profit more than doubles on stronger oil prices -- BP reported third-quarter profits more than doubled on Tuesday, underpinned by stronger oil prices. The British oil giant posted first-quarter underlying replacement cost profit, used as a proxy for net profit, of $3.8 billion for the three-month period ending Sept 30. Analysts at data firm Refinitiv had been expecting third-quarter net profit to come in at around £3.013 billion ($3.847 billion).In the third quarter of 2017, BP reported net profit of $1.865 billion."Overall a good set of results with everything working well," Brian Gilvary, CFO at BP, told CNBC's "Squawk Box Europe" on Tuesday.Here are the key takeaways:

• Underlying replacement cost profit, used as a proxy for net profit, came in at $3.8 for the three-month period ending Sept 30.
• In the third quarter of 2017, BP reported net profit of $1.865 billion.
• Dividend of 10.25 cents a share for the third quarter, 2.5 percent higher than a year earlier

Earlier this year, BP announced the acquisition of BHP's Billiton's shale assets for $10.5 billion. At the time, the oil firm claimed the purchase would allow it to beef up its U.S. business and increase earnings and cash per share.The original deal was agreed with BP offering 50 percent cash and 50 percent shares for BHP Billiton's shale assets. However, the company announced it would now complete the transaction at the end of the month from available cash without resorting to a rights issue as planned.Gilvary said this "simplified the transaction an awful lot." Oil and gas production for the first nine months of the year rose to 2.5 million barrels of oil equivalent per day and was well placed to increase further, BP said, thanks in large part to its acquisition of BHP's U.S. shale business.

Shell Produces One of Its Strongest Ever Quarters - Royal Dutch Shell’s CEO Ben van Beurden announced Thursday that good operational delivery across all Shell businesses produced one of the company’s “strongest ever quarters”. The company reported cash flow from operating activities of $12.1 billion in the third quarter (3Q), which included negative working capital movements of $2.6 billion, compared with $7.6 billion in the third quarter of 2017, which included negative working capital movements of $1.3 billion. “Excluding working capital movements, cash flow from operations of $14.7 billion mainly reflected increased earnings and higher dividends received,” Shell said in its latest results statement. Shell’s CCS (current cost of supplies) earnings attributable to shareholders in 3Q were $5.6 billion, excluding identified items, compared with $4.1 billion, excluding identified items, in 3Q 2017. “Earnings primarily benefited from increased realized oil, gas and LNG prices as well as higher contributions from trading in Integrated Gas, partly offset by lower margins in Downstream, higher deferred tax charges in Upstream and adverse currency exchange effects,” Shell said in its results statement. 

Low Rhine River water levels disrupt petroleum product shipments to parts of Europe - Historically low water levels on the Rhine River in Europe have resulted in transportation disruptions for shipments of petroleum products by barge, which in turn have resulted in higher freight costs and higher prices in markets upriver, such as in southern Germany. These disruptions are occurring at a time when markets along the Rhine River typically build inventories of distillate fuel for space heating ahead of the winter. The Rhine River, which runs northwest from Switzerland through Germany, France, and the Netherlands into the North Sea, is a major petroleum product transportation corridor. The navigable portions of the river connect the major refinery and petroleum trading centers of Amsterdam and Rotterdam in the Netherlands and Antwerp in Belgium, collectively known as the ARA, to inland markets. Tanker barges carry petroleum products from the ARA upriver to inland bulk distribution terminals that provide petroleum products to nearby areas. Water levels on the Rhine River fluctuate with seasonal rainfall, and both high and low water levels can create problems for barges: high water levels on the Rhine may put barges at risk of potentially striking bridges over the river, and low water levels mean barges risk becoming stuck and hitting the river bottom. Within safety and operational constraints, barges adjust the amount of cargo they carry to balance bridge clearance and deep draft restrictions based on water levels. Low water levels mean barges must carry less cargo, increasing the freight rate per unit of cargo. Water levels on the Rhine River measured at Kaub, Germany—near the Rhine’s midway point—have recently reached historic lows. The average water level at Kaub in October was 1.7 feet, compared to the five-year average level of 4.8 feet. The record low water levels in October 2018 are a sharp contrast to the water levels of early 2018 when water levels were at more than 20 feet.

NT's fracking emissions could cost more than $4b a year to offset by 2030, report finds - Offsetting emissions generated by fracking could cost up to $4.3 billion per year when the shale gas industry is at full production in the Northern Territory in 2030, according to new research by the Australia Institute. The huge sum is a warning sign of the mammoth task at hand for those responsible for developing a yet-to-be-implemented emissions offset framework in the Territory. The Australian Petroleum Production and Exploration Association has rejected the findings, labelling them a "deliberate attempt" to overstate potential emissions. Chief Minister Michael Gunner is bound by his word after he accepted in-full the fracking inquiry's recommendation that the NT and Australian governments seek to ensure there is no net increase in greenhouse gas emissions from onshore gas produced in the NT. "The Government made a very clear undertaking publicly that it would require all emissions to be offset, it's absolutely essential that it goes ahead," Australia Institute principal adviser Mark Ogge said. Mr Gunner indicated that he is waiting on the Federal Government to take the lead on emissions policy. "There's been a change of Prime Minister since those conversations [about national emissions policy] have started and the current Australian Government's policy is not entirely clear," he said.

Defiant Energy Policy of Mexico’s President-Elect Rattles Moody’s and Fitch - Moody’s has rated the $2 billion of senior unsecured notes due 2029 that Mexico’s state-owned oil company Pemex is in the process of issuing one notch above junk. Pemex is offering to pay a coupon interest rate of 6.5%. In its report on Friday, Moody’s blamed the company’s “weak liquidity, a heavy tax burden and the resulting weak free cash flow, high financial leverage and low interest coverage; and challenges related to crude production and reserve replacement.”Moody’s is also worried about the large amounts of debt coming due in 2020 and beyond. And Pemex will continue to be “dependent on debt capital markets to fund negative free cash flow,” it said.Fitch Ratings downgraded the outlook for Pemex’s debt from stable to negative amid concerns about the incoming government’s proposed energy policies. It rates Pemex three notches above “junk” (BBB+), but only because the company is state-owned. Its standalone credit profile — if Pemex were not backstopped by the Mexican state — is junk, seven notches into junk (CCC). Fitch has also warned earlier that if Pemex’s credit rating drops, so, too, will Mexico’s sovereign debt rating. Even a small deterioration in credit risk could exact a heavy toll on both the company and the country.

Argentina restarts natural gas exports to Chile - Argentina has begun exporting natural gas to Chile after a 12 year interlude, Chilean President Sebastian Pinera said on Tuesday, as the two South American neighbors seek to increasingly integrate their energy supply and electricity grids. The unconventional gas is being piped from Argentina’s oil- and gas-rich Vaca Muerta shale field to Chile’s southern province of Biobio. Argentina, which sits atop the world’s No. 2 shale gas reserves, was once a major supplier of natural gas to Chile, but triggered a diplomatic crisis in the mid-2000s by cutting off shipments when its own supplies ran low. Pinera said the two countries had very different, but often complementary, energy needs, and that depending on the time of year and circumstance, could either export or import fuel and electricity across their shared border. “This will permit us to back one another up without having to spend excess money to do so,” he said.

Oil spill detected in the channel of the Tuapse river Russia - According to the SCC of Rosmorrechflot, the operational duty officer of the Azov-Black Sea branch of the FBU “Morspasluzhba” received a message that pressure drop sensors in the pipeline operated at the Tikhoretsk-Tuapse oil pipeline in the port of Tuapse. ACF FBU MSS received a letter from the Transneft company with a request for help in eliminating the possible ingress of oil products into the open sea. A group of rescuers led by the head of the rescue operations of the port of Tuapse in a vehicle drove to the place of the alleged pollution of the sea area, since it is impossible to do this on the ship immediately due to floating large debris and trees at the place of deployment of the Bonsport Ship Valery Barsky. Visually observed rainbow spots in the river.  Then “Valery Barsky” moved to the place of pollution of the waters of the river bed, which flows into the sea and began to explore the area. Separate foci of rainbow spots were discovered, which immediately began to be treated with a sorbent. From the port of Novorossiysk, the tugs Antares and Agat (tugboats owner – Transneft Service) were sent to help with the emergency oil spill response.

IMO meeting eliminates doubts over 2020 delay - - If any doubts remained that the International Maritime Organization’s tighter sulfur emission limits for ships in 2020 could be delayed or otherwise watered down, those doubts should have been laid to rest at a key committee meeting of the UN body last week. The IMO’s global marine fuels sulfur limit is set to drop from 3.5% to 0.5% at the start of 2020, forcing ship operators to use cleaner, more expensive alternatives to heavy fuel oil and bringing wide-ranging other consequences for commodity markets. S&P Global Platts Analytics forecasts a shift of approximately 3 million b/d of marine demand from high sulfur fuel oil to lower sulfur alternatives, and a significant jump in crude prices as refiners increase runs to maximize middle distillate output to meet the new demand. The January 1, 2020 implementation date for the new sulfur limit was decided two years ago, but doubts have repeatedly surfaced since then about whether it would be met, or could be postponed or phased in in a more relaxed manner. Those doubts were given another outing at a meeting of the IMO’s Marine Environment Protection Committee (MEPC) last week. A Wall Street Journal story on October 19 raised the prospect of the US putting obstacles in the way of the sulfur cap, quoting a White House source as saying the Trump administration would seek to “mitigate the impact of precipitous fuel cost increases on consumers.” The oil market reacted as if the Trump administration was opposing the lower sulfur cap outright: the 2020 hi-low fuel oil swap narrowed significantly on the morning of October 19, showing reduced expectations of a large-scale shift in marine demand that year. 

Thousands of ships could dump pollutants at sea to avoid dirty fuel ban -Thousands of ships are set to install “emissions cheat” systems that pump pollutants into the ocean to beat new international rules banning dirty fuel. The global shipping fleet is rushing to meet a 2020 deadline imposed by the International Maritime Organization (IMO) to reduce air pollution by forcing vessels to use cleaner fuel with a lower sulphur content of 0.5%, compared with 3.5% as currently used. The move comes after growing concerns about the health impacts of shipping emissions. A report in Nature this year said 400,000 premature deaths a year are caused by emissions from dirty shipping fuel, which also account for 14 million childhood asthma cases per year. But the move to cleaner fuel could see harmful pollutants increasingly dumped at sea. According to industry analysis seen by the Guardian, between 2,300 and 4,500 ships are likely to install an exhaust gas cleaning system known as a scrubber to meet the regulations on low-sulphur fuel instead of buying the more expensive clean fuel. The scrubbers allow ship owners to continue buying cheaper high-sulphur fuel, which is washed onboard in the scrubber. In the case of the most used system, known as open loop, the waste water is discharged into the ocean. Although expensive at around $2-4m per ship fitting, the cost of buying and fitting a scrubber would be recovered in the first year, the industry analysis says. Cleaner low-sulphur fuel is likely to cost between $300 and $500 more a tonne, according to analysts. Ned Molloy, an independent shipping analyst, said that although the scrubbers were allowed by the IMO as a way to meet the lower-sulphur emissions rules, they were little more than an “environmental dodge”. Molloy said the scrubbers that had so far been fitted on the global fleet in advance of the 2020 deadline were mostly open-loop systems, which discharge into the sea, rather than the more expensive closed-loop systems, which require storage of waste water to be discharged into a facility on shore.

Pakistan works to contain oil spill near Karachi - AP News - Authorities in Pakistan have launched an operation to contain an oil spill that has damaged about 1.5 kilometers (nearly 1 mile) of coastline near the southern port city of Karachi. Moazzam Khan, of the Word Wildlife Fund, said Sunday that traces of oil have been found across an 8-kilometer (5-mile) stretch, endangering marine life. Residents suspect the oil leaked from an underwater pipeline at a nearby refinery. Mohammad Abid, of the Pakistan Maritime Security Agency, said two trails of oil can be seen from the air, but that the source is unknown. The refinery denied it was the source of the spill, but suspended operations after been ordered to do so by local authorities.

Damages from massive 2014 oil spill amount to NIS 281 million - The Environmental Protection Ministry said Sunday damages from a 2014 oil spill in southern Israel, considered to be the worst ecological disaster in the country’s history, totaled NIS 281 million ($75 million).  According to the ministry, some 5 million liters of crude oil were spilled in December 2014 when a pipeline belonging to state-owned Eilat Ashkelon Pipeline Company (EAPC) ruptured, causing significant environmental damage to the Arava desert and Evrona Nature Reserve. The ministry’s announcement on the cost of the damages was included in a legal opinion it had ordered as part of mediation proceedings on the oil spill.  “This opinion is a direct continuation of the ministry’s policies, according to which harming nature has a price, and therefore it must be ensured that companies that fail to protect the environment will fully bear the damages caused to the environment and the public,” the ministry said in a statement. The total damages included NIS 65 million ($17 million) in rehabilitation costs and NIS 216 million ($58 million) in compensation for the environmental damages, according to the ministry, the former of which was already paid by EAPC as part of clean-up efforts. The ministry said a criminal investigation has also been underway, but did not indicate who is suspected.

Red Sea Project to Create 30,000 Jobs - Saudi Aramco and SABIC will develop an integrated industrial complex to convert crude oil to chemicals (COTC) at Yanbu, located on Saudi Arabia’s west coast, the companies said Thursday in a joint statement. On Nov. 26, 2017, Saudi Aramco reported that it signed a memorandum of understanding with SABIC to develop a fully integrated COTC complex in the Kingdom. The facility reportedly will be capable of processing 400,000 barrels per day of crude oil and producing approximately 9 million tons of chemicals and base oils annually using an economically viable and unprecedented configuration. Earlier this year, Saudi Aramco and SABIC selected Wood and KBR to perform the project management and front end engineering work for the complex. In Thursday’s statement, the developers noted that the contractors are finalizing their selection of leading technologies to complement their technologies. According to Saudi Aramco and SABIC, the joint project bolsters the alliance between the top two Saudi global entities and supports the Kingdom’s goal of creating a world-leading downstream sector in country. Additionally, the developers maintain the complex will generate an estimated 30,000 direct and indirect jobs and contribute 1.5 percent to Saudi Arabia’s gross domestic product by 2030. “This venture will contribute to the realization of one of the major aspirations of Saudi Vision 2030, namely achieving economic prosperity by boosting our investment capacity, diversifying the economy and creating jobs for Saudi nationals,” SABIC Vice Chairman and CEO Yousef Abdullah Al-Benyan stated in the companies’ Nov. 26 announcement. “Once completed, this project will not only be the largest crude oil to chemicals complex in the world, it will also set a new competitive threshold thanks to the project’s mass scale and the benefits derived from our joint collaboration.” In the same announcement, Saudi Aramco President and CEO Amin H. Nasser pointed out that COTC will help the national oil company to expand its downstream portfolio and reduce its focus on the transportation sector. 

OPEC Should Boost Crude Production at Next Meeting, the IEA Says - OPEC must decide to boost oil output at its next meeting to “comfort” a tightening market, said the head of the International Energy Agency. “Global oil markets are going through a very sensitive period -- global economic growth as well,” IEA Executive Director Fatih Birol said in an interview in London Thursday. “If the oil producers care about the health of the growth of the global economy, which I believe they do, they should take the steps to further comfort the market.” Without an increase in output from the Organization of Petroleum Exporting Countries, Birol reiterated his warning the global economy will enter “a red zone” because momentum is already slowing amid trade disputes. The world still needs more oil to compensate for losses from Iran and Venezuela, he said. While the oil market is well supplied right now “the next few months might be difficult if the producers don’t increase production or give the signal for it.” Birol’s warning came in contrast to a statement from ministers from Saudi Arabia, Russia and other producers. They gave the clearest sign yet that they could return to cutting production, highlighting the need to prepare “options” for how much oil the group should produce next year to prevent the market slipping back into imbalance. Saudi Arabia’s Energy Minister Khalid Al-Falih said in an interview with state-owned television Al Arabiya that he is concerned about rising oil inventories and will monitor output levels in producing countries including Iran, Venezuela, Libya and Nigeria.In its latest oil market report the IEA cut forecasts for oil demand growth this year and next because of increasing threats to global economic growth. However it also warned that dwindling spare production capacity will keep prices high.Swiss bank UBS Group AG said in a recent report that it sees global oil demand growth slowing to 1.2 million barrels a day in 2019, from 1.5 million barrels a day this year and last year. Supply-side risks will remain in focus until mid-2019, potentially pushing spare capacity to a 10-year low, it said. After surging almost 7 percent in September, Brent crude futures are almost back to where they started due to high U.S. inventories, rising shale output and a stock market rout.

Trump’s sanctions on Iran tested by oil-thirsty China, India (Reuters) - Shortly after U.S. President Donald Trump announced in May he would reimpose sanctions on Iran, the State Department began telling countries around the world the clock was ticking for them to cut oil purchases from the Islamic Republic to zero. The strategy is meant to cripple Iran’s oil-dependent economy and force Tehran to quash not only its nuclear ambitions, but this time, its ballistic missile program and its influence in Syria. With just days to go before renewed sanctions take effect Nov. 5, the reality is setting in: three of Iran’s top five customers – India, China, and Turkey - are resisting Washington’s call to end purchases outright, arguing there are not sufficient supplies worldwide to replace them, according to sources familiar with the matter. That pressure, along with worries of a damaging oil price spike, is putting the Trump administration’s hard line to the test and raising the possibility of bilateral deals to allow some buying to continue, according to the sources. The tension has split the administration into two camps, one led by National Security Adviser John Bolton, who wants the toughest possible approach, and another by State Department officials keen to balance sanctions against preventing an oil price spike that could damage the U.S. and its allies, according to a source briefed by administration officials on the matter. The global price of oil peaked just below $87 a barrel earlier this month, before easing back to their current level around $77 a barrel on Monday. Because of the concern over oil prices, the source said, the administration is considering limited waivers for some Iranian customers until Russia and Saudi Arabia add additional supply next year, while limiting what Tehran can do with the proceeds in the meantime. Revenues from sales could be escrowed for use by Tehran exclusively for humanitarian purposes, the source, who asked not to be named, said – a mechanism more stringent than a similar one imposed on Iran oil purchases during the last round of sanctions under U.S. President Barack Obama. “If you’re the administration, you’d like to ensure you don’t have a spike in the price. So, you are better off from mid-2019 onwards to aggressively enforce the barrels side of reducing to zero and in the interim aggressively enforcing the revenue side,” the source said. 

Trump Admin May Stun Iran Oil Waiver Seekers -- The oil market could be in for a surprise when U.S. sanctions on Iranian crude exports are implemented in 10 days, according to Hedgeye Risk Management LLC. Traders who expect the U.S. to hand out waivers allowing certain nations to continue buying oil from the Islamic Republic, "are making a huge miscalculation," Joe McMonigle, head of energy policy at Hedgeye, said in a note. "We see more than a 50 percent chance of an early enforcement of Iran sanctions to send a message and incentivize others to get Iran imports to zero," McMonigle said. "We think this will come as a shock to oil markets." Oil prices this month have tumbled from their highest levels in almost four years, in part on speculation that waivers could blunt the impact of sanctions. Hedgeye sees that reversing, with the loss of at least 1 million barrels-a-day of Iranian exports boosting Brent crude by $5 a barrel. The international benchmark could even hit $90 a barrel for the first time since 2014, before settling back to around $85, McMonigle said. 

Iran is still selling a lot of oil just days before Trump's sanctions deadline - The Trump administration has cut down Iran's oil exports more quickly than many expected, but just days before a White House deadline, it is still a long way from achieving its stated goal of zeroing out Iranian oil sales.Iran's oil exports have fallen by about a third in the five months through September. They tumbled by about 800,000 barrels per day since President Donald Trump announced in May that he wasabandoning a nuclear accord with Iran and restoring wide-ranging sanctions on its economy.Still, Iran was selling roughly 1.7 million to 1.9 million bpd of crude oil and condensate, a super light form of oil, in September, according to estimates by investment banks, tanker-tracking firms and the International Energy Agency.That's down from a 2018 peak of 2.7 million bpd in June, according to ClipperData. In the first six months of the year, Iran was averaging 2.4 million bpd in shipments, S&P Global Platts Analytics estimates.Some of Iran's biggest customers, including China and India, are expected to keep buying its barrels. The Trump administration has also indicated it will allow some countries to continue importing limited quantities of Iranian oil, but officials haven't disclosed which nations will receive waivers. Along with China and India, countries like Turkey, Italy, Spain, Greece and Japan have kept purchasing Iran's crude. But analysts widely expect the losses to balloon to between 1 million and 1.5 million bpd by the end of the year.  "Iranian crude and condensate exports look set to finish October around a similar level to September, although we expect volumes to drop off next month as sanctions kick in and buyers dissipate," said Matt Smith, director of commodity research at ClipperData, a firm that tracks tanker traffic. Petro-Logistics, another tanker-tracking firm, says Iran probably lost more than 100,000 barrels per day in October.

EU Struggles To Create Iran Oil Trade Payment Vehicle - Although the European Union (EU) has vowed to create a special purpose vehicle to continue trade with Iran after the U.S. sanctions on Tehran’s oil return next week, the bloc is struggling with the set-up of such vehicle because no EU member is willing to host it for fear of angering the United States, the Financial Times reported on Sunday, citing EU diplomats.The EU said last month that the foreign ministers of China, France, Germany, Russia, and the UK - the countries still in the Iran nuclear deal - met with Iran’s foreign minister and decided to create a special purpose vehicle for dealings with Iran. After the meeting, Federica Mogherini, the High Representative of the EU for Foreign Affairs and Security Policy, said that with the planned vehicle:“In practical terms this will mean that EU Member States will set up a legal entity to facilitate legitimate financial transactions with Iran and this will allow European companies to continue trade with Iran, in accordance with European Union law, and could be opened to other partners in the world.”But the EU has met several hurdles in the work to setting up a payment mechanism with Iran, including the fact that no EU nation is eager to host the special purpose vehicle.“No EU government wants to cross the US by having the SPV,” one official told FT after meetings within European Commission.The United States will be “aggressive and unwavering” in enforcing the sanctions on Iran and won’t let those sanctions be evaded by the European Union or anyone else, U.S. national security advisor John Bolton said after the EU announced it would be working to create such vehicle.U.S. Secretary of State Mike Pompeo also criticized the EU plan for continuing transactions with Iran, describing it as “one of the most counterproductive measures imaginable for regional global peace and security.”The EU-Iran payment mechanism should be legally in place by November 4, when the U.S. sanctions on Iran return, three EU diplomats told Reuters last week, but added that the mechanism won’t be operational until early in 2019.

Sunday Midnight Will Mark Dividing Line in Oil World -- Midnight on Sunday will mark a dividing line in the world of oil. Beyond that point, anyone unloading a tanker from Iran risks the full wrath of the U.S. government. The Middle East’s third-biggest oil producer has already seen many buyers flee, with sales tumbling 37 percent since President Donald Trump announced that he’d reimpose sanctions. Once those restrictions formally kick in on Nov. 5, the overall supply disruption could become the biggest since Libya erupted in civil war at the start of the decade. There are signs the impact will be mitigated, as some buyers win partial exemptions while other producers -- particularly Saudi Arabia -- pump more to fill the gap. Still, there are doubts about their capacity to do so and the global nature of the oil market means nobody is fully insulated. Even U.S. drivers, whose engines haven’t seen a drop of Iranian crude for decades, have felt pain at the pump. U.S. oil futures climbed to a four-year high near $77 a barrel last month on growing concerns there could be a shortage as sanctions bite deeper. While those fears have eased along with prices in recent weeks, significant risks remain. “Iran’s oil exports are falling rapidly, and perhaps more and more in the weeks to come,” Fatih Birol, executive director at the International Energy Agency, said in a Bloomberg television interview. The Trump administration has sent mixed signals, swerving between saying it’ll send Iranian oil exports to “zero” and dangling waivers that could allow some to keep buying. A senior administration official said this week that the U.S. has agreed to let eight countries -- including Japan, India and South Korea -- keep buying Iranian oil, but only temporarily. While analysts don’t expect a complete halt, there’s a growing consensus that Trump’s tough stance means crude exports will plunge further than during a previous round of sanctions under Barack Obama’s administration in 2012. Back then they were sliced in half to 1 million barrels a day, according to the IEA, which advises industrialized countries on energy policy. This time, 1.1 million barrels a day have already been cut from Iran’s shipments -- a combination of crude and a light oil called condensate that was spared from curbs in 2012, according to data compiled by Bloomberg. The corresponding drop in production has been smaller as some of that output went into storage. That takes total exports to about 1.76 million barrels a day in October -- more than is pumped from the North Sea. 

Russia says US sanctions 'illegal', will help Iran trade oil -- Russian Energy Minister Alexander Novak has said Moscow will support Iran to counter US oil sanctions.Washington on Friday restored sanctions on Tehran, which had previously been lifted under the 2015 nuclear deal.  The measures are due to come into effect on Monday.In an interview with the British Financial Times newspaper, Novak said that Russia is looking to continue trading Iranian crude oil beyond the Monday cut-off."We believe we should look for mechanisms that would allow us to continue developing cooperation with our partners, with Iran," Novak told the FT.  Under a 2014 oil-for-goods deal, Moscow sells Iranian oil to third parties while Tehran uses the revenues from those sales to pay for Russian goods and services.The Russian energy ministry told the FT that the trade would continue next week, while Novak said that Moscow considered the US sanctions to be "illegal". "We already live in the condition of sanctions," he said. "We do not recognise the sanctions introduced unilaterally without the United Nations, we consider those methods illegal per se."

Trump will reportedly allow India and South Korea to keep buying sanctioned Iranian oil - The United States is poised to grant waivers to India and South Korea that will allow the countries to continue buying oil from Iran, despite the renewal of U.S. sanctions next week, according to news reports. The Trump administration gave oil buyers 180 days to wind down purchases of Iranian crude in May, when President Donald Trump announced he was abandoning a nuclear accord with Iran and restoring sanctions on its economy. The administration told importers to completely cut off purchases by Nov. 4, but it is widely expected to allow some countries to continue reducing purchases beyond that date.On Thursday, The Economic Times reported that the administration will allow India to purchase 1.25 million tons of Iranian oil each month through March. A source told the English-language Indian newspaper that India and Washington have "broadly agreed on a waiver" and that "India will cut import by a third."India, the second-largest purchaser of Iranian oil, imported about 22 million tons from Iran in the 2017-2018 period, according to the paper.High crude prices and a deteriorating Indian rupee have caused oil price inflation in the country and sparked protests over fuel costs. While Brent crude is trading at about $75, India is essentially paying double that after inflation, Fatih Birol, executive director of the International Energy Agency, told CNBC this week.The payment mechanism remains uncertain, but India is expected to continue paying for Iranian oil in euros and rupees, sources said. Iran would use rupees to pay for rice, drugs and other items, while the balance of revenues would be held in escrow until sanctions are lifted, The Economic Times reported.Bloomberg News later reported that South Korea, in addition to India, has agreed to the outlines for a waiverwith the United States. Bloomberg also reported that funds from Indian imports would go into an escrow account. Several other oil importing nations are also seeking waivers.Japan's top spokesperson for the government on Thursday said the nation had yet to receive a waiver, Reuters reported. China, Iran's biggest oil customer, has also sought a waiver, and its biggest refiners have reportedly halted imports in November until Beijing gets clarity from Washington. U.S. sanctions have cut Iran's exports by roughly a third, with shipments shrinking to roughly 1.7 million to 1.9 million barrels per day by the end of September, according to estimates from several sources.

US Approves Waivers On Iranian Oil Imports As Supply Panic Fades - With oil prices already extending the drop from their highs as the trader "panic attack" identified by celebrated energy analyst Art Berman abates, and approaching a bear market from recent highs, a Friday morning report from Bloomberg will likely ensure that prices continue to move lower.According to an anonymous "senior administration official", the US will soon approve waivers for eight countries, including Japan, India and South Korea, that will allow them to continue buying Iranian crude oil even after sanctions are reimposed on Monday. China is also believed to be in talks to secure a waiver, while the other four countries weren't identified. The waivers are part of a bargain for continued import cuts, which the administration hopes will lead to lower oil prices.  Secretary of State Mike Pompeo is expected to announce the exemptions on Friday.Speculation that waivers could be forthcoming had been brewing for some time, and has been one of the factors driving oil prices lower in recent weeks. Pompeo has acknowledged that waivers were being considered for countries who insist that they depend on Iranian supplies, while adding that "it is our expectation that the purchases of Iranian crude oil will go to zero from every country or sanctions will be imposed." Assuming the US does follow through with the waivers, it's expected that they would be temporary, and the US would expect that the recipients would continue to wean themselves off Iranian crude. The administration will also reportedly ask that these countries reduce their trade in non-energy goods. It's believed that Turkey, another major importer of Iranian crude, may be one of the four working on an exemption, according to Turkish Energy Minister Fatih Donmez told reporters in Ankara on Friday. Iran was Ankara’s biggest source of oil last year, accounting for more than 25% of Turkey’s daily average imports of around 830,000 barrels.

Oil Trades Below $68 -- Oil traded below $68 a barrel as traders assessed mixed supply signals from producers. Futures in New York dropped as much as 0.5 percent after falling 2.2 percent last week. Russia suggested on Saturday the country may keep its output at the current level above the Soviet-era record or raise production further, and warned of a potential supply shortage. That’s just days after the Organization of Petroleum Exporting Countries and its allies signaled they could cut output in 2019. Oil has slumped about 12 percent from a four-year high earlier this month as a rout in global equity markets raised concerns about economic growth and energy demand at a time of growing U.S. crude inventories. With renewed American sanctions on Iran going into full effect in just a week, traders are looking for signs whether OPEC and its partners are able -- and willing -- to increase production to fill any potential supply gap. “I expect investors will take a wait-and-see stance this week before the return of sanctions on Iran and U.S. midterm elections,” Makiko Tsugata, a senior analyst at Mizuho Securities Co., said by phone from Tokyo. Despite a potential decline in Iranian exports, “if both Saudi Arabia and Russia boost output and U.S. production continues to rise, we could have a supply glut.” West Texas Intermediate for December delivery declined as much as 32 cents to $67.27 a barrel on the New York Mercantile Exchange and traded at $67.36 a barrel at 3:38 p.m. in Tokyo. The contract rose 26 cents to $67.59 on Friday. Total volume traded was about 14 percent below the 100-day average. Brent for December settlement fell 29 cents to $77.33 a barrel on the London-based ICE Futures Europe exchange. The contract climbed 73 cents to $77.62 on Friday. The global benchmark crude traded at a $9.99 premium to WTI. Russian Energy Minister Alexander Novak told reporters in Istanbul he sees no grounds for reducing output and that there are risks of a deficit in oil markets. The nation’s oil production in September rose by almost 150,000 barrels a day to 11.356 million, a post-Soviet high, from a month earlier. The country suggested its output rose further in October. Similarly, Saudi Arabia said last week the kingdom can further increase its production to ease supply shortfalls even as it has already boosted output to 10.7 million barrels a day, near an all-time high. Energy Minister Khalid Al-Falih said OPEC and its allies are in “produce as much as you can mode” to meet demand and replace any shortages. 

Hedge funds cut bullish bets on oil to lowest for over a year- Kemp (Reuters) - Hedge fund managers continued to liquidate former bullish positions in oil last week and for the first time in more than a year clear signs of fresh short-selling emerged. Rising oil production from Saudi Arabia, the United Arab Emirates, Kuwait and Russia has eased concerns about the availability of supplies once U.S. sanctions on Iran are re-imposed in November. At the same time, intensifying fears about a possible global economic slowdown have hit oil prices and equity markets hard over the last three weeks. The bullish wave of hedge fund position-building in oil and refined products that started in July 2017 and crested in January 2018 has now largely broken. Portfolio managers’ combined positions in crude and refined products climbed from a low of 310 million barrels at the end of June 2017 to almost 1.5 billion barrels in late January but have since fallen back to just over half that level. Fund managers have not yet turned bearish on the outlook for oil prices; U.S. sanctions on Iran are deterring all but the most aggressive sellers. But the hedge fund community is no longer significantly bullish, with most managers opting to realise their profits after a year-long rally and await further developments. Hedge funds and other money managers cut their combined net long position in the six most important petroleum futures and options contracts by 111 million barrels in the week to Oct. 23. Portfolio managers have cut their combined net long position by the equivalent of 298 million barrels over the last four weeks to just 801 million barrels, the lowest level for more than a year. Bullish long positions were cut to just 965 million barrels, the lowest level for 65 weeks, according to position records published by regulators and exchanges. The ratio of long to short positions sank to less than 6:1, down from a recent peak of more than 12:1 at the end of September (https://tmsnrt.rs/2CMzx3Y ). 

Oil dips as Russia signals output will stay high (Reuters) - Oil prices edged lower on Monday, with futures on track for the worst monthly performance since mid-2016, after Russia signaled that output will remain high and as concern over the global economy fueled worries about demand for crude. Brent crude LCOc1 futures fell 28 cents to settle at $77.34 a barrel. U.S. West Texas Intermediate (WTI) crude CLc1 futures fell 55 cents to settle at $67.04 a barrel. Global benchmark Brent was on track to drop about 6.6 percent for the month. U.S. crude was on course to fall about 8.5 percent. Both were set for the steepest monthly decline since July 2016. Even with U.S. sanctions on Iranian exports due to come into force on Nov. 4, oil prices have fallen about $10 a barrel since four-year highs reached in early October. Russian Energy Minister Alexander Novak said on Saturday there was no reason for Russia to freeze or cut its oil production levels, noting that there were risks that global oil markets could be facing a deficit. The Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia and non-OPEC member Russia, agreed in June to lift oil supplies, but OPEC then signaled last week that it may have to reimpose output cuts as global inventories rise. “When the Russians start talking about keeping the production levels high and even the possibility that they need to increase it because of a possible tightness in supply, that brought on some selling pressure,” said Gene McGillian, director of market research at Tradition Energy in Stamford, Connecticut. Industrial commodities such as crude and copper have also been rattled by hefty losses in global equities due to concern over corporate earnings, and fears over the impact to economic growth from escalating trade tensions, as well as a stronger dollar. The U.S. dollar index .DXY also rose, supported by robust U.S. consumer spending data. [USD/] A stronger dollar makes greenback-denominated commodities more expensive for holders of other currencies.

Crude Oil Falls on Glut Fears - The two key crude oil benchmarks settled lower Monday amid fears of a potential supply glut. A barrel of West Texas Intermediate (WTI) crude oil for December delivery lost 55 cents Monday to settle at $67.04. The light crude benchmark traded within a range from $66.67 to $67.95. The December Brent futures price posted a more gradual decline, falling 28 cents to settle at $77.34 a barrel. As Bloomberg reported earlier Monday, traders contemplated an uncertain crude supply outlook as implementation of U.S. economic sanctions on Iran approaches. The Bloomberg article notes that Russia has suggested it may not cut its oil production to stave off a “potential supply shortage.” Moreover, it states that Saudi Arabia has indicated it could hike its output further. The article quotes a Saudi official as saying that the Kingdom and other OPEC members are in a “‘produce as much as you can mode.’” Reformulated gasoline (RBOB) often follows the pattern of crude oil, but that was not the case Monday. November RBOB posted a modest increase, ending the day a penny higher to settle at $1.82 a gallon. The settlement price for November Henry Hub natural gas was flat Monday at $3.185. During the early week session, the front-month contract bottomed out at $3.10 and peaked at just under $3.20. 

Oil Holds Losses -- Oil held losses near $67 a barrel on speculation that an escalating trade dispute between the U.S. and China will dampen global growth at a time when American crude inventories are growing. Futures in New York were little changed, after a 0.8 percent decline on Monday. The U.S. is said to prepare another round of tariffs on all remaining Chinese imports if talks between the presidents of the two countries fail to ease trade friction. Meanwhile, American crude stockpiles are forecast to have risen for a sixth straight week. Crude has retreated more than 8 percent this month, the worst monthly decline since July 2016. While ongoing trade tensions between the world’s two largest economies stoke concerns over global energy demand, traders continue to watch how much Iranian supply will be taken out of the market when U.S. sanctions hit early next month. Meanwhile, OPEC is likely to keep output policy steady when it meets in December, Nigeria’s oil minister said. “The negative outlook on global growth, which had been spurred by the U.S.-China trade war and economic crisis in emerging markets, is bleeding into the oil market,” Will Yun, a commodities analyst at Hyundai Futures Corp., said by phone. “However, depending on what happens with Iran later this week, oil could go both ways, so the market seems to be taking a cautious stance near $67 a barrel.” West Texas Intermediate for December delivery was up 10 cents at $67.14 a barrel on the New York Mercantile Exchange at 7:28 a.m. in London. The contract dropped 55 cents to $67.04 on Monday. Total volume traded was in line with the 100-day average. Brent for December settlement, which expires Wednesday, traded at $77.15 a barrel on the London-based ICE Futures Europe exchange, down 19 cents. The contract lost 0.4 percent to $77.34 on Monday. The global benchmark crude traded at a $9.99 premium to WTI. In case a planned meeting between presidents Donald Trump and Xi Jinping yields no progress on the sidelines of a Group 20 summit in Buenos Aires next month, U.S. officials are preparing a new list which would apply to the Chinese products that aren’t already covered by previous rounds of tariffs. 

Oil Awaits Direction As Iran Sanctions Loom  -  Oil started out the week seeing some volatility and choppy trading, awaiting more signs of a clear direction.  With just days to go before U.S. sanctions on Iran go into effect, it appears that India, China and Turkey are still resisting demands from Washington to eliminate purchases. Reuters reports that there is tension within the Trump administration over how hard to press these countries, with one camp, led by national security adviser John Bolton, pushing for zero tolerance, and others more in favor of offering some waivers. Several top importers are still set to buy some Iranian oil in November. “We have told this to the United States, as well as during Brian Hook’s visit,” a source from the Indian government told Reuters, referring to the U.S.’ special envoy. “We cannot end oil imports from Iran at a time when alternatives are costly.”  Crude oil posted steep losses over the past two weeks, the result of growing concerns about the health of the global economy. Other commodities, including copper, have also seen volatility. “It is often said that when stock markets sneeze, commodities catch a cold. This adage was on full display last week as a global rout on equity gauges dragged the energy complex lower,” PVM Oil Associates strategist Stephen Brennock said to Reuters.   With Iran sanctions set to take effect in a few days, the market is awaiting further clarity. Saudi Arabia and Russia have vowed to cover any supply shortfall, but Iran’s oil exports likely won’t go to zero. “I expect investors will take a wait-and-see stance this week before the return of sanctions on Iran and U.S. midterm elections,” Makiko Tsugata, a senior analyst at Mizuho Securities Co., told Bloomberg. Even though Iran is set to lose a significant portion of its exports, “if both Saudi Arabia and Russia boost output and U.S. production continues to rise, we could have a supply glut.”

Oil prices down more than 1 pct on rising supply, trade war(Reuters) - Oil prices dropped more than 1 percent on Tuesday on signs of rising supply and concern that global economic growth and demand for fuel will fall victim to the U.S.-China trade war. Brent crude futures fell $1.43, or 1.9 percent, to settle at $75.91 a barrel. U.S. West Texas Intermediate (WTI) crude futures fell 86 cents to settle at $66.18 a barrel, a 1.3 percent drop. Earlier in the session, Brent reached a session low of $75.09 a barrel, the lowest since Aug. 24. WTI slumped to $65.33 a barrel, the weakest since Aug. 17. Prices were little changed in post-settlement trade after industry group the American Petroleum Institute reported U.S. crude inventories rose 5.7 million barrels last week, more than analysts’ forecast for a 4.1 million-barrel build. Investors will look to official government data on U.S. inventories due to be released Wednesday. Both crude benchmarks have fallen about $10 a barrel from four-year highs reached in the first week of October and were on track to post their worst monthly performance since July 2016. Oil has been caught in the global financial market slump this month, with equities under pressure from the trade fight between the world’s two largest economies. The United States has imposed tariffs on $250 billion worth of Chinese goods, and China has responded with retaliatory duties on $110 billion worth of U.S. goods. U.S. President Donald Trump said on Monday he thinks there will be “a great deal” with China on trade but warned that he has billions of dollars worth of new tariffs ready to go if a deal is not possible. Trump said he would like to make a deal now but that China was not ready. He did not elaborate. “One discussion that is developing is that (trade tensions) are hurting demand for crude oil. There’s probably an element of truth to that,” said Bob Yawger, director of futures at Mizuho in New York. The International Energy Agency (IEA) said high oil prices were hurting consumers and could dent fuel demand at a time of slowing global economic activity. Oil production from Russia, the United States and Saudi Arabia reached 33 million barrels per day (bpd) for the first time in September, Refinitiv Eikon data showed.

Vitol sees oil prices falling as demand growth falters (Reuters) - Oil prices will likely fall next year as demand is curbed by trade wars and weakness in emerging market economies, the world’s biggest oil trader Vitol predicted on Tuesday. Chief executive Russell Hardy told the Reuters Commodities Summit that Vitol had revised down its forecast for oil demand growth next year to 1.3 million barrels per day (bpd) from 1.5 million previously. It also cut this year’s forecast to 1.3 million from 1.7 million. “We have never been hyper-bullish. We have always had an expectation that high prices would dent demand,” Hardy said in his first in-depth interview since becoming CEO in March. “Crude markets are not that tight in the immediate term ... and a fair price of oil going into next year is probably closer to the $70 or $65 per barrel mark than the $85-$90 area that some people are talking about.” Oil prices jumped above $85 per barrel earlier this month on fears of a steep decline in Iranian supply as U.S. sanctions on Tehran come into force on Nov. 4. Hardy said he saw Iranian oil exports declining, but not as sharply as previously feared - probably sticking above 1 million bpd because China, India and Turkey were likely to continue buying crude from Tehran. Combined with softer demand, this should help keep the oil market in balance for the first half of next year, provided Saudi Arabia pumped near record-high volumes and the world avoided another major supply disruption, Hardy said. “There’s not much room for things to go wrong in any supply sense, because there is pretty much no spare capacity at the moment,” he said. A potential worsening of the macro-economic environment represents a risk to the downside. If demand worsened further, it could add downward pressure on prices because it would come just as the United States adds more oil to the market in the second half of 2019. 

Why Oil Prices Could Still Go Lower -  Art Berman - Crude markets had a panic attack in August and September that sent prices soaring. Sanity is now returning. Prices have fallen but are likely to move even lower over the next few months. The panic attack was caused largely by Trump’s August 7 announcement that sanctions would be re-imposed on Iran. Anxiety about the effect on oil supply and prices was reasonable but the reaction was hysterical.From August 15 to October 1, Brent December futures spreads increased $3.01 (175 percent) from $1.72 to $4.73. Brent prices increased $15.53 (22 percent) from $70.76 to $86.29 (Figure 1). Figure 1. Brent Dec spreads collapsed from $4.73 to $1.52 since Oct 1 & are now less than when price rally began after announcement to re-impose Iran sanctions in mid-August. Front-month Brent down from $86.29 to $76.17 but still higher than $70.76 Aug 15 price. Source: Barchart and Labyrinth Consulting Services, Inc.Then spreads and prices collapsed. By October 24, spreads had fallen from $4.73 to $1.52, less than when the price rally began. Front-month Brent price decreased from $86.29 to $76.17. Prices and spreads recovered slightly on October 24 closing at $76.89 and $1.76, respectively. It seems unlikely that the correction is over. The timing depends on how long it takes for markets to fully recover from what Vitol’s Ian Taylor calls the supply fear factor. After 6 weeks of fear, markets must adjust to the reality that the “oil market is adequately supplied for now.”   Clearly markets are concerned about more than just Iran. Falling or uncertain output from the problem children Venezuela, Libya and Nigeria, and take-away constraints from the Permian basin are critical. Iran, however, is different because it is a completely artificial supply crisis. It was a choice made by Donald Trump and his advisors. Markets are used to the uncertainty of its problem children but not to the apparent certainty of an executive decision. The reaction was consistent with the cause—certain and linear. It was also wrong.World liquids production has, in fact, increased 2.91 mmb/d so far in 2018. Much of that increase came from producers other than U.S. & OPEC (Figure 2).

WTI Pops Despite Sixth Weekly Crude Build In A Row - Demand concerns and contagion from equity carnage continue to weigh on WTI (overwhelming fears about supply disruptions in Iran and Venezuela) as it tested a $65 handle again today.API reported a bigger than expected 5.69mm crude build, the sixth weekly rise in inventories in a row, as Gasoline and Distillates drewdown.API

• Crude +5.69mm (+3.2mm exp)
• Cushing +1.44mm (+2.1mm exp)
• Gasoline -3.5mm
• Distillates -3.1mm

6 weeks of Crude builds in a row (and 6 weeks of Cushing builds and Distillate draws)...  The original 14.4mm build associate with Cushing was a typo from the provider. WTI tested back into the $65 handle once again today, but some are suggesting that is weakness to buy...

Oil Prices Inch Higher Despite Crude Build - The American Petroleum Institute (API) reported yet another crude oil inventory build this week, this time of 5.69 million barrels for the week ending October 26. The build was the fourth in as many weeks as reported by the API. The report was largely in line with analyst expectations that this week would see another substantial build in crude oil inventories of 4.110 million barrels.The string of builds weighed heavily on prices, which were already depressed after IEA warned on Tuesday that the longer trend of higher oil prices would start to dent demand in key oil consuming markets such as India and Indonesia.According to API data, the six-week running tally of crude oil inventory gains equals 27 million barrels.The API reported a draw in gasoline inventories as well for week ending October 26 in the amount of 3.5 million barrels. Analysts had predicted a draw of 2.137 million barrels for the eek. Oil prices were down in afternoon trading prior to the release of the API data on inventories as traders feared additional inventory increases. At 1:58 pm EDT, WTI was trading down 0.88% (-$0.59) at $66.45—nearly flat week on week. The Brent crude benchmark was trading down 1.51% (-$1.17) at $76.20, also flat on the week.

Crude oil is doing something it hasn't done in years - Energy expert John Kilduff sees an unusual phenomenon affecting crude oil and beaten-down stocks.According to the Again Capital founding partner, oil and stocks have embarked on the closest trading relationship since early 2016 and during the financial crisis sell-off."This has been the highest correlation that I've seen in quite some time," he said Tuesday on CNBC's "Futures Now."His latest thoughts came with U.S. benchmark West Texas Intermediate crude on track for its worst month in more than two years. WTI closed at $66.40 a barrel on Tuesday, while Brent crude settled at $76.23."A lot of folks like to trade crude oil and other commodities to get away from the correlations you have in the stock market," said Kilduff, a CNBC contributor. "But over the past 20 days, you can see where stocks peak out in early October. Crude oil peaked out in early October."He suggests that fears of a global economic slowdown could be behind the rare move."It's a real risk off, and the same things that are bedeviling the equity market are bedeviling the crude market," he said.However, Kilduff isn't implying the trend spells more downside ahead. There's a bullish factor hanging over the oil market: Iran.On Sunday, sanctions against Iran exports are scheduled to go back into effect. And, it's unclear how they'll impact oil prices."We'll know in a relatively short amount of time whether the sanctions on Iran are really going to bite or not. I think they are to a degree," he said.

Oil prices rise for first time in three days, but trade war drags - Oil turned positive on Wednesday after government data showed U.S. fuel stockpiles dropped, offsetting a rise in the nation's crude inventories.U.S. sanctions on Iran set to go into full effect next week and a bounce in stock markets from recent losses also underpinned crude futures.Still, crude futures are more than $10 below four-year highs reached on Oct. 3 and on track for their worst monthly performance since July 2016.U.S. light crude was 17 cents higher at $66.435 a barrel by 11:28 a.m. ET (1528 GMT). It hit a two-month low of $65.33 a barrel on Tuesday.Benchmark Brent crude oil was still down 4 cents at $75.87, reversing some of its earlier losses.. The contract fell 1.8 percent on Tuesday, at one point touching its lowest since Aug. 24 at $75.09.U.S. commercial crude stockpiles rose by 3.2 million barrels, the U.S. Energy Information Administration reported, compared with expectations for an increase of 4.1 million barrels in a Reuters survey. The rise was driven by an increase at the Cushing, Oklahoma delivery hub, where inventories jumped by 1.9 million barrels, EIA said.Meanwhile, gasoline held in storage fell by 3.2 million barrels and distillate fuel inventories — including diesel and heating fuel — dropped by 4.1 million barrels.Global oil supply is rising with the top three producers, Russia, Saudi Arabia and the United States, pumping 33 million barrels per day (bpd) in September, Refinitiv data show, an increase of 10 million bpd since the start of the decade. Hedge funds are still overwhelmingly long oil and may have to liquidate positions if prices keep falling, accelerating a market sell-off, analysts say.

WTI Pops Back Above $66 On Big Product Drawdowns - Following API's bigger than expected crude build, WTI's 'odd' jump has been erased, trading back below $66 as DOE data prints. Crude inventories rose for the sixth week in a row (as did Cushing stocks) but WTI popped back above $66 on the heels of big drawdowns in Gasoline and Distillates.Bloomberg Intelligence Senior Energy Analyst Vince Piazza notes that "market sentiment seems to have come around to the view that U.S.-China trade tensions will weigh on global economic growth, suppressing demand for oil."Last week’s DOE report showed an increase in refinery utilization, which “could have been indicative of the end of turnaround season. If we have that occur again this week, it will probably confirm that,” says Thomas Finlon, director of Energy Analytics Group. DOE:

• Crude +3.22mm (+3.2mm exp)
• Cushing (+2.1mm exp)
• Gasoline -3.16mm (-2.25mm exp)
• Distillates -4.05mm - biggest draw since Oct 2017

6th weekly rise in Crude and Cushing stocks and 6th weekly decline in Distillate inventories... US Crude Production jumped notably on the week, back to record highs, rebounding after hurricane interruptions...

Oil prices fall on signs of rising global supply (Reuters) - Oil prices fell on Wednesday and posted the worst monthly performance since mid-2016 on evidence of rising global crude supply, but losses were limited by signs of strong U.S. demand for fuel. The Brent crude December futures contract, which expired Wednesday, fell 44 cents to settle at $75.47 a barrel. The more-active January contract LCOF9 fell 91 cents to settle at $75.04 a barrel. West Texas Intermediate (WTI) crude CLc1 futures fell 87 cents to settle at $65.31 a barrel. Both benchmarks were more than $10 a barrel below the four-year highs reached on Oct. 3. They both posted their worst monthly performance since July 2016, with Brent falling 8.8 percent for the month and WTI dropping 10.9 percent. Investor sentiment across risky asset classes, such as equities and energy, turned negative during the month as U.S.-China trade tensions sparked demand worries. Weighing on market sentiment on Wednesday were signs of rising global output. U.S. crude oil production surged by 416,000 barrels per day (bpd) to a record 11.346 million bpd in August, the U.S. Energy Information Administration said. The United States and other top producers Russia and Saudi Arabia pumped 33 million barrels per day in September, Refinitiv data showed, an increase of 10 million bpd since the start of the decade. Russian oil output has reached 11.41 million bpd in October, a level unseen since the collapse of the Soviet Union in 1991, an industry source told Reuters. The increases in production comes just ahead of new U.S. sanctions on Iran, set to come into force Nov. 4, that are expected to cut supply. “There’s this perception that there’s enough oil in the market right now to get through the Iranian sanctions,” said Phil Flynn, analyst at Price Futures Group in Chicago. Washington has made it clear to Tehran’s customers that it expects them to stop buying any Iranian crude oil from that date. However, on Wednesday U.S. national security adviser John Bolton said that while the United States wants to apply maximum pressure on Iran with sanctions on its crude exports, it does not want to harm countries that are friends and allies that depend on the oil. Imports of Iranian crude by major buyers in Asia hit a 32-month low in September as China, South Korea and Japan sharply cut their purchases ahead of the sanctions, government and ship-tracking data showed.

Crude Oil Extends Downward Trend -- Crude oil continued its downward momentum Wednesday that began at the beginning of this week. The December futures price for a barrel of West Texas Intermediate (WTI) crude oil fell by 87 cents Wednesday to settle at $65.31. The intraday range for the benchmark was a high of $67 even and a low of $65.01. For the Brent, the global benchmark declined 44 cents to settle at $75.47 a barrel. “The daily charts for December WTI and January Brent crude oil show the market holding above major support levels,” said Jerry Rafferty, president and CEO of Rockville Center, N.Y.-based Rafferty Commodities Group, Inc. Despite recent bearish price movements, Rafferty still sees a potential upside. “While the crude markets have declined further than we had expected, as long as December WTI holds above 6495 and January Brent holds above the 7515 to 7476 areas, we remain bullish,” said Rafferty. “We still believe that buying around these levels provides favorable risk/reward. A close below these levels would cause us to change our outlook.” November reformulated gasoline (RBOB) also declined during midweek trading, losing nearly four cents to settle at $1.77. The December Henry Hub natural gas futures price picked up seven cents to end the day at $3.26. Rafferty observed that gas prices have been in a holding pattern lately. “Since breaking out above the previous resistance at the 3100 area four weeks ago, December natural gas has met resistance at the 3350 to 3400 area,” Rafferty said. “The market is now trading within a sideways consolidation pattern defined by the 3100 area at the bottom and the 3350 to 3400 areas on the top.” 

Iran's Worst Nightmare Is Coming True - In what must seem like a nightmare scenario for Iran, not only is another U.S. president leveling sanctions against its economy, and particularly that economy’s lifeblood, its oil sector, but the current U.S. president has admittedly made it his mission to drive Tehran to its knees over what he sees as non-compliance over the 2015 nuclear accord between western powers and Tehran. As recently as the start of this month, the oil markets narrative was that perhaps President Donald Trump had pushed a bit too hard by reimposing sanctions against Iran. Oil markets, for their part, were jittery while both global oil benchmark Brent and U.S. Benchmark West Texas Intermediate (WTI) futures hit four-year highs largely on supply concerns. Some predicted that $100 per barrel oil by the end of the year was imminent, while Tehran maintained a defiant tone, stating that neither Saudi Arabia nor OPEC would be able to pump enough oil to compensate for the loss of Iranian barrels, estimated between 500,000 bpd and 1 million bpd.Now, what a different just a few weeks can make. Oil prices are now trending downward, falling for a third consecutive week as global stock markets tumbled and oil markets focused on a weaker demand outlook for crude going forward. Brent crude fell 2.7 percent last week and is down 10.5 percent from its October 3 high of $86.74. WTI ended the week down some 2.2 percent and has now dropped around 12 percent from its recent high of on October 3. Moreover, in a sign of things to come, hedge-fund and money managers are trimming their bets that crude oil prices will rise.Oil market headwinds, perhaps even storm clouds are brewing over a slowdown in economic growth due to trade war tensions between Washington and Beijing, and a stronger dollar weighing on emerging market economies, with those countries seeing an exodus of currency for higher yielding, safer havens like the US Dollar and Japanese Yen. A stronger dollar also increases the price for oil import dependent countries, with India, the Philippines, Indonesia and others particularly vulnerable. “We’ve seen oil prices sell off here throughout the correction we’ve had in the broad market. The concern in the sell-off is clearly global growth, and that’s immediately reflected in oil prices.”  How all of this plays out remains to be seen, but with a general downturn in economic growth and a slowdown in oil growth demand going forward, the loss of Iranian barrels now looks easily manageable - a scenario sure to cause consternation for Tehran.

Oil prices fall as economic outlook deteriorates: Kemp -  (Reuters) - Global economic momentum is decelerating, according to a broad range of financial and real-economy indicators, which is weighing on worldwide equity markets and oil prices. The depth and duration of the slowdown is impossible to gauge at this point, whether it turns out to be simply a mild and short-lived “soft patch”, a longer but still positive “growth recession” with output falling relative to trend, or an “outright recession” with activity falling in absolute terms. Recent declines in equity markets and softness in freight indicators may turn out to be a false alarm or a pause within an extended cycle rather than mark a cyclical turning point. Most commentary about the economic cycle is still influenced by the last deep and wrenching recession which accompanied the global financial crisis in 2008/09. But severe recessions have not been common since the end of the Second World War and most downturns have proved milder, which therefore seems a more likely prediction for the next cyclical slowdown. In the United States, post-1945 recessions have tended to be short, lasting less than a year in most instances, and in some cases have seen business activity level off rather than decline (https://tmsnrt.rs/2CQDDYT ). If the economy is nearing a cyclical peak, however, the next stage in the cyclical sequence is likely to  involve some combination of:

• Fiscal expansion
• Financial easing
• Lower trade tensions
• Lower oil prices

Further tax cuts or an increase in government spending, possibly on highways and other infrastructure, would be one way to ameliorate the slowdown and get the economy growing again. The U.S. federal government is already on course to run an annual budget deficit of more than $1 trillion by the end of the decade but the prospect of even higher deficits is unlikely to forestall demands for fiscal stimulus. If the expansion slows or tips into recession, the Federal Reserve will also come under pressure to cancel planned interest rate increases and rescind some of the rises that have already happened. 

Oil Set for Biggest Monthly Slide Since 2016-- Oil’s set for its biggest monthly drop since 2016 as the specter of a slowdown in the global economy haunts the market while U.S. inventories grow and producers relay mixed signals. Futures in New York are poised for an 8.8 percent drop in October, following two months of gains. A global equity rout and an escalating U.S.-China trade war are weighing on the outlook for growth and energy demand, dragging down prices that only weeks earlier surged to a four-year high. Concerns of a supply squeeze due to impending American sanctions on Iran eased after some other OPEC nations pledged to pump more. Still, while Saudi Arabia’s Energy Minister said the Organization and Petroleum Exporting Countries is in a “produce as much as you can mode,” an OPEC committee said it could cut supplies next year, spurring uncertainty in the market. In the U.S., inventories are forecast to climb for a sixth consecutive week. After breaching $76 a barrel earlier this month for the first time since 2014, New York’s West Texas Intermediate has lost over 10 percent. “In the oil market, concerns continue to exist over the ongoing U.S.-China trade spat as well as the risk aversion sentiment that’s caused by a plunge in global shares,” Kim Kwangrae, a commodities analyst at Samsung Futures Inc., said by phone. “Prices couldn’t remain above $75 a barrel this month on rising U.S. inventories and strong indication from Saudi Arabia to ramp up production.” WTI for December delivery traded at $66.78 a barrel on the New York Mercantile Exchange, up 60 cents, at 8:43 a.m. in London. The contract had declined more than 2 percent in the past two sessions. Total volume traded was about 12 percent below the 100-day average. Brent for December settlement, which expires Wednesday, added 81 cents to $76.72 a barrel on the London-based ICE Futures Europe exchange. Prices are on course for a 7.3 percent drop this month, the biggest monthly loss since July 2016. The global benchmark crude traded at a $9.91 premium to WTI.

Oil Extends Losses Near $65 -- Oil extended losses near $65 a barrel after the worst month in more than two years on lingering concern over a supply glut and a stronger dollar. Futures in New York fell as much as 0.9 percent, after falling 1.3 percent on Wednesday. U.S. crude inventories rose for a sixth straight week, according to government data. Russia is said to raise oil and condensate production to a record high in October just as the U.S. signaled some countries may continue importing Iranian crude after sanctions take effect. A rally in the greenback this week has also diminished the appeal of commodities priced in dollars. Oil slumped about 11 percent last month, the most since July 2016, as a global equity rout and trade tensions between the U.S. and China stoked concerns over economic growth and energy demand. Still, Organization of Petroleum Exporting Countries and its allies including Russia are sending mixed signals on whether they will ramp up output to fill any shortfalls as the return of U.S. sanctions next week are set to squeeze the Persian Gulf state’s exports. “While the gain in U.S. crude inventories was in line with the market expectation, it’s still a sixth consecutive week of increase on the back of rising American production,” Takayuki Nogami, chief economist at Japan Oil, Gas and Metals National Corp., said by phone from Tokyo. “Even if it’s temporary, concerns over a supply glut are weighing on prices as Saudi Arabia, Russia and the U.S. all increase production.” West Texas Intermediate for December delivery fell as much as 58 cents to $64.73 a barrel on the New York Mercantile Exchange, and was at $65.03 at 3:47 p.m. in Tokyo. The contract declined 3.4 percent in the past three sessions. Total volume traded was about 0.8 percent below the 100-day average. Brent for January settlement slipped 33 cents to $74.71 a barrel on the London-based ICE Futures Europe exchange. The December contract fell 44 cents to $75.47 before expiring on Wednesday. The global benchmark crude traded at a $9.52 premium to WTI for the same month. The U.S. sanctions enter into full force Nov. 5, with the aim of limiting Iranian supply. Several countries “may not be able to go all the way to zero” right away on purchases of Iranian oil, said White House National Security Adviser John Bolton. The U.S. wants to put maximum pressure on Iran, but doesn’t “want to hurt friends and allies,” he said.

Oil Prices Plunge As Storm Clouds Gather Over Global Economy - Oil declined more than 3% on Thursday, and extended those losses Friday, with ICE West Texas Intermediate (WTI) Light Sweet Crude Oil Futures probing lows not seen since April, due to weakening global demand at a time when the output from the Organization of the Petroleum Exporting Countries (OPEC), Russia, and the U.S. is rising. Record crude production from the U.S. and Russia, along with a surge from OPEC, has once more created oversupplied conditions.  Russian, U.S. & Saudi crude oil production (data via Reuters Eikon Graphics)  Oil prices started declining in early October on fears that global economic momentum was waning as the U.S-China trade war escalates, and a slowdown in emerging market economic data (primarily in Asia) was becoming more evident. WTI has plunged 17% since its 76-handle probe in early October. Analysts told Reuters they anticipate more selling in coming sessions, noting that oil did not bounce on Thursday on weakness in the dollar, nor did it positively correlate with the rebound in equity markets. Besides global growth momentum waning, another reason for downward pressure in oil could be that Washington just granted several waivers on sanctions on Tehran, allowing countries like South Korea, Japan, and India to continue to import Iranian crude (in other words, more supply). John Kemp, Reuters Senior Market Analyst of Commodities and Energy, believes oil prices are falling as a broad range of financial and real-economy indicators show the global economy is slowing."The depth and duration of the slowdown is impossible to gauge at this point, whether it turns out to be simply a mild and short-lived “soft patch”, a longer but still positive “growth recession” with output falling relative to trend, or an “outright recession” with activity falling in absolute terms.Recent declines in equity markets and softness in freight indicators may turn out to be a false alarm or a pause within an extended cycle rather than mark a cyclical turning point.Most commentary about the economic cycle is still influenced by the last deep and wrenching recession which accompanied the global financial crisis in 2008/09.  But severe recessions have not been common since the end of the Second World War and most downturns have proved milder, which therefore seems a more likely prediction for the next cyclical slowdown.  Kemp provides historical charts on the business cycle:

Oil under pressure from rising output, but Iran sanctions loom - Oil prices dipped on Friday after a week of heavy falls as markets braced for the imposition next week of U.S. sanctions on Iran, which Washington hopes will halt exports of Iranian oil. Brent crude oil was down 22 cents a barrel at $72.67 by 9:44 a.m. ET (1344 GMT). The contract has fallen 6 percent this week and 16 percent since the beginning of October, when it reached its highest since 2014. U.S. light crude was 31 cents lower at $63.38, down 17.5 percent since hitting four-year highs a month ago.Investors are concerned about the prospects for oil supply when new U.S. sanctions are implemented against Iran on Monday.Washington has said it aims eventually to stop all Iranian oil exports but has granted several countries waivers on sanctions, allowing them to continue imports for a while.The U.S. government has agreed to let eight countries, including South Korea and Japan, as well as India, keep buying Iranian oil after it reimposes the sanctions, Bloomberg reported on Friday, citing a U.S. official."Oil prices look to remain under pressure, as fears of global oversupply have returned with a vengeance," said Ashley Kelty, oil and gas research analyst at Cantor Fitzgerald Europe.A list of all countries getting U.S. waivers allowing them to import Iranian oil is expected to be released officially on Monday, industry sources say.Despite these efforts, waivers are likely to be only temporary. Goldman Sachs said it expected Iran's crude oil exports to fall to 1.15 million barrels per day by the end of the year, down from around 2.5 million bpd in mid-2018.

Soaring U.S. Oil Production Forces Prices Down - Oil prices continued to slide on Friday afternoon, despite a small decline in the U.S./Canadian rig count. Iran sanctions are just days away but the market has come around to the idea that Iranian oil exports won’t be going to zero, despite months of promises from the Trump administration. New reports suggest waivers are in the offing. “Oil prices look to remain under pressure, as fears of global oversupply have returned with a vengeance,” Ashley Kelty, oil and gas research analyst at Cantor Fitzgerald Europe, told Reuters. The U.S. has granted exemptions to eight importers of Iranian oil just days before sanctions on Iran take effect. The countries will be allowed to continue to import oil without fear of retribution from the U.S. as long as they continue to make reductions in those purchases, according to Bloomberg. Four of the countries include Iran’s top buyers – China, India, South Korea and Japan. The other four were not identified in the Bloomberg report, but the decision is expected to be announced on Monday.. The EIA said the U.S. produced more than 11.3 mb/d in August, a massive jump of over 400,000 bpd from a month earlier. The new record high also made the U.S. the largest oil producer in the world. Record output, combined with higher production from OPEC, has dealt sharp losses to crude oil prices amid mounting fears of oversupply. President Trump spoke with Xi Jingping by phone on Thursday, and Trump tweeted that the discussion went well. His economic adviser Larry Kudlow said that there was a “thaw” in relations. The two leaders are expected to meet later this month at the G20 summit in Argentina, and the conversation by phone this week raises the odds of a breakthrough on trade.  U.S. diplomats have reportedly stepped in to try to resolve disputes in the Middle East to increase oil flows. According to the Wall Street Journal, the U.S. is trying to broker a deal between Saudi Arabia and Kuwait over the Neutral Zone oil fields, which have 500,000 bpd of capacity but have been offline for years. The U.S. is also trying to help Iraq export more oil through Kurdistan, which would add another 300,000 bpd or so to global supplies. Washington is trying to ease these burdens at a time when it is seeking to shut in Iranian production.

Oil Set for Worst Week Since February - Oil’s set for the biggest weekly loss since February as fears over a supply disruption eased as the U.S. was said to agree on giving waivers to eight nations to continue importing Iranian crude after it reimposes sanctions on the OPEC producer. Futures in New York are on course for a 6 percent weekly decline. While America’s goal remains to choke off revenue to Iran’s economy, exemptions are being granted to countries including Japan, India and South Korea so as not to drive up oil prices, said a senior administration official. Crude earlier pared a weekly drop on signs of a possible trade agreement between the U.S. and China. Oil is approaching a bear market with prices falling more than 16 percent from a four-year high in October as a rout in global equity markets and U.S.-China trade tensions stoked concerns over economic growth. Investors are keeping an eye on the level of global supplies as the Organization of Petroleum Exporting Countries have boosted output to the highest level in October to replace potential shortfalls from Iran at a time when U.S. inventories and production are also growing. “In theory, we could have been in a bullish market because of sanctions against Iran. But rising production from Saudi Arabia and others, coupled with a global equity rout and concerns over economic outlook, is weighing on prices,” Jun Inoue, a senior economist at Mizuho Research Institute Ltd., said by phone from Tokyo. “As South Korea and India reportedly agreed with the U.S. on waivers, the Iran factor is weakening.” West Texas Intermediate for December delivery lost 25 cents to $63.44 a barrel on the New York Mercantile Exchange at 7:51 a.m. in London. The contract fell $1.62 to $63.69 on Thursday. Total volume traded was 30 percent above the 100-day average. Brent for January settlement fell 18 cents, or 0.3 percent, to $72.71 a barrel on the London-based ICE Futures Europe exchange. The contract is down 6.4 percent this week for a fourth consecutive week. The global benchmark crude traded at $9.14 premium to WTI for the same month. 

Oil market passes cyclical peak: John Kemp (Reuters) - The recovery in oil prices since the downturn of 2014/15 looks a lot like the upward adjustments that followed the slumps of 2008/09 and 1997/98, which could provide clues about what happens next.The oil market is strongly cyclical, and although no two cycles are the same, they often show similar characteristics (“Cyclical behaviour of oil prices”, Reuters, June 4, 2018).Spot prices and calendar spreads exhibit cyclical movements that correlate closely with the market, alternating between periods of under- and over-supply (https://tmsnrt.rs/2CXAFBR).Brent’s six-month calendar spread seems to have reached a major cyclical peak in April 2018, up from a post-slump trough in January 2015, before trending downwards.Spot prices may have reached a similar peak in early October 2018. Although it is too early to be certain, most hedge funds and other money managers have liquidated a large share of their bullish positions in recent weeks.In the recent recovery, Brent calendar spreads rose for 39 months from trough to the first major peak, which is roughly comparable with recoveries in 1998-2000 (21 months) and 2009-2011 (33 months).Spot prices have risen for 33 months from trough to their peak in October, which is also broadly comparable with recoveries in 1998-2000 (22 months) and 2008-2011 (28 months). Oil prices, spreads and the reactions of producers and consumers suggest the market has passed the first major cyclical peak after the slump of 2014/15.

OPEC oil output rises to highest since 2016 despite Iran: Reuters survey (Reuters) - OPEC has boosted oil production in October to the highest since 2016, a Reuters survey found, as higher output led by the United Arab Emirates and Libya more than offset a cut in Iranian shipments due to U.S. sanctions. The 15-member Organization of the Petroleum Exporting Countries has pumped 33.31 million barrels per day this month, the survey on Wednesday found, up 390,000 bpd from September and the highest by OPEC as a group since December 2016. OPEC agreed in June to pump more oil after pressure from U.S. President Donald Trump to curb rising prices and make up for an expected shortfall in Iranian exports. Oil LCOc1 hit a four-year high of $86.74 a barrel on Oct. 3 but has since eased to $76 as concerns over tight supplies faded. “Oil producers appear to be successfully offsetting the supply outages from Iran and Venezuela,” said Carsten Fritsch, analyst at Commerzbank in Frankfurt. The June pact involved OPEC, Russia and other non-members returning to 100 percent compliance with output cuts that began in January 2017, after months of underproduction in Venezuela, Angola and elsewhere had pushed adherence above 160 percent. In October, the 12 OPEC members bound by the supply-limiting agreement lowered compliance to 107 percent as production rose, from a revised 122 percent in September, the survey found. This is the closest OPEC has moved to 100 percent compliance since the June agreement. UAE, LIBYA The biggest increase has come this month from the UAE. Output in October rose by 200,000 bpd to 3.25 million bpd, the survey found, and could in theory rise further as the UAE says its oil-production capacity will reach 3.5 million bpd by the year-end. The second-largest came from Libya where production averaged 1.22 million bpd, the survey found, a rise of 170,000 bpd. Libyan output remains volatile due to unrest, raising questions about the stability of current OPEC production. Saudi Arabia, after opening the taps in June and then scaling back its plans to pump more, supplied 10.65 million bpd in October, more than in June and close to a record high, the survey found. The kingdom, OPEC’s top producer, has indicated it is concerned about potential oversupply, raising the prospect that its next production adjustment could be to rein in output. OPEC’s second-largest producer, Iraq, also raised output in October. 

Khashoggi BOMBSHELL: Britain ‘KNEW of kidnap plot and BEGGED Saudi Arabia to abort plans’ Intercepts by GCHQ of internal communications by the kingdom’s General Intelligence Directorate revealed orders by a “member of the royal circle” to abduct the troublesome journalist and take him back to Saudi Arabia. The orders, intelligence sources say, did not emanate directly from de facto ruler Crown Prince Mohammad bin Salman, and it is not known if he was aware of them. Though they commanded that Khashoggi should be abducted and taken back to Riyadh, they “left the door open” for other actions should the journalist prove to be troublesome, sources said. Last week Saudi Arabia’s Attorney General confirmed that the murder had been premeditated - in contrast to initial official explanations that Khashoggi had been killed after a fight broke out. “The suspects in the incident had committed their act with a premeditated intention,” he said. “The Public Prosecution continues its investigations with the accused in the light of what it has received and the results of its investigations to reach facts and complete the course of justice.” Those suspects are within a 15-strong hit squad sent to Turkey, and include serving members of GID. Speaking last night the intelligence source told the Sunday Express: “We were initially made aware that something was going in the first week of September, around three weeks before Mr Khashoggi walked into the consulate on October 2, though it took more time for other details to emerge. “These details included primary orders to capture Mr Khashoggi and bring him back to Saudi Arabia for questioning. However, the door seemed to be left open for alternative remedies to what was seen as a big problem.

Saudi Arabia won't extradite suspects in Khashoggi killing to Turkey - The suspects in the killing of Saudi journalist Jamal Khashoggi will be prosecuted in Saudi Arabia, the Saudi foreign minister said Saturday. His comments come after Turkey said it wanted to extradite 18 Saudi nationals that authorities say were involved in the murder. However, according to the BBC, speaking at a security conference in Bahrain, Adel al-Jubeir said: “On the issue of extradition, the individuals are Saudi nationals. They’re detained in Saudi Arabia, and the investigation is in Saudi Arabia, and they will be prosecuted in Saudi Arabia.” Speaking at the same conference on a different panel, U.S. Defense Secretary Jim Mattis said the killing of Khashoggi undermined Middle Eastern stability and that Washington would take additional measures against those responsible, Reuters reported. Saudi Arabia initially denied all knowledge of the journalist’s fate, but the Saudi public prosecutor now describes it as a premeditated murder. However, Riyadh denies the ruling royal family was involved and blames “rogue agents.” Al-Jubeir, along with Bahrain’s Foreign Minister Shiekh Khalid bin Ahmed Al Khalifa, told the conference that the Gulf states are playing a critical role in ensuring stability in the region against Iran, Reuters also reported. “We are now dealing with two visions in the Middle East. One is a (Saudi) vision of light … One is a (Iranian) vision of darkness which seeks to spread sectarianism throughout the region,” al-Jubeir said.

Canada upholds $15 billion Saudi arms deal after Khashoggi murder - In the nearly four weeks since the Saudi regime had journalist Jamal Khashoggi murdered, Canada’s Liberal government has gone out of its way to avoid criticizing Riyadh, while insisting Canada must fulfill a $15 billion arms deal with the kingdom—a linchpin of US imperialism’s domination of the oil-rich Middle East.  Turkish President Recep Tayyip Erdogan has avoided publicly accusing Crown Prince Mohammed Bin Salman, the kingdom’s effective ruler, of ordering Khashoggi’s murder. But Turkish authorities have systematically leaked information contradicting Riyadh’s claims, including video of the arrival in Turkey of a 15-man Saudi assassination squad. Everything points to the Saudi journalist having been tortured and beheaded inside the consulate, then his dismembered body being smuggled out of the premises. With public outrage over Khashoggi’s gruesome murder mounting, Prime Minster Justin Trudeau and his Liberal government have spent the past two weeks twisting and turning in the face of mounting criticism from sections of the media and opposition over its insistence that Canada must fulfill its $15 billion contract to supply Riyadh with 740 LAVs (Light Armored Vehicles), manufactured at a General Dynamics plant in London, Ontario. For the first week, Trudeau and Foreign Minister Chrystia Freeland claimed, as they have in the past, that Canada’s international reputation would be damaged if it failed to “honour” the contract, while emphasizing that it was the Harper Conservative government that entered into the deal—Canada’s largest ever arms contract—with Riyadh in 2014. However, Prime Minister Justin Trudeau has now come forward with a second argument. Cancelling the contract, he insists, would result in massive financial penalties. Initially, Trudeau spoke of a billion dollars, but by Thursday he was claiming Canadian taxpayers would be on the hook for “billions of dollars.” According to Trudeau, the deal is subject to stringent confidentiality clauses such that the government cannot make the financial penalties section, or any other part of it, public. In other words, the government must be taken at its word.

Trudeau won’t stop $12bn of arms sales to Saudi after Khashoggi’s death because money always wins over murder - Almost 5,000 miles from the city in which his corpse was secretly buried – in one piece or in bits – by his Saudi killers, Jamal Khashoggi’s murder now rattles the scruples and the purse-strings of yet another country. For Canada, land of the free and liberal conscience – especially under Justin Trudeau – is suddenly confronted by the fruits of the bright young prime minister’s Conservative predecessors and a simple question of conscience for cash: should Trudeau tear up a 2014 military deal with Saudi Arabia worth $12bn? When Ottawa decided to sell its spanking new light armoured vehicles (LAVs) to the Saudi kingdom, the Saudis already had a well-earned reputation for chopping off heads and supporting raving and well-armed Islamists. But Mohammed bin Salman had not yet ascended the crown princedom of this pious state. The Saudis had not yet invaded Yemen, chopped off the heads of its Shia leaders, imprisoned its own princes, kidnapped the Lebanese prime minister and dismembered Khashoggi.So the Conservative Canadian government of Stephen Harper had no scruples about flogging off its LAVs – as these little armoured monsters are called – to Riyadh, specifically for the “transport and protection” of government officials.Now you can hardly accuse Trudeau of being a supporter of the Saudi regime. Back in August, Mohammed bin Salman’s lads ordered the expulsion of the Canadian ambassador to Riyadh and closed down trade agreements with Canada after Trudeau’s foreign minister had complained about the arrest of women’s rights campaigners in the kingdom. The Canadians had made “false statements”, claimed the Saudis – whose own reputation for false statements would soon achieve proportions worthy of a Hollywood horror epic. Trudeau was in the Saudi doghouse as well as Washington’s because, only two months earlier,Trump had called him “dishonest and weak”.

Turkey Says Saudis Strangled Khashoggi Immediately On Entering Consulate, Dismembered Body -  Hours after the Washington Post published an anonymously sourced story claiming that Saudi Arabia is still refusing to cooperate with Turkish investigators looking into the murder of insider-turned-dissident Jamal Khashoggi, Istanbul's head prosecutor has delivered a statement revealing more incriminating details about the circumstances surrounding the journalist's murder at the hands of a 15-man "hit squad" inside the Kingdom's Istanbul consulate.  In a revelation that supports the theory, advanced by a steady stream of leaks to Western and Turkish media from the prosecutor's office, that Khashoggi's murder was a premeditated act ordered by senior intelligence officials and possibly Crown Prince Mohammad bin Salman himself, Istanbul's head prosecutor said Wednesday that Khashoggi was strangled to death as soon as he entered the consulate in a murder that was likely pre-planned. His body was then "cut into pieces" and presumably smuggled it out of the consulate.From the statement: Turkey asked for the extradition of the suspects arrested in Saudi Arabia and the whereabouts of Khashoggi's body. No response from the Saudi side.  Finally, adds that the talks with the top Saudi prosecutor were not productive. pic.twitter.com/DUyDvtJPK9   Notably, the statement from the Turkish prosecutor comes shortly after his Saudi counterpart, Saud al-Mojeb, left the country after a meeting between the two. The Saudis have largely stonewalled the inquiry into Khashoggi's disappearance and killing. After denying any involvement, the kingdom admitted earlier this month that Khashoggi was, in fact, murdered inside the embassy, something the kingdom has officially said was the result of a "botched interrogation," the Saudis pledged "full cooperation" with their Turkish counterparts. But that promise was apparently less-than-sincere. The Saudis have rebuffed demands expressed by prosecutors and President Erdogan himself that the kingdom disclose where Khashoggi's body was buried, or the name of the "local cooperator" whom the Saudis claim the killers worked with to dispose of Khashoggi's remains. Turkey has also requested the extradition of the 18 Saudi nationals who were arrested by the kingdom in connection with the murder. But while the international pressure has inspired Germany to suspend arms exports to Saudi Arabia, and US lawmakers have continued to push for some kind of punitive action despite President Trump's obvious reluctance, the fallout from the scandal has been relatively muted. And as the international outrage subsides, many epect MbS will ultimately use this as one more excuse to consolidate power in Riyadh. Though the Turks still have an ace up their sleeve: The rumored audio recording of Khashoggi's murder which has been widely cited in the press, but never released to the public. And while the Turks reportedly played it for CIA Director Gina Haspel, their plans for the record remain unclear.

Did The Saudi Hit Squad Dissolve Jamal Khashoggi's Body In Acid- - Friday will mark one month since Jamal Khashoggi waltzed into the Saudi consulate in Istanbul, planning to pick up paperwork that would allow him to legally marry his Turkish girlfriend, and was never heard from or seen again. And despite repeated demands from Turkish authorities that the Saudi government reveal the location of Khashoggi's remains, or at least identify the "local collaborator" who is said to have disposed of the body, the kingdom has repeatedly refused. The Saudi prosecutor's inexplicable refusal to help with the recovery of Khashoggi's remains has apparently led the Turks to conclude that one of the particularly gruesome rumors about the circumstances of Khashoggi's demise just might have been true. That is, after he was strangled and dismembered inside the consulate, Khashoggi's remains were dissolved in a vat of acid, then dumped either in a well on the property of the consul general, or somewhere on the consulate grounds, according to Washington Post. Initially, Turkish investigators focused their search for Khashoggi’s body on two wooded areas outside of Istanbul, partly inspired by surveillance footage that Turkish authorities said showed Saudi diplomatic vehicles apparently scouting Belgrad Forest the night before the journalist was killed. Last week, investigators suspended the search, focusing instead on the consulate’s grounds and the consul general’s residence. The search focused in particular on a well on consular property, where The Turks believe the assailants may have disposed of Khashoggi’s dissolved remains. According to WaPo, biological evidence uncovered during the search of the consul's residence suggests that Khashoggi's remains were disposed of near where he was dismembered. A senior Turkish official said in an interview that Turkish authorities are pursuing a theory that Khashoggi’s dismembered body was destroyed in acid on the grounds of the Saudi Consulate or at the nearby residence of the Saudi consul general. Biological evidence discovered in the consulate garden supports the theory that Khashoggi’s body was disposed of close to where he was killed and dismembered, the official said. "Khashoggi’s body was not in need of burying," said the official, who spoke on the condition of anonymity to discuss a sensitive investigation.

MbS: The New Saddam of Arabia? - As Mohammad bin Salman (MbS) has terrorized his opponents at home and abroad, fear has spread within the Saudi kingdom. Has he become the new Saddam of Arabia? As Iraq’s Saddam Hussein did in the 1980s, MbS is cementing his power domestically and regionally through fear and economic largesse under the guise of fighting Iran, Islamic radicalism, and terrorism.Much like the tyrant of Baghdad did in Iraq, MbS has crushed his domestic and regional opponents. Both of them have enlisted the support of foreign powers, especially the United States and Britain, to buttress their hold on power in their territories and expand their reach internationally. They both spoke the language of “reform,” which appeals to Western audiences, and both demonized Iran as a promoter of regional instability and a source of evil internationally.They both used chemical weapons against their opponents—Saddam against his Kurdish citizens and against Iran during the Iran-Iraq war; MbS against civilians in Yemen. Saddam threatened and later invaded his neighbor Kuwait. MbS has waged a vicious campaign against his neighbor and fellow Gulf Cooperation Council member Qatar and threatened to invade it.Saddam and MbS also cynically donned the mantle of Sunni Islam in their hypocritical claims against the so-called Shia Crescent and its main proponent Iran. Saddam’s “Republic of Fear” seems to be slowly morphing into a “Kingdom of Fear” under MbS.In his “city-busting” campaign during the Iran-Iraq war, Saddam committed horrible atrocities against civilians in Iranian cities in the 1980s. Thirty years later, MbS is committing equally horrible crimes against innocent civilians in Yemen. The famine and starvation that MbS’s war has wrought on Yemeni children is arguably more calamitous than what Saddam did in Iran. Sadly, both Saddam and MbS have relied on American military, intelligence, and political support in the execution of their bloody wars.Saddam killed thousands of people and arrested and executed hundreds of his opponents, including journalists, academics, and peaceful dissidents. MbS has used the same playbook. The “premeditated murder” of Jamal Khashoggi—a Saudi citizen, a U.S. permanent resident, and a Washington Post journalist—starkly illustrates MbS’s campaign against his critics.

Recep Tayyip Erdogan: Saudi Arabia still has many questions to answer about Jamal Khashoggi’s killing -  Recep Tayyip Erdogan is the president of Turkey. The story is all too familiar: Jamal Khashoggi, a Saudi journalist and a family man, entered Saudi Arabia’s Consulate in Istanbul on Oct. 2 for marriage formalities. No one – not even his fiancee, who was waiting outside the compound — has ever seen him again.Over the course of the past month, Turkey has moved heaven and earth to shed light on all aspects of this case. As a result of our efforts, the world has learned that Khashoggi was killed in cold blood by a death squad, and it has been established that his murder was premeditated.Yet there are other, no less significant questions whose answers will contribute to our understanding of this deplorable act. Where is Khashoggi’s body? Who is the “local collaborator” to whom Saudi officials claimed to have handed over Khashoggi’s remains? Who gave the order to kill this kind soul? Unfortunately, the Saudi authorities have refused to answer those questions.We know the perpetrators are among the 18 suspects detained in Saudi Arabia. We also know those individuals came to carry out their orders: Kill Khashoggi and leave. Finally, we know the order to kill Khashoggi came from the highest levels of the Saudi government. Some seem to hope this “problem” will go away in time. But we will keep asking those questions, which are crucial to the criminal investigation in Turkey, but also to Khashoggi’s family and loved ones. A month after his killing, we still do not know where his body is. At the very least, he deserves a proper burial in line with Islamic customs. We owe it to his family and friends, including his former colleagues at The Post, to give them an opportunity to say their goodbyes and pay their respects to this honorable man. To ensure that the world will keep asking the same questions, we have shared the evidence with our friends and allies, including the United States.

In WaPo Op-Ed, Erdogan Says "We Know The Order To Kill Khashoggi Came From Highest Level Of Saudi Government" -  With the Jamal Khashoggi grotesque murder by some 18 Saudi agents fading from the public's attention, Turkish President Recep Tayyip Erdogan took the opportunity to remind the world that he now has the upper hand in the Middle Eastern balance of power, and said that the order to kill the U.S.-based journalist and Saudi dissident came from the "highest levels" of the Saudi government. "We know that the perpetrators are among the 18 suspects detained in Saudi Arabia,” Erdogan wrote in a Washington Post op-ed published Friday afternoon. "We also know that those individuals came to carry out their orders: Kill Khashoggi and leave. Finally, we know that the order to kill Khashoggi came from the highest levels of the Saudi government." Some seem to hope this “problem” will go away in time. But we will keep asking those questions, which are crucial to the criminal investigation in Turkey, but also to Khashoggi’s family and loved ones.  A month after his killing, we still do not know where his body is. At the very least, he deserves a proper burial in line with Islamic customs. We owe it to his family and friends, including his former colleagues at The Post, to give them an opportunity to say their goodbyes and pay their respects to this honorable man. To ensure that the world will keep asking the same questions, we have shared the evidence with our friends and allies, including the United States. "As responsible members of the international community, we must reveal the identities of the puppetmasters behind Khashoggi’s killing and discover those in whom Saudi officials — still trying to cover up the murder — have placed their trust," he concluded.

Saudi-Led Coalition Sends Over 10,000 Troops to Yemen’s Hodeidah — The Saudi-led military coalition in Yemen has sent more than 10,000 troops towards a strategic rebel-held port city ahead of a new assault, Yemeni government officials said on Tuesday.The pro-government coalition deployed the reinforcements to the Red Sea coast ahead of a new offensive on Hodeidah that will be launched “within days”, a military official told the AFP news agency.He said they would also “secure areas liberated” from the Houthi rebels, and that forces from Sudan, part of the coalition, had moved in to “secure” areas around the city.Houthi rebels have for the past 10 days been stationing fighters on rooftops of buildings in Hodeidah city, government military officials told AFP.The adjacent port is the entry point for three-quarters of imports to the impoverished country, which is teetering on the edge of famine.Saudi Arabia and its allies intervened in Yemen in 2015 to support President Abd Rabbuh Mansour Hadi’s government after the Houthis ousted it and took swathes of territory including the capital Sanaa. The coalition has used air power to push the rebels back from much of Yemen, but the Houthis have held onto Hodeidah and Sanaa.

True Yemen Death Toll Five Times Higher Than Previous Estimate, Researchers Say - At least 56,000 people have been killed in armed violence in Yemen since January 2016, according to data collected by an independent research group, a tally that is more than five times higher than previously reported. The new figure encompasses the deaths of both combatants and civilians in Yemen between January 2016 and 20 October 2018, explained Andrea Carboni, a research analyst at the Armed Conflict Location & Event Data Project (ACLED). It does not take into account the Yemenis who have died as a result of the humanitarian crisis engulfing the country and its related problems, such as diseases and malnutrition. “The fatality numbers refer to the number of people that were killed as a direct consequence of armed violence,” Carboni told Middle East Eye on Monday. That violence includes air strikes and artillery fire from Saudi-led coalition forces currently fighting in Yemen, as well as armed clashes between various factions fighting inside the country, such as the Houthis. Middle East Eye could not independently verify the 56,000 number.The Saudi-led coalition has been accused of committing war crimes in Yemen, such as the deliberate bombing of hospitals, buses and other civilian infrastructure. The Houthis have also been accused of taking hostages and arbitarily detaining and torturing opponents – all potential war crimes.However, as Yemen has become increasingly closed off to outside observers and journalists amid the devastating conflict, reliable information on the number of deaths has been hard to come by. The number was also an underestimate when it was released, Carboni said, since it was based on deaths that were reported at medical facilities in the country. “Most of the people, the casualties, do not get to medical centres. That number was actually missing a lot of the violence and the casualties that are related to it,” he said. Based on an estimate of around 2,000 fatalities every month in Yemen, total deaths between the start of the conflict in 2015 to the end of this year is expected to sit between 70,000 and 80,000, Carboni said.“These are estimates based on the methodology we’ve applied elsewhere. They are likely also to be an underestimate themselves,” he said. He added that three-quarters of all civilian deaths in Yemen are attributable to the Saudi-led coalition.

Saudis Pound Yemen After US Officials Demand ‘Immediate Ceasefire’  — Earlier this week, Defense Secretary James Mattis called for an immediate ceasefire in Yemen. In the course of this, he demanded an end to fighting, and an immediate halt to all airstrikes against populated areas.Friday in Yemen was much like any other, with Saudi warplanes pounding areas in and around the northern cities of Hodeidah and Sanaa. Heavy airstrikes were reported particularly around Sanaa Airport, which is definitely a civilian-populated area.Sanaa was mostly hit with airstrikes, while locals reported heavy clashes around Hodeidah, a vital port city that Saudi forces have been massing around all week. In no case is there any indication that a ceasefire is starting. Saudi and UAE officials have yet to comment on the US call for a ceasefire and peace talks at all. The only response at all from their camp was from Yemeni officials backed by the Saudis, who embraced the idea of peace talks, but similarly showed no signs of stopping fighting in the meantime.

Leaked U.N. Memo Reveals Saudis Demanded Western Propaganda For $1bn Pledged To Aid Agency -- We wonder if the Saudis had never been caught in Jamal Khashoggi's gruesome murder, would such essential stories and leaks now happening such as the below Guardian report ever see the light of day? On Tuesday The Guardian published select contents of a leaked internal United Nations document detailing a "pay to play" scheme orchestrated by Saudi Arabia. According to the leaked document, the Saudis demanded that aid groups and humanitarian agencies operating in Yemen provide favorable publicity for Saudi Arabia in return for Riyadh providing close to a billion dollars to fund their efforts. The document identifies $930m given to the aid groups, even as the Saudi-led coalition bombed the very people the donations were supposed to help.  The Guardian report calls the extent of Saudi demands "highly unusual" as part of the requirement for groups to receive aid included floating favorable stories and coverage of "the Saudi humanitarian effort in Yemen" to newspapers like the New York Times and the Guardian — publications specifically named in the internal memo. Thus the nearly $1bn was essentially hush money for the sake of propaganda meant to shield the kingdom from scrutiny over its Yemen actions.

Crown prince Mohammed bin Salman is ‘chief of the tribe’ in a cowed House of Saud — For just over two years, until June 2017, Mohammed bin Nayef was crown prince of Saudi Arabia, the designated heir to the throne. A grandson of the kingdom’s founder, with long experience at high levels of government, he was the first of his generation to reach the direct line of succession. Today, bin Nayef, 59, is rarely seen outside his palace in Jiddah, on Saudi Arabia’s Red Sea coast. Usurped by an ambitious cousin barely half his age who took over his title and froze his once-hefty bank accounts, he reportedly passes his days under heavy guard. The ouster was not completely surprising, since his cousin was the favored son of bin Nayef’s uncle Salman, the current king. But the speed and apparent ruthlessness with which it was done — a late-night summons that left the crown prince with little choice — were shocking to many in the extended royal family, in which decisions had traditionally been made by consensus after extensive consultation. Now well more than a year into the job, the new crown prince, Mohammed bin Salman, enjoys nearly absolute power in the kingdom, directly controlling foreign and domestic policy, the security forces, and the economy. In doing so, Mohammed has replaced “cautious” royal leadership with “impulsive interventionist politics,” as one Western intelligence agency predicted in late 2015, warning that his rapid ascent would lead to trouble at home and abroad. The prescience of that three-year-old analysis, by Germany’s Federal Intelligence Service, appears borne out by events as Mohammed’s command has grown — an endless and seemingly futile war in Yemen, stubborn disputes and peremptory behavior toward neighbors and allies, and crackdowns on even the mildest forms of internal dissent.

Saudi Arabia’s ruling family – annotated family tree (Reuters)

EXCLUSIVE: Saudi dissident prince flies home to tackle MBS succession-  Prince Ahmad bin Abdulaziz, the younger brother of King Salman, has returned to Saudi Arabia after a prolonged absence in London, to mount a challenge to Crown Prince Mohammed bin Salman or find someone who can. The septuagenarian prince, an open critic of bin Salman (MBS), has travelled with security guarantees given by US and UK officials. “He and others in the family have realised that MBS has become toxic,” a Saudi source close to Prince Ahmad told Middle East Eye. “The prince wants to play a role to make these changes, which means either he himself will play a major role in any new arrangement or to help to choose an alternative to MBS.” The source said that the prince returned “after discussion with US and UK officials”, who assured him they would not let him be harmed and encouraged him to play the role of usurper. Apart from those western guarantees, Ahmad is also protected by his rank. Last November, bin Salman conducted a sweeping purge of dissident royals, yet was not able to touch any sons of King Abdulaziz, the founder of the modern Saudi state, who are regarded as too senior a target for him. The 33-year-old heir to the Saudi throne’s dominance in the kingdom has come under intense scrutiny following the murder of journalist Jamal Khashoggi on 2 October, leading to speculation that he could be replaced. MEE understands that while Prince Ahmad was in London he held meetings with other members of the Saudi royal family who are currently living outside the kingdom. Prince Ahmad also consulted figures inside the kingdom who have similar concerns and have encouraged him to usurp his nephew.

Summit in Istanbul as ramifications of the Khashoggi debacle roll on – Pepe Escobar - The Russia-Turkey-Germany-France summit in Istanbul today (October 27) is an extraordinary affair. The Kremlin has been deploying a wily strategy, downplaying the summit as just “comparing notes”, and not a breakthrough.Yet Istanbul is a de facto breakthrough in itself – on superimposed layers. It signals the top two EU powers acquiescing that Russia is in control of Syria’s future. It confers extra legitimacy to the Astana format (Russia, Turkey, Iran) on Syria, as well as adding new meaning to the efficacy of a quad. The nominal Quad (US, Japan, India and Australia) is essentially a mechanism of Chinese containment already showing signs of derailment. In contrast, there’s a Eurasian Quad that will be discussing not only the geopolitical chessboard in wider southwest Asia but also the supreme trans-Atlantic dilemma: how to deal with Washington’s sanction obsession.Istanbul, of course, won’t “solve” the tragedy in Syria. President Putin is carefully maneuvering around President Erdogan’s neo-Ottoman ambitions while the EU pair is not exactly in a strong negotiating position.Putin has already appeased Saudi Arabia, and that’s no mean feat. No more funding and weaponizing of any forms of Salafi-jihadism in Syria. The Arab League – with no Saudi objections – is even embarking on normalizing relations with Damascus.Riyadh is now part of the Russian Direct Investment Fund (RDIF), which will in fact be “renamed as the Russian-Chinese-Saudi Fund”, as revealed by its director, Kirill Dmitriev, at the Future Investment Initiative, or “Davos in the Desert”. The fund was originally set up in 2012 by RDIF and China Investment Corporation (CIS) to turbo-charge bilateral economic cooperation between Moscow and Beijing. Davos in the Desert, by the way, yielded a bombshell that was virtually ignored by the 24/7 news-cycle dementia. Prime Minister Imran Khan, fresh from receiving a much-needed Saudi cash injection to his nation’s economy, revealed that Pakistan is mediating a resolution for the tragedy in Yemen between Saudi Arabia and Iran.

Four-nation Syria summit calls for lasting Idlib ceasefire - The leaders of Turkey, Russia, France and Germany on Saturday called for a political solution to Syria's devastating seven-year civil war and a lasting ceasefire in the last major rebel-held bastion of Idlib. A joint statement adopted at the end of a major summit in Istanbul said the countries were committed to working "together in order to create conditions for peace and stability in Syria". It also "stressed the importance of a lasting ceasefire" in Idlib, while hailing "progress" following a deal last month between Syrian-regime supporter Russia and rebel-backer Turkey to create a buffer zone around the northwestern province. Turkish President Recep Tayyip Erdogan spoke for several hours with Russia's Vladimir Putin, France's Emmanuel Macron and German Chancellor Angela Merkel about the Syrian conflict, in which more than 360,000 people have been killed since 2011. Their statement, read by Erdogan, called for a committee to be established to draft Syria's post-war constitution before the end of the year, "paving the way for free and fair elections" in the war-torn country. It also said there was "the need to ensure humanitarian organisations' rapid, safe and unhindered access throughout Syria and immediate humanitarian assistance to reach all people in need". The talks came after a week of escalating violence in Idlib culminated in Syrian regime artillery fire killing seven civilians on Friday, the highest death toll there since the fragile ceasefire began last month.

Germany And France Just Broke The US Boycott Of Syria - There weren't exactly any breakthroughs at the four-way summit involving France, Germany, Russia, and host Turkey in Istanbul on Saturday, but the event itself was a significant victory for one side in terms of optics. Says Syria expert Joshua Landis: "The real importance of France and Germany going to Turkey to meet Putin and Erdogan is that they are effectively hiving off from the US by joining the Astana process." Ultimately, according Professor Landis: They are breaking the boycott of Syria, while preserving the "need for elections" talking point.Alas, as the photo op of summit participants suggests, the United States has indeed effectively been cut out of the Russia and UN-brokered Astana process to bring Syria's war to a close — which has both set the terms for the current shaky Idlib ceasefire agreement, and brought Turkey and Russia into an orbit of cooperation to seek long-term peace and stability. Notably Germany's Merkel and France's Macron now see the Russia-Turkey deal on Idlib as the only workable track that could stave off another mass refugee and jihadi influx into Europe, already reeling from a years-long migrant crisis.  And President Putin, sitting beside his European counterparts, still affirmed that Russia is in the driver's seat since its 2015 intervention in the war at the request of Damascus. Putin vowed during the summit: "Should radicals… launch armed provocations from the Idlib zone, Russia reserves the right to give active assistance to the Syrian government in liquidating this source of terrorist threat."

Syria Sitrep – ISIS Defeats U.S. Proxy Force – Again - The U.S. backed proxy force in east Syria again lost positions to the Islamic State. The map shows the positions of ISIS (grey), the US. proxy force SDF (yellow) and the Syrian army (red) at the border with Iraq on October 19. bigger Here are the positions as of today. bigger The U.S. proxy force lost the towns Susah, Hawi al-Susah, Safafinah, Mozan, Shajlah and Baghuz Fawqani and ISIS is back at the Iraqi border. The Iraqi forces were alarmed and sealed the border on their side. The immediate cause of the loss was another sandstorm which ISIS used to counterattack.  A similar counterattack during a sandstorm  happened two weeks ago. That makes this U.S. spokesman's statement laughable: “The sandstorm allowed an ISIS counterattack, which was surprising given the conditions, but now the air is clear and the Coalition will continue to increase air and fire support to assist our partners,” Col. Ryan said ... Sandstorms disable air and artillery support. That is why ISIS, which lacks an airforce, has for years used each and every sandstorm to attack. That is not surprising at all, but one of its signature forms of fighting. Sandstorms mean that one can expect an ISIS attack. That one has to double one's guard and be ready to defend one's position. The U.S. special forces who are supposed to lead their proxies seem to have neglected that. ISIS jihadis attacked during the sandstorm in their usual manner. A suicide bomber blew up the first position at the frontline and more than 100 fighters stormed through and rolled up their enemie's lines. Since Friday some 60 to 80 SDF were killed, more were wounded and at least 20 were taken prisoners. Others simply fled in panic and ISIS could recapture several villages without a fight. ISIS claims that all the captured fighters were Arabs, not Kurds.

NATO Is At War With NATO In Northern Syria - Not for the first time the Turkish army has attacked U.S.-backed forces in northeastern Syria on Sunday in yet another absurd contradiction of American policy in the region. It highlights the awkward fact that in northern Syria for over the past year one NATO country (Turkey) is at war with another NATO country's proxy force, namely the Pentagon armed and trained Kurdish-led Syrian Democratic Forces (SDF, of which the YPG is a core part).The new flair up of tensions comes as President Turkey's President Recep Tayyip Erdogan again vowed to eliminate "terrorists and separatists" from near its border. Speaking at the four-way Syria summit involving Russia, Germany, and France in Istanbul over the weekend, Erdogan said, "We will continue eliminating threats against our national security at its root in the Euphrates' east as we have done so in its west."Notably the Saturday summit with two major European/NATO powers did not include the United States.  Syrian Kurdish groups, for their part, have accused Turkey of committing ethnic cleansing on Syrian soil in a bid to essentially annex territory while conducting a campaign of 'Turkification' — a charge for which there's ample evidence. As a new AFP report finds in the northwest Syrian town of Azaz: "From Turkish-language classes for Syrian children to the state-owned Turk Telekom company erecting its first cell towers on Syrian soil, Ankara's role in the rebel-held region around Azaz has been expanding."And on Sunday amidst a continuing slow onslaught of pro-Turkish forces, the Associated Press reported:  The Turkish army shelled on Sunday positions held by the U.S.-backed Kurdish fighters in northeastern Syria, east of the Euphrates River, in a new spike in tension along the borders.The report further noted the timing of Turkey's shelling US-backed fighters east of the Euphrates, coming just after Erdogan, Putin, Macron, and Merkel met in order to talk Syria, and among other things shore up the shaky ceasefire over Idlib brokered between Turkey and Russia.

Russia Ready To Shoot Down U.S. Spy Plane Behind Attacks On Airbase, Says Defense Official - A Russian defense official has doubled down on prior claims that the United States was behind a prior massive drone attack against Khmeimim Air Base near Latakia (alternately Hmeimim), which has further come under sporadic waves of attack by small armed drones which have appeared increasingly sophisticated. Vladimir Shamanov, head of the lower parliamentary house's defense committee and a former airborne troops commander, warned, according to a translation of his Tuesday statement by Russian Market:In case of another U.S. drone attack on Russian Military Base in Syria, Russia is ready to shoot-down that plane.  The threat was made against an American spy plane possibly being in the area near Syria to coordinate any future attack. Last week the Kremlin said, based on new intelligence provided by the Russian defense ministry, that a major attack on Khmeimim last January was coordinated by a US P-8 Poseidon surveillance plane. 

Russia, India And Iran To Cooperate On New Trade Route Alternative To Suez Canal - After their leaders pledged to strengthen bilateral trade and military cooperation at a bilateral summit last month, Russia and India announced earlier this week that they had sealed a long-discussed $6 billion arms deal despite threats of economic sanctions from Washington. And in the latest indication of the increasingly close relationship between the two countries, Iran, Russia and Iran announced on Thursday that they would meet next month to work out the details of a massive project to open up a new sea-land transport corridor that would that would be a cheaper and shorter alternative to shipping oil and other goods through the Suez Canal. According to RT, the North-South Transport Corridor (INSTC), the name for the new transit route, will connect India to Russia and Europe via a combination of sea routes and an overland passage through Iran, according to Iranian state-owned news outlet Press TV. The 7,200-kilometers long corridor will reduce the time and costs of shipping by up to 40%. Transport time between Mumbai and Moscow will fall to 20 days. The annual capacity of the transport artery is expected to reach 30 million tons.Indian logistics companies presently need to route shipments through China, Europe or Iran to access Central Asian markets. Already, routing shipments through Iran is the least time-consuming option. But the INSTC will have the ancillary benefit of allowing Indian companies to forge a new trade route to Afghanistan without having to travel through Pakistan, as tensions over Kashmir are once again on the rise. The passage corridor through the Persian Gulf will mean billions of dollars in trade for Afghanistan, cutting its dependence on foreign logistics.

Bahrain says ‘Arab NATO’ to be formed by next year -- Bahrain's Foreign Minister Khalid bin Ahmed Al Khalifa has said a planned Gulf security alliance, expected to include Egypt, will be formed by next year.At a security summit in capital Manama on Saturday, Khalifa said the Middle East Strategic Alliance (MESA), an initiative pushed by US President Donald Trump to confront Iran, will help the Gulf remain "a pillar of stability"."It (MESA) is an alliance for security and prosperity for the region and will be open to those who accept its principles," he said, adding that the alliance would also cooperate on economic issues.Relations between Saudi Arabia, which is the lynchpin of the US-backed regional bloc, and its Western allies are strained following the murder of journalist Jamal Khashoggi. Doubts over MESA have also been raised over a protracted dispute between Qatar and four Arab states who launched a blockade against Doha in 2017.Saudi Arabia, the United Arab Emirates, Bahrain and Egypt cut off travel and trade ties with Qatar in June 2017, accusing it of backing Iran and supporting "terrorism". Qatar denies the charges and says the boycott impinges on its sovereignty.

Taliban Stronger Than at Any Time Since Afghanistan War Began in 2001 —With Afghan security forces suffering record casualties, and their already tenuous control slipping all the time, things are looking dire in Afghanistan. But from the Taliban perspective, all these same stats add up to things looking pretty good. The Taliban is getting stronger all the time, and now controls more of Afghanistan than at any time since the 2001 US invasion. That control is extending in all regions of the country, with them contesting substantial portions of even vital provinces, or controlling them outright. That’s true even in the capital city of Kabul. According to the most recent SIGAR estimate, 12% of Kabul is under direct Taliban control, with another 32% of the city considered at the very least “contested.” All of this adds up to a Taliban able to contest virtually any part of Afghanistan they choose, able to make a serious run at seizing almost any city in the country, at least temporarily, and can carry out so many simultaneous offensives that the Afghan military can’t react to them all. Afghan officials are determined to not publish death tolls for their forces as they face major pushes from the Taliban. They do, however, admit that the casualties are higher than in any previous comparable period. The record casualties were a bit more closely defied by Defense Secretary James Mattis, who said over 1,000 Afghan security forces suffered casualties in August and September. This was done to praise them for continuing to fight. But they’re fighting and losing. The record casualties are not coming as part of some costly offensive by the Afghan government, but rather amid mounting losses. Afghan government control in the country is shrinking apace, and shows now sign of slowing, despite the eternal optimism of the Pentagon. One of the most immediate concerns with the casualties is that the Afghan government’s official troop figures have always been inflated. In reality, much of the army exists only on paper, and as very real troops suffer casualties, the remaining percentage of the military that is wholly imaginary only grows.

Video Shows Iranian Boats Harassing U.S. Ship With CENTCOM Chief On Board -- A hugely significant incident occurred in the Persian Gulf on Friday, first reported by CNN and now confirmed through official U.S. Navy statements. An American warship — the Wasp-class amphibious assault ship Essex — was approached by two armed Iranian fast boats at a moment that commander of U.S. Central Command, Gen. Joseph Votel, was on board. CNN reported, based on official military sources, that at one point the pair of Iranian boats crossed within 300 yards in front of the Essex; however a Navy statement did not deem the incident as intentionally hostile in spite of video footage revealing what clearly appears to be harassing maneuvers around the much larger U.S. vessel. U.S. Naval Forces Central Command told Marine Corps Times in a statement: “Today’s interaction with U.S. 5th Fleet forces and the IRGCN [Islamic Revolutionary Guard Corps Navy] was characterized as safe and professional" — meaning the US didn't consider it to be an overt or intentional act of aggression. The statement continued: “The U.S. Navy continues to operate wherever international law allows.”As CENTCOM Chief Votel was on board, we can imagine that if for a moment the Navy interpreted the approach as hostile the USS Essex would have blown the Iranian fast boats out of the water. However, stunning video of the incident shows the armed Iranian military boats in an attempt to shadow and harass the Essex.

Iran's Khamenei calls for fight against enemy 'infiltration': state TV (Reuters) - Iranian Supreme Leader Ayatollah Ali Khamenei called on Sunday for the stepping up of efforts to fight enemy “infiltration” in a speech to officials in charge of cyber defense, state television reported. “In the face of the enemy’s complex practices, our civil defense should ... confront infiltration through scientific, accurate, and up-to-date ... action,” Ayatollah Khamenei told civil defense officials, who are in charge of areas including cyber defense. The television report did not give details of the “infiltration” Khamenei was referring to. Iranian officials have long warned about Western cultural influences through entertainment, social media and the Internet as a threat against Islamic and revolutionary values. A decade ago, Iran’s nuclear program was hit by Stuxnet, a virus which was deployed by U.S. and Israeli intelligence agencies against a uranium enrichment facility. Gholamreza Jalali, head of Iran’s civil defense agency, said on Sunday that Iran had recently neutralized a new version of Stuxnet. “Recently we discovered a new generation of Stuxnet which consisted of several parts ... and was trying to enter our systems,” Jalali was quoted as saying by the semi-official ISNA news agency at a news conference marking Iran’s civil defense day. He did not give further details. 

By Way Of Deception – False Flag Terror Acts Press Europe To Sanction Iran - Israels secret service Mossad, with the CIA behind it, is framing Iran with alleged assassination plots in Europe. In September a terror attack killed some 30 people in Iran. Two entities, an Arab separatist movement as well as the Islamic State terror group ISIS, took responsibility. After an investigation Iran found that it was ISIS which was responsible. It took revenge against the identified culprits. Six weeks later Denmark claims, without providing evidence, that Iran tried to assassinate a leader of the Arab separatist movement over the incident. Iran denies any such attempt. The right wing Danish government uses the claim  to urge other European countries to sanction Iran. It is unlikely that Iran would take action in Europe, which it urgently needs to reduce the damage of U.S. sanction, over an incident for which it already punished the Islamic State.The Danish claims are allegedly based on information provided by Mossad. That only increases the suspicion that the assassination plot is a false flag operation similar to a recent one in Belgium. More likely though is that the CIA is behind such false flag incidents.The details:On September 22 gunmen killed 29 and wounded more than 70 participants and onlookers of a veterans day parade in Ahvaz, Iran: "The terrorists disguised as Islamic Revolution Guards Corps (IRGC) and Basiji (volunteer) forces opened fire to the authority and people from behind the stand during the parade," the governor of Khuzestan, Gholam-Reza Shariati, said, according to IRNA.  U.S. State Department spokeswoman Heather Nauert said, "We stand with the Iranian people against the scourge of radical Islamic terrorism and express our sympathy to them at this terrible time".  The Islamic State as well as an Arab separatist movement claimed responsibility:  After Yaqoob Al-Ahvaz claimed responsibility Iran accused Saudi Arabia of involvement in the attack:

Oman says time to accept Israel in region, offers help for peace (Reuters) - Oman described Israel as an accepted Middle East state on Saturday, a day after hosting a surprise visit by its prime minister that Washington said could help regional peace efforts. Oman is offering ideas to help Israel and the Palestinians to come together but is not acting as mediator, Yousuf bin Alawi bin Abdullah, the sultanate’s minister responsible for foreign affairs, told a security summit in Bahrain. “Israel is a state present in the region, and we all understand this,” bin Alawi said. “The world is also aware of this fact. Maybe it is time for Israel to be treated the same [as others states] and also bear the same obligations.” His comments followed a rare visit to Oman by Israeli Prime Minister Benjamin Netanyahu which came days after Palestinian President Mahmoud Abbas paid a three-day visit to the Gulf country. Both leaders met with Oman’s Sultan Qaboos. “We are not saying that the road is now easy and paved with flowers, but our priority is to put an end to the conflict and move to a new world,” bin Alawi told the summit. Oman is relying on the United States and efforts by President Donald Trump in working toward the “deal of the century” (Middle East peace), he added. Bahrain’s foreign minister Khalid bin Ahmed Al Khalifa voiced support for Oman over the sultanate’s role in trying to secure Israeli-Palestinian peace, while Saudi Arabia’s foreign minister Adel al-Jubeir said the kingdom believes the key to normalizing relations with Israel was the peace process. The three-day summit was attended by Saudi Arabia and Bahrain. U.S. Defense Secretary Jim Mattis, and his counterparts in Italy and Germany also participated, but Jordan’s King Abdullah canceled his appearance after a flood that hit the Dead Sea region killed 21 people.

Is Oman Helping Netanyahu Make Peace with Saudi Arabia and Iran? - Sultan Qaboos Al-Said seemingly took the world by surprise when he hosted Israeli Prime Minister Benjamin Netanyahu in Muscat last week. The British-educated Qaboos, who is also the Arab world’s longest serving monarch, has played an indispensible role since assuming power in 1970 to narrow differences between Washington and Teheran and between Israel and the Arab states.For instance, amid rumors of an imminent Israeli attack on Iran in 2011, Qaboos helped the Obama administration with facilitating a secret backchannel with Iran, which led to the Interim Agreement of 2013, the precursor of the Joint Comprehensive Plan of Action (JCPOA) of 2015.Although Netanyahu staunchly opposed the JCPOA and actively lobbied the Trump administration to scrap it altogether, his visit to Muscat was closely coordinated with the White House—and with the blessings of President Donald Trump’s son in-law Jared Kusher in particular—to help lend Arab support for a lasting peace between Israelis and Palestinians.By inviting Netanyahu, Oman demonstrated significant diplomatic bravery by seeking to accommodate two regional powers—Israel and Iran—that its fellow Gulf Arab states do not accept.The preparations for Netanyahu’s visit most likely began last February when Omani Foreign Minister Yusuf bin Alawi visited the Al-Aqsa Mosque in Jerusalem where he called for the need to establish a Palestinian state. But the timing of the Israeli leader’s talks in Muscat coincides with mounting international outrage over the murder of Saudi journalist Jamal Khashoggi at the Saudi consulate in Istanbul.From an Omani perspective, the Khashoggi affair, which is pitting Turkish President Recep Tayyip Erdogan against Saudi Arabia’s Crown Prince and de-facto ruler Mohammad bin Salman (MbS) in a high-stakes zero-sum game, is further contributing to instability in the volatile Middle East. Muscat believes that Israel is a stabilizing force in the Middle East, particularly now amid Saudi Turkish tensions, and thus seeks to strengthen regional stability by supporting the U.S.-led peace process by publicly engaging Netanyahu and Palestinian President Mahmoud Abbas.

Israel wants US mediation in gas dispute with Lebanon - Israel offered on Wednesday to accept US mediation in a dispute with Lebanon over a potentially lucrative block of gas resources in the Mediterranean. As tension rises over the issue, the senior US diplomat for the Middle East, David Satterfield, made a surprise visit to Lebanon this week for talks with senior government officials, and Secretary of State Rex Tillerson is expected to visit on Feb. 15. “We are willing to accept American mediation to resolve the issue diplomatically. There was international mediation on the matter in the past,” Israeli Energy Minister Yuval Steinitz said on Wednesday. “We were close to reaching a compromise in 2013, but the whole thing collapsed at the 11th hour.” There is also growing unease over Israeli plans to build a cement wall on its border with Lebanon. Construction work has already begun at the Ras Al-Naqoura border crossing. Talks took place at Ras Al-Naqoura on Wednesday between representatives of the Lebanese and Israeli armies, brokered by the UN Interim Force in Lebanon (UNIFIL). The two sides discussed the possibility of deciding on the maritime border between the two countries in the same way as the land border was established. “UNIFIL proposed this solution, and Lebanon welcomes it provided the international force undertakes this task,” Lebanese MP Mohammed Qabbani told Arab News. Lebanon’s Higher Defense Council said Israel’s behavior was a violation of UN Security Council Resolution 1701, and threatened border stability. “We grant the armed forces the political backing to act against any Israeli aggression on the border — on land and at sea,” it said. Resolution 1701 was passed after the Israeli war on Lebanon in 2006, and guarantees Lebanon’s territorial integrity and sovereignty. Israeli minister Steinitz said: “I do not need these explicit threats. Energy security and the protection of our energy installations — and to a great extent the gas rigs as well — are at the top of our list of priorities. “Let there be no doubt, the state of Israel is the strongest nation in the region, and we will defend our territorial waters and our gas rigs and fields. “I think both Israel and Lebanon are interested in a diplomatic solution. Lebanese officials are interested in exploiting gas and oil, and they have the right to do so. However, they should not make threats.”

Israeli Forces Launch 87 Overnight Airstrikes Against Gaza Strip  — The Israeli army carried out scores of air strikes across the besieged Gaza Strip in the early hours of Saturday, in the highest-intensity offensive on the coastal Palestinian territory since the summer.The Israeli army launched at least 87 air strikes, Israeli news outlet Ynet reported, saying it was in response to some 34 rockets fired from the enclave into southern Israel.Islamic Jihad claimed responsibility for the rockets, saying in a statement that they were in retaliation for the Israeli army’s killing of five Palestinian protesters on Friday.“The resistance will not accept the equation imposed by the enemy on the basis of killing on their part and silence on our part,” the group said in a statement.Following the exchanges, Islamic Jihad’s media office announced on Saturday morning that it had accepted an Egypt-mediated ceasefire with Israel.Locals told Middle East Eye that one four-storey building in central Gaza City that was turned to rubble overnight had hosted charitable institutions and research centres. Gaza’s Ministry of Health, meanwhile, said that air strikes had targeted the perimeter of the Indonesian Hospital in Beit Lahiya in the northern Gaza Strip, causing material damages to the building.

Israel Strikes Gaza Hospital During Massive Response To 'Islamic Jihad' Rocket Attacks - Gazans reported explosions so massive they seemed to turn night into day overnight Friday as Israeli aircraft began pounding the Gaza Strip since the evening in response to Hamas reportedly firing some 30 rockets toward the Israeli city of Sderot.The Israeli Defense Forces (IDF) said it destroyed 80 Hamas targets in the operation, which had been somewhat expected since a week ago the began staging an unprecedented build-up of forces along the Israeli-Gaza border fence. Sporadic bombings continued through Saturday morning. A terrorist group operating in Gaza which often acts independently of Hamas called Islamic Jihad implicitly claimed responsibility for the rocket fire, issuing a statement saying it "can no longer stand idle before the continued killing of innocents and bloodshed by the Israeli occupation". In the immediate aftermath of the most intense part of the overnight bombings there were no reports of casualties on either side, however, the air raid follows one of the deadliest days in weeks as on Friday 5 Palestinians were reportedly shot by Israeli snipers near the border fence. Throughout the night Friday Israeli media reported that multiple Israeli settlements in the south of the country had most of their residents staying in bomb shelters. But on the Gaza side it was chaos as frequent explosions rocked the strip and there were broad power outages.  And notably Palestinian authorities have blamed the IDF for a direct strike on an Indonesian-sponsored hospital in the northern Gaza strip — which appears to be confirmed in images and video uploaded to social media.

Israel Crushes Resistance at Home and Abroad -The Jewish-Israeli left is in tatters.They make up just a tiny fraction of the Jewish population of the country, and their numbers have been steadily shrinking since the start of the millennium. No alliance of progressive parties can hold a candle to Israel’s hawkish governing coalitions. No liberal newspaper can pull the public away from the tabloids that back Prime Minister Benjamin Netanyahu and his rivals even further to the right. And no upstart activist group has been able to sway the hearts and minds of significant numbers of young Jews, brainwashed with ever-increasing doses of Zionist propaganda. Top Israeli lawmakers openly incite against leftist figures with frightening regularity, knowing that these attacks will only increase their own popularity among Israeli voters. Even without this egging on, Israeli society is increasingly purging its leftists from positions of influence, as all the Israelis who have lost their jobs in recent years after being outed for their left-leaning views can attest to.  But to grasp the cost that Israeli Jews are forced to pay if they harshly criticize their own government’s racist policies, one need only consider a case reported on earlier this month, that of 58-year-old Guri Mintzer of Tel Aviv.  Until recently, Mintzer was on top of the world as the CEO of a medical services firm he started from scratch over a quarter-century ago, today employing hundreds of workers – a so-called Israeli success story.But when right-wing activists learned that, in a private capacity, he supported Palestinian rights – even paying some of the legal costs of Palestinian activist Ahed Tamimi – they called to punish Mintzer by boycotting his firm.After a spate of attacks against him, the company’s employees and their property, Mintzer reluctantly sold the firm that was his life’s work. Under duress, he was reportedly forced to sell it off for a price less than its actual worth, by $10m – and possibly several times that figure.