oil prices now down by half from January’s high on coronavirus and price war impacts; globl oil surplus near 2.2 mpd in February even with OPEC cuts still in effect; biggest distillates draw since January 2004, natural gas rigs at a new 40 month low
US oil prices fell 23% this past week after the Saudis initiated an oil price war against the Russians for their failure to agree on oil production cuts that the Saudis were pushing at the OPEC meeting the week before, a failure which itself had precipitated a 10% drop to a 42 month low on Friday of last week...before the markets even opened for this week, oil prices had plunged 30% in early trading on Sunday night, after the Saudis marked down prices on all the grades of oil they sell and indicated they'd be increasing production....hence, when the markets opened Monday morning, the contract price of US light sweet crude for April delivery opened $8.41 or 20.4% lower than last week's close of $41.28 at $32.87 a barrel and continued falling in early trading, tanking by more that 30% to $27.34 amid forecasts for $20 oil, before recovering to settle at $31.13 a barrel, hence posting a loss of $10.15 or 24.6% on the day, its biggest one day drop since 1991...oil prices then rebounded on Tuesday following reports that talks between OPEC and its allies remained possible, with oil prices closing up $3.23 or more than 10% at $34.36 a barrel, surging with the equity markets as the possibility of economic stimulus encouraged buying while U.S. producers slashed spending in a move that traders hoped would reduce output....after opening higher and rallying to as high as $36 early Wednesday, crude prices turned lower after Saudi Aramco said it had been directed by the energy ministry to raise its production capacity by a million barrels per day (10%) and after the EIA reported the biggest jump in US crude supplies since October, with US crude settling $1.38, or 4% lower at $32.98 per barrel....oil prices fell again on Thursday amid a broad decline in global markets after the US banned travel from Europe following the World Health Organization's decision to declare the coronavirus outbreak a pandemic, with US crude prices falling as much as 8% to a low of $30.02 before recovering to close at $31.50, a loss of $1.48 on the day...oil prices opened lower on Friday and were down more than a dollar while waiting for Trump's expected State of Emergency declaration, but jumped more than 5% after Trump announced his intention to buy "large quantities of oil" for the Strategic Petroleum Reserve and settled with a gain of 23 cents at $31.73 a barrel ...nonetheless, oil prices posted their biggest weekly percentage drop since the financial crisis of 2008 this week, rocked by both the coronavirus pandemic and efforts Saudi Arabia and its allies to flood the market with record levels of supply...
the above graph is a screenshot of the interactive price chart for the April oil contract at Barchart.com, a "leading provider of real-time or delayed intraday stock and commodities charts and quotes", and it shows the range of prices for the April oil futures contract as a vertical bar for each day over the past 6 months...note that each bar has two small horizontal appendages: the one on the left is the opening price for the month the bar indicates, while the appendage on the right is the month's closing price...across the bottom the red and green bars indicate the trading volume for each day, with down days indicated in red and days when the price rose indicated in green...what we want to note here is the precipitous fall in oil prices since the interim high for the April contract was hit on January 8th, when oil briefly traded at $64.99 a barrel before falling back...this week's closing price thus represents less than half of that high, with Monday nadir of $27.34 a barrel representing a 58% decline in just two month's time..
while oil prices were falling, natural gas prices were moving higher on expectations that the collapse in oil prices would prompt drillers to cut back on both oil and gas production... after rising 1.4% to $1.708 per mmBTU even as the weather remained bearish last week, the contract price of natural gas for April delivery jumped 7 cents, or over 4% on Monday on forecasts for colder weather and higher heating demand next week than was previously expected...natural gas futures then soared 15.8 cents or almost 9% on Tuesday, on hopes of an economic stimulus package and expectations the that oil price collapse would prompt U.S. drillers to cut back on oil and associated gas production in major shale oil basins...after flirting with $2 gas, prices fell back on Wednesday and ended 5.8 cents lower despite forecasts for a little more gas demand over the next two weeks than was previously expected...prices fell another 3.7 cents, or 2%, after the EIA reported a smaller than expected withdrawal of gas from storage on Thursday, even as the decline was limited by forecasts for cooler U.S. weather and higher heating demand over the next two weeks and expectations the oil price drop this week would cut crude and associated gas production in shale basins....the April natural gas contract then added 2.8 cents on Friday's state of emergency declaration to finish the week at $1.869 per mmBTU, thus showing a 9.4% gain for the week..
the natural gas storage report from the EIA on the week ending March 6th indicated that the quantity of natural gas held in underground storage in the US fell by 48 billion cubic feet to 2,043 billion cubic feet by the end of the week, which left our gas supplies 796 billion cubic feet, or 63.8% higher than the 1,247 billion cubic feet that were in storage on March 6th of last year, and 227 billion cubic feet, or 12.5% above the five-year average of 1,816 billion cubic feet of natural gas that has been in storage as of the 6th of March in recent years....the 48 billion cubic feet that were withdrawn from US natural gas storage this week was less than the consensus estimate for a 55 billion cubic feet withdrawal from a survey of analysts by S&P Global Platts, and was also much less than the average 99 billion cubic feet of natural gas that have been pulled from natural gas storage during the first week of March over the past 5 years, while it was way less than the 164 billion cubic feet withdrawal reported during the corresponding week of 2019..
The Latest US Oil Supply and Disposition Data from the EIA
US oil data from the US Energy Information Administration for the week ending March 6th indicated that a modest increase in our oil imports and a big drop in our oil exports left us with a large surplus of oil to add to our stored commercial supplies, the eighteenth addition to storage in the past twenty-six weeks....our imports of crude oil rose by an average of 174,000 barrels per day to an average of 6,412,000 barrels per day, after rising by an average of 21,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 744,000 barrels per day to 3,410,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,002,000 barrels of per day during the week ending March 6th, 918,000 more barrels per day than the net of our imports minus our exports during the prior week...over the same period, the production of crude oil from US wells fell by 100,000 barrels per day to 13,000,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production totaled an average of 16,002,000 barrels per day during this reporting week..
meanwhile, US oil refineries reported they were processing 15,702,000 barrels of crude per day during the week ending March 6th, 5,000 more barrels per day than the amount of oil they used during the prior week, while over the same period the EIA's surveys indicated that an average of 1,095,000 barrels of oil per day were being added to to the supplies of oil stored in the US....so looking at that data, this week's crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports and from oilfield production was 794,000 barrels per day less than what what was added to storage plus what our oil refineries reported they used during the week....to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a (+794,000) 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 they label in their footnotes as "unaccounted for crude oil", thus suggesting an error or errors of that magnitude in the oil supply & demand figures we have just transcribed...however, since the media treats these figures as gospel and since they drive oil pricing and hence decisions to drill for oil, we'll continue to report them, just as they're watched & believed as accurate by most everyone else...(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 fell to an average of 6,354,000 barrels per day last week, now 6.5% less than the 6,797,000 barrel per day average that we were importing over the same four-week period last year....the 1,095,000 barrel per day net addition to our total crude inventories was all added to our commercially available stocks of crude oil, while the quantity of oil stored in our Strategic Petroleum Reserve remained unchanged....this week's crude oil production was reported to be 100,000 barrels per day lower at 13,000,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day lower at 12,500,000 barrels per day, while a 1,000 barrel per day decrease Alaska's oil production to 473,000 barrels per day had no impact on the rounded national total....last year's US crude oil production for the week ending March 8th was rounded to 12,000,000 barrels per day, so this reporting week's rounded oil production figure was 8.3% above that of a year ago, and 54.2% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...
meanwhile, US oil refineries were operating at 86.4% of their capacity in using 15,702,000 barrels of crude per day during the week ending March 6th, down from 86.9% of capacity the prior week, but still near the recent average refinery capacity utilization for the first week of March, historically the time of year that refineries changeover to summer blends and undergo maintenance...however, the 15,702,000 barrels per day of oil that were refined this week were 2.0% less than the 16,020,000 barrels of crude that were being processed daily during the week ending March 8th, 2019, when US refineries were operating at 87.6% of capacity....
even with the amount of oil being refined little changed, gasoline output from our refineries was somewhat higher, increasing by 199,000 barrels per day to 9,956,000 barrels per day during the week ending March 6th, after our refineries' gasoline output had decreased by 40,000 barrels per day over the prior week... after this week's increase in gasoline output, our gasoline production was 2.3% higher than the 9,735,000 barrels of gasoline that were being produced daily over the same week of last year....meanwhile, our refineries' production of distillate fuels (diesel fuel and heat oil) increased by 57,000 barrels per day to 4,705,000 barrels per day, after our distillates output had decreased by 198,000 barrels per day over the prior week...but even after this week's increase in distillates output, our distillates' production for the week was 3.1% less than the 4,856,000 barrels of distillates per day that were being produced during the week ending March 8th, 2019....
even with the increase in our gasoline production, our supply of gasoline in storage at the end of the week fell for the six week in a row, after twelve consecutive increases, and was hence down for the 20th time in 38 weeks, falling by 5,049,000 barrels to 246,999,000 barrels during the week ending March 6th, after our gasoline supplies had decreased by 4,339,000 barrels over the prior week....our gasoline supplies decreased by even more this week because the amount of gasoline supplied to US markets increased by 263,000 barrels per day to 9,449,000 barrels per day, while our exports of gasoline fell by 67,000 barrels per day to 745,000 barrels per day, while our imports of gasoline rose by 199,000 barrels per day to 710,000 barrels per day....but even after this week's big inventory decrease, our gasoline supplies were still fractionally higher than last March 8th's gasoline inventories of 246,090,000 barrels, and about 1% above the five year average of our gasoline supplies for the same time of the year...
similarly, with the decrease in our distillates production, our supplies of distillate fuels decreased for the 18th time in 24 weeks and for 33rd time in the past 49 weeks, falling by 6,404,000 barrels to 128,060,000 barrels during the week ending March 6th, the biggest draw since January 2004, after our distillates supplies had decreased by 4,008,000 barrels over the prior week....our distillates supplies fell by a near record amount this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 479,000 barrels per day to 4,398,000 barrels per day, and because our exports of distillates rose by 103,000 barrels per day to 1,530,000 barrels per day, while our imports of distillates rose by 183,000 barrels per day to 308,000 barrels per day....after this week's big inventory decrease, our distillate supplies at the end of the week were 6.1% lower than the 136,369,000 barrels of distillates that we had stored on March 8th, 2019, and fell to about 10% below the five year average of distillates stocks for this time of the year...
finally, with the big drop in our oil exports, our commercial supplies of crude oil in storage rose for the twentieth time in thirty-seven weeks and for the thirty-second time in the past 52 weeks, increasing by 7,664,000 barrels, from 444,119,000 barrels on February 28th to 451,783,000 barrels on March 6th, the largest increase since November 1st ....but even after 7 straight increases, our crude oil inventories were stlll roughly 2% below the five-year average of crude oil supplies for this time of year, even while they remained about 35% higher than the prior 5 year (2010 - 2014) average of crude oil stocks after the first week of March, with the disparity between those comparisons arising because it wasn't until early 2015 that our oil inventories first rose above 400 million barrels....even though our crude oil inventories had generally been rising over the past year, except for during this past summer, after generally falling until then through most of the prior year and a half, our oil supplies as of March 6th were just fractionally above the 449,072,000 barrels of oil we had in commercial storage on March 8th of 2019, and still 4.8% above the 430,928,000 barrels of oil that we had in storage on March 9th of 2018, while at the same time remaining 14.5% below the 528,156,000 barrels of oil we had in commercial storage on March 10th of 2017, a week which followed a period when we had been adding 10 million barrels per week to storage...
OPEC's Monthly Oil Market Report
Wednesday of this past week saw the release of OPEC's March Oil Market Report, which covers OPEC & global oil data for February, and hence it gives us a picture of the global oil supply & demand situation as production cuts totaling 2.1 million barrels a day from OPEC and its partners were still in effect, before the recent breakdown of OPECs agreemen...but as we'll see, this report shows there was already a surplus more than 2 million barrels per day of oil produced globally in February, almost entirely due to coronavirus related downward revisions to demand...we should note as a caveat that estimating demand while an epidemic is spreading is pretty much a crapshoot, and hence the numbers we'll be reporting this month should be considered having a much larger margin of error than we'd normally expect from this report..
the first table from this monthly report that we'll look at is from the page numbered 55 of that report (pdf page 63), and it shows oil production in thousands of barrels per day for each of the current OPEC members over the recent years, quarters and months, as the column headings indicate...for all their official production measurements, OPEC uses an average of estimates from six "secondary sources", namely the International Energy Agency (IEA), the oil-pricing agencies Platts and Argus, the U.S. Energy Information Administration (EIA), the oil consultancy Cambridge Energy Research Associates (CERA) and the industry newsletter Petroleum Intelligence Weekly, as a means of impartially adjudicating whether their output quotas and production cuts are being met, to thus avert any potential disputes that could arise if each member reported their own figures...
as we can see from the above table of oil production data, OPEC's oil output fell by 546,000 barrels per day to 27,772,000 barrels per day in February, from their revised January production total of 28,318,000 barrels per day...however that January output figure was originally reported as 28,859,000 barrels per day, which means that OPEC's January production was revised 541,000 barrels per day lower with this report, and hence February's production was, in effect, a 1,087,000 barrel per day decrease from the previously reported OPEC production figures (for your reference, here is the table of the official January OPEC output figures as reported a month ago, before this month's revisions)...
from that OPEC table, we can also see that the 647,000 barrel per day decrease in production in wartorn Libya was the only reason for the February drop in OPEC's output, and were it not for that, there would have been a modest production increase, as several OPEC members increased output...nonetheless, it appears that oil output from most OPEC members, other than that of Iraq, still remains far enough below the output allocations that were originally determined for each OPEC member after their December 7th, 2018 meeting, when OPEC agreed to cut 800,000 barrels per day as part of a 1.2 million barrel per day cut agreed to with Russia and other oil producers so as to allow for such modest increases....those output allocations for 2019, before the first quarter's additional cuts, can be seen in the first table of OPEC production quotas for last year which we've included on the left below:
in addition to the allocations shown on the table on the left, at their meeting with other oil producers on December 6th of this past year, OPEC announced additional production cuts of 500,000 barrels per day through to March 2020 on top of those 2019 allocations, a breakdown of which we have in a table from OPEC on the right above...that table was posted on OPEC's website after their December 6th meeting, and it shows the additional production cuts each of the OPEC members and their allies among other producers were expected to make over the 3 month period beginning January...as you see, the heaviest output cuts have been on the core OPEC members of Saudi Arabia. the United Arab Emirates, Kuwait and Iraq, while embargoed Iran and Venezuela remain exempt...obviously, that table would be more useful if their current production, or even their expected end production, were included, but i've been unable to find a table with those complete metrics, so we'll just have to make do switching back and forth between the two tables we have to see how each member is impacted....in addition to those cuts that came out of the December OPEC meeting, the Saudis had voluntarily pledged to cut an additional 400,000 barrels a day more than was mandated by the December 6th agreement, bringing the total current output cut for the group to 2.1 million barrels a day, or more than 2% of global output...however, with the breakdown of the OPEC talks the Friday before last, and the Saudi's subsequent declaration that they would increase production, those production cuts have now gone by the boards...nonetheless, the stated intentions to increase production going forward do not affect the February data that we're looking at today...
the next graphic from the report that we'll include shows us both OPEC and world oil production monthly on the same graph, over the period from March 2018 to February 2020, and it comes from page 54 (pdf page 66) of the March OPEC Monthly Oil Market Report....on this graph, the cerulean blue bars represent OPEC oil production in millions of barrels per day as shown on the left scale, while the purple graph represents global oil production in millions of barrels per day, with the metrics for global output shown on the right scale...
largely due to the 546,000 barrel per day drop in OPEC's production from what they produced a month ago, OPEC's preliminary estimate indicates that total global oil production was down by a rounded 0.29 million barrels per day to average 99.75 million barrels per day in January, a reported decrease which came after January's total global output figure was revised lower by 80,000 barrels per day from the 100.12 million barrels per day of global oil output that was reported a month ago, as non-OPEC oil production rose by a rounded 250,000 barrels per day in February after that revision, with higher oil production from the US, Norway, Guyana, Bahrain, Oman and the UK the major reasons for the non-OPEC output increase in February... despite the decrease in February's output, the 99.75 million barrels of oil per day produced globally in February were 0.86 million barrels per day, or 0.9% greater than the 98.89 million barrels of oil per day that were being produced globally in February a year ago, the 2nd month of OPECs first round of production cuts (see the March 2019 OPEC report (online pdf) for the originally reported February 2019 details)...with this month's downward revision to and decrease in OPEC's output, their February oil production of 27,772,000 barrels per day fell to 27.8% of what was produced globally during the month, down from the 28.3% share OPEC contributed in January, and the 29.3% global share they had in December, before Ecuador quit the cartel...OPEC's February 2019 production, which included 522,000 barrels per day from Ecuador, was reported at 30,549,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year produced 2,255,000 fewer barrels per day of oil in February than what they produced a year ago, when they accounted for 30.8% of global output, with 760,000 barrel per day drop in the output from Libya, a 663,000 barrel per day drop in the output from Iran, a 404,000 barrel per day decrease in output from Saudi Arabia, and a 242,000 barrel per day decrease in the output from Venezuela from that time accounting for most of the year over year output decrease...
even with the big drop in OPEC's output that we've seen in this report, there was a still substantial surplus in the amount of oil being produced globally during the month, as this next table from the OPEC report will show us...
the above table came from page 30 of the March OPEC Monthly Oil Market Report (pdf page 40), and it shows regional and total oil demand estimates in millions of barrels per day for 2019 in the first column, and OPEC's estimate of oil demand by region and globally quarterly over 2020 over the rest of the table...on the "Total world" line in the second column, we've circled in blue the figure that's relevant for February, which is their estimate of global oil demand during the first quarter of 2019...
OPEC is estimating that during the 1st quarter of this year, all oil consuming regions of the globe will be using 97.58 million barrels of oil per day, which is a 1.95 million barrel per day downward revision from the 99.51 million barrels of oil per day they were estimating for the 1st quarter a month ago (circled in green), largely reflecting coronavirus related demand destruction....meanwhile, as OPEC showed us in the oil supply section of this report and the summary supply graph above, OPEC and the rest of the world's oil producers were producing 99.75 million barrels per day during February, which means that there was a surplus of around 2,170,000 barrels per day in global oil production in February when compared to the demand estimated for the month...
the revisions to January output and to 1st quarter demand (included in the green ellipse above) means that the previous surplus figure we had computed for January should be revised as well....however, the downward revision to 1st quarter demand was due to the impacts of the coronavirus, which were negligible during January, meaning that 1.95 million barrel per day revision for the quarter reflects demand impacts that fell over February and are expected over March...however, since we're computing monthly surplus or shortfalls off of quarterly demand data, the only way we can get close to an accurate estimate for the 3 months of the quarter would be to compute the figures as if the demand revision were evenly spread over those months...
hence, since we had estimated a surplus of 610,000 barrels per day in global oil production during January a month ago, based on the figures published at that time, we'll adjust that as part of an eventual first quarter total and revise that accordingly... as we saw earlier, January's global output figure was was revised 80,000 barrels per day lower than the figures published a month ago, while global demand for the 1st quarter was 1.95 million barrel per day lower, so with these revised figures, we'll now find that global oil production in January was running roughly 2,480,000 barrels per day in excess of demand...
meanwhile, for 2019, OPEC is revising its demand estimates 80,000 barrels per day lower, which we have circled in orange...while most of that downward revision falls in the 4th quarter, it's now a bit too far removed for us to be recomputing monthly figures for that period, so we'll just apply that 80,000 barrel per day demand revision to the year as a whole....based on revisions in the February OPEC Monthly Oil Market Report, we had figured and oil shortage of 284,090,000 barrels for the entirely of 2019...since demand for the year has now been revised 80,000 barrels per day lower, our new estimate would be that 2019's glogal oil production saw a shortage of 254,890,000 barrels, compared to OPEC's estimated demand....that's still a substantial a net oil shortfall that is the equivalent of more than two and a half days of global oil production at the December production rate...
This Week's Rig Count
despite the recent drops in both oil & gas prices, the US rig count remained nearly stagnant for the 7th week in a row over the week ending March 13th, as decisions to redeploy equipment typically lag prices by several weeks...but while the rig count is down by just a quarter-percent since the beginning of this year, it still remains down by 27% from the end of 2018....Baker Hughes reported that the total count of rotary rigs running in the US decreased by one rigs to 792 rigs this past week, which was still down by 234 rigs from the 1026 rigs that were in use as of the March 15th report of 2019, and 1,137 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began to flood the global oil market in an attempt to put US shale out of business...
the number of rigs drilling for oil increased by 1 rig to 683 oil rigs this week, which was still 150 fewer oil rigs than were running a year ago, and much lower than the recent high of 1609 rigs that were drilling for oil on October 10th, 2014....at the same time, the number of drilling rigs targeting natural gas bearing formations decreased by 2 to 107 natural gas rigs, which was the least number of natural gas rigs active since October 21st of 2016, and hence was another 40 month low for natural gas drilling...natural gas rigs were also down by 86 gas rigs from the 193 natural gas rigs that were drilling a year ago, and way down from the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008...in addition to the rigs drilling for oil & gas, two rigs classified as 'miscellaneous' continued to drill this week; one on the big island of Hawaii, and one in Lake County, California... a year ago, there were no such "miscellaneous" rigs deployed..
offshore drilling activity in the Gulf of Mexico dropped by 4 rigs to 19 rigs this week, with 18 Gulf rigs remaining in Louisiana waters and one rig still drilling offshore from Texas...that's now three less than the number of rigs that were deployed in the Gulf a year ago, when 19 rigs were drilling offshore from Louisiana and three rigs were operating in Texas waters...with no rigs deployed off other US shores elsewhere at this time, the current Gulf of Mexico rig count is thus equal to the national offshore rig total, as it has been all winter...
the count of active horizontal drilling rigs increased by 5 rigs to 713 horizontal rigs this week, which was the most horizontal rigs active since November 1st 2019, but still 194 fewer horizontal rigs than the 907 horizontal rigs that were in use in the US on March 15th of last year, and also well down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014....on the other hand, the directional rig count was down by three rigs to 48 directional rigs this week, and those were also down by 17 from the 65 directional rigs that were operating during the same week of last year....in addition, the vertical rig count was also down by three rigs to 31 vertical rigs this week, and those were down by 23 from the 54 vertical rigs that were in use on March 15th of 2019...
the details on this week's changes in drilling activity by state and by major shale basin are shown in our screenshot below of that part of the rig count summary pdf from Baker Hughes that gives us those changes...the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the table below that 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 March 13th, the second column shows the change in the number of working rigs between last week's count (March 6th) and this week's (March 13th) count, the third column shows last week's March 6th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running before the same 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 the 15th of March, 2019...
the 5 rig drop in the Louisiana rig count reflects the shutting down of the 4 aforementioned offshore rigs that had been deployed in Louisiana waters, and a Haynesville shale rig in the northwest corner of the state; however, the Haynesville rig count remained unchanged because a rig began drilling in that basin on the Texas side of the state line at the same time...the 4 rig increase in Texas includes that rig, Permian basin rigs that were added Texas Oil Districts 7C and 8A, the districts that encompass the Permian Midland basin, as well as rig additions in Texas Oil Districts 1 and 3, which were offset by the stacking of a rig in Texas Oil District 2...with Texas thus adding two Permian rigs this week, we can therefore figure that the rig that was added in New Mexico had to drilling in the western Permian Delaware...the Cana Woodford addition was an oil rig drilling in Oklahoma, offset by a conventional rig that was shut down elsewhere in the state...among rigs drilling for natural gas, two were added in West Virginia's Marcellus while 2 were shut down in Ohio's Utica and two more natural gas rigs were shut down in "other basins" that Baker Hughes does not track separately..
- DRILLED: 165 (162 as of last week)
- DRILLING: 110 (111)
- PERMITTED: 478 (476)
- PRODUCING: 2,451 (2,451)
- TOTAL: 3,204 (3,200)
Four horizontal permits were issued during the week that ended March 7, and 12 rigs were operating in the Utica Shale
Court Stalls Fracking Leases in Ohio's Only National Forest - ― A federal judge today stalled oil and gas leasing in Ohio’s Wayne National Forest, ruling that the Trump administration failed to consider threats to public health, endangered species and watersheds before opening more than 40,000 acres of the forest for fracking.U.S. District Judge Michael Watson said the U.S. Forest Service and U.S. Bureau of Land Management “demonstrated a disregard for the different types of impacts caused by fracking in the Forest. The agencies made decisions premised on a faulty foundation.” Watson’s ruling requires the agencies to redo their environmental analysis of the potential harms from fracking in the Wayne.“We’re thrilled the court is requiring the Trump administration to examine fracking’s serious threats to our air, water and forest wildlife,” said Wendy Park, an attorney at the Center for Biological Diversity. “Fracking is a dirty, dangerous business. This ruling helps ensure the health of this spectacular forest and its endangered animals and protects the water source for millions of people.”In May 2017 conservation groups sued the Forest Service and the BLM over plans to permit fracking in the Wayne, saying federal officials had relied on an outdated plan and ignored significant environmental threats before approving fracking in the forest. The lawsuit also aimed to void two BLM lease sales. The court will decide later whether to void those existing leases, but a planned March sale will likely be postponed. In today’s ruling the judge said the agencies ignored potential harm from fracking to endangered Indiana bats, the waters of the Little Muskingum River and the region’s air quality.
Mountaineer NGL storage project loses its environmental permit - Powhatan Salt company and the sponsors of the Mountaineer Storage Project, a natural gas liquids (NGL) storage facility in Dilles Bottom, Ohio, allowed a state environmental permit to expire last week. Why give up a permit they worked hard to secure from the Ohio Department of Natural Resources (ODNR)? The answer is that construction of the project’s most promising potential customer, the PTT Global Chemical (PTTGC) Petrochemical Complex, has been delayed due to the weakened state of cracker plant and plastic markets. It is a chicken and egg problem. The storage facility can secure the required permits and even line up financing, as it has with Goldman Sachs’ merchant banking arm. But in order to start construction, the storage facility needs an anchor that will actually commit to using its capacity. PTTGC, a company based in Thailand, first announced its interest in building a multi-billion-dollar cracker plant on the Ohio River in 2015. PTTGC has continually delayed making a final decision on moving forward with the cracker, and now is saying it will decide by the summer of 2020. PTTGC has solid reasons for not proceeding with its planned complex. The company’s profits were down by 58% in 2019. It is also fielding a number of substantial projects in other parts of the world. PTTGC’s appetite for expansion led Moody’s recently to conclude last month: “[Our] estimates incorporate [our] expectation that PTTGC will significantly reduce its shareholder returns and not embark on any new capacity expansion plan until margins improve on a sustained basis.” (Emphasis added.) It is unlikely that 2020 will be a year when the company’s margins improve, as plastic prices have started the year low and the Chinese market, a major buyer of PTTGC’s products, is showing signs of a slow year. Starting a new expansion now would be a risk to the company’s credit rating. Clearly, the State of Ohio wants to provide support to both PTTGC and the storage facility. JobsOhio, the state’s privatized economic development arm, has provided $50 million in pre-development grants to PTTGC in the past two years as an incentive for the company to move forward with the full investment (and the agency previously granted $17 million to the former owners of the site for clean-up and preparation). ODNR granted a permit for the storage facility even though the company was not prepared to move forward with construction in a timely manner.
Mammoth Cracker Plant Presents Huge Opportunity --The enormous Royal Dutch Shell petrochemical complex taking shape along the Ohio River in Monaca, Pa., is quite a sight. Sprawled across the 386-acre site in Beaver County are multiple buildings from one-level units to structures several stories high – and construction cranes that reach into the sky.On the ground are 7,500 workers daily – 1,000 on the night shift. “We are at the peak construction phase,” says Shell spokesman Ray Fisher. “Site workers have erected all of the larger vertical structures, and we are at the stage where we are connecting everything via many miles of pipe and building out the electrical scope across 386 acres. “To give you a sense of how extensive that work is, one of the site’s units – the ethane cracker – contains a network of 95 miles of pipes,” he continues. Given the concentration of wet gases found in the Marcellus and Utica shale plays in the Greater Pittsburgh region and eastern Ohio, and the extraction of these gases through the hydraulic fracturing process that took hold here a decade ago, the region could accommodate four more ethane cracker plants, experts say. And at least two are being actively explored. ExxonMobil Corp. scouted locations last fall in Beaver County for construction of its own ethane cracker plant, according to published reports. And in Ohio, PTT Global Chemical America continues to evaluate the possibility of developing a cracker plant on a site in Belmont County. “We anticipate a final investment decision in the first half of this year,” says Dan Williamson, spokesman for PTT Global and its partner, Daelim Chemical USA. JobsOhio, the state’s private nonprofit economic development corporation, has provided PTT more than $70 million in grants to underwrite the project. “JobsOhio’s assistance facilitates the efforts of PTTGCA and Daelim Chemical USA to move forward on critical site-related engineering and site preparation work in a comprehensive and timely manner,” says JobsOhio spokesman Matt Englehart.
Court sides with Grant Township on injection well -- A state appeals court has turned aside an appeal by Pennsylvania Department of Environmental Protection and left standing a home rule charter adopted by a northern Indiana County municipality in a bid to control its own local environment. The Pennsylvania Commonwealth Court ruled Wednesday against the DEP’s petition to invalidate the Grant Township home rule form of government. The judges called the effort a “collateral attack” and said it was “without merit.” The township has been backed for several years by The Community Environmental Legal Defense Fund (CELDF) in its mission to halt the planned construction of an injection well, using a spent natural gas well near East Run for the disposal of fluids and other waste drawn from gas well drilling and exploration by Pennsylvania General Energy (PGE). The ruling, according to CELDF community organizer Chad Nicholson, “allows Grant Township to argue that local governing authority is necessary to protect the community’s constitutional rights in the face of harmful state oil and gas policies.” Grant Township, a community of about 700 with no commercial properties within its borders, has fought the PGE plan for the fracking water disposal site since 2014. CELDF attorneys defended the township against lawyers for DEP in a hearing Oct. 4 before a panel of Commonwealth Court judges in Pittsburgh. Township residents voted in 2015 to adopt a home rule charter form of local government which carried a “community bill of rights,” drafted with assistance of CELDF. The bill of rights asserted that the township has final control over use of local land, but the DEP charged that the local ordinance usurped the state’s authority to grant permits for allowed uses of land. DEP brought the township to court, charging that the local charter interfered with its ability to enforce state oil and gas policy.
Enverus releases report on US natural gas - Enverus, an oil and gas SaaS and data analytics company, has released its latest FundamentalEdge report, Marcellus Natural Gas Flows, which is focused on natural gas production and pipeline flow patterns in the Marcellus and Utica formations in the Northeast, MidAtlantic, and Midwestern regions of the US. Enverus analysts examine the history of these two prolific natural gas plays, their tremendous growth over the last decade, pipeline bottlenecks and flow patterns, regional export opportunities, and life in what seems to be a never-ending low price environment.“As the number one producer of natural gas in the world, the US continues to suffer from growing pains and that’s most obvious in the Northeastern US,” said Rob McBride, Senior Director, Strategy and Analytics at Enverus.“However, on a macro scale, we can look to this region as a case study for the country as a whole. Just as production here surpassed local demand, the US nationally has overproduced and surpassed demand domestically and needs more outlets to share its pent-up natural gas with the world. We are seeing the benefits from the call years ago for more pipelines and tactical ways to move Marcellus and Utica gas to the markets who demand it. It’s a microcosm of our new, global outlook in exporting liquefied natural gas (LNG) worldwide,” McBride said. “To add insult to injury for today’s current natural gas pains, the elephant in the room now is the coronavirus,” added McBride. “While many are focused on suppressed demand for crude oil – natural gas’ higher valued hydrocarbon partner – there will be an impact on the gas market as well. Unlike oil, which is much more a global commodity, natural gas prices in the US are mostly impacted by US gas fundamentals. Still, all hydrocarbons are tied together at the drill bit, and one will affect the other,” he added.
Analysts expect gas producers to gain amid oil losses - The loss to U.S. shale oil producers could allow the region’s gas-focused producers to benefit, as production cuts due to low oil prices are likely to ease the supply glut in the gas market, Kallanish Energy reports. According to analysts, while Permian oil drillers will be forced to cut down drilling and development activities to survive, associated gas output is expected to fall. This would give gas drillers in the Appalachia’s Marcellus and Utica shales a potential advantage. If they also curb their production, U.S. gas prices could rise. Gas prices could surpass $3 per thousand cubic feet (Mcf) if oil prices stay low and shale gas producers stick to their own cuts, Tudor Pickering Holt & Co. analysts said in a note on Monday. “Add it all up, and it’s possible we exit the year with a 3 Bcf/d (billion cubic feet per day) undersupplied gas market,” they forecast. Goldman Sachs estimated that there could be a drop of 1 Bcf/d of U.S. gas production if oil companies continue to invest in a scenario of WTI prices around $30-45 a barrel. On Tuesday, the U.S. benchmark future was trading up by 6.07%, or $1.89, at $33.02. The gain follow a massive price crash on Monday. On a less optimistic note, Jane Trotsenko, shale analyst at investment bank Stifel Nicolaus & Co., said that natural gas traders need “clear evidence of improving supply-demand fundamentals … in order to update their Henry Hub forward curve expectations, which in turn will drive natural gas stocks higher.” She noted earlier this month that it usually takes three to six months for the rig count to respond and six to nine months for production to moderate. “We need to see lower rig count and production cuts in oil plays to become more positive on the (gas) space,” said Trotsenko.
Analyst: Oil price war might actually be good for Pennsylvania shale industry -Saudi Arabia and Russia are in the midst of a price war against one another that is also meant to hurt American oil companies, and analysts say it could hurt American shale companies that produce oil. But it might not actually hurt the shale gas industry in Pennsylvania, according to one analyst. That’s because the companies that drill for oil in places like Texas and North Dakota also extract natural gas — mostly as a byproduct — and if they stop drilling for oil, their natural gas output will fall, too. “The ramifications of that is … oil production will start to decline. The associated gas that comes with it will start to decline” too, said Sam Andrus, executive director of North American natural gas, for the IHS Markit. That could increase demand from the gas-rich Utica and Marcellus shale region in Pennsylvania, said Anne Robba, head of Americas gas & power for S&P Global Platts. “If we do lose that kind of (natural gas) volume from crude producers, (the market) is going to turn to Marcellus producers in Pennsylvania to make up” for the loss in production, Robba said. “Because they’re able to ramp up volumes fairly quickly to meet demand.” Prices for natural gas, at some of their lowest levels since the 1970s, have actually increased this week, by about 10 percent since Monday, Robba said. “What we’re actually seeing is a strengthening of natural gas prices,” she said. At the same time, oil prices have crashed around 20 percent to $33 a barrel. And the trend may not end soon.
Why falling oil prices could boost the Marcellus Shale - The Saudi-Russia spat that sent oil prices plunging over the weekend could be bad news for Permian Basin oil producers — which could, maybe, be slightly good news for Marcellus and Utica natural gas producers. At least that's one of the thoughts driving Wall Street, where several publicly traded natural gas producers saw their shares go up Friday despite the 256-point drop in the Dow Jones industrial average and the general coronavirus-fueled volatility of global markets. Observers believe the spread of the coronavirus will continue to cut global oil demand. Evercore ISI reported Monday that there will probably be near zero growth in demand for oil in the near term. And it looks like at least some companies in the Permian Basin agree. Exxon Mobil Corp. confirmed Thursday it was cutting its rig count in the Permian Basin to what its CEO Darren Woodstold the Associated Press were "a very challenging short-term margin environment which is now being compounded by the growing economic impact of the coronavirus." How would that impact producers in the Marcellus and Utica Shales, which are already getting knocked around by falling natural gas prices and oversupply that has forced them to cut spending and lay off employees? Because the strong growth of the Permian Basin is one of the reasons why the Marcellus and Utica, one of the global centers of natural gas production, has seen hard times. Natural gas is a byproduct of oil production in the Permian, and sold for low prices there, swamping supply. A cut to oil and natural gas production there could be good for prices here in the long run, observers say.
Groups rally against tax breaks for petrochemical manufacturers - Environmental groups from throughout the state gathered in Harrisburg on Monday to rally against tax breaks for some natural gas manufacturers. Environmental groups and legislators from throughout the state gathered in Harrisburg on Monday to rally against hefty tax breaks for some natural gas manufacturers. Representatives from PennFuture, the Breathe Project and nearly three dozen other organizations spoke out against House Bill 1100 in the Capitol rotunda, urging Gov. Tom Wolf to veto the bill passed with bipartisan support last month. HB 1100 would establish multi-million-dollar tax breaks for companies investing at least $450 million to build a manufacturing plant that creates a minimum of 800 combined temporary and permanent jobs. The incentive is similar to what Shell Chemicals received years ago to build its petrochemical complex in Potter Township. The new program would cost $22 million annually per plant in missed taxes until the strategy ends in 2050. It encourages the use of natural gas across the board, roping in fertilizer manufacturers. Speakers argued the subsidy’s return on investment would include health complications and environmental degradation related to natural gas extraction. Others said clean energy companies should be included in the tax breaks. “No industry is entitled to an open-ended tax credit,” said PennFuture president Jacquelyn Bonomo. “The entitlement mindset of this industry is unacceptable to communities who refuse to be soaked in toxins in exchange for jobs. The days where Pennsylvanians must accept pollution in exchange for progress must come to an end.”
Fire Put Out at PBF's Delaware City Refinery, Two Injured - PBF ENERGY said a fire that occurred at one operating unit at its Delaware City, Delaware, refinery on Wednesday has been extinguished and two employees are being treated for injuries. According to energy intelligence service Genscape, the fire is believed to have occurred at the 182,200 barrel-per-day refinery's alkylation unit. The refinery was expected to shut its alkylation unit in February-March 2020 for maintenance, according to a source familiar with the plant's operations. The company said the fire was reported around 1:40 p.m. EDT and all employees and contractors have been accounted for. The cause of the fire was unknown and an investigation will be conducted, PBF said in an emailed response. "Ambulances, medics and two medevac helicopters responded to the scene for reported injuries," said a local media report. A Delaware Department of Transportation (DelDOT) camera showed "thick, black smoke with embedded flames shooting from the ground and also from a nearby smokestack," according to the report.
Oil and gas officials, West Virginia Chamber of Commerce optimistic of pipeline continuation — Since December of 2018, work to complete the 600 mile Atlantic Coastal Pipeline has been halted, resulting in the loss of hundreds of jobs and tens of thousands of dollars in revenue across the state. On Feb. 23, the U.S. Supreme Court appeared ready to remove an obstacle to construction of the Atlantic Coast Pipeline, with a majority of justices expressing skepticism about a lower court ruling that tossed out a key permit needed for the natural gas pipeline to cross under the Appalachian Trail. Thanks to that skepticism, Charlie Burd, executive director of the Independent Oil and Gas Association of West Virginia, said he was optimistic the U.S. Supreme Court will overturn the Fourth Circuit’s decision that the U.S. Forest Service did not have the authority to grant a right of way allowing the pipeline to cross beneath the Appalachian Trail in the George Washington National Forest. “These pipelines are vitally important, not only to West Virginia oil and gas, but to end users where gas is being transported, and it’s [needed] to make sure we have adequate national security and are able to produce energy within our country,” he said. Burd said Dominion stopped the progress on the pipeline in December of 2018, and “pipeliners in the hundreds went to work on other pipelines in other parts of the country” while Dominion did its best to retain as many as possible in the area. Due to the stoppage, Burd said hundreds of thousands of dollars have been lost by local vendors in taxes, groceries, leasing spaces, camping areas and more. Burd said he hopes to see the pipeline continue, which would provide benefits to well beyond just the oil and gas industry. Steven Roberts, president of the West Virginia Chamber of Commerce, confirmed the adverse effects the pipeline stoppage has had on the workers and economy of the Mountain State. “The economic impact on West Virginia is substantial. It has caused many, many construction workers to go without work this winter and a great deal of lost tax revenue. We have a lot of natural gas in West Virginia, way more than previously thought, (but) the markets for the gas are larger outside of West Virginia. Our ability to produce and collect severance tax is impeded if we can’t sell the gas out of state.,”
Pipeline protesters try to stop work at TransCanada building in Charleston - — A large group of pipeline protesters inside and outside of the TC Energy/old Columbia Gas building in Charleston drew a heavy police presence on Monday morning.The group, Appalachians Against Pipelines (AAP), stood in solidarity with the Indigenous Wet’suwet’en people for more than three hours at the facility starting before 7 a.m. Dozens blocked elevators, stood outside of the main entrance and stopped work from happening inside. More than 100 people participated in the protest.According to a AAP release, the Indigenous Wet’suwet’en people are defending their un-ceded land in Canada, from the Coastal GasLink Pipeline and other unwanted, dangerous pipeline projects including the Mountain Valley Pipeline. The Coastal GasLink Pipeline is a project of TC Energy, formerly known as TransCanada.“I’m here in solidarity with the Indigenous Wet’suwet’en people and all occupied Indigenous lands, in solidarity with missing and murdered Indigenous women and against extractive oil and petrochemical industries,” Sasha Irby, a protester from the New Orleans area told MetroNews.Irby, one of the vocal leaders, said the end goal is the end of extraction industries on Indigenous lands and to get their land back, as well as protection for their women.She held a sign in the shape of a red dress that symbolized the missing and murdered Indigenous women in both Canada and the United States. Other signs at the protest stood in solidarity with Wet’suwet’en, some saying “You Are On Stolen Land,” and others “Justice for Missing and Murdered Indigenous Women.” Four people locked their bodies together, by interlinking arms and locking their necks together, inside the lobby as part of the blockade. Outside of the building, the group raised a warrior flag symbolizing Indigenous power after taking down the American flag from the pole. “We have the Mountain Valley Pipeline going through where we are at,” Crystal Mello told MetroNews. “The State of Virginia had a lawsuit against them and they pay a $2 million and suddenly everything is good, let’s go back to destroying the water, the mountains and the endangered species.”
National Grid holds first public meeting on gas supply options - Green-energy advocates on Monday crowded a public forum outlining options for the region’s future natural gas needs, urging National Grid and the state to opt for conservation and renewable sources instead of costly new measures to bolster supply. The meeting at the Hicksville Community Center was the first of six the company agreed to hold as part of a settlement with the state last year after its controversial moratorium on new gas hookups led Gov. Andrew M. Cuomo to threaten to revoke the British-based company’s franchise to operate in the state. National Grid implemented the moratorium after the state twice rejected partner Williams Co.’s environmental permits for a 23.5-mile undersea gas pipeline called the Northeast Supply Enhancement Project to increase local supply by 14 percent. Protesters chanting, “The people have spoken — renewables now,” dominated the public speaking portion of the event, questioning assertions in National Grid’s report about the need for more natural gas, and demanding that the company follow mandates in new state climate law. “Bringing in more fracked, radioactive gas is not the answer,”National Grid employees manned stations at the community center, each outlining an option the company said will partly or fully alleviate a long-term supply shortage it predicts will impact the region over the next several years. Among the options proposed were a new liquefied natural gas offshore port in either the Atlantic Ocean or the Long Island Sound at a cost of $1.9 billion to $2.22 billion; a new liquefied natural gas import terminal to be fed by tankers, at a cost of up to $2.78 billion; a peak-season liquid natural gas terminal at up to $2.54 billion; a series of barges to feed liquefied natural gas at up to $2.42 billion, and an expansion of natural gas capacity at a transmission line in Staten Island, at a cost of up to $2.63 billion.The company did not outline the impact any of the projects would have on rates.
Report Questions Claims of a Gas Shortage in Debate Over New NY Pipeline -A report released Monday by climate activists raises questions about the rationale for building new natural gas infrastructure in a state that has mandated a dramatic reduction in fossil-fuel use over the next three decades.The activists’ report comes ahead of a hearing Monday evening in which National Grid will present the findings of a study it released last month. That study projected demand for natural gas over the next 15 years and outlined ways to cover what the utility says will be a supply shortage—with the construction of a new pipeline as a top option.Monday’s meeting is one in a series that, along with National Grid’s study, were required under a settlement the utility reached last fall with the Cuomo administration, which hadthreatened to suspend National Grid’s license over the utility’s self-imposed moratorium on new gas connections.That dispute followed the state’s rejection last May of a permit for National Grid’s Northeast Supply Enhancement (NESE) project—a 24-mile underwater pipeline running from New Jersey to the Rockaways also known as the Williams Pipeline (Williams is the company that would build and operate it).The utility has appealed that denial and the Cuomo administration will have to decide by this May whether to again reject the project, which the Trump administration has discussed subverting state environmental authority in order to facilitate, or accept the construction of multimillion-dollar fossil-fuel infrastructure that will last for decades beyond the legal deadline for New York to move to other fuel sources.
NYC Comptroller Scott Stringer slams National Grid - The government should consider launching a publicly-run energy utility if National Grid can’t help the city and state meet their clean-energy goals, says City Comptroller Scott Stringer. He slammed the energy giant’s long-term infrastructure and rate-hike plans in a Wednesday letter to National Grid’s President John Bruckner. Advertisement Stringer voiced his “opposition to any plan that relies on the installation of onerously expensive and environmentally detrimental infrastructure that will only carry us farther away from our climate goals. “Rather than raising rates to expand gas capacity and build out pipeline infrastructure … National Grid must instead do more to prioritize gas demand reduction and support beneficial electrification,” he added. Environmental activists have slammed National Grid’s plans to build about 14,000 feet of underground gas pipeline in North Brooklyn. [More Politics] Coronavirus prompts NYC Council leaders to cancel hearings, close offices » The company — which serves Brooklyn, Queens, Staten Island and Long Island along with upstate New York and parts of New England — has earmarked “millions of dollars” for “new fossil fuel infrastructure,” according to Stringer, who’s readying to run for mayor.
NH Primary Source: Exeter voters oppose Granite Bridge pipeline - Exeter voters on Tuesday turned thumbs down on the proposed Granite Bridge natural gas pipeline project, which is currently under review by the state’s Public Utilities Commission. The project calls for a $414 million, 27-mile, 16-inch pipeline and a liquified national gas storage tank in Epping. If approved by the PUC, the project would then be subject to review by the state Site Evaluation Committee. Consultants hired by the PUC opposed approval of the project last fall. The plan calls for the pipeline to be located on state property along Route 101 from Exeter to Manchester, passing through Brentwood, Epping, Raymond, Candia and Auburn. Although the communities affected have no veto power, Exeter residents voted by a 1,605-897 margin, approving a warrant article that asks town officials to express opposition to the project. “The safety risks of gas pipelines is evident in the recent leaks and explosions in Keene and Lawrence, Massachusetts,” Article 25 stated. “Furthermore, this fossil fuel project with its methane emissions and carbon dioxide is in opposition to the principles of Exeter’s ‘Right to a Healthy Climate Ordinance’ passed in 2010 and the Select board’s vote to support the goals of the Paris Climate Agreement.”
DEQ notes problems with erosion control during lull in work on Mountain Valley Pipeline - At a time when building the Mountain Valley Pipeline was focused almost entirely on controlling erosion, muddy runoff continued to flow from dormant construction sites. In a letter last month to a conservation group that first raised the issue, Virginia Department of Environmental Quality Director David Paylor said the infractions would be forwarded to the state attorney general’s office, which has the authority to seek tough financial penalties. DEQ is “committed to aggressively and effectively enforcing and maintaining compliance of the Mountain Valley Pipeline construction,” Paylor wrote in a Feb. 13 letter to David Sligh, conservation director of Wild Virginia. Sligh made the letters public this week. Sligh had asked the week before about DEQ inspections that showed violations of erosion and sediment control regulations from Sept. 19 through Dec. 20, 2019 — when construction of the controversial natural gas pipeline was stalled by legal action, leaving workers to concentrate largely on efforts to curb erosion. The violations were especially troubling, Sligh wrote, because they began so shortly after Sept. 18 — the last day covered by a consent decree in which Mountain Valley agreed to pay Virginia $2.15 million to settle a lawsuit that alleged similar problems in the past. Approved in December, the consent decree carried a provision for enhanced fines should the same issues recur. Paylor wrote a month ago in his letter to Sligh that “DEQ acknowledges noncompliance noted in inspection reports during the last quarter of 2019. These will be communicated to the Office of the Attorney General for inclusion in a future demand for penalties.” But no demand had apparently been made by Tuesday. DEQ spokeswoman Ann Regn said the agency is “compiling noncompliance information monthly” and will notify Mountain Valley, in conjunction with the attorney general, of any violations or penalties. A spokeswoman for Mountain Valley said the company had not been told of any recent violations. “MVP continues to work cooperatively with the DEQ,” Natalie Cox wrote in an email. In a follow-up letter to Paylor on Monday, Sligh urged the state to act promptly. “Violations by MVP, which have been frequent and damaging to waterbodies and landowners, must not be handled as routine occurrences,” he wrote. “If construction resumes, the history of this project tells us that the frequency and magnitude of violations is likely to increase, unless DEQ shows that it will act quickly and decisively.”
Judge Rules Against Virginia County in Challenge to Pipeline Project -- A federal judge has sided with a pipeline company in a dispute over the permitting powers of local governments, a win for the beleaguered natural gas producer after several setbacks in court. The proposed Atlantic Coast Pipeline would stretch 600 miles between West Virginia and North Carolina to transfer natural gas throughout the region and on to ports for further sale. Backed by the region’s largest energy producer, Dominion Energy, the project has long faced legal fights and pushback from environmentalists and locals who fear the project’s impact on rural regions. Among those fights was one between Nelson County, Virginia’s board of supervisors and the pipeline company over floodplain development permits. The county changed its own permitting rules in 2017 and has since disputed the validity of federal permits issued for the project. But Senior U.S. District Judge Norman Moon, a Bill Clinton appointee, sided with Atlantic Coast Pipeline LLC in a ruling issued Monday, finding federal law superseded the county’s effort to block the project. “Nothing gives these floodplain regulations, as modified, the force of federal law now,” the judge wrote, referring to the county’s zoning ordinances. “Rather… because the floodplain regulations and their application through the [county] to deny Atlantic’s variance request stands as a clear obstacle to the meaning and purposes of the [Natural Gas Act], it is therefore preempted as applied to the Atlantic Coast Pipeline.” Alongside the 24-page opinion, Moon issued an order stating the pipeline company not need comply with the county’s permitting process.
Piedmont details LNG plans - — With the opening of Piedmont’s liquefied natural gas facility in the summer of 2021, the flow of natural gas into and through Robeson County will increase exponentially. Piedmont Natural Gas Company, a Charlotte-based subsidiary of Duke Energy that serves 1 million customers here and in three states, has a $250 million LNG facility under construction on N.C. 71 between Maxton and Red Springs. The investment will generate nearly $1 million in county taxes a year. Patterson said the plant’s purpose is twofold: Ensure gas supplies during winter peak periods in a growing Southeastern North Carolina, and to purchase natural gas at lower summer rates, liquefy and store it for use during winter. “Piedmont has 45 years of experience with liquefied natural gas storage facilities,” Patterson said. “This is a very safe operation with no incidents.” Piedmont operates three similar facilities in Charlotte and Goldsboro and Nashville. The one-billion-gallon storage tank to be built in western Robeson County will sere 80,000 to 100,000 customers, both industrial and residential. The facility will occupy 65 acres of a 685-acre tract that Piedmont owns. The company has replanted forests on the surrounding acreage. “We will use two existing major transmission pipelines to supply the plant,” Patterson said. “This is an optimal location to serve our customers.”
U.S. natgas jumps 4% with oil price drop expected to cut gas output - (Reuters) - U.S. natural gas futures jumped over 4% on Monday on forecasts for colder weather and higher heating demand next week than previously expected and expectations the collapse in oil prices would prompt drillers to cut back on oil and gas production. Earlier in the day, gas prices dropped to their lowest in over 21 years as they followed the collapse in oil prices. But by midday, some analysts noted plunging oil prices could help gas prices by reducing associated gas production. U.S. oil futures fell as much as 34% in their biggest daily rout since the 1991 Gulf War after Saudi Arabia signaled it would hike output to win market share even though the coronavirus has already left the market oversupplied. Even before crude futures collapsed, gas prices over the past week had been trading within a nickel of their lowest since August 1998 as record production and mild weather enabled utilities to leave more gas in storage this winter, making fuel shortages and prices spikes unlikely. Much of the growth in gas output was coming from gas associated with the production of oil in shale basins like the Permian in West Texas. Since drillers were seeking oil, that production was insensitive to low gas prices. "A large enough decrease in (oil production in) the Permian could support natural gas prices as a whole," Daniel Myers, market analyst at Gelber & Associates in Houston, said in a report. Front-month gas futures for April delivery on the New York Mercantile Exchange rose 7.0 cents, or 4.1%, to settle at $1.778 per million British thermal units (mmBtu). Earlier in the session, gas slid to $1.61 per mmBtu, its lowest since August 1998. If prices drop below that level, they would fall to their lowest since September 1995. Refinitiv, a data provider, projected average demand in the U.S. Lower 48 states, including exports, would rise from 100.7 billion cubic feet per day (bcfd) this week to 107.5 bcfd next week. That compares with Refinitiv's forecast on Friday of 104.4 bcfd this week and 99.6 bcfd next week.
U.S. natgas jumps almost 9% with oil price gain, hopes of output cuts - (Reuters) - U.S. natural gas futures soared almost 9% on Tuesday, following a 10% increase in oil prices, on hopes of economic stimulus and expectations the oil price collapse will prompt U.S. drillers to cut back on oil and gas production in shale basins. Analysts said a cutback in U.S. production and a possible increase in gas use spurred by low prices should give demand a chance to grow, absorbing some of the supply glut that built up over the past few years. "Gas futures gained momentum throughout the day yesterday and are building on those increases today as the market continues to garner support from oil's abrupt tumble" on Monday, Daniel Myers, market analyst at Gelber & Associates in Houston, said in a report, noting "lower oil prices are further solidifying anticipated supply reductions this year." Much of the growth in U.S. gas output in recent years has come from gas associated with the production of oil in shale basins like the Permian in West Texas and eastern New Mexico. Since drillers in oil basins were seeking crude, that production was insensitive to low gas prices. Energy firms kept producing oil and associated gas even though gas prices in the Permian fell to negative levels. In 2019, they also burned or flared record amounts of gas in the Permian because output there increased more quickly than companies could build pipelines to transport the fuel to markets. The oil price rout has already prompted several U.S. shale producers to rush to deepen spending cuts, which could reduce production. In their biggest daily percentage gain since January, front-month gas futures for April delivery on the New York Mercantile Exchange rose 15.8 cents, or 8.9%, to settle at $1.936 per million British thermal units, their highest close in almost three weeks. Gains in some forward months were even bigger than the front-month, with futures for the balance of 2020 up about 7% and calendar 2021 trading over 2022 for the first time since January.
Coronavirus Shocks Ripple Through Markets Everywhere as Natural Gas Futures Tumble - With the coronavirus pandemic hammering markets everywhere amid escalating efforts to protect public health, natural gas futures were trading sharply lower in early trading Thursday. The April Nymex contract was down 9.1 cents to $1.787/MMBtu shortly after 8:30 a.m. ET. In the wake of the Trump Administration’s announcement of a ban on travel from Europe to limit the spread of the virus, April crude oil futures also were down, off $2.01 to $30.97/bbl. Natural gas futures began to move lower in Wednesday’s session after the front month failed to break through resistance at $1.998, analysts at EBW Analytics Group said. “The move lower is likely to accelerate during the remainder of this week due to panic selling across all asset classes triggered by the coronavirus, and a significant bearish shift in the 11-15 day forecast,” the EBW analysts said. Traders also will have to factor in the latest government storage data. Estimates show the Energy Information Administration (EIA) reporting a lighter-than-average weekly withdrawal from U.S. natural gas stocks when it releases its 10:30 a.m. ET report. A Bloomberg survey Wednesday showed a median 56 Bcf pull, while a Reuters poll landed on a withdrawal of 59 Bcf. NGI’s model predicted a 51 Bcf withdrawal for the EIA report, which covers the week ended March 6. Estimates as of Wednesday ranged from minus 49 Bcf to minus 66 Bcf. Last year, EIA recorded a 164 Bcf pull for the similar week, and the five-year average is a withdrawal of 99 Bcf. “It was warmer than normal over almost the entire country, especially so across the Midwest,” NatGasWeather said of this week’s EIA report period. “Our algorithm expects a draw of 48-50 Bcf, to the bearish side.” As for the overnight weather data, the forecaster noted a milder outlook from the European model for this weekend and also for the March 20-25 period, with the model reversing colder trends from runs earlier in the week.
U.S. natgas falls 3% with oil decline, despite higher demand forecasts (Reuters) - U.S. natural gas futures fell 3% on Wednesday with a decline in oil prices despite forecasts for a little more gas demand over the next two weeks than previously expected. That drop follows a more than 13% jump for gas futures over the past two days on expectations the oil price collapse earlier in the week would cause drillers to cut back on oil and associated gas production in shale basins like the Permian in West Texas and eastern New Mexico, allowing demand to absorb some of the gas supply glut that has built up in recent years. Front-month gas futures for April delivery on the New York Mercantile Exchange fell 5.8 cents, or 3.0%, to settle at $1.878 per million British thermal units (mmBtu). Oil prices fell about 4% on Wednesday as Saudi Arabia prepares to boost oil production capacity for the first time in more than a decade and demand weakened due to the spread of the coronavirus. Despite big gains earlier this week, gas prices were still down 35% since hitting an eight-month high of $2.905 per mmBtu in early November because near-record production and mild winter weather enabled utilities to leave more gas in storage, making fuel shortages and price spikes unlikely. Data provider Refinitiv projected average demand in the U.S. Lower 48 states, including exports, would edge up from 100.8 billion cubic feet per day (bcfd) this week to 102.3 bcfd next week. That is a little higher than Refinitiv's forecast on Tuesday of 99.8 bcfd this week and 101.8 bcfd next week. The amount of gas flowing to U.S. LNG export plants was on track to hold at 8.3 bcfd on Wednesday, the same as Tuesday, according to preliminary data from Refinitiv. That compares with an average of 7.8 bcfd last week and an all-time daily high of 9.5 bcfd on Jan. 31.
US working natural gas in underground storage decreases by 48 Bcf: EIA | S&P Global Platts — Oversupply issues continue in the US gas storage as volumes fell by 48 Bcf, less than the market expected, and the NYMEX Henry Hub April contract retreated on Thursday morning from gains made earlier in the week. Storage inventories fell by 48 Bcf to 2.043 Tcf for the week ended March 6, the US Energy Information Administration reported Thursday morning. The pull was less than an S&P Global Platts' survey of analysts calling for a 55 Bcf withdrawal. It was much less than the 164 Bcf pull reported during the corresponding week in 2019 as well as the five-year average draw of 99 Bcf, according to EIA data. Storage volumes now stand 796 Bcf, or 64%, more than the year-ago level of 1.247 Tcf and 227 Bcf, or 13%, more than the five-year average of 1.816 Tcf. The NYMEX Henry Hub April contract slipped 7 cents to $1.80/MMBtu in trading following the release of the weekly storage report. The balance of the 2020 contract strip for NYMEX Henry Hub fell 5 cents to average $2.08/MMBtu. Despite a bounce in prices earlier in the week supported by a collapse in oil prices, bearish domestic fundamentals continue to weigh on gas prices, especially in light of sticky production levels and falling seasonal demand, according to S&P Global Platts Analytics. US supply-demand balances continue to slacken as the market lurches towards the shoulder season. On the supply side, production has managed to remain remarkably flat over the past several weeks. The week ended March 6 posted zero change to maintain an average of around 92 Bcf/d of combined onshore and offshore receipts. Rather than from production, lower Canadian imports drove most of the drop in supply, which fell by 0.6 Bcf/d for the reference week. Platts Analytics' supply and demand model currently expects a 2 Bcf injection for the week ending March 13, which would mark the first net injection of year. The first net injection of the year typically occurs during the last week in March or first week in April, according to EIA data. The week in progress has closely followed last week, with balances widening by 6.6 Bcf/d on small drops in supply matched with larger drops in demand. Total supplies are down 1.3 Bcf/d to average 94.5 Bcf/d, with almost all of the declines stemming from lower Canadian imports and LNG sendout. Downstream, total demand fell by about 7.9 Bcf/d, the vast majority of which was from residential and commercial usage as average US population-weighted temperatures increase.
U.S. natgas futures slip with oil decline and small storage draw - (Reuters) - U.S. natural gas futures fell 2% on Thursday with a 5% drop in oil prices and a smaller-than-expected storage draw last week. Traders noted the gas decline was limited by forecasts for cooler U.S. weather and higher heating demand over the next two weeks than earlier expected and expectations the oil price drop this week would cut crude and associated gas production in shale basins, allowing gas demand to absorb some of the supply glut that has built up in recent years. The U.S. Energy Information Administration (EIA) said utilities pulled 48 billion cubic feet (bcf) of gas from storage during the week ended March 6. That was lower than the 59-bcf decline analysts expected in a Reuters poll and compares with a drop of 164 bcf during the same week last year and a five-year (2015-19) average reduction of 99 bcf for the period. The decrease for the week ended March 6 cut stockpiles to 2.043 trillion cubic feet (tcf), 12.5% above the five-year average of 1.816 tcf for this time of year. Front-month gas futures for April delivery on the New York Mercantile Exchange fell 3.7 cents, or 2.0%, to settle at $1.841 per million British thermal units (mmBtu). U.S. oil prices fell about 5% on Thursday after U.S. President Donald Trump restricted travel from continental Europe, among measures to halt the spread of the coronavirus after the World Health Organization described the outbreak as a pandemic. Over the past few months, gas prices have fallen 37% since hitting an eight-month high of $2.905 per mmBtu in early November because near-record production and mild winter weather enabled utilities to leave more gas in storage, making fuel shortages and price spikes unlikely. Data provider Refinitiv projected average gas demand in the U.S. Lower 48 states, including exports, would edge up from 101.4 billion cubic feet per day (bcfd) this week to 104.5 bcfd next week. That is higher than Refinitiv's forecast on Wednesday of 100.8 bcfd this week and 102.3 bcfd next week. The amount of gas flowing to U.S. LNG export plants was on track to rise to 8.4 bcfd on Thursday from 8.3 bcfd on Wednesday, according to preliminary data from Refinitiv. That compares with an average of 7.8 bcfd last week and an all-time daily high of 9.5 bcfd on Jan. 31. U.S. production, meanwhile, edged up to 93.7 bcfd on Wednesday from 93.6 bcfd on Tuesday, according to Refinitiv. That compares with an average of 93.7 bcfd last week and an all-time daily high of 96.6 bcfd on Nov. 30.
U.S. natgas futures edge up with oil on expectations output will decline - (Reuters) - U.S. natural gas futures edged up on Friday on expectations the plunge in oil prices earlier in the week would cause oil and its associated gas production to drop, allowing demand to absorb much of the gas oversupply that has built up in recent years. U.S. energy firms responded quickly to falling oil prices, which lost a third of their value this week, by announcing plans to slash spending on new drilling that were even bigger than what they had already said they would cut. U.S. financial services firm Cowen & Co said the independent exploration and production firms it tracks have released plans to cut spending on new drilling by 17% in 2020. That is up from planned spending cuts of 11% before the oil price drop and compares with cuts of 11% in 2019 from 2018's levels. Analysts said a drop in U.S. crude output would cut the amount of gas produced in association with oil drilling in shale basins like the Permian in West Texas. Much of the growth in gas output over the past several years has come from associated gas. Front-month gas futures for April delivery on the New York Mercantile Exchange rose 2.8 cents, or 1.5%, to settle at $1.869 per million British thermal units (mmBtu). For the week, the front-month was on track to rise over 10%, its biggest weekly increase since November. Looking ahead, futures for calendar 2021 were on track to rise over calendar 2022 for the first time since January. Despite this week's gains, gas prices were still down about 36% since hitting an eight-month high of $2.905 per mmBtu in early November because near-record production and mild winter weather enabled utilities to leave more gas in storage, making fuel shortages and price spikes unlikely. With all the price swings this week, implied volatility for gas futures soared 65% to its highest since late February.
As climate fight intensifies, U.S. states seek to block local natural-gas bans - (Reuters) - Lawmakers in at least five U.S. states have proposed bills since mid-February to prevent cities from banning natural gas as an energy source in new buildings, marking an escalation in the national battle over the fuel’s role in fighting climate change. The new bills, backed by business and utility interests, come as a growing number of cities in California and the Northeast vote to electrify their building sectors to avoid gas, a fossil fuel that contributes to global warming but which the drilling industry says is cleaner than alternatives like coal. The stakes for the gas industry are huge: Direct gas consumption by residential and commercial buildings amounted to about 8.45 trillion cubic feet in 2018, rivaling the 10.63 tcf used by utilities to power the grid, according to the U.S. Energy Information Administration (EIA). The recent bills prohibiting such bans on gas use by buildings were introduced by lawmakers in Missouri, Minnesota, Oklahoma, Tennessee and Mississippi, many of them using near-identical language. Arizona last month became the first state in the country to pass such legislation. The bills were supported by local and state chambers of commerce and businesses related to the gas industry. The American Gas Association and the American Public Gas Association, U.S. trade groups representing gas utilities, have also publicly opposed local efforts to ban direct use of natural gas, but said they did not play a role in the state bills. “Banning natural gas from communities, taking a clean energy solution away from people, is not going to accomplish our shared goal of reducing greenhouse gas emissions,” said AGA President and CEO Karen Harbert. The legislative push mirrors a similar clash between state lawmakers and local politicians that occurred years ago over hydraulic fracturing, with several municipalities seeking to ban the practice and states like Texas, Oklahoma and Colorado passing laws to block them from doing so.
Columbia Gas pleads guilty to violating safety rules — The head of Columbia Gas of Massachusetts pleaded guilty in federal court Monday to causing a series of natural gas fires and explosions that ripped through the Merrimack Valley more than a year ago.The guilty plea, entered in U.S. District Court by Columbia Gas President Marc Kempic on behalf of the utility, follows a settlement between Columbia Gas and it's parent company, NiSource, with U.S. Attorney Andrew Lelling.The deal allows the company and its executives to avoid criminal prosecution for violating the federal Pipeline Safety Act in exchange for paying a $53 million fine and selling Columbia Gas of Massachusetts to a third-party.Federal officials blame the companies for causing the Sept. 13, 2018 disaster that killed a teenager, injured dozens and damaged more than 130 homes in Andover, North Andover and south Lawrence. Thousands of residents and businesses in the three communities were left without natural gas for heat and hot water for several months, in some cases.Under the plea deal, Columbia Gas accepted responsibility for the disaster and agreed to pay a record fine while NiSource puts the company up for sale. Eversource has offered to buy Columbia Gas of Massachusetts in a deal worth $1.1 billion, which appears to have taken shape under the cloud of the federal investigation.Columbia Gas has also agreed to allow a federal monitor to supervise its residential and commercial gas operations in the state for the next three years, or until it is sold.
Judge Approves $143M Natural Gas Explosions Settlement - A Massachusetts judge approved a $143 million class action settlement Thursday for residents and business owners affected by natural gas explosions in Massachusetts in 2018. The settlement's approval comes days after Columbia Gas of Massachusetts pleaded guilty to causing the explosions that killed one person, injured dozens of others, and damaged or destroyed more than 100 buildings. “This community suffered greatly in the wake of the explosions, and the compensation that residents and businesses will receive from this settlement will go a long way in healing the Merrimack Valley,” the lawyers leading the class action suit said in a statement. Columbia Gas is also on the hook for a $53 million criminal fine — the largest ever imposed for breaking a federal pipeline safety law. Its parent company will sell off the Massachusetts operation. Rival utility Eversource has said it plans to acquire the assets. The National Transportation Safety Board concluded last year that Columbia Gas poorly planned a routine pipeline replacement project in Lawrence, causing natural gas overpressurization that led to the explosions and fires in homes and businesses on Sept. 13, 2018. The board also determined that the utility inadequately responded to the disaster, which resulted in a prolonged recovery effort in which residents and businesses were without natural gas service for heat or hot water, sometimes for months through the winter. The class action settlement is meant to compensate residents, property owners, and businesses in Lawrence, Andover and North Andover.
Canadian Oil Company Hires Engineer for Controversial Pipeline in Michigan - The Canadian company Enbridge is moving forward with plans to build a $500 million oil pipeline in the Straits of Mackinac, which runs between Michigan's upper and lower peninsulas. The oil transportation company said it would go ahead with plans despite an ongoing lawsuit with Michigan, according to Kallanish Energy. Enbridge Inc. has hired two companies to build the pipeline, which will run beneath the channel that links Lake Huron and Lake Michigan. The construction will replace twin pipes that have been under the Straits of Mackinac in Northern Michigan since 1953, as The Associated Press reported. Michigan's Attorney General Dana Nessel, a Democrat, has appealed to the state's Court of Appeals to stop the construction. A lower court decided in October that an agreement between Enbridge and former Republican Governor Rick Snyder was legal and could proceed. The Michigan Court of Appeals decided not to halt the project while it considers the case, according to The Associated Press. Despite the existing lawsuit, Enbridge says it expects construction to start next year and for a new tunnel to be in service by 2024, according to WLUC in Michigan. The pipeline drew criticism from some of the Democratic presidential candidates. Last summer, Bernie Sanders tweeted that the Line 5 tunnel should be shut down, noting that Enbridge's 6B pipeline spilled 1.2 million gallons of crude oil into the Kalamazoo River a decade ago. "Today, with the climate crisis worsening, we must #ShutDownLine5 pipeline in Michigan and ban all new fossil fuel infrastructure. What we need is a Green New Deal," Sanders added to his tweet. Elizabeth Warren also recognized the threat the Enbridge construction posed, tweeting "Michigan's Line 5 pipeline is a threat to millions who rely on the Great Lakes for clean water and a healthy economy." She added, "Let's #ShutDownLine5 and build a 100% clean energy future." The Line 5 tunnel carries 23 million gallons of crude oil and natural gas liquids every day between Superior, Wisconsin, and Sarnia, Ontario. A near 4-mile segment divides into two pipes that run beneath the Straits of Mackinac, according to The Associated Press.
New: Line 5 tunnel contractors hired by Enbridge have troubling track records ⋆ Michigan Advance New information uncovered by the Michigan Advance about the companies hired by Enbridge to build the Line 5 tunnel project, which will encase the dual pipelines under the Straits of Mackinac, has raised alarm bells for Michigan’s attorney general and environmental groups around the state. There already are concerns about the integrity of Line 5, which is approaching 70 years old and was reportedly only built to last 50 years. Enbridge has maintained that building an underwater tunnel around the twin pipes is the safest option forward. The Canadian oil company brokered a deal with Republican former Gov. Rick Snyder before he left office to set the tunnel plan in motion and effectively tie the hands of the incoming Gov. Gretchen Whitmer administration in its efforts to reverse the deal. Now Enbridge has come under further scrutiny for the companies it has hired for the project, casting doubt on whether a tunnel is indeed the safest bet for protecting the Great Lakes from a potentially catastrophic oil spill. On Friday, Enbridge announced that it had hired three companies to build and design the tunnel. The news release noted that the new tunnel-encased Line 5 segment is expected to be placed into service in 2024. After the London-based engineering firm Arup finalizes the designs, a partnership between Livonia-based Jay Dee Contractors Inc. and the U.S. affiliate of Japan-based Obayashi Corp., known jointly as Great Lakes Tunnel Constructors, will start building the tunnel. This will involve drilling into the bedrock under the Straits, and is expected to begin in 2021. But just last year, Jay Dee was one of three plaintiffs sued in Macomb circuit court for negligence in connection with the infamous Fraser sinkhole collapse in 2016. The complaint was filed last April and remains open. The Macomb County drainage district is seeking $70 million dollars plus costs and attorney fees to recover some of the costs of the Dec. 24, 2016. incident. The sinkhole opened when a sewer line collapsed between Hayes and Utica near 15 Mile Road. The incident closed a portion of 15 Mile for nearly a year, temporarily displaced more than 20 families, and led to two homes being demolished.
Oil price war boosts uncertainty for developers of U.S. LNG projects - Saudi Arabia’s oil price war with Russia spelled more pain for the U.S. LNG sector in the near term and trouble for new U.S. LNG projects, even though it could ultimately help balance an oversupplied global natural gas market. The U.S. LNG sector was already grappling with a supply glut bumping up against the demand shock of the coronavirus before plummeting oil prices heightened worry over the global economy and sent LNG stocks tumbling as part of an overall rout of U.S. stocks. American crude oil futures fell on March 9 to near $30 per barrel. The oil price crash raised the possibility that a collapse in shale oil drilling will result in a reduction of associated natural gas production, reigning in some of the global oversupply of gas. Domestic gas prices could rise, benefitting long-struggling gas producers in Appalachia. But weak global demand for LNG could also mean less of an outlet for domestic gas. “The main issue we don’t know today is whether demand or supply will fall faster,” said Nikos Tsafos, a senior fellow with the energy security and climate change program at the Center for Strategic and International Studies. “You can take some associated gas off the market, but if you have nowhere to sell the LNG to, you might be taking off quite a bit of demand at the same time. We just don’t know which of these two factors are going to be moving faster.” The meltdown in crude oil markets also cast doubt on the appetite for investments in multi-billion dollar energy infrastructure such as LNG terminals. “Major new capital investment seems largely off the table,” energy analyst Katie Bays, co-founder of research and consulting firm Sandhill Strategy, said in a March 9 note to clients. There are a dozen or so export facilities being developed in the U.S., but many LNG developers have struggled to secure the long-term contracts they need to secure financing and advance to construction. Several developers had already delayed targets for commercially sanctioning their projects.
Houston Is Not Prepared for the Oil Bust – Houston has weathered its fair share of floods and hurricanes in recent years, but are we ready for the economic Big One? It has been more than 35 years since the self-proclaimed Energy Capital of the World saw a real economic disaster like the one barreling toward us. The Saudis are flooding the market with crude and the global coronavirus response is suppressing demand. Our homes may be filled with toilet paper and nonperishable meals, but it’s harder to get ready for an oil bust. For all the boosterish rhetoric about our diversified economy, the region’s continued economic success relies on international consumption of oil. The petroleum industry drives a third of greater Houston’s GDP and directly employs a quarter-million workers—a number that was already beginning to shrink before things went south this month. Crude has always been a global commodity, and Texas became even more exposed to market swings when the Obama administration removed the ban on crude oil exports. So when millions of quarantined people in China stop driving their cars, or businesses across the world cancel their international travel, suddenly there are a lot fewer people out there trying to buy Texas crude. The International Energy Agency reports that global oil demand is actually falling. That hasn’t happened since the 2009 fiscal crisis. If that weren’t bad enough, Saudi Arabia (the world’s second-largest oil producer) has declared an energy war because Russia (the third-largest producer) wouldn’t agree to limit its production to keep global prices at a stable level. So the Saudis are threatening to sell oil below the market price to undercut Russia and make them fall back in line. Caught in the crossfire is the world’s top producer—the United States. With few exceptions, the producers whose fracking techniques turned the U.S. into an oil behemoth can’t make moneywhen crude sells at only $31 per barrel. Already, Houston companies are plummeting. Apache Corporation and Occidental Petroleum saw share prices fall by more than half on Monday. Layoffs seem imminent. And all this bad news follows an already tenuous outlook for Houston’s economy.
In Big Spring, a Rural Community Braces for Another Oil Bust - Sometimes Big Spring is a boomtown. Sometimes it’s a bust. And usually, the defining factor is one simple number: the price of a barrel of crude. The community of 28,000, two hours west of Abilene, sits at the edge of the world’s most productive oilfield. It’s home to hundreds of hydraulic fracturing rigs. Billboards advertising jobs for oilfield truck drivers and mechanics dot Interstate 20. The Alon refinery at the eastern edge of town lights up the sky with flares from its towering spires. The oil industry can be a nasty business—one that pollutes the environment, contributes to traffic fatalities, and drives up housing costs—but it’s the biggest business in town. In Howard County, the industry provides 2,800 jobs and has a total annual economic output of $4.5 billion. Big Spring’s fortune hinges on a stable market, however; with crude prices nosediving, a sign that oilfield workers may soon flee the area, Howard County Judge Kathryn Wiseman is worried. “We’re an oil town. The workers spend a lot of money in Howard County.” Wiseman has a rough metric for judging the oil industry’s health: She counts the number of paying customers each morning at Dell’s Cafe on East Fourth Street. Lately it’s been about three-quarters full when she goes for breakfast. But Dell’s, along with local RV parks, motels, and other businesses frequented by itinerant oilmen, may clear out soon. Over the weekend, Russia, the world’s third-biggest oil producer, backed out of a nascent agreement with Saudi Arabia to cut global oil production in order to raise prices. Saudi Arabia, which leads the world in oil exports, retaliated, slashing its export prices in the second chapter of what the New York Times has described as a “price war.” Overnight, oil prices plummeted from nearly $60 a barrel to $35—“one of the greatest shocks in history” for the petroleum industry, oil and gas consulting firm Rystad Energy wrote in a statement. It was the biggest price drop since the United States launched an invasion of Kuwait in 1991.
Crossing state lines? Oil firms flare Texas gas as investors vent on climate - (Reuters) - Across the Permian Basin’s high desert landscape, natural gas is going up in smoke even as oil majors including Exxon Mobil and BP pledge cuts in greenhouse gas emissions. Flaring, the deliberate burning of unwanted polluting gas, is rife during oil production in the biggest U.S. shale field, and an acute problem in Texas, home to most of the Permian reservoir, which sprawls 86,000 square miles (220,000 km2) across two states. Loose regulation in Texas means that companies including Exxon, Matador Resources and privately-held BTA Oil Producers last year burned off gas at more than twice the rate as in neighboring New Mexico, a Reuters analysis of data compiled by Rystad Energy from more than 50 of the largest producers shows. Some drillers burned natural gas at up to six times the rate in Texas as they did over the state line, the data shows. Exxon flared more gas in Texas last year than any other producer, data released in February by a state regulator shows. This is despite Exxon and other large oil producers, which have spent billions drilling and building pipelines in the region, promising emissions cuts to curb global warming. Although companies have to apply for permits to burn unwanted gas, Texas allows producers to burn unwanted gas for six months and routinely issues waivers after the six months expires. New Mexico allows new wells to flare for 60 days and is moving toward 30-day extensions thereafter. Producers must present a plan to pipe or store gas with their permit request. Even though flaring is legal, it is a growing problem for companies. While it is cheaper for them to burn gas, investors are badgering them to improve their green credentials. Exxon is “making significant investments in gathering, processing and natural gas pipelines” and was able to lower its Permian flaring rate to just above 2% by the end of the year, spokeswoman Julie King said. The Rystad data shows it averaged 6.6% across the Permian during the first 11 months of last year.
Oil leak near McKittrick resumes, Chevron aware - — After being inactive for months, an oil spill that started near McKittrick in November 2019 has reportedly resumed. Chevron said they are aware the leak, called a surface expression, resurfaced Friday.In a statement the company said:We take our responsibility to operate safely and in a manner that protects public health, the communities where we operate, and the environment very seriously. We remain committed to stopping and preventing seeps, consistent with CalGEM’s new regulations. In the course of our efforts to permanently stop the GS-5 seep in the Cymric field, some seep reactivations may occur. Our commitment to stop GS-5, per CalGEM’s request, outweighs the possible risk of a short-term seep reactivation.Jonathan Harshman Communications Advisor Corporate Affairs, San Joaquin Valley Business UnitChevron said they were notified on Feb. 28 by regulatory agencies of flow of reservoir fluids to surface in the Cymric field in Kern County. They said this was a reactivation of the previous leak.As of Monday, a total of 985 gallons were recovered, including approximately 867 barrels of produced water (water from the oil formation that is produced along with the oil) and 118 barrels of crude oil from the flow location. The flow is contained in an earthen berm that has been netted to protect wildlife.Chevron said there has been no impact to any personnel, wildlife, or waterway as a result of the flow location and they have a vacuum truck available to pull material.
Oil price shock could drive more midstream distribution cuts, experts warn Saudi Arabia's oil price war with Russia could force some U.S. pipeline companies to slash distributions as debt reduction becomes even more urgent, industry experts said. While guaranteed revenues from long-term contracts help to insulate the midstream sector from direct commodity price exposure, anticipated production spending cuts could jeopardize gathering and processing operations closer to the wellhead that already faced a "no-to-low growth environment," according to analysts at energy investment bank Tudor Pickering Holt & Co. "While our existing concern was that select [gathering and processing companies, or] G&Ps would be unable to manage leverage profiles ... that risk is now increasingly widespread as production trajectory shifts to one of absolute declines," the company wrote in a March 9 note to clients. "With upstream budget cuts imminent and every basin out of the money, midstream operators have effectively 1-2 quarters before activity rolldown filters through the system." In order to account for reduced earnings later in 2020 while still prioritizing debt reduction, both Tudor Pickering Holt and UBS Investment Bank said they expect that the pressure on higher-yield midstream companies to cut investor payouts will intensify. Tudor Pickering Holt flagged Enable Midstream Partners, EnLink Midstream LLC, Targa Resources Corp. and Western Midstream Partners LP as candidates for "expeditious revisions" amid "deafening" calls for balance sheet conservation. Western Midstream CFO Michael Pearl said in February that the master limited partnership does not intend to trim investor payouts despite poor stock price performance, while EnLink's January distribution cut failed to translate into stock price momentum. CBRE Clarion Securities portfolio manager Hinds Howard noted that, in general, midstream companies have not curtailed leverage, distributions or spending enough to be prepared for plunging crude prices and equity values even after the enormous wave of distribution cuts set in motion by collapsing commodity prices in 2014. "Midstream companies and long-only midstream investors will put on a brave face and argue that oil and gas will still flow through pipelines. ... But the truth is nobody knows how this 35% drop in oil prices in less than a week will impact the oil and gas business in the U.S.," he said in an email. "It is not good for midstream, and ... midstream as a group of companies has not done enough to position for another downturn." Howard also said that plunging oil prices could set the stage for further midstream M&A "as owners of some of the quality assets get fed up with the negative impact their peers are having on their valuation." Analysts at UBS, too, said in a March 9 note to clients that recent events may serve as a "catalyst for consolidation discussions."
Oklahoma Corporation Commission adopts more restrictive proration order for unallocated natural gas wells - A majority of elected members of Oklahoma’s Corporation Commission voted Thursday to limit how much natural gas is produced by the state’s most prolific wells. Commission Chairman Todd Hiett and Commissioner Dana Murphy signed an order setting a proration formula for the period between April 1 and Sept. 30 that requires operators to limit an unallocated gas well’s absolute open flow to 50%, or to cap its maximum allowable production at 2 million cubic feet per day (mmcf/d), whichever is greater. Since 1999, commissioners routinely had been approving a proration formula that had required operators to limit a well’s absolutely open flow at 65% or a maximum allowable production of 2 mmcf/d. But that, officials previously have said, really had been no limit at all, given that its parameters exceeded production capabilities on nearly all gas wells in the state. Based on data provided to commissioners by Murphy, drawn with the help of agency staff from reports filed by operators of the state’s 174 most capable gas wells in 2019, the requirement to restrict wells back to 50% of absolute open flow potential could provide some limited impact on the amount of natural gas Oklahoma produces. Murphy’s data estimated the impact of the state’s previously allowed formula on those sample wells’ reported production in 2019. If properly enforced, it would have limited those wells’ production by 1.97%. It also estimated what the impact would have been if the formula adopted Thursday had been in place and enforced in 2019. It shows production from those sample wells would have been reduced by 4.64%. Finally, it estimated what the impact would have been if a tighter restriction that had been called for by some producers in recent weeks had been adopted and enforced that same year.
All Eyes on Illinois Commerce Commission as Pipeline Expansion Finally Gets a Hearing - A long-awaited, oft-delayed hearing got underway Thursday to determine whether owners of the controversial Dakota Access pipeline, which originates in North Dakota and terminates nearly 1,200 miles later in Patoka, Illinois, will be granted permission by the Illinois Commerce Commission to double the pipeline’s capacity.Both those in favor of and opposed to the expansion turned out in equally large numbers for the evidentiary hearing, the tediousness of which belied the proceeding’s high-stakes consequences, with many environmental activists viewing the issue as a referendum on the state’s commitment to combating climate change. “Every decision made on behalf of the people must consider the impact of climate change above all else,” said Deni Mathews, president of Save Our Illinois Land (SOIL), one of the organizations challenging the pipeline’s expansion. “We can not continue with business as usual.”Pledges like Chicago’s commitment to transitioning to renewable energy by 2035 would be rendered meaningless if the expansion is approved, said David O’Donnell of Extinction Rebellion. “No way do we do that if we increase the amount of fossil fuel going through the pipeline.” While the hearing afforded no opportunity for public comment — it was limited to pre-submitted witness testimony and cross-examination by lawyers — spectators’ mere presence, regardless of which side of the debate they were on, was designed to send a message: “We’re watching.” “I wonder how many decisions are made in rooms like this?” asked protester Catherine Garcia-Goettling. “It’s crazy that we don’t get a vote.”
Minnesota Supreme Court sides with Winona County on frac-sand ban --The Minnesota Supreme Court ruled Wednesday that Winona County did not violate the Commerce Clause of the U.S. Constitution with its ban on frac-sand mining. Winona County changed its comprehensive zoning ordinance in 2016 to prohibit “industrial mineral operations.” “Construction materials” were still able to be extracted, but a conditional-use permit was required. Minnesota Sands, LLC, filed a lawsuit against the county about these limitations. When the lower courts did not rule in its favor, the company requested the Minnesota Supreme Court look at the case, leading to the court affirming with the decision of the court of appeals. Minnesota Sands has argued the county’s ban is unconstitutional because it singles out sand used for industrial purposes while allowing mining for local construction uses. The sand is used to fracture shale rock in order to extract oil and natural gas. According to a statement from the company, “Minnesota Sands is disappointed in the decision made by the court and the impact it will have on other regulated industries across our state. The company agrees with the Court’s dissenting justices who found that ‘Winona County’s ordinance erects a facially discriminatory ban on silica sand mining when intended for hydraulic fracturing that is per se invalid.’ We will review the decision before making any additional decisions related to this matter.”
Environmental Defense Center settles Clean Water Act case - The Environmental Defense Center (EDC) has reached a final settlement with Pacific Coast Energy Company LP (PCEC), for alleged violations of the Clean Water Act (CWA). PCEC conducts oil exploration and development activities using enhanced oil extraction techniques such as cyclic steam injection at its 5,400 acre Orcutt Hill oil field operation. Polluted runoff from this facility in northern Santa Barbara County, flows into Orcutt Creek and San Antonio Creek, which drain into the Santa Maria River and the Pacific Ocean, respectively. These waters provide important habitat for threatened and endangered species, such as the unarmored threespined stickleback, the tidewater goby, the red-legged frog, and steelhead, and are used for public recreation and enjoyment. The settlement will reduce polluted runoff from the Orcutt Hill facility and establish a $115,000 fund for projects that enhance the quality of local watersheds. Under the settlement, PCEC has agreed to improve storm water-management practices at its facility, largely by improving its road network to reduce runoff, addressing a specific problematic well pad, adding a location for the collection of stormwater samples, and improving its program for monitoring runoff. In addition, instead of a penalty, PCEC will donate $115,000 to the Rose Foundation for Communities and the Environment for the sole purpose of providing grants for restoration projects in the San Antonio Creek, Orcutt Creek, and/or Santa Maria River watersheds.
Pipeline company to pay more than $60 million for 2015 oil spill near Santa Barbara - A pipeline company has agreed to pay more than $60 million, and change its operations, to settle litigation arising from an oil spill that gushed from one of its lines in 2015, north of Refugio State Beach near Santa Barbara, the U.S. Department of Justice said Friday. The spill dumped roughly 2,934 barrels of crude oil along the Gaviota coast, forced the closure of Refugio and El Capitan state beaches and covered waves, rocky shores, sandy beaches and kelp forests with oil. Hundreds of sea birds and mammals, many coated in crude, washed up in the area in the weeks following the spill. According to a Justice Department news release, the spill was caused by the company’s failure to address external corrosion and have proper procedures place in its control room. In addition, the environmental damage was “further exacerbated by [the company’s] failure to respond properly to the release,” the department said. The operator of an underground pipeline that ruptured and released up to 105,000 gallons of crude oil in Santa Barbara County -- and tens of thousands of gallons into the ocean -- said Wednesday that the spill happened after a series of mechanical problems caused the line to be shut down. Under the settlement, Plains All American Pipeline L.P. and Plains Pipeline L.P. agreed to modify operations to prevent further spills, and to pay $24 million in penalties, plus $22.325 million in natural resource damages, $10 million for natural resource damage assessment costs and $4.26 million for Coast Guard cleanup costs. The total costs exceed $60 million, the Justice Department said, “excluding the value of the required injunctive relief changes to Plains’ national operations.” “Today’s settlement shows federal and local governments working in partnership to hold industry fairly accountable,” said Deputy Assistant Atty. Gen. Bruce Gelber of the Justice Department’s Environment and Natural Resources Division. “The agreement will also promote public health and safety, and protect the environment for local communities.” The Justice Department said it worked closely with its co-plaintiff, the state of California, on behalf of federal agencies including the Pipeline and Hazardous Materials Safety Administration; the Department of the Interior; the Department of Commerce; the National Oceanic and Atmospheric Administration; and the U.S. Coast Guard.
Remediation of Keystone Pipeline spill site in northeast North Dakota nears completion - TC Energy cleanup crews are expected to return to the spill site in late spring to finish remediation. A fine has yet to be determined for the Canada-based pipeline company, but DEQ Director Dave Glatt said the company has been cooperative. TC Energy reported an oil spill in the rural Edinburg area, about 30 miles northwest of Grafton, N.D., on Wednesday, Oct. 30. Submitted photo The site of the Keystone Pipeline oil spill outside Edinburg, N.D., which weeks ago was abuzz with activity and TC Energy cleanup crews, has quieted substantially as remediation nears completion. According to a Department of Environmental Quality report, a Feb. 27 inspection of the site found that excavation was completed and the site had been partially backfilled, with stacks of topsoil waiting to be spread. The report noted that there was no sign of contamination or current work being done at the site. TC Energy spokesperson Sara Rabern said crews are now waiting for warmer weather to finish the final stages of remediation. She estimates cleanup will be completed by late spring. The cause of the Oct. 29 spill, which released about 383,000 gallons of crude oil onto about five acres of land, has yet to be determined, according to the incident report. The release was one of the largest onshore oil spills in the U.S. in the last decade. Because the spill impacted wetlands, it automatically resulted in a fine from the Department of Environmental Quality. DEQ officials had their first meeting with representatives from TC Energy, formerly TransCanada Energy, to discuss enforcement action on Feb. 4. The results of that meeting and information about enforcement will remain confidential until an agreement between the parties has been reached, but DEQ Director Dave Glatt told the Herald the meeting was "very cordial."
Questions about Garden Creek spill linger for Oneok as it pursues pipeline - -North Dakota Public Service Commission Chairman Brian Kroshus had one big question for Oneok during a public hearing in Williston on a pipeline that would serve Hess Corp.’s Tioga gas plant.That question related to the 2015 spill of natural gas liquids at the Garden Creek processing plant in McKenzie County.Kroshus said he understood that the company is proposing a pipeline, and that the Garden Creek leak occurred at a gas processing facility.“But nonetheless, we are still tying back to, was that a construction technique issue, was it a faulty pipe, or a hairline crack in a 2-inch pipe that leaked an extended period of time?” he said. “Can you tell me about that? What has Oneok done to apply lessons learned in that instance to construction and, hopefully pending approval, of this facility?”Oneok Operations Engineer Blake Holland read a prepared statement that sounded similar to one the company released after news media reported last year that the Garden Creek leak had been much larger than the 10 gallons the company initially reported. It went on to attribute the leak to hairline cracks in the pipeline at the facility but did not detail how or why the leak occurred, nor what particular steps have been taken to assure such an incident doesn't happen again.“Was it just a bad patch of pipe?” Kroshus pressed Holland after the statement was read. “I don’t have the answer to the root cause of the hairline cracks,” Holland said. Kroshus said after the meeting that “I was hopeful that they would have something we could convey to the public and incorporate into the testimony that would have at least given me a higher level of confidence.”
Disposal of wastewater from hydraulic fracturing poses dangers to drivers - Environmental concerns about hydraulic fracturing—aka "fracking," the process by which oil and gas are extracted from rock by injecting high-pressure mixtures of water and chemicals—are well documented, but according to a paper co-written by a University of Illinois at Urbana-Champaign environmental economics expert, the technique also poses a serious safety risk to local traffic. New research from Yilan Xu, a professor of agricultural and consumer economics at Illinois, shows that the growing traffic burden in fracking boomtowns from trucks hauling wastewater to disposal sites resulted in a surge of road fatalities and severe accidents. "Fracking requires large amounts of water, and it subsequently generates a lot of wastewater," she said. "When trucks need to transport all that water within a narrow window of time to a disposal site, that poses a safety threat to other drivers on the road—especially since fracking occurs mostly in these boomtowns where the roadway infrastructure isn't built up enough to handle heavy truck traffic." The researchers identified a causal link between fracking-related trucking and fatal traffic crashes, finding that an additional post-fracking well within six miles of the road segments led to 8% more fatal crashes and 7.1% higher per-capita costs in accidents. "Our back-of-the-envelope calculation suggests that an additional 17 fatal crashes took place per year across the sampled road segments, representing a 49% increase relative to the annual crash counts of the drilling counties in North Dakota in 2006," Xu said. "That's a significant number when you're talking about a sparsely populated area like North Dakota. "And besides the fatality and injury costs in fatal crashes quantified in our study, other costs may occur as well, including injury costs in nonfatal crashes and indirect expenditures on emergency services, insurance administrative costs, and infrastructure maintenance and replacement."
North Dakota's oil industry hopes for only 'a blip' as prices collapse - A steep collapse in oil prices led to a dramatic Monday on Wall Street and sent shock waves all the way to the Bakken oil fields. The volatility follows a year of relative stability for the oil patch. Oil prices hovered in the range of $50 to $60 per barrel during 2019, high enough to send North Dakota crude production climbing to 1.5 million barrels per day. Then, as the new coronavirus began to spread throughout the world early this year, came a global drop in oil demand. By mid-February, there were rumblings within North Dakota about the potential impact to the oil industry here. State Mineral Resources Director Lynn Helms said to keep an eye on what OPEC does when it meets in March. The group of oil-rich countries, in coordination with Russia, has issued production cuts over the past few years in an effort to bolster prices. When prices are higher, oil companies tend to drill more because crude is more profitable. But Russia threw a curveball late last week when it refused to cut production again amid the virus outbreak, and oil prices plummeted Friday. In wake of that development, OPEC leader Saudi Arabia decided it will ramp up its own oil output. Those moves shocked the industry -- and the stock market -- and prices spiraled downward even further on Monday. “Every producer and everybody in the industry is contemplating ‘what ifs.’” West Texas Intermediate crude, the U.S. benchmark in oil pricing, bottomed out Monday around the $30-per-barrel mark, a level not seen since early 2016 following a yearlong collapse in prices during 2015. At their peak the year before, oil prices topped $100 per barrel. “This is not like 2015,” said Ness, whose group represents North Dakota’s oil industry. “In 2015, we were coming off a very long-term, healthy price range, and there were a lot of efficiencies companies were able to implement.” North Dakota’s oil industry learned to drill faster and make other changes to bolster production from wells to stay profitable amid lower prices. Since the start of 2020, the oil industry had already experienced a 25% drop in prices by the middle of last week amid the coronavirus outbreak, Ness said. The new developments with Russia and Saudi Arabia have caused prices to fall almost the same amount all over again in just the past couple of days.
North Dakota, Canadian oil producers at disadvantage when crude prices are low - If a new era of bargain crude prices arrived with Monday's oil-market rout, producers in North Dakota and Canada will likely be at a disadvantage. Both are simply farther from the hub of the North American oil market, the Gulf Coast, raising transportation costs, analysts said. Canadian oil-sands producers face higher production costs, too. Minnesota is the primary conduit of Canadian oil imports into the United States via Enbridge's corridor of cross-border pipelines. "It's generally agreed that the farther you are from the Gulf Coast, the less cost-efficient you are," said Sandy Fielden, an oil-industry analyst in Texas with Morningstar. Of course, there's an upside for consumers in Monday's oil massacre: Gasoline prices, already relatively low by historic standards, should fall further if oil prices remain depressed. Oil prices have been dropping in recent weeks as global demand has rapidly declined — an economic blow courtesy of the novel coronavirus. But over the weekend, oil markets suddenly faced the specter of a supply glut, too, after talks between Russia and Saudi Arabia broke down over production targets. The Saudis pledged to open their taps — and oil prices staged a historic collapse. "Unprecedented is an understatement,"
Canadian firm starts US prep work for Keystone XL pipeline (AP) — A Canadian company said Wednesday it has started preliminary work along the route of the proposed Keystone XL oil sands pipeline through the U.S. in anticipation of starting construction next month, as opponents await a judge’s ruling on their request to block any work. TC Energy spokeswoman Sara Rabern said the Calgary-based company was moving equipment this week and will begin mowing and felling trees in areas along the pipeline’s 1,200-mile (1,930-kilometer) route within the next week or so. The work is planned in Montana, South Dakota and Nebraska, Rabern said. She did not provide further location details. In April the company plans to begin construction at the line’s border crossing in northern Montana. That would be a huge milestone for a project first proposed in 2008 that has since attracted bitter opposition from climate activists who say fossil fuel usage must be curbed to combat global warming. The company also plans work next month on employee camps in Fallon County, Montana and Haakon County, South Dakota. Environmental groups in January asked U.S. District Judge Brian Morris to block any work. They said clearing and tree felling along the route would destroy bird and wildlife habitat. The judge in December had denied a request from environmentalists to block construction because no work was immediately planned. The request by environmentalists came days after the Trump administration approved a right-of-way allowing the $8 billion line to be built across federal land. “It is irresponsible for TC Energy to jump the gun before Judge Morris rules on our motion,” Stephan Volker, an attorney for the Indigenous Environmental Network and North Coast Rivers Alliance, said Wednesday.
Putin Launches War On US Shale After Dumping MbS & Breaking Up OPEC+ -- OPEC+ is no more, after a torrid 24 hours in which Russia overturned the balance of power in the oil world, leaving the members of OPEC+ dazed and confused, shocking Saudi which now faces social unrest with the price of oil far below Riyadh's budget, and - in a repeat of the Thanksgiving 2014 OPEC massacre - sending oil prices plunging by the most since the financial crisis. And now, Bloomberg has the stunning backstory behind Friday's announcement that Russia is quitting its output deal with OPEC and its allies, after last week's Vienna summit meant to back a proposal by oil producers to cut output collapsed, causing a 10% plunge in oil prices, with some markets seeing their biggest one-day falls since the financial crisis. Driving a stake right through the heart of his former OPEC colleagues, Russian Energy Minister Alexander Novak said that "considering the decision taken today, from April 1 of this year onwards, neither we nor any OPEC or non-OPEC country is required to make (oil) output cuts." With global fears over coronavirus already severely impacting the oil market (down 30% since the start of the year), and with the Russians surprising oil ministers gathered at OPEC headquarters by suddenly abandoning a plan meant to keep oil prices steady, the biggest shock was felt by the Saudis, because as Bloomberg puts it, Putin has just effectively dumped crown prince MbS to start a war on America's shale oil industry: Alexander Novak told his Saudi Arabian counterpart Prince Abdulaziz bin Salman that Russia was unwilling to cut oil production further. The Kremlin had decided that propping up prices as the coronavirus ravaged energy demand would be a gift to the U.S. shale industry. The frackers had added millions of barrels of oil to the global market while Russian companies kept wells idle. Now it was time to squeeze the Americans.After five hours of polite but fruitless negotiation, in which Russia clearly laid out its strategy, the talks broke down. Oil prices fell more than 10%. It wasn’t just traders who were caught out: Ministers were so shocked, they didn’t know what to say, according to a person in the room. The gathering suddenly had the atmosphere of a wake, said another.
U.S. shale companies facing a money-losing reality after oil price collapse -America’s shale producers already had a profitability problem. It just got a lot worse. At a stroke, Saudi Arabia and Russia and their battle for market share have made almost all U.S. shale drilling unprofitable. Only five companies in two areas of the country have breakeven costs lower than the current oil price, according to data compiled by Rystad Energy, an Oslo-based consultancy. Wells drilled by Exxon Mobil Corp., Occidental Petroleum Corp. Chevron Corp. and Crownquest Operating LLC in the Permian Basin, which stretches across West Texas and southeastern New Mexico, can turn profits at $31 a barrel, Rystad’s data show. Occidental’s wells in the DJ Basin of Colorado are also in the money at that price, which is where oil settled Monday. But that’s not the case for the rest of the shale industry — more than 100 operators in a dozen fields. For them, drilling new wells will almost certainly mean going into the red. Shale projects are heralded for their ability to be quickly ramped up and down. But because output from these wells declines much faster than from their old-school, conventional cousins, companies have to drill more of them just to keep output flat. That has meant sluggish investor returns, one of the main reasons oil and gas represents less than 4% of the S&P 500 Index. At this point, “companies should not be burning capital to be keeping the production base at an unsustainable level,” said Tom Loughrey, a former hedge fund manager who started his own shale-data firm, Friezo Loughrey Oil Well Partners LLC. “This is swing production — and that means you’re going to have to swing down.” “Even the best operators will have to reduce activity,” said Artem Abramov, head of shale research at Rystad. “It’s not only about commerciality of the wells. It’s a lot about corporate cash flow balances. It’s almost impossible to be fully cash flow neutral this year with this price decline.”
These energy companies have the highest debt and the most at risk as the oil market collapses - Investors shocked at Saudi Arabia’s decision to lower oil prices and increase production sent financial markets reeling. A concern now for the oil and gas industry is which players can survive a prolonged market imbalance.West Texas crude oil for April delivery CL.1, 3.434% fell as much as 25% to $31.13 a barrel Monday. That action followed Saudi Arabia’s announcement Saturday that after failed negotiations between OPEC and Russia to cut production in an attempt balance supply with reduced demand as the coronavirus spread, it would actually lower its own prices while increasing production.“Now the question is, what is the Russian response?” said Philip Orlando, chief equity market strategist for Federated Hermes, in an interview. “Do they hold their breath until they turn blue? Or do they say, ‘You have the market weight here, why don’t we sit down to cut and stabilize the market?’ That may be too obvious and rational, so I have no idea how this is going to end up.”Banks with heavy exposure to the energy industry may be facing defaults, loan losses and other fallout. Here’s a list of banks with the most exposure as a share of tangible common equity. But how about the energy borrowers? Starting with the S&P Composite 1500 (made up of the S&P 500, the S&P 400 Mid Cap Index, and the S&P Small Cap 600 Index, here are the 20 U.S.-listed oil companies with the highest percentages of long-term debt to equity, according to FactSet, based on their most recent regulatory filings as of March 6:
U.S. Shale Drillers Could Be Casualties of Oil-Price War – WSJ - Standoff between Russia, Saudi Arabia over oil production cuts threatens to devastate U.S. frackers, who have little ability to withstand lower prices. U.S. shale drillers are poised to be among the biggest losers in the oil-price war stoked by Russia and Saudi Arabia that has sent global prices crashing. Dozens of debt-addled companies, including Chesapeake Energy Corp. and Whiting Petroleum Corp., were already facing financial difficulties even before U.S. benchmark prices plummeted 25% to $31.13 a barrel Monday, the largest drop since 1991.
Russia's oil price war with Saudi Arabia could cause defaults in US — Russian officials have wounded the US shale industry by starting a full blown oil price war. While the standoff could cause enduring damage to the American energy sector, some analysts think the price war is temporary. Shares for Houston-based oil and gas companies like Apache and Occidental Petroleum plunged more than 50% yesterday after an oil-pumping frenzy erupted: Russian authorities, with an eye on the US energy industry, reportedly refused to agree with their Opec partners on a production cut to stabilize oil prices. Saudi Arabia retaliated by slashing its official prices and signaling that it will crank up output. The stakes are getting higher as Saudi Arabia’s state-owned oil company pledged today a massive ramp up in production.Benchmark oil prices plunged more than 20% yesterday, the largest one-day drop since the Gulf War in 1991, sparking pandemonium in equity and bond markets around the world. Brent crude rose about 6% to $37 a barrel in London trading this morning.Many American companies that specialize in extraction from shale and fracking are vulnerable because they are highly indebted. Energy exploration and production firms have $86 billion of debtcoming due between now and 2024, and much of it is junk rated, according to Moody’s Investors Service. Those companies have to repay their borrowings or find a way to refinance. That could be difficult for a host of oil executives as energy prices drop, hurting revenue and profit, and as credit markets get tighter, making it harder to raise funds.Bonds of Antero Resources were heavily traded yesterday, according to MarketAxess data. The yield on the Denver-based company’s notes that are due November 2021 jumped as much as 3.7 percentage points relative to similar-maturity Treasuries, signaling growing investor concern about the company’s creditworthiness. Bond yields increase as their price falls. The US energy industry has been a powerful tailwind for creating jobs, sucking in workers from around the country and even the rest of the world. And while lower energy prices can put some extra money in consumers’ pockets, a series of energy company defaults would put a substantial number of laborers out of work. The chief executive at Pioneer Natural Resources told the Wall Street Journal yesterday that half of the publicly listed exploration and producing companies could go bankrupt (paywall) in the next two years.
Jim Cramer says he could see '9 or 10' oil companies going bankrupt if crude declines persist -- CNBC’s Jim Cramer said Monday he could see the oil industry experiencing a significant wave of bankruptcies if low crude prices persist. Of the more than 35 companies in the oil industry he follows, Cramer said, “I think fully maybe 9 or 10 can go.” Cramer’s remarks on “Closing Bell” came as oil prices sank to multiyear lows after a heightening of tensions between Saudi Arabia and Russia. His comments also came shortly after the Dow Jones Industrial Average fell more than 2,000 points, or 7.79%, in its worst day since 2008. U.S. West Texas Intermediate crude declined 24.59%, or $10.15, on Monday to close the session at $31.13 per barrel. In early January, WTI was at more than $60 per barrel. International benchmark Brent crude sank 21.3% to $35.58 per barrel on Monday. The steep declines in crude prices follow reports that Saudi Arabia is planning to cut its oil prices while also increasing production. Saudi Arabia is planning the move after OPEC was unable to reach an agreement with its allies, led by Russia, over production cuts. The production cuts were being considered in response to a decline in global demand for oil, brought about by the fast-spreading coronavirus. The XOP ETF, which tracks oil and gas companies, fell 27% on Monday. Cramer is among many analysts and experts who are warning about the future of oil companies if crude remains at such a low price. One big reason: Over the next four years, the U.S. oil and gas industry has about $86 billion of rated debt due, according to Moody’s. And low oil prices make it difficult for those companies to make debt payments. “We’ll see bankruptcies. We’re going to see some [companies] really trying to survive,” oil expert Daniel Yergin told CNBC earlier Monday. “This is a very difficult, bracing period for those companies.”
Oil Price Crash: 50% Of U.S. Shale Could Go Bankrupt - Oil opened on Monday down roughly 25 percent, the sharpest decline in decades, and broader financial markets fell so precipitously that the circuit breakers put in place during times of volatility tripped, temporarily halting trading.The list of adjectives available to describe what is happening to the oil market is not adequate. There are now multiple crises unfolding at the same time.First, there is obviously a health crisis – the coronavirus continues to spread. Large swathes of northern Italy are now on lockdown. The number of cases in the U.S. has surged, and could explode in the coming days. Mandatory lockdowns may not be far off. The Trump administration is asleep at the wheel, actively trying to play down the extent of the crisis.Second, there is a brewing economic crisis. China shut down parts of its economy in January and February. Parts of Europe followed. The U.S. is next. The Dow Jones has fallen by more than 16 percent in the past week, and markets have quickly shifted from concern to full blown panic.Third, if all of that is not enough, OPEC and Russia just added on an oil supply crisis. The collapse of talks last week and the ensuing price war has WTI down to $33 per barrel as of midday on Monday, down from $45 last Thursday on the eve of the OPEC+ talks. OPEC and Russia have said that all restraints on production expire at the end of the month, and everyone can produce at will. Oil could easily be in the $20s at any moment (and might be by the time this piece is published).For the U.S. oil industry, this is a historic crisis. It has the ingredients to be far worse than the 2008 financial meltdown. At that time, a sharp contraction in the global economy blew a hole in the market. But OPEC responded by cutting production. This time, that same potential for an economic calamity is present, but there is an oil price war occurring simultaneously.
Only 4 Shale Drillers Are Still Profitable At $31 Oil --Most shale oil wells drilled in the United States are unprofitable at current oil prices, Rystad Energy has warned. The Norwegian consultancy said, as quoted by Bloomberg, that drilling new wells would be loss-making for more than 100 companies. Just four shale drillers - Exxon, Chevron, Occidental, and Crownquest - can drill new wells at a profit at $31 per barrel of West Texas Intermediate. The problem is the nature of shale oil wells: while quick to start production and expand it, they are also quick to run out of oil, so drillers need to keep drilling new ones to maintain production, which is what U.S. shale patch players have been doing for years.However, this has affected investor returns, Bloomberg notes, and now it is affecting spending plans.“Companies should not be burning capital to be keeping the production base at an unsustainable level,” Tom Loughrey from shale oil data company Friezo Loughrey Oil Well Partners LLC told Bloomberg.“This is swing production -- and that means you’re going to have to swing down.” The situation is more positive for drilled but uncompleted wells, according to Rystad. The consultancy said yesterday that as much as 80 percent of DUCs in the U.S. shale patch have a breakeven price of less than $25 per barrel of WTI. Yet this is dangerously close to current prices.
U.S. oil company workers make big, bad retirement bet: their own stock (Reuters) - Employees at the largest U.S. oil companies have lost around $5 billion in retirement savings since the end of 2018 because of outsized bets on their own slumping stock, according to a Reuters analysis of company disclosures, a trend exacerbated by the recent crash in oil prices. The losses spread across the 401(k) plans of some 66,000 workers underscore the dangers facing employees that do not diversify their retirement investments. The issue is most pronounced at big blue-chip corporations that have historically matched worker retirement contributions in shares and whose stocks have track records of stable growth. “A lot of people think their company’s stock is safer than an index fund,” said David Blanchett, head of retirement research at Morningstar Inc. The biggest U.S. oil producers by market cap - Exxon Mobil Corp (XOM.N), Chevron (CVX.N), ConocoPhillips (COP.N), EOG Resources (EOG.N) and Occidental Petroleum Corp (OXY.N) - held $44 billion of 401(k) assets for some 66,000 workers at the end of 2018, 36% of which was made up of company stock, according to the filings that contain the latest available data. By contrast, only about 6% of 401(k) assets held at U.S. corporations across all industries were invested in company stock at the end of 2016, according to the Employee Benefit Research Institute, a nonpartisan group based in Washington. The median total return for the five oil companies’ shares, meanwhile, amounted to negative 44% since the end of 2018, with a range of negative 22% to negative 77%. That includes losses after major oil benchmarks on Monday recorded their biggest one-day percentage drop since 1991 due to a looming price war between major oil producers Saudi Arabia and Russia.
White House likely to pursue federal aid for shale companies hit by oil shock, coronavirus - The White House is strongly considering pushing federal assistance for oil and natural gas producers hit by plummeting oil prices amid the coronavirusoutbreak, as industry officials close to the administration clamor for help, according to four people familiar with internal deliberations. President Trump has touted the growth of oil and natural gas production under his administration, celebrating their rise in politically crucial swing states such as Pennsylvania. But many oil and gas firms were hammered Monday by the price war that broke out between Saudi Arabia and Russia, driving oil prices down in their steepest one-day drop in almost 30 years. White House officials are alarmed at the prospect that numerous shale companies, many of them deep in debt, could be driven out of business if the downturn in oil prices turns into a prolonged crisis for the industry. The federal assistance is likely to take the form of low-interest government loans to the shale companies, whose lines of credit to major financial institutions have been choked off, three people said. Trump and advisers have been taking calls since Monday from concerned energy sector allies, who have voiced concern and at times exasperation not only about oil prices, but also privately warning against the administration supporting any sweeping paid sick leave policy, according to a major GOP donor and a White House official familiar with the discussions. These people spoke on the condition of anonymity to candidly discuss private conversations. Even major oil companies are threatened by the oil price slump. Occidental Petroleum on Tuesday slashed its dividend to 11 cents a share from 79 cents and cut capital spending by a third. Oil prices staged a partial rebound Tuesday after plummeting the day before. One of the companies hardest hit was Continental Resources, founded by Harold Hamm, a Trump supporter and an adviser to the president on energy issues. It lost more than half of its market value Monday, though it recovered about 8 percent by midday Tuesday. Hamm’s 77 percent personal stake in the company lost $2 billion of its value Monday. Hamm said in an interview Tuesday he had reached out to the administration but had not made “direct" contact. He said that the administration should consider using laws on illegal dumping to prevent Russia and Saudi Arabia from slashing prices of oil sold in the United States. Hamm said the administration should consider “any action that the administration might take to protect and preserve American interests at this time from being unfairly disadvantaged by whatever government — and we’re talking governments here, whether it be Russia or Saudi Arabia.”
Trump's coronavirus handout to oil industry would be dumb, destructive - Thousands have died. Millions are in quarantine. Almost all of us are in the path of what has now been declared a global pandemic that is shutting down whole cities. For most Americans, the coronavirus is a frightening reminder of our personal and social vulnerabilities.To oil industry executives, though, COVID-19 smells like opportunity. Citing a plunging demand for oil linked to the virus and the industry’s global failure to curb its own production, U.S. oil companies just asked the Trump administration for a long list of special handouts.They didn’t have to wait long for an answer. Trump and Senate Republicans are reportedly considering various plans to offer low-interest loans to oil companies, making it even easier to drill and frack our beautiful public lands, defer tax payments and cut royalties for oil production on federal property, and perhaps even use public money to buy up the companies’ crude for the Strategic Petroleum Reserve.These demands aren’t really new. The industry, which already gets billions in subsidies every year, has long fought to evade royalties for oil taken from our public lands, and the Trump administration has happily helped companies pay taxpayers as little as possible.But the coronavirus is being used as fresh wrapping for these old, bad ideas. And if oil companies’ wish list is granted by Trump officials eager to appease shale oil billionaires like Harold Hamm, it’ll be one of the dumbest, most damaging things the administration has done for this polluting industry. We’ll see even more destructive drilling and fracking on public lands at a time when the administration is already opening natural treasures like the Arctic National Wildlife Refuge and California’s central coast to the oil industry.We’ll see oil companies do even more harm to our climate even though fossil fuel production on federal lands already causes about a quarter of all U.S. greenhouse gas emissions. One need not be a genius — stable or not — to spot the major logical flaw here. If the Trump administration makes it even cheaper and easier to drill on our public lands, what will oil companies do? They’ll pump more oil, contributing to the glut and drive prices lower.
The Absurdity Of Trump’s Bid To Bail Out The Oil And Gas Industry -- The White House’s nascent effort to bail out oil and gas producers struggling with plunging oil prices could become a political boondoggle, legal and industry experts say, given the difficulty of finding congressional support for offering federal dollars to an industry plagued by reckless financing and devastating effects on the climate.The price war that broke out between Saudi Arabia and Russia on Sunday pushed the price of crude into its steepest single-day nosedive since 1991. Both producers vowed to continue oversupplying the market even as the panic over the coronavirus pandemic grounded planes and shuttered factories, significantly reducing demand. The combined effect sent the price of oil below $33 a barrel Wednesday and threatened what one analyst called a “financial bloodbath” for the U.S. fracking industry, whose rapid expansion over the past decade was fueled by precarious debt. In response, the Trump administration, which has aggressively bolstered the oil and gas sector, this week began “strongly considering” offering low-interest government loans to drillers, The Washington Post reported Tuesday. It’s unclear what form such an aid package would ultimately take and whether it would require congressional approval if it reached fruition. The American Petroleum Institute, the industry’s largest and most powerful lobby, told reporters it was “not asking” for a bailout and denied having any talks with the administration. At a Wednesday hearing on Capitol Hill, Treasury Secretary Steven Mnuchin said the administration was considering a loan package to certain industries similar to the federal program to prop up airlines after the Sept. 11, 2001, terrorist attacks caused an abrupt drop in air travel. That measure, which provided direct aid worth $7.3 billion in today’s dollars and $14.6 billion in loan guarantees for the airline industry, came through Congress and was signed into law by President George W. Bush on Sept. 23, 2001.
Warren Buffett’s Berkshire Hathaway Backs Away From Canadian Gas Project – WSJ - Move spurred by protests against another big energy project that involved blocking rail lines. Berkshire Hathaway Inc. has backed out of financing a major gas project in the Canadian province of Quebec, prompting worries that international investors are increasingly shunning the country after protests over another energy project. Warren Buffett’s conglomerate pulled out of providing roughly 4 billion Canadian dollars ($2.99 billion) in equity financing for the Énergie Saguenay Project, a proposed Canadian natural gas export facility to be built 130 miles north of Quebec City, according to three people familiar with...
US shale and Canadian oil sands production in a "cheap crude" world. - It’s a new world, folks. The Saudis and Russians, who until a few days ago had been trying to prop up crude oil prices through supply management, are now engaged in an all-out war for market share. Crude oil prices are sharply lower. Three weeks ago, West Texas Intermediate was selling for $53/bbl and Western Canadian Select for $37/bbl; yesterday, they were selling for $34/bbl and $22/bbl, respectively. And things may get worse. All this has profound implications for North American production, but the effects on production in U.S. shale plays versus the Canadian oil sands will be very different. Today, we explain how the oil sands provide steady-as-she-goes baseload supply through pricing peaks and valleys while U.S. shale plays serve as a global swing supplier.The crude-oil market gyrations of the past few days have left the energy industry shell-shocked, and for good reason. It’s been years since we’ve seen anything close to the once-unthinkable confluence of events that has dragged down oil prices. A coronavirus pandemic that is now affecting more than 100 countries, including the U.S. and Canada, and crippling global oil demand. The utter collapse of a fragile-but-effective coalition of OPEC and non-OPEC producers — including Russia — that for more than three years had held crude supply in check to keep prices from tumbling. And then there’s the stock market, whose free fall in recent days has left a long list of North American exploration and production companies (E&Ps) in a financially precarious state.This got us thinking about the challenges that U.S. shale and Canadian oil sands producers will be facing, particularly if crude oil prices stay low for a long time. The ups and downs of shale plays and the oil sands have been frequent topics in the RBN blogosphere. In our new Dakota series, for example, we’ve been discussing how gathering-system development has been sustaining an oil-production resurgence in the Bakken Shale. On the downside, we discussed slumping activity and production in the SCOOP and STACK plays of Oklahoma in Broke Down Engine. For the oil sands, there’s been more down than up since the crude oil price slump of 2014-16, as we noted in several series such as The Thrill is Gone, although bitumen production keeps rising. And in our seriesEverybody Wants to Rule the World, we covered the competitive strain that rising non-OPEC production had been putting on OPEC and its supply-management collaborators.
‘Ghost Flights’ Still Polluting the Skies as Coronavirus Keeps Passengers Grounded - The demand for flights has plummeted as the new coronavirus spreads around the globe, but some British airlines are still sending empty planes into the skies, burning thousands of gallons of fossil fuelsthat contribute needlessly to the climate crisis.These so-called "ghost flights" are taking off because of European rules saying airlines must use their airport space or give it up, The Times of London reported Friday. The situation has prompted UK Transport Secretary Grant Shapps to write to the independent airport slot coordinator Thursday, asking them to relax the rule in order to prevent airlines from flying nearly or entirely empty planes."Such a scenario is not acceptable," Shapps wrote. "It is not in the industry's, the passengers' or the environment's interests and must be avoided."European rules stipulate that airlines taking off from the continent must use 80 percent of their slots or lose them to someone else, Business Insider explained. Airport Coordination Limited has already relaxed the rules for flights to and from Hong Kong and mainland China, but they remain in effect for all other destinations, including outbreak hotspots like Italy and South Korea, according to The Independent.Shapps isn't the only one who has spoken out. Virgin Atlantic CEO Shai Weiss also called for the rules to be suspended, as they were following 9/11 and the SARS epidemic. "Passenger demand for air travel has dramatically fallen due to Covid-19 and in some instances we are being forced to fly almost empty planes or lose our valuable slots," he told The Independent.
America's shale gas 'revolution' has led to exports that span the globe — and helped solve Japan’s energy needs after a nuclear disaster -At the busy Port of Yokohama, near Tokyo, large oceangoing vessels carry new cars from Japanese factories to a global market. But one product the Japanese have always had to import is energy, and it’s clear from the port traffic how much energy the country needs. Tankers full of coal, liquefied petroleum gas and liquefied natural gas, or LNG, sail into the harbor from all over the world. More and more of that energy originates in the US. A boom in shale gas drilling in places like Texas and Pennsylvania has created a glut of domestic natural gas. That means even before the COVID-19 virus disrupted the energy markets in the past months, prices were at an all-time low. Producers eager to find new markets now ship gas overseas. And that has helped make the US the third-largest natural gas exporter in the world. And Japan is one country that has increased its imports of US shale gas. Nine years ago, on March 11, 2011, Japan’s energy landscape suddenly transformed when the massive Tohoku earthquake and subsequent tsunami killed an estimated 22,000 people and led to a meltdown at the Fukushima Daiichi nuclear power plant. About half a million residents fled the radiation; some never returned to their homes. Japan shut down its nuclear power plants in the wake of that disaster, which meant the source of one-third of the country’s energy production quickly vanished. New imports helped make up for the loss. US exports of coal to Japan increased and the amount of electricity generated from natural gas jumped 50% in the wake of the disaster. Japan has long been the world’s largest importer of natural gas, and the newly abundant US shale gas wells provided a solution to the sudden loss of nuclear energy. “After 2010, everybody, including the Japanese government and industry, realized the significance of the shale revolution in the United States,” said Ken Koyama, chief economist and managing director at the Institute of Energy Economics in Japan. Japan has little natural resources of its own and must import its fossil fuels. Energy security is key for Japan, says Koyama. The country is still dependent on Middle East oil. “That’s a critical challenge,” Koyama said. “LNG is an important source of diversification for us.”
Pertamina cleans beaches in Balikpapan of possible oil pollution - State-owned oil and gas company Pertamina has cleaned several beaches in Balikpapan, East Kalimantan, of what appears to be traces of an oil spill.Pertamina deployed its Health, Safety, Security and Environment (HSSE) team on Sunday to clean up oil floating on the water and inspect the company’s facilities, according to its spokesman Roberth Marchelino Verieza.“We’ve received information regarding oil spills and have found that there are some traces of oil in the area. We also checked our facilities to ensure that we’re not the one causing the oil trail,” he said as quoted by tribunnews.com. Pertamina’s inspection, according to Roberth, found no traces of oil at the company’s jetty and oil catchers. The Balikpapan Environment Agency has recorded five oil spills over the course of two years, two of which occurred in 2018. Sunday’s incident occurred at around 5 p.m., with pollution detected on the four beaches of Monpera, Kemala, Adi Pratama and Kilang Mandiri, agency head Suryanto said.He added that the agency was still investigating the incident by burning the floating substance, but said it did not react to the fire.“[We’ve conducted testing] from the beach of Monpera to Benua Patra. We held fire to the water surface but it didn’t burn,” he said, adding that the floating black substance could be wastewater rather than oil. However, the agency has asked Pertamina to clean up the pollution as the company owns spill kits and water treatment plants to process hazardous waste. (mpr)
Crude oil spill in Narali dam poses serious threat to human health - A recent waste crude oil spillage, after recent heavy rain spell, in the Nirali Dam of Gujar Khan has posed serious threat to human health and environment in the vicinity. Assistant Director Punjab Environment Protection Department (EPD) Amin Baig told APP that the crude oil leakage occurred in the Adhi Oil field of Pakistan Petroleum Limited (PPL). “After reports of the oil flow over into the reservoir, EPD team visited the site and took the PPL administration on board whereas DO Fisheries Muratab Ali also accompanied the team. Water samples have been collected from the banks of the dam and also from the middle of the water reservoir to ascertain the level of oil contamination in the reservoir," he added. He noted that the water color and shining surface in the centre of the dam indicated the presence of crude oil. He informed that the water samples were sent to the laboratory in Lahore to gauge the level pollution in the dam. Amin added that the dam water was used for irrigation and fish farming purposes and was not used for drinking. “The oil overflow into the dam was first identified by the Irrigation Department where after meticulous observation of the water reserve proved the presence of oil," he noted. To a question, he said Well No.5 at the Oil field was suspected to be the oil leaking sources where we had collected random samples from final outlet of the oil field and then the dam. According to Safe Drinking Water Foundation (SDWF), a Canadian charity working on the subject since January 1998 claimed that oil pollution could damage ecosystems, including plants and animals, and contaminate water for drinking and other purposes.
Coal cargo ship grounded near Karachi coast - A vessel carrying coal cargo has grounded near Mubarak Village at Karachi’s coast, quoting local fishermen ARY News reported on Wednesday. Big waves in the sea steered the coal cargo ship from its route towards the beach this morning, which grounded at the rocky surface of the beach near Mubarak Village, local fishermen said. It is unlikely to guide the ship out due to high waves and rough weather according to sources. The coal cargo of the ship belongs to a power company based in Balochistan, sources said. Local residents have expressed apprehensions about spread of pollution after grounding of the coal ship near Mubarak Village. “The coastline will pollute again as happened after October 2018 oil spill”, local councilor Sarfaraz Haroon said. “Those responsible for the oil spill yet to be traced,” Haroon said. The oil spill had affected livelihood of local fishermen while the government yet to compensate the losses, a local fisherman said. The pollution from the coal ship will also affect the marine life, residents said. The oil spill had damaged about one mile of the coastline near the port city of Karachi. Traces of oil were found across an 8-kilometer (5-mile) stretch.
Reps order investigation of NOSDRA over five years oil spill - The House of Representatives, on Wednesday in Abuja, ordered an immediate probe of the cleanup of spills and remediation in oil-producing areas of the country in the last five years. Considering a motion sponsored by Abubakar Hassan Fulata at plenary presided by Speaker, Femi Gbajabiamila, it resolved to set up an ad-hoc committee to probe activities of the National Oil Spill Detection and Response Agency (NOSDRA) in the Joint Investigative Visits. It also resolved to investigate the extent of compliance with the Environmental Guidelines and Standards for Petroleum Industry in Nigeria (EGASPIN) and report within eight weeks for further legislative action. While moving the motion, Fulata (Jigawa APC) expressed concern over the sufferings in the Niger Delta region as a result of over 50 years of oil spills and subsequent pollution of the freshwater system, degradation of water quality and lowering of food web productivity. He said he was privy to information that life expectancy in the country stood at 55 years whereas in the Niger Delta it was lower by 10 years due to pollution. He claimed that the annual report of the Department of Petroleum Resources (DPR) indicated that 569 incidents of oil spills were conveyed with 9718.22 barrels spilled and only 800.55 barrels were recovered, while thousands of barrels of oil were lost to the environment. Fulata said he was aware that the oil-producing communities continued to complain of belated joint investigative visits (JlVs), inadequate oil spill cleanup and remediation, thus aggravating the woes of polluted communities. The lawmaker noted that increase in oil revenue to the nation was contingent on the peace and harmony that reigns in the oil-producing areas, adding that with the current drift in global oil prices, failure to clean up impacted sites would create tension in the communities, which may impact national oil production.
World Bank accused over ExxonMobil plans to tap Guyana oil rush -The World Bank is to pay for Guyana’s oil laws to be rewritten by a legal firm that has regularly worked for ExxonMobil, just as the US producer prepares to extract as much as 8bn barrels of oil off the country’s coast.The World Bank has pledged not to fund fossil fuel extraction directly, but it isgiving Guyana millions of dollars to develop governance in its burgeoning oil sector, as the south American country prepares for an oil rush led by ExxonMobil and its partners.Guyana’s government was in charge of hiring US law firm Hunton Andrews Kurth to revise its Petroleum (Exploration and Production) Act, the environment and rights campaign group Urgewald found.The World Bank reviewed the procurement and found no problems with the process. The Washington-based bank will fund the work with a grant worth $1.96m (£1.5m).Hunton Andrews Kurth has acted for ExxonMobil for 40 years, including multiple cases involved in climate impacts, such as an action by native Americans in the Alaskan village of Kivalina who argued that the climate crisis was threatening their way of life.“The World Bank claims to be striving for ‘good governance’ in revising Guyana’s legal framework for oil development,” said Heike Mainhardt, senior advisor on multilateral financial institutions at Urgewald. “However, they are hiring the law firm who counts among their major clients ExxonMobil– the company leading the oilfield development in Guyana.“This is ‘good governance’ for the oil companies, not for the people of Guyanaor the global climate. The World Bank is causing a conflict of interest, in effect undermining good governance.”
Saudi Aramco shares fall below IPO price for first time, Gulf stocks plummet after OPEC deal failure - Shares of Saudi state oil giant Aramco traded below their original IPO price for the first time Sunday, at 30.90 riyals ($8.24) at 12:30 p.m. in Riyadh compared with the listing price of 32 riyals in December. That’s down 6.36% on the day. Saudi Arabia’s stock exchange, the Tadawul, was down 7.7% in afternoon trading after plans to orchestrate a supply cut among OPEC and non-OPEC states collapsed amid investor fears surrounding the fast-spreading coronavirus. Aramco became the world’s most valuable publicly traded company when its share price gave it a record valuation of $1.7 trillion after 1.5% of the enormous firm was listed on the local stock exchange late last year.Stock markets across the rest of the Gulf also fell dramatically during Sunday trading. Indexes in Abu Dhabi, Dubai and Kuwait were all down several percentage points after the market open. The Abu Dhabi index fell 5.8%, Dubai’s Financial Market General Index was down 7.47% and Kuwait’s premier market index had plunged by 10% at 1:30 p.m. Dubai time, causing trading on the Kuwait index to be suspended.
Oil demand set for first contraction since 2009 due to coronavirus (Reuters) - Global oil demand is set to contract in 2020 for the first time in more than a decade as global economic activity stalls due to the coronavirus, the International Energy Agency said on Monday. The downward revision came as oil prices dropped as much as third in their biggest one-day fall since the 1991 Gulf War after Saudi Arabia launched a bid for market share following the collapse of an output pact with Russia. The energy watchdog said it expected oil demand to be 99.9 million barrels per day (bpd) in 2020, lowering its annual forecast by almost 1 million bpd and signalling a contraction of 90,000 bpd, the first time demand will have fallen since 2009. Global oil demand fell 2.5 million bpd on the year in the first quarter, or around 2.5%, the IEA estimated in its report, as coronavirus cut travel and economic activity. Around 1.8 million bpd of that was in China. The Paris-based IEA said in its medium-term outlook report that in an extreme scenario where governments fail to contain the spread of the coronavirus, which has affected over 100,000 people, consumption could drop by up to 730,000 bpd. The virus has led to a sharp drop in industrial activity particularly in China and other Asian economies, as well as Italy, one of the worst-affected places outside China. The virus has led to a slowdown in demand for ground and air transport. IEA Executive Director Fatih Birol urged producers to "behave responsibly" in the face of the coronavirus crisis, after a deal on output restraint between OPEC, Russia and other producers collapsed last week, sending oil prices plunging. "At such a time of uncertainty and potential vulnerability to the world economy ... playing Russian roulette with the oil markets may well have grave consequences," Birol told reporters. Saudi Arabia, OPEC's biggest producer, signalled it would pump more, sending oil prices down to levels that will place a strain on its budget and those of other oil producers, and put a severe squeeze on producers of more costly U.S. shale oil. Birol said the low oil prices could put many major crude producing nations such as Iraq, Angola and Nigeria under "huge" financial strain and fuel social pressures.
Is coronavirus causing the largest oil decline in history? — The coronavirus outbreak is threatening to cause a historic drop in global oil sales, potentially resulting in the first annual decline in demand since the financial crisis and recession of more than a decade ago. Both the Wall Street investment bank Goldman Sachs and the research firm IHS Markit predicted as much this week with IHS forecasting crude demand will decline by 3.8 million barrels per day over the first three months of 2020, which would be the largest drop in history and another blow to Texas’ oil industry. The Norwegian consultancy Rystad issued its own dire forecast on Thursday, estimating that oil demand plunged by 4.6 million barrels a day in February. “This is a sudden, instant demand shock — and the scale of the decline is unprecedented,” said Jim Burkhard, vice president and head of oil markets at IHS Markit.The virus’s potential to upend global energy demand has roiled commodity markets. Oil settled at $46.78 a barrel Wednesday in New York, down 40 cents on the day. Oil is down more than 20 percent from the beginning of the year, when it was trading about $60 a barrel. And with coronavirus now spreading to countries around the globe, fear is building that energy demand could fall much further. Flights are being canceled in Europe, while schools are closed in Japan and towns quarantined in Italy. So far, the hit to demand mostly has come in China, where government officials have ordered residents in some regions off the road, crashing fuel demand to near zero, said Ann Louise Hittle, head oil market analyst at research firm Wood Mackenzie. But it’s unclear whether such a demand hit would come in other countries, where governments don’t maintain the same degree of authority. “People literally couldn’t drive in Hubei (province in central China) unless they had permission,” Hittle said. “I don’t think we’re going to see that in northern Italy. It’s not like the government there can do that.”
Oil is now a 'bigger problem for markets than the coronavirus,' analyst says - Oil prices plunged last week as OPEC and its allies failed to reach an agreement on production cuts, and as prices look set to continue cratering, some are warning about the impact on the broader economy. “Crude has become a bigger problem for markets than the coronavirus,” Adam Crisafulli, founder of Vital Knowledge, said Sunday. “It will be virtually impossible for the [S&P 500] to sustainably bounce if Brent continues to crater,” he added. Crisafulli noted that oil is “critical” to the U.S. economy. Many people are employed by the industry, and highly leveraged oil and gas companies are key to the fixed income market. “The sector is like the ‘FANG’ of credit, esp. high yield, given the enormous amount of debt it has outstanding,” he said. Oil prices have been suppressed since the coronavirus outbreak stoked fears about a slowdown in demand for crude. U.S. West Texas Intermediate crude has dropped 32% this year, while international benchmark Brent crude is down 31%. Many on the Street expected OPEC to step in with deeper production cuts in an effort to prop up prices. But after talks collapsed Friday — OPEC ally Russia refused to agree to the proposed additional output reductions of 1.5 million barrels per day — there could now also be issues on the supply side. The 14-member cartel and its allies, known as OPEC+, also failed to reach an agreement on extending the current production cuts. This means that on April 1, when the current agreement expires, each nation effectively has free rein over how much crude it pumps. On Saturday Saudi Arabia announced massive discounts to its official selling prices for April, and the nation could theoretically pump up to its capacity of 12.5 million barrels per day. Morgan Stanley forecasts Brent falling to $35 per barrel in the second quarter, with WTI trading as low as $30 per barrel. The firm’s prior forecast had Brent at $57.50 and WTI at $52.50. Some are even more bearish. ″$20 oil in 2020 is coming,” Ali Khedery, formerly Exxon’s senior Middle East advisor and now CEO of U.S.-based strategy firm Dragoman Ventures, wrote Sunday on Twitter. “Huge geopolitical implications. Timely stimulus for net consumers. Catastrophic for failed/failing petro-kleptocracies Iraq, Iran, etc - may prove existential 1-2 punch when paired with COVID19.”
Putin just sparked an oil price war with Saudi Arabia — and US energy companies may be the victims - Vladimir Putin just sparked what could end up being one of the ugliest oil price wars in modern history, and American oil and gas companies may be the victims. This weekend Saudi Arabia dropped the oil bomb. It not only cut its forward crude price to Chinese customers by as much as $6 or $7 per barrel, but is also reportedly looking to raise its daily crude output by as many as 2 million barrels per day into an already oversupplied global market. Look out below. The move by the Saudis is both a market share grab and a loud signal to Moscow that it’s done playing games. The dramatic action is in response to a contentious, and ultimately failed, OPEC meeting in Austria on Friday. OPEC members laid out a proposal to further cut oil output quotas by as much as 1.5 million barrels per day. OPEC itself was aligned on the deal, but non-OPEC member Russia said “nyet,” effectively killing it. A source inside the negotiations tells me that as the two sides worked out production cut plans, in the end the “red lines weren’t even close.” The source added that the Russians “definitely don’t want to continue to support shale” at least in part because the Rosneft sanctions were still “too raw.” It was only three weeks ago that the Trump administration imposed sanctions on Russian oil giant Rosneft for transporting Venezuelan oil. Secretary of State Mike Pompeo believes that in helping Venezuela sell oil, Russia is effectively propping up the Maduro regime. Rosneft is run by Igor Sechin, a former employee and close friend of Putin. Connect the dots. Putin reacting to Trump. The Saudis, led by Energy Minister and son of the king Abdulaziz bin Salman, reacting to Putin. And American oil and gas workers and investors are caught in the middle of this epic ego battle. It couldn’t occur at a worse time. Coronavirus is already slamming global oil demand and crude prices have fallen 30% this year. Italy is trying to severely limit population movement in its most important economic region for a month, one which is responsible for about 20% of the nation’s economy. Put another way: economically, Italy is trying to lock down the output of California, Oregon and Washington states combined. For a month. Could that happen here in the states? Unlikely, but there is a real risk of a sharp economic hit, as travel slows and people are asked to work from home. As the world’s biggest consumer, we use about 20 million barrels of oil per day. So even a small slowdown would have a huge impact on global supply and demand.
Saudi Arabia Starts All-Out Oil War- MbS Destroys OPEC By Flooding Market, Slashing Oil Prices - Following Friday's shocking collapse of OPEC+, when Russia and Riyadh were unable to reach an agreement during the OPEC+ summit in Vienna which was seeking up to 1.5 million b/d in further oil production cuts, on Saturday Saudi Arabia kick started what Bloomberg called an all-out oil war, slashing official pricing for its crude and making the deepest cuts in at least 20 years on its main grades, in an effort to push as many barrels into the market as possible. In the first major marketing decision since the meeting, the Saudi state producer Aramco, which successfully IPOed just before the price of oil cratered ... launched unprecedented discounts and cut its April pricing for crude sales to Asia by $4-$6 a barrel and to the U.S. by a whopping $7 a barrel in attempts to steal market share from 3rd party sources, according to a copy of the announcement seen by Bloomberg. In the most significant move, Aramco widened the discount for its flagship Arab Light crude to refiners in north-west Europe by a hefty $8 a barrel, offering it at $10.25 a barrel under the Brent benchmark. In contrast, Urals, the Russian flagship crude blend, trades at a discount of about $2 a barrel under Brent. Traders said the Saudi move was a direct attack at the ability of Russian companies to sell crude in Europe. The draconian cuts in monthly pricing by state prouder Saudi Aramco are the first and clearest indication of how the Saudis will respond to the break up of the alliance between OPEC and Russia, which as we noted earlier, dumped MbS on Friday in a stunning reversal within OPEC+. Talks in Vienna ended in dramatic failure on Friday as Saudi Arabia’s gamble to get Russia to agree to a prolonged and deeper cut failed to pay off. And the second indication that the OPEC oil cartel is now effectively dead, came a few hours later when Bloomberg again reported that in addition to huge price cuts, Saudi Arabia was set to flood the market with a glut of oil to steal market share and capitalize on its just announced massive price cuts as the kingdom plans to increase oil output next month, going well above 10 million barrels a day. In addition to slashing prices, Saudi Arabia has privately told some market participants it could raise production much higher if needed, even going to a record of 12 million barrels a day, according to Bloomberg sources.
Oil plummets 30% as OPEC deal failure sparks price war -- Oil prices plunged 30% in early trading Sunday night after OPEC's failure to strike a deal with its allies regarding production cuts caused Saudi Arabia to slash its prices as it reportedly gets set to ramp up production, leading to fears of an all-out price war. International benchmark Brent crude futures plummeted 30% to $32.05 per barrel. U.S. West Texas Intermediate crude dropped 27% to $30 per barrel, its lowest level since Feb. 22, 2016. "This has turned into a scorched Earth approach by Saudi Arabia, in particular, to deal with the problem of chronic overproduction," . "The Saudis are the lowest cost producer by far. There is a reckoning ahead for all other producers, especially those companies operating in the U.S shale patch." After the initial drop the losses were pared somewhat, with each contract trading down slightly more than 21%. On Saturday, Saudi Arabia announced massive discounts to its official selling prices for April, and the nation is reportedly preparing to increase its production above the 10 million barrel per day mark, according to a Reuters report. The kingdom currently pumps 9.7 million barrels per day, but has the capacity to ramp up to 12.5 million barrels per day. "We believe the OPEC and Russia oil price war unequivocally started this weekend when Saudi Arabia aggressively cut the relative price at which it sells its crude by the most in at least 20 years," . "The prognosis for the oil market is even more dire than in November 2014, when such a price war last started, as it comes to a head with the significant collapse in oil demand due to the coronavirus," the firm added. Saudi Arabia's price cut followed a breakdown of talks in Vienna last week. On Thursday, OPEC recommended additional production cuts of 1.5 million barrels per day starting in April and extending until the end of the year. But OPEC ally Russia rejected the additional cuts when the 14-member cartel and its allies, known as OPEC+, met on Friday. The meeting also concluded with no directive about the production cuts that are currently in place but set to expire at the end of the month. This effectively means that nations will soon have free rein over how much they pump.
OPEC deal collapse sparks price war: '$20 oil in 2020 is coming' - Oil prices fell through the floor in early trading Monday, tanking as much as 30% after Saudi Arabia slashed its crude prices for buyers. The kingdom is reportedly preparing to open the taps in an apparent retaliation for Russia’s unwillingness to cut its own output. “This has turned into a scorched Earth approach by Saudi Arabia, in particular, to deal with the problem of chronic overproduction,” John Kilduff, founding partner of Again Capital, told CNBC. International benchmark Brent crude was trading at $33.79 a barrel — down almost 50% year to date — at 10:45 a.m. Singapore time, with West Texas Intermediate at $30.72. The U.S. benchmark commodity is on pace for its worst day since January 17, 1991, when it lost 33%, and its second-worst day ever. That was during the Persian Gulf War. Experts are now calling dramatically lower crude prices as major OPEC and non-OPEC producers ready for an all-out price war after failing to reach an output cut agreement Friday, in a sudden U-turn from previous attempts to support the oil market as the new coronavirus hammers global demand. ″$20 oil in 2020 is coming,” Ali Khedery, formerly Exxon’s senior Middle East advisor and now CEO of U.S.-based strategy firm Dragoman Ventures, wrote Sunday on Twitter. “Huge geopolitical implications. Timely stimulus for net consumers. Catastrophic for failed/failing petro-kleptocracies Iraq, Iran, etc - may prove existential 1-2 punch when paired with COVID19.” The comment came as oil prices are down 48% for the year and two days after Saudi Arabia announced massive discounts to its official selling prices for April, between $6 to $8 lower per barrel across all regions. Plunging price forecasts are also coming amid reports of a possible increase in production by the OPEC kingpin from its current 9.7 million barrels per day (bpd) to as many as two million bpd more. With previously agreed OPEC+ production cuts expiring at the end of March, Saudi Arabia can theoretically pump as much as it wants — up to its capacity of 12.5 million bpd. And Russian Energy Minister Alexander Novak said Friday that essentially the wheels come off next month: “As from 1 April we are starting to work without minding the quotas or reductions which were in place earlier,” he told reporters at the OPEC+ meeting in Vienna, adding, “but this does not mean that each country would not monitor and analyze market developments.” watch now
Oil bust, the sequel - The days of $30 a barrel are back. Oil followed Friday's rout by plunging more than 20 percent Sunday after Saudi Arabia said it planned to boost output and cut prices. The move followed the failure of OPEC and its allies, led by Saudi Arabia and Russia, to reach an agreement to further cut production. Now, unleashed from the restrictions, the Saudis have signaled a campaign to regain market share, even if it means a price war with Russia and other producers.The timing, of course, couldn't be worse since prices were already sliding as the coronavirus pandemic slows the global economy and undermines energy demand.The situation is all too reminiscent of 2014, when OPEC also failed to agree on production cuts in the face of worldwide glut and tried to pump the American shale industry out of business. Oil prices went into free fall, taking hundreds of companies and tens of thousands of jobs with them. The oil and gas sector was already weakened by a long period of lackluster prices, faltering investor confidence and tight capital conditions. The question now is whether the shale industry can take a second oil bust in five years.
Oil Prices - McBride - From CNBC: Oil prices plunge as much as 30% after OPEC deal failure sparks price war - Oil prices plunged after OPEC’s failure to strike a deal with its allies regarding production cuts caused Saudi Arabia to slash its prices as it reportedly gets set to ramp up production, leading to fears of an all-out price war. The first graph shows WTI spot oil prices from the EIA. According to Bloomberg, WTI is at $32.55 per barrel today, and Brent is at $35.68.Prices collapsed in 2008 due to the financial crisis, and then increased as the economy recovered. Oil prices collapsed again in 2014 and 2015, mostly due to oversupply.Currently demand has weakened due to the COVID-19 pandemic, and Saudi Arabia is apparently going to increase production. The second graph shows the year-over-year change in WTI based on data from the EIA.Six times since 1987, oil prices have increased 100% or more YoY. And several times prices have almost fallen in half YoY.Currently WTI is down 42% year-over-year.
Column: As Saudi Arabia blows up crude oil market, stand by for fallout - Russell - (Reuters) - Saudi Arabia has detonated a metaphorical nuclear weapon in the global oil market, blowing up prices and trade relationships with its decision to slash the cost of its own crude while ramping up output. The Saudi move was no shot across the bows aimed at Russia’s reluctance to extend and boost a deal to curb production. Instead, it was a full-on declaration of war. Saudi Aramco aims to lift its output above 10 million barrels per day (bpd) in April, possibly as high as 11 million bpd, two people with knowledge of the matter told Reuters on March 8. Given its current output is around 9.7 million bpd, this means as much as an extra 1.3 million bpd could flood the market next month - just as demand is taking a major hit from the economic fallout of the global coronavirus epidemic. But pumping more oil was only one of the two barrels fired by the Saudis. The other was a massive cut to their official selling prices (OSPs) for April. Saudi Aramco prices its crude against various benchmarks for the different regions it supplies. The OSP for Saudi Aramco’s benchmark Arab Light grade was cut by $6 a barrel for Asian customers, the destination of about two-thirds of the kingdom’s exports. This was the largest monthly cut in Refinitiv records stretching back to 2003. The OSP was cut to a discount of $3.10 a barrel to the Oman/Dubai average for April, down from a premium of $2.90 for March cargoes. It wasn’t just Asian refiners getting a massive price cut. The Saudis slashed the Arab Light OSP for Northwest Europe by $8 a barrel to a discount of $10.25 a barrel to Brent, and the United States got a reduction of $7 a barrel to a discount of $3.75 against the Argus Sour Crude Index. When OPEC and its allies, including Russia, failed to agree to extend their output cut of 2.1 million bpd, which expires at the end of this month, or agree a further 1.5 million bpd reduction, it was always likely the Saudis would take action. The prevailing logic was that the Saudis wanted to send a message to Russia: Extending and increasing output restrictions would have been a good idea, and that it would have been in all the producers’ interests to make this happen. But there was nothing subtle in the eventual Saudi actions - the largest cut to the OSP in at least three decades and a threat to deluge an already swamped oil market.
Coronavirus and Russia Will Test Saudi Game Plan by Mohamed A. El-Erian - Frustrated by the unwillingness of Russia and some other producers to join in a collective and coordinated output cut, Saudi Arabia announced over the weekend that it would slash its contractual export terms. The result will be a significant fall in prices as other producers follow suit and, concurrently, some traders and short-sellers feel encouraged to push markets even harder in an attempt to force distress selling by those with over-exposed long positions. This isn’t the first time that Saudi Arabia has taken this approach to resolve what is the main challenge to the Organization of Petroleum Exporting Countries’ ability to manage oil prices using its long-standing swing producer model. To work well, the model needs to operate in a bounded range for global oil demand, be supported by the general compliance of OPEC members, and face only limited erosion from production outside the cartel. With the growth of shale oil and non-OPEC production, this third condition has been particularly challenging, adding to the recurrent problem of some members cheating on their output ceilings. Indeed, it convinced Saudi Arabia some five years ago to abandon the swing producer role for a while as a way of getting compliance within the group as well as collective action with other major producers, such as Russia, or what has become known as OPEC+. The Saudis also wanted to curtail what had been a massive investment phase in shale. For this to work again, Saudi Arabia will need to navigate what is likely to be a sharp drop in oil earnings in the interim – and do so better than most other producers using some of its inherent structural advantages, including very low cost-per-barrel production, long-standing marketing relationships, high productivity and adaptability, and a massive national and international infrastructure. The implied challenges, including tighter domestic budget conditions, will be amplified by what is likely to be fragile global demand as coronavirus fears continue to undermine activity through economic cascading stopsthat leave a path of simultaneous supply and demand destruction. Shale production is less of an issue as lower oil prices will quickly result in another market-driven reduction in output and investment in that area.
The Oil Price War Is Turning Into a Debt War -- Saudi Arabia's bloated budget means it's not really a low-cost producer. That's why any race to the bottom will be difficult to win. In a war of attrition, the winner isn’t the force with overwhelming power, but the one with the greatest capacity to sustain damage. The current price war in the oil market is little different. Brent crude fell the most since the 1991 Gulf War Monday, dropping 31% in a matter of seconds, after Friday’s OPEC+ meeting broke up in disarray and Saudi Arabia slashed its crude prices and promised a surge in output.That decision to open the spigots may seem contradictory from a country that just days ago was trying to coax Russia to join a 1.5 million barrels-a-day production cut. What’s happening, though, is really just a change of tactics. While previously Saudi Arabia hoped to maintain its position and revenues in the oil market by encouraging cooperation between major players, it’s now betting that its best prospect is to do the opposite: Engage in a game of chicken with Moscow and the U.S. independent oil industry, and count on being the last player standing.If done right, this approach can be devastatingly effective. The current crisis looks like nothing so much as Saudi Arabia’s decision to flood the oil market in 1985 after years of restraint. That event, as we’ve written, ultimately helped precipitate the fall of the Soviet Union.Each of the major players has advantages and disadvantages right now. No one can produce oil as cheaply as Saudi Arabia: It takes just $2.80 to get a barrel out of an existing Saudi Arabian Oil Co. field, compared with about$16 for Exxon Mobil Corp. and more than $20 for Rosneft PJSC. Overheads in this industry can be significant, though. That’s particularly the case with Aramco, which isn’t just an oil company, but an institution almost indistinguishable from the Saudi state itself. Once you consider the dependence of the Saudi economy on oil production, the best complete measure of Aramco’s overheads is probably the price at which the country’s budget breaks even — and that’s a whopping $83.60 a barrel, which we haven't seen in more than five years. Russia’s fiscal breakeven is around half that at $42 a barrel, and after sharp improvements in recent years, commercial producers in America’s Permian basin are around the same level.
Russia Says It Can Weather $25 Oil For Up To 10 Years - Now that both OPEC+ and OPEC no longer exist, and it's a free-for-all of "every oil producer for themselves" and which Goldman described as return to "the playbook of the New Oil Order, with low cost producers increasing supply from their spare capacity to force higher cost producers to reduce output", the key question is just how long can the world's three biggest producers - shale, Russia and Saudi Arabia ... sustain a scorched-earth price war that keep oil prices around $30 (or even lower). While we hope to get an answer on both Saudi and US shale longevity shortly, and once the market reprices shale junk bonds sharply lower, we expect the US shale patch to soon become a ghost town as money-losing US producers will not be solvent with oil below $30, assuring that millions in supply will soon be pulled from the market, moments ago we got the answer as far as Russia is concerned, when its Finance Ministry said on Monday that the country could weather oil prices of $25 to 30$ per barrel for between six and 10 years. The ministry said it could tap into the country’s National Wealth Fund to ensure macroeconomic stability if low oil prices linger. As of March 1, the fund held more than $150 billion or 9.2% of Russia’s growth domestic product. Incidentally, this may explain why over the past two years, Putin has been busy dumping US Treasury and hoarding gold: he was saving liquidity for a rainy day, and as millions of shale workers are about to find out today, it's pouring.
Investors should sell oil stocks on any rumored OPEC deal, Jim Cramer says - Investors with holdings in oil and gas companies should offload their positions on any sign of a breakthrough in discussions between OPEC and its allies, CNBC’s Jim Cramer said Monday. “If there’s any kind of rumor that the Saudis and the Russians have a new deal to save OPEC and reinstate the old order, I think you use that as a chance to sell,” the “Mad Money” host said. “If you need the money, by all means sell [Tuesday] if it’s an oil company with a terrible balance sheet like Occidental.” Cramer, who has emerged as a critic of oil and gas stock ownership, made the recommendation after crude prices experienced their steepest one-day decline in nearly three decades. U.S. West Texas Intermediate crude dropped 25% to less than $31 and international benchmark Brent crude plunged 26% to fall under $34, suffering their worst day since 1991. The sell-off in crude, which began last week after OPEC members failed to agree on oil production cuts with its allies, brought oil prices to their lowest levels since Feb. 2016. Wall Street participants worry that the failed talks could lead to an oil price war. Those anxieties, coupled with ongoing concerns about the fast-spreading coronavirus, led to a severe dip in the major stock averages. Cramer thinks oil and gas stocks are no longer investible largely in part due to eco-friendly investing trends among younger generations. “The issue is that when lots of money managers refuse to own your stocks, those stocks go lower,” Cramer said. “Now, though, we’ve got a much more serious, draconian reason to sell them: the sudden collapse in crude as Saudi Arabia and Russia engage in this vicious price war.”
Who will blink first? What an all-out oil price war means for the US, Saudi Arabia and Russia - An all-out oil price war has created an “unprecedented” situation in energy markets, analysts told CNBC Monday, with traders impatiently waiting to see which of the world’s largest oil producers will blink first. It comes after OPEC and non-OPEC allies, sometimes referred to as OPEC+, failed to agree on the terms of deeper supply cuts late last week. The fallout between OPEC kingpin Saudi Arabia and non-OPEC leader Russia has kickstarted an oil price war, with crude futures on track to register their biggest daily rout since the first Gulf War in 1991. Oil prices were already reeling from the coronavirus outbreak, with many increasingly concerned about the outlook for oil demand growth. International benchmark Brent crude traded off lows at $37.24 Monday afternoon, still down more than 17%, while U.S. West Texas Intermediate (WTI) stood at $34.55, around 16% lower. Brent futures were down more than 30% at one stage in the session, before paring some of their losses. “We are experiencing, within a short period of time, a demand shock with corona and a supply shock now with OPEC,” “I mean, figuring that out is absolutely amazing, we are making history here. You can call it now a world war of oil. It is not that actually Saudi Arabia is taking on Russia which everyone is talking about. They may do that, but Russia always said they want to take on a little bit more of the shale industry.” “By Saudi Arabia actually now declaring war, they are front-running the Russians in declaring war on U.S. shale,” Benigni said. US oil industry ‘will certainly take the brunt of the pain’. On Saturday, Saudi Arabia announced massive discounts to its official selling prices for April, Reuters reported, with the oil-rich kingdom preparing to ramp up production above the 10 million barrels per day (bpd) mark. Riyadh currently pumps 9.7 million bpd but it has the capacity to increase production up to 12.5 million bpd. Chris Midgley, head of global analytics at S&P Global Platts, said Sunday that “unprecedented conditions” had created a situation where oil traders will be looking to see which producer blinks first. “While low prices will test Saudi fiscal balances, they have the lowest cost barrels and with low debt can pull on sovereign reserves and take the pain.” “Russia may simply allow the Rouble to slide in order to sustain flow or Roubles into their economy while U.S. Shale will certainly take the brunt of the pain — their production is unlikely to change quickly with much activity already committed and significant volumes hedged and protected,” Midgely said.
Oil market is facing a 'triple whammy' of pressures, says expert Dan Yergin -Oil expert Daniel Yergin told CNBC on Monday that the industry is facing “a triple whammy” of pressures, contributing to the tumult facing global markets. “You have oil, you have geopolitics, and you have the virus,” the Pulitzer Prize-winning author said on “The Exchange.” The situation at hand for oil producers has become “a battle for market share in a constricting market,” he said. Yergin’s comments came as oil prices sank to multiyear lows following an escalation of tensions between Saudi Arabia and Russia. OPEC was unable to reach an agreement with its allies last week on production cuts, with Russia reportedly spearheading the opposition. Saudi Arabia responded by reducing its oil prices while it reportedly plans to increase its own production. But Yergin called attention to one of the reasons the potential production cut was being discussed: the fast-spreading coronavirus. The disease, which originated in China but has since spread across the globe, has dramatically reduced the demand for oil as business activity and other consumer behavior such as travel have been curtailed. “It starts with the virus,” said Yergin, vice chairman of IHS Markit. “In the first quarter, we estimate that oil demand compared to last year was down almost 4 million barrels a day.” And in the U.S. and Europe, where cases of the coronavirus have been escalating lately, the demand for oil is going to drop further before it gets better, he said. While demand for oil may not fall significantly in Europe and North America as it did in China, Yergin said, “This means that this market is going to be very difficult and countries are not going to be able to make up on volume what they lose on price.” U.S. West Texas Intermediate crude declined 24.59%, or $10.15, to end Monday at $31.13 per barrel. WTI was at more than $60 per barrel in early January. Brent crude, the international benchmark, fell by 21.3% on Monday to end the session at $35.58 per barrel. The low cost per barrel is causing concern over the fate of oil companies, many of which have sizable debt burdens that become more difficult to repay at current price levels.
Rebound from collapsed oil prices will be low and slow - If there were questions about what volatility in a low-priced oil market looks like, on Sunday, an iconic example was on full display. When the markets opened, oil traded in the $30/barrel range—a whopping 20 percent decline from the previous Friday. The fall was triggered by Russia and Saudi Arabia, which both promised to boost global oil supplies. Those announcements had multiple intents, including disciplining the U.S. shale industry, boosting Chinese imports, shaping global oil markets—and, possibly, punishing each other. The disorder and conflict that preceded these announcements, and the market chaos that ensued, clearly demonstrated that no one institution is in control of the oil markets. The new price volatility brings some key market trends to the foreground, all of which bear watching:
- The integrated Chinese oil majors will pay the price for national service. Low prices hit state-owned oil companies hard, including their diversified oil, gas, and petrochemical interests. But in this downturn, the typical boost from low prices may be muted, as broader economic decline tamps down robust demand for energy or petrochemical products. China’s rush to build out its gas infrastructure to move high cost imported gas will lose momentum. Even PetroChina is looking to offload its loss-making pipeline assets.
- The energy sector’s strategies are in disarray. Subsidies are now at war with economic fundamentals. Watch the fallout as markets unravel affecting the various subsidies and oil and gas cross-pollination schemes in Canada, Argentina, and between and within companies; industry-sponsored carbon innovation schemes around the world; and new technologies to boost production, from drill bit designs, to geological wizardry, to applications of IT. All must be rethought as claims about marginal productivity growth give way to more fundamental and dramatic deterioration in the investment rationale for fossil fuel investments.
- The economic risks of fossil fuel lock-in have just exploded. Asia’s energy growth markets have long been told to bulk up on high cost fossil fuels rather than build lean and nimble grids that can scale in alignment with advances in deflationary new power technologies. The volatility of the past three days has destroyed what used to pass for conventional wisdom. The high-cost infrastructure needed to service fossil fuel imports —grids, ports, gasification terminals, rails, and pipelines—takes decades to pay off. These investments make no sense when fuel price volatility can whipsaw markets and wreck even the biggest energy companies.
- The oil majors’ capital budgets are now up in the air. ExxonMobil, for example, just announced a new round of capital spending of up to US$35 bn annually that has been rendered obsolete almost overnight. Did the company learn anything from the last downturn?
- Market instability will undermine the economic chain that supports petrochemical and plastics production. Even with lower cost feedstocks, a slowdown in demand coupled with lower prices for plastics creates economic uncertainty. Will the price disruption slow down capital spending on new cracker plants and plastics manufacturing? Will some companies put their development plans on hold, or cancel them outright?
- Political risks in the oil markets have multiplied. Just when it seemed impossible for the political fragmentation within energy-producing nations to get any worse, it did.
Yes, fossil fuel interests will continue their talk of an “if only” rebound: if only the flu would go away, if only interest rates would stabilize, if only oil and gas prices would rise, if only climate and environmental regulations would disappear, if only U.S. shale producers would become disciplined. Yet in truth, fossil fuel development is too expensive for this economic epoch.
Saudi Arabia and Russia are playing hardball, waiting for each other to blink in the oil standoff - The standoff between oil majors Saudi Arabia and Russia could “last a while” as they wait for each other “blink first,” an analyst said Tuesday. The oil markets tanked Monday, plunging over 20% amid already poor sentiment due to the coronavirus outbreak. The oil slump followed a disagreement on production cuts between OPEC and its allies. Russia declined to lower output last week, and Saudi Arabia announced Saturday that it will offer discounts to its official selling prices next month. The kingdom is also reportedly planning to raise production. “It’s always tough to pick a fight with Russia, with Putin,” said Robert Johnston, director of global energy and natural resources at the Eurasia Group, a consultancy. “Now you have a standoff between Saudis and Russians over who will blink first. I do think this is going to last a while; I think this could be two to three months at least,” Johnston told CNBC. As much as the squabble is about oil production and prices, it is also about challenging the narrative of U.S. energy dominance, he added. The U.S. shale industry has changed the landscape for the global energy sector as the country heads toward becoming a net energy exporter. “Russia has been pushing back against U.S. influence all over the world, so think this is tied to that. I don’t think that would be resolved in the next two or three weeks,” said Johnston. It is an expensive and risky move by Moscow, which is a relatively expensive producer and it remains to be seen if they will be able to “kill shale or put it into hibernation,” he said. But, “they do have a lot of dry powder to work with here.” There are already about 3 million barrels a day in crude oil oversupply this year, so any loss in U.S. supply due to producers being squeezed out in the low-price environment would not be bullish for prices, said Richard Gorry, managing director at JBC Energy Asia.
Russia hints at further talks with Saudi Arabia after oil prices crash - Russia has refused to rule out talks with OPEC to stabilize energy markets, according to reports, after oil prices registered their worst declines in almost 30 years on Monday. International benchmark Brent crude traded at $37.32 Tuesday afternoon, up over 8.5%, while U.S. West Texas Intermediate (WTI) stood at $33.69, around 8.2% higher. It comes after Brent and WTI both dropped 24% on Monday, sinking to more than four-year lows. The moves follow a breakdown in talks between the kingpin of oil-producing group OPEC, Saudi Arabia, and non-OPEC member Russia late last week. Markets had been hoping for an agreement by both countries, and other oil producers, to curb oil output in an effort to bolster prices; their failure to agree led oil prices to crash on Monday. Speaking to reporters Tuesday, Russian Energy Minister Alexander Novak said that Moscow had not ruled out measures with OPEC to stabilize oil markets, according to Interfax news agency. Russia’s energy ministry has proposed to hold a meeting with Russian oil companies on Wednesday, Reuters reported, citing two unnamed sources. They are expected to discuss whether to prolong Russia’s alliance with OPEC. The collapse of the OPEC and non-OPEC agreement “does not appear to have been part of any pre-meditated strategy or plan on Russia’s part or done with the intention of undermining U.S. shale production,” Daragh McDowell, head of Europe and principal Russia analyst at Verisk Maplecroft, told CNBC via email. “The arrangement was unpopular with key members of the Russian elite — notably Rosneft’s Igor Sechin — and the economic damage caused by the COVID-19 outbreak provided a handy pretext for abandoning the deal.”
Oil jumps 6% following worst day since 1991, as Street hopes for continued OPEC talks - Oil prices surged on Tuesday following reports that ongoing talks between OPEC and its allies, known as OPEC+, remain possible. But some of the gains were pared as the Street digested what a possible increase in production from both Russia and Saudi Arabia would mean for the market.Speaking to reporters Tuesday, Russian Energy Minister Alexander Novak said that Moscow had not ruled out measures with OPEC to stabilize oil markets, according to Interfax news agency. Russia’s energy ministry has proposed to hold a meeting with Russian oil companies on Wednesday, Reuters reported, citing two unnamed sources.International benchmark Brent crude gained $2.25, or 6.5%, to trade at $36.62 per barrel, while U.S. West Texas Intermediate futures were up 7.1% to trade at $33.35 per barrel. Earlier in the session WTI surged more than 10%. Tuesday’s jump follows steep declines on Monday, which which saw WTI and Brent drop 24% for their worst decline since 1991. Both contracts closed at a more than 4-year low.Saudi Aramco CEO Amin Nasser said on Tuesday that the kingdom plans to supply a record 12.3 million barrels per day (bpd) in April, well above current production levelty of 9.7 million bpd. In response, Novak said that Russian oil companies may boost output by up to 300,000 barrels per day, according to a report from Reuters, while noting that the country has the ability to increase production by as much as 500,000 barrels per day.This potential oversupply comes at a time when oil prices were already moving lower after the coronavirus outbreak and subsquent travel slowdown has led to soft demand for crude. “We could be in a situation where Saudi ramps up production, and the Russians raise production, so in that type of situation when there’s so much concern about demand this would be a really negative impact for oil prices,”
Oil Jumps 10% Despite Saudi Plans To Boost Output By More Than 20% --Crude oil futures soared 10% on Tuesday morning after the most significant decline since the 1991 Gulf War on Monday, after Saudi Arabia slashed export prices of oil over the weekend in retaliation to Russia walking away from a production cut agreement at OPEC's meeting in Vienna, Austria, on Friday. Oil futures started the rebound on Monday evening when President Trump said his administration would discuss a possible payroll tax cut with the US Senate, saying they would seek "very very substantial relief" for the economy that has been roiled by the outbreak of Covid-19. Oil pared some gains around 0635ET on Tuesday when Saudi Aramco CEO Amin Nasser said Saudi Arabia was prepared to boost its output by more than 20%, and supply 12.3 million barrels per day (bpd) in April, above the current production levels of 9.7 million bpd. Nasser told Reuters in an e mailed statement that April's crude supply will be "300,000 barrels per day over the company's maximum sustained capacity of 12 million bpd." Speaking on Tuesday, Russian oil minister Alexander Novak said that Moscow has yet to rule out measures with OPEC to stabilize the oil market, adding that the next OPEC+ meeting was scheduled for May-June. However, Saudi Arabia's energy minister told Reuters that there was no need for OPEC+ to hold a meeting in May-June timeframe if there was no understanding with Russia on production cuts to stabilize oil markets amid plunging demand in China.Separately, Russia's Energy Minister Novak said Russian companies may boost oil output by up to 300k BPD and has potential to increase by 500k BPD; adding that after the initial reaction, markets are now more balanced. And while there were some reports that the next OPEC+ meeting would be planned for May/June, subsequently, Saudi Energy Ministry state they do not see the point in holding such a meeting only to demonstrate failures in dealing with ongoing crisis.
WTI Maintains Gains Despite Much Bigger Than Expected Crude Build - Oil prices screamed higher (partly in response to investors' rising skepticism about the escalating war of words between key oil exporters Saudi Arabia and Russia) bouncing after yesterday's carnage. Today's most notable headline was OXY cutting its dividend (by 86%), but that failed to worry bullish oil machines who bought with both hands and feet today. Bloomberg's Liam Denning noted: Oxy’s decision to stretch itself to beat Chevron Corp. in a bid battle for Anadarko Petroleum Corp. left it vulnerable in an industry not exactly famed for its stability. This is just damage control on a grand scale. API
- Crude +6.407mm (+1.9mm exp)
- Cushing +364k
- Gasoline -3.091mm (-2.1mm exp)
- Distillates -4.679mm (-1.8mm exp)
API was expected to report a continued trend from last week - more builds for crude and draws for products - but the data was more extreme with a much bigger than expected crude build and much bigger than expoected product draws...
Don't Be Fooled By The Oil Price Rebound - A mild winter in the northern hemisphere, the COVID-19 outbreak, and now the price war that Saudi Arabia declared last weekend have combined to produce an all-new oil price crisis just four years after the last one. And things might get worse before they get better. After last week data from hedge funds showed a slowdown in the selloff of oil and fuel contracts, as reported by Reuters’ John Kemp, this week’s data, for the first week of March, indicated a serious acceleration of sales. During that week, Kemp reported in his weekly column, fund sold the equivalent of 133 million barrels of oil across the six most traded oil and fuel contracts. This compares with sales of just 11 million barrels of oil equivalent across the six contracts just a week earlier. The overall long position of hedge funds on oil and fuels was down to 392 million barrels by March 3, Kemp also noted, which compares with 970 million barrels at the start of 2020. That’s a decline of as much as 60 percent, and that’s not all. The ratio of bullish to bearish positions, Kemp says, has fallen to 2:1 from 7:1 in January and is one of the lowest ratios in the past few years. Meanwhile, the COVID-19 epidemic is marching across the world, fueling panic and dampening oil demand as people self-quarantine, flights get grounded, Italy extends its lockdown to the whole country, and a growing number of states in America declare a state of emergency. While this was happening, Saudi Arabia fired the first shot in what many are seeing as an all-out price war. After Russia refused to take part in deeper production cuts to prop up prices, with energy minister Alexander Novak saying that from April the country’s oil producers will be pumping oil as usual, without compliance to any OPEC+ quotas, Riyadh said it was cutting the prices for its oil and planning a production increase, utilizing its full production capacity, which is about 12 million bpd. The bad news: hedge funds were extremely bearish on oil and fuels even before OPEC+ broke down. This suggests they might get even more bearish on oil after the latest developments there. And this, in turn, means prices could fall further despite a temporary improvement yesterday, in which Brent recouped some of its losses to trade, at the time of writing, at close to $37 a barrel. “This has turned into a scorched Earth approach by Saudi Arabia, in particular, to deal with the problem of chronic overproduction,” John Kilduff from Again Capital told CNBC. “The Saudis are the lowest cost producer by far. There is a reckoning ahead for all other producers, especially those companies operating in the U.S shale patch.”
Escalating an oil price war with Russia, Saudi Arabia moves to ramp up production -OPEC kingpin Saudi Arabia unveiled plans Wednesday to dramatically ramp up oil production, raising the stakes of an all-out price war with non-OPEC leader Russia. State-owned oil behemoth Saudi Aramco said Wednesday that it had been asked by the Saudi energy ministry to raise its production capacity to 13 million barrels per day (bpd), up from 12 million bpd at present. The oil-rich kingdom has been pumping around 9.7 million bpd in recent months, but it has plenty of spare capacity to pump more crude, with hundreds of millions of barrels also in storage. “This bold move to attempt to order production to 13 (million) barrels confirms that Saudi is trying to apply maximum pressure on both Russia and the U.S.,” Cailin Birch, a global economist at the Economist Intelligence Unit (EIU), told CNBC via email on Wednesday. “By sending signals that they will flood the market as soon as possible, they may be hoping to either force Russia back to the negotiating table or to prompt a wave of bankruptcies and investment cuts in the U.S. that would have a noticeable impact on shale production,” Birch said. International benchmark Brent crude traded at $36.05 Wednesday morning, down over 3.2%, while U.S. West Texas Intermediate (WTI) stood at $33.30 around 3% lower. Oil prices have almost halved since the start of 2020.
WTI Extends Losses After Huge Crude Build Indicate Significant Virus Impact Oil's modest rebound from its biggest crash in decades on Saudi-Russia price war escalations has faded notably overnight as OPEC now sees a whopping 94% drop in 2020 global oil demand growth in response to the economic impact of the coronavirus even as global oil supply is set to explode. Prices are not plunging yet, but in order for prices to move even lower and stay there, "we need to see storage tanks being filled at a greater level than we originally thought following the coronavirus outbreak," said Edward Marshall, commodities trader at Global Risk Management. So all eyes are on this morning's official inventory data as today's report is likely to give the first view into the effects of the virus and how crude export weakness ripples through the markets (though keep in mind this does not include the effect of the very recent price war plunge in prices). DOE:
- Crude +7.664mm (+1.9mm exp, whisper +3.25m) - biggest build since Oct 2019
- Cushing +704k
- Gasoline -5.049mm (-2.1mm exp) - biggest draw since Apr 2019
- Distillates -6.404mm (-1.8mm exp) -biggest draw since 2004
API reported bigger than expected builds for crude and draws for products and the official DOE data shoiwed it was even more extreme with crude inventories jumping most since Oct 2019, and massive product draws...
Oil drops 4% after Saudi Aramco asked to raise output capacity - Oil prices fell on Wednesday, giving up earlier gains, after Saudi Aramco said it had been directed by the energy ministry to raise its production capacity by a million barrels per day. Brent crude slid $1.27, or 3.4%, to trade at $35.95 per barrel, while U.S. West Texas Intermediate crude dropped $1.38, or 4.02%, to settle at $32.98 per barrel. Saudi Aramco Chief Executive Amin Nasser said the state-run oil giant had been asked by the Ministry of Energy to boost its production capacity to 13 million barrels per day (bpd) from 12 million bpd now. Saudi has been pumping around 9.7 million bpd in the past few months, but has extra capacity it can turn on and has hundreds of millions of barrels of crude in storage. Oil prices had climbed earlier in the day, recouping nearly half of Monday’s 25% losses, on hopes spending cuts by North American producers to cope with multi-year low crude prices would lead to a drop in output. U.S. crude oil inventories rose in the most recent week, while gasoline and distillate stocks dropped, data from industry group the American Petroleum Institute showed. Meanwhile, worries about the economic fallout from the coronavirus outbreak and its impact on energy demand continued to pressure oil prices. Policymakers and central banks have been taking measures to bolster their economies against disruption caused by the virus outbreak, the latest being the Bank of England that unexpectedly cut interest rates by half a percent on Wednesday. “Coronavirus is still spreading globally and no doubts that the virus spread in major economies like the United States will continue to hurt oil demand,” said Victor Shum, vice president of Energy Consulting at IHS Markit. “I think we are looking at $30 levels (in Brent) and I would not be surprised in some day to see prices lower than $30.”
Saudi Arabia Strikes Back At Russia In Key Oil Market The world’s top oil exporter Saudi Arabia is going after Russia’s oil market share in Europe with deeply discounted Arab Light crude at up to three times the usual volumes, people with knowledge of European refiners’ operations told Bloomberg on Thursday. The Saudis, OPEC’s de facto leader and top producer, are aiming to grab market share from Russia in the oil price war it launched on Moscow to punish it for refusing to back deeper OPEC+ production cuts last week. And Europe is a key battleground in the new oil wars as Russia’s Urals crude has traditionally been a popular choice among European refiners. Saudi Arabia hasn’t seen Europe as a core market in recent years because it has prioritized continuously growing demand in Asian markets. But in the war of market share, the Kingdom is now looking to squeeze Russian oil out of Europe by offering deep discounts which make its Arab Light crude priced at as low as $25 a barrel at Rotterdam, much lower than the price of Urals. If prices of Urals and other crude grades going into Europe don’t drop to match the Saudi discounts, Saudi Arabia is set to “push out” the Urals grade from the refiners’ diet, Energy Aspects’ chief oil analyst Amrita Sen said in a note, as carried by Bloomberg. The price of Urals has also slumped in recent days, but it needs to drop further to become appealing to European refiners, given the hefty Saudi discounts, traders told Reuters on Wednesday. Saudi Arabia has promised to flood the oil market with an extra 2.6 million bpd of oil from April, while its fellow OPEC producer and ally, the United Arab Emirates (UAE), pledged an additional 1 million bpd in supply. This will result in a total increase of 3.6 million bpd in global oil supply from OPEC’s heavyweights at a time of depressed oil demand due to the coronavirus outbreak and at a time of crashing oil prices, following the abrupt end to the OPEC+ deal last week. Russia, for its part, claims it can live with $25 oil for years and says it can raise its oil production by 200,000 bpd to 300,000 bpd in the short term, with a potential for up to a total increase of 500,000 bpd.
Oil falls 6% as coronavirus pandemic prompts Trump travel ban - Oil prices fell for the second straight day on Thursday amid a broad decline in global markets after the United States banned travel from Europe following the World Health Organization's decision to declare the coronavirus outbreak a pandemic.The slump in oil is being compounded by the threat of a flood of cheap supply as Saudi Arabia promised to raise output to a record high in its standoff with Russia.Brent crude was trading down $2.22, or 6.2%, at $33.56. The contract fell nearly 4% on Wednesday. U.S. crude was down $2.18, or 6.6%, at $30.71 after also dropping 4% in the previous session.The two benchmarks are down about 50% from highs reached in January and had their biggest one-day declines on Monday since the 1991 Gulf War after Saudi Arabia launched a price war.The price difference between near-term and longer-term Brent prices also widened to the most in five years, prompting traders to fill tankers with oil to store for later delivery when they are betting prices will be higher.Global shares were also down on Thursday after U.S. President Donald Trump said the United States will suspend all travel from Europe as he unveiled measures to contain the coronavirus epidemic.The travel ban, which excludes Britain, will hit U.S. airlines "extremely hard", their industry association said.The surprise move is likely to mean a further drop in demand for jet and other fuels in an already battered oil market, although just how much is hard to quantify."This is what a large positive supply shock and a large negative demand shock looks like," said Lachlan Shaw, head of commodities research at National Australia Bank in Melbourne. "It's hard to come up with a more bearish scenario."The United Arab Emirates followed Saudi Arabia in announcing plans to boost oil output after the collapse last week of an agreement between OPEC, Russia and other producers, a grouping known as OPEC+, to withhold supply and buttress prices.UAE's national oil company, ADNOC, said it plans to raise crude sales to more than 4 million barrels per day (bpd) and accelerate a push to boost capacity by a quarter to 5 million bpd."Without OPEC+, the global oil market has lost its regulator and now only market mechanisms can dictate the balance between supply and demand," said Espen Erlingsen, head of upstream research at Rystad Energy, which estimates that oil will need to fall to the low $20s to achieve equilibrium.
Oil drops as much as 8%, on pace for worst week in more than a decade - Oil prices dropped as much as 8% on Thursday as crude continues to take a hit on both the supply and demand side. U.S. West Texas Intermediate crude is now down more than 25% this week, putting it on track for its worst week since December 2008, and its third largest weekly decline on record. On Thursday WTI fell $1.48, or 4.49%, to settle at $31.50 per barrel. Earlier in the session it traded as low as $30.02. International benchmark Brent crude fell $2.51, or 7%, to trade at $33.31 per barrel. The coronavirus outbreak has led to softer demand for crude as people cut back on travel, among other things. On Wednesday, President Donald Trump imposed a 30-day ban on foreigners arriving from most of Europe, a move likely to reduce demand further. “Our initial assessment of the impact of cancelling transatlantic flights between the US and Europe is a direct loss of about 600,000 barrels per day per month in jet fuel demand,” Rystad Energy’s head of oil markets Bjoernar Tonhaugen said. As prices fell, OPEC met in Vienna last week where Wall Street largely expected an announcement of additional production cuts in an effort to prop up prices. The 14-member cartel proposed an additional cut of 1.5 million barrels per day, but ally Russia rejected the proposal. OPEC then decided that the production cuts currently in place, but that expire at the end of the month, would not be extended. This means that starting April 1, nations can pump as much as they want. WTI dropped 10% on Friday after the meeting ended with no agreement. Following Russia’s rejection of the proposal, OPEC de facto leader Saudi Arabia retaliated by slashing its official oil prices while announcing plans to ramp up production. As tensions between the two powerhouse producers escalated, WTI and Brent each plummeted 24% on Monday, posting their worst day in nearly three decades while sending prices to a more than four-year low. Then on Wednesday, Saudi Aramco said that it received a directive to increase its production capacity from 12 million barrels per day to a record 13 million barrels per day.
India could be a 'major winner' as oil prices plummet - Oil prices crashed this week, sparking a sharp global sell-off in capital markets — but experts say low energy prices could be a silver lining for India, one of the world’s closely-watched economies. U.S. crude and international benchmark Brent prices plunged to multi-year lows after OPEC failed last week to strike a deal on production cuts with its allies, including include Russia. That led Saudi Arabia, the world’s largest oil exporter and the de facto leader of the energy cartel, to slash oil prices and threaten to ramp up production. A supply glut has kept oil prices relatively low in recent years, as OPEC+ — made up of the Organization of the Petroleum Exporting Countries and its non-OPEC allies such as Russia — coordinated production cuts to support energy prices. The current agreement expires at the end of March, which means that starting Apr. 1, countries can pump as much oil as they want unless the producers can reach an agreement before that. “The Indian economy is a major winner from lower world oil prices,” Rajiv Biswas, Asia Pacific chief economist at IHS Markit, told CNBC, pointing out that more than 80% of India’s total energy consumption in the 2018-2019 financial year was imported. He explained that falling energy prices could reduce India’s inflation and lower the cost of its import bill — that could, in turn, help narrow the country’s trade and current account deficits. India lost its crown as one of the fastest-growing major economies in recent quarters, owing to a number of internal and external factors that dragged GDP expansion to below 5%. In the three months that ended in December, India expanded at 4.7%, in line with market expectations. “A prolonged spell of low oil prices will support discretionary purchasing power,” Radhika Rao, an economist at Singapore’s DBS Group, told CNBC. Discretionary purchasing power refers to the amount of cash a person has available to spend after discounting their tax, debt obligation, and other expenses. She explained that domestic oil prices could potentially become cheaper and declining margin pressures on non-oil businesses may translate into some relief for the low demand weighing on the economy. “If accompanied by an improvement in sentiments and better confidence over income prospects, this would spell good news for growth,”
Oil falls a third day, Brent crude set for worst week since 1991 - Oil prices fell on Friday for a third day, with Brent crude set for its biggest weekly drop since 1991 and U.S. crude heading for the worst week since 2008 as panic about plunging demand from the coronavirus outbreak grips the market. Brent crude was down 67 cents, or 2%, at $32.55 a barrel by 0126 GMT after falling more than 7% on Thursday. For the week, Brent is set to fall 28%, the biggest weekly decline since the week of Jan. 18, 1991, when it fell 29% at the outbreak of the first Gulf War. U.S. West Texas Intermediate (WTI) crude was down 66 cents, or 2.1%, at $30.84 after falling more than $1 earlier. The contract fell 4.5% in the previous session. WTI is set to drop 25% this week, the most since the week of Dec. 19, 2008, when it fell 27% at the height of the Global Financial Crisis. A flood of low-priced oil into the market from Saudi Arabia and the United Arab Emirates is intensifying the pressure on prices after the collapse of a price supporting agreement with Russia last week. “With the coronavirus triggering the first global oil demand drop in years, the surge of Saudi Arabian and Russian oil production could lead to a supply overhang of 4 million barrels per day,” Eurasia Group said. Four million barrels is about 4% of daily global consumption before the coronavirus outbreak that started in China. Oil prices were also impacted by record declines in equity markets with Japan’s Nikkei 225 falling by 10% on Friday after U.S. markets fell by the most since Black Monday in 1987 on Thursday. U.S. President Donald Trump announced a ban on travel to the United States from Europe that sent the markets swooning as everything from sporting events to weddings were cancelled across many parts of the world with the coronavirus spreading to more countries.
Oil Surges After Trump Orders DOE To Fill Up Strategic Petroleum Reserve - Amid the panic buying surge in the last 30 minutes of trading, sparked by Trump's national emergency declaration, oil has soared higher after Trump said that he has asked the energy department to buy "large quantities of oil" for the Strategic Petroleum Reserve and to "fill it right to the top." With the reserve currently 635MM barrels full, that means there is over 90 million barrels that will soon be purchased by the US to fill up the SPR. And since Trump's demand means that there will be a forced buyer even as OPEC is an aggressive seller, oil quick spiked with WTI & Brent surging to session highs, boosting the energy sector and leading to an extension of gains in equities, while also helping the petro-currencies such as CAD, RUB, MXN catch a bid.
Oil prices post biggest weekly percentage drop since 2008 - Oil prices edged higher on Friday, but a Saudi-Russian price war and the global spread of the COVID-19 pandemic still meant prices posted the sharpest weekly drop since 2008. The market has likely “reacted correctly” to expectations that COVID-19 would drop oil demand by two to three million barrels a day for a few weeks, at least, and to Russia and Saudi Arabia ramping up production by two million barrels a day “or more,” said Michael Lynch, president of Strategic Energy & Economic Research. “That will create an enormous inventory build, 100-150 million barrels a month,” he told MarketWatch. But the very sharp price fall “seems likely to encourage the Russians to offer some kind of deal to the Saudis that would see a brief, but sharp production drop.” West Texas Intermediate crude for April delivery on the New York Mercantile Exchange rose 23 cents, or 0.7%, to settle at $31.73 a barrel, while May Brent crude Badded 63 cents, or 1.9%, at $33.85 a barrel on ICE Futures Europe. For the week, WTI fell 23%, while Brent lost 25%—with both marking their biggest weekly percentage declines, based on the front-month contracts, since December 2008, according to Dow Jones Market Data. A combination of growing fears over the demand hit from the coronavirus pandemic and Saudi Arabia’s launch of a price war against Russia, that threatens to flood an already-oversupplied market with more crude, hammered prices for oil this week. President Donald Trump’s decision to impose restrictions on travel to the U.S. from Europe added to pressure Thursday given the hit to jet fuel demand.
Crude posts biggest weekly losses since 2008, hit by coronavirus and Saudi price war - (Reuters) - Oil prices on Friday posted their biggest week of losses since the 2008 global financial crisis, rocked by the coronavirus outbreak and efforts by top exporter Saudi Arabia and its allies to flood the market with record levels of supply. The rare combination of severe shocks to both supply and demand has caused the crude market to collapse as producers around the world steel themselves for an unexpected glut of oil in coming weeks. “It’s a problem of an oil price war in the middle of a constricting market when the walls are closing in,” U.S. energy historian Daniel Yergin said. The coronavirus sparked panic selling across markets for the bulk of the week. The virus has infected at least 138,000 people worldwide and killed more than 5,000, disrupting business, markets and daily life. Major oil producers were pumping more crude into the market as demand collapses. Saudi Arabia has chartered more than 30 crude supertankers to export oil in coming weeks, specifically targeting big refiners of Russian oil in Europe and Asia, in an escalation of its fight with Moscow for market share. Goldman Sachs said it now expected a record oil surplus of six million barrels per day (bpd) by April, in a global market that usually consumes about 100 million bpd. On Friday, prices were higher, rebounding after the United States and other nations signalled plans to support weakening economies. But Brent crude LCOc1 dropped 25% on the week, the biggest weekly fall since the 2008 global financial crisis. On Friday, Brent rose 63 cents to settle at $33.85 a barrel. U.S. West Texas Intermediate (WTI) crude CLc1 futures fell about 23% on the week, their biggest percentage decline since 2008. WTI rose 23 cents to settle at $31.73 a barrel, after earlier gaining to $33.87 a gallon. Hopes for a U.S. stimulus package that could ease an economic shock from the coronavirus provided some support to the oil and stock markets on Friday. “There’s hope that all the stimulus will stabilize the economy and offset some of the concerns about weaker demand and keep parts of the economy strong enough to support oil prices,”
Oil prices will keep falling until Russia or Saudi Arabia hit 'pain point': Ex-White House aide - The price of oil is likely to fall “much lower from here,” according to Bob McNally, who was energy advisor to former U.S. president George W. Bush. The oil rout started on Monday, plunging over 20% following a disagreement on production cuts between OPEC and its allies. Russia declined to lower output last week, and Saudi Arabia announced Saturday that it will offer discounts to its official selling prices next month. The kingdom, the de facto leader of OPEC, is also planning to raise production, together with the United Arab Emirates. Despite the market turmoil and resultant losses, Saudi Arabia will not cut production unilaterally, said McNally, founder of oil consultancy Rapidan Energy Group. “Prices of oil are going much lower from here,” said McNally told CNBC on Thursday. “Everybody’s got a pain point and we’re going to go down and test it.” Oil prices are going to fall until they hit a “political-financial pain point” for Saudi Arabia or Russia — or if North American production is significantly curtailed, said McNally. He did not give a price forecast. Prices will test a point well below Russia’s break-even price — at $42.4 a barrel for Urals crude, said McNally. But there’s more at stake than just oil. “National prestige is involved here, honor is involved and political power is involved. And political leaders will suffer costs in a war if they believe they are pursuing a greater and more important aim,” said McNally.
The losers — and even bigger losers — of an oil price war between Saudi Arabia and Russia - An intensifying oil price war between Saudi Arabia and Russia has created “very painful” market conditions for the world’s largest crude producers, analysts have told CNBC, with many braced for sliding revenues over the coming months. International benchmark Brent crude traded at $32.97 Thursday, down almost 8%, while U.S. West Texas Intermediate (WTI) stood at $30.40, around 7.8% lower. Oil prices have almost halved since the start of the year. Most energy analysts have dismissed the idea that Saudi Arabia and Russia’s price war has been specifically designed to target U.S. shale, but the industry is expected to bear the brunt of the pain. Securing America’s Future Energy (SAFE), a think tank that advocates for reducing U.S. dependence on oil, believes the American oil industry is the loser from the current price war. “Saudi Arabia claims to be the swing producer to stabilize the market, but mostly they just cause swings that hurt the free market and the ability to compete,” Robbie Diamond, president and CEO of SAFE, said via email shortly after OPEC and non-OPEC allies failed to reach an agreement. “Our industry and the U.S. economy has no choice but to watch once again as Saudi Arabia tanks the price of oil to suit its domestic priorities,” he added. Trump initially welcomed the declaration of a price war between Saudi Arabia and Russia, hailing lower oil prices as good news for U.S. consumers. Saudi Arabia has since signaled its intent to flood the market with crude, unveiling plans Wednesday for state-owned Saudi Aramco to ramp up production to 13 million barrels per day (bpd). It is thought such a move could prompt a wave of bankruptcies and investment cuts in the U.S. which, in turn, would have a noticeable impact on shale production.Some believe the worst hit from a sharp drop in oil prices will be long-time allies of de facto OPEC leader, Saudi Arabia. “My main worry today is mainly on some of the major oil-producing countries who have not — despite the calls from the IEA many, many times — diversified their economies.”
Saudi Arabia, Russia oil dispute is about the 'restructuring of supply,' strategist says - The oil price rout this week may be a chance for the industry to restructure and could ultimately be a positive for the market, a strategist said on Wednesday. The oil markets tanked Monday, plunging over 20% following a disagreement on production cuts between OPEC and its allies. Russia declined to lower output last week, and Saudi Arabia announced Saturday that it will offer discounts to its official selling prices next month. The kingdom is also reportedly planning to raise production. Benchmark international Brent crude oil futures were trading around $37 a barrel on Wednesday afternoon in Asia. Benchmark U.S. West Texas Intermediate crude oil futures were around $34 a barrel. Both grades were trading above $40 a barrel last week. Despite the depressed prices, the response from Saudi Arabia and Russia is “long-term rational” for them, said Damien Courvalin, head of energy research at Goldman Sachs. Low-cost producers like Saudi Arabia have been supporting prices for years through supply cuts — which in turn boosted higher-cost producers like shale companies in the U.S. and enabled even greater output from the shale producers. The latest market developments will allow for the restructuring and rebalancing of supply to take place, Courvalin told CNBC, who expects oil prices to stay low — around $30 a barrel for Brent crude — for two quarters. “This is more about a restructuring of supply — less activity by high-cost producers for low-cost producers to roll,” said Courvalin. And there will be a point at which there will be a “material change” in the landscape where overall production would fall due to low prices. A higher price for crude will then emerge as supply falls. “A couple of quarters of $30 is of course, painful for those (major) producers,” said Courvalin, as Saudi Arabia and Russia both sell below cost. But they will gain market share.
Coronavirus destabilises Saudi Arabia - The coronavirus is accelerating economic warfare between Saudi Arabia, Russia and the US, while exacerbating the social, economic and political tensions within Saudi Arabia. In turn, Riyadh is “weaponizing” the Covid-19 pandemic in its ongoing war of words, blaming Iran and Qatar—and by implication the Shia—for deliberately spreading the virus to the Sunni Arab world. The coronavirus has swept across the Middle East and North Africa, as nearly every country in the region has confirmed cases of the new virus. Iran is by far the worst affected, with 7,161 confirmed cases and 237 deaths reported by Sunday as its beleaguered health care system struggles to cope with the criminal US-imposed sanctions that have starved it of pharmaceutical and medical supplies.Last week, Riyadh called on OPEC countries to cut production by 1.5 million barrels a day (bpd) to curb the fall in oil prices and counter plunging demand as the coronavirus curtails international trade and travel. Russia, the world’s second largest producer, refused, saying that any reduction in oil supplies would be replaced on the world market with American shale oil.Saudi Arabia retaliated by slashing its prices and vowing to step up production by as much as 2 million bpd in an over-supplied oil market where prices have already fallen by one third since the beginning of the year. Its aim is to hold onto its market share and push out its competitors in Russia and the US. The Saudi announcement led to a sharp fall in the share prices of its national oil company Saudi Aramco and Russia’s Rosneft.The fall in oil prices follows Riyadh’s temporary suspension of the Umrah pilgrimage to Mecca and Medina, and a ban on entry to the kingdom for pilgrims, to sterilize the religious sites to halt the spread of the new coronavirus. Saudi’s corporate elite, the pilgrimage guarantees a steady flow of income, lucrative construction contracts and the growth of luxury hotel chains around the holy mosque. A 10-day Hajj package trip, from specially licensed agencies with close connections to the ruling family, can cost around $7,000 not including the presents that the pilgrims are expected to buy for their families.
MbS Widens Purge- Dozens Of Royals And Army Officers Swept Up After Powerful Princes Arrested - Yesterday we predicted a return to MbS' infamous Ritz-Carlton Riyadh shakedown of 2017 after a dramatic Friday morning raid on the homes of King Salman's brother, Prince Ahmed bin Abdulaziz al Saud, and Prince Mohammed bin Nayef bin Abdulaziz al Saud.All eyes are on the spread of the deadly coronavirus, so what better time to initiate a broader crackdown (or at least dramatically restart the 2017-2018 purge), than when world leaders are distracted by making sure their societies survive a potential apocalyptic pandemic? The pair, which happen to be the kingdom's top most powerful royals aside from MbS, having both in the past been in charge of Saudi armed forces and intelligence in the post of Interior Minister, were arrested for allegedly plotting a coup to unseat the king and crown prince. Of course any level of evidence was not forthcoming. Treason could bring the death penalty. It appears the resumption of MbS' purge of any power rivals or centers of influence is back on after a year-long lull following the Oct. 2018 murder and dismemberment of journalist Jamal Khashoggi is officially back on.The WSJ reports: "Saudi Arabian Crown Prince Mohammed bin Salman has embarked on a broad security crackdown by rounding up royal rivals, government officials and military officers in an effort to quash potential challenges to his power, Saudi royals and advisers familiar with the matter said Saturday."This includes "dozens of Interior Ministry officials, senior army officers and others suspected of supporting a coup attempt...". The crackdown in the Saudi kingdom has barely made a dent in terms of competing with the dozens of coronavirus headlines this weekend. And yet hundreds of princes and high Saudi officials are now experiencing chills of a very different sort: The security sweep has sent a chill across the leadership of Saudi Arabia, where Prince Mohammed has spent three years consolidating power in anticipation of his expected ascension to the throne when 84-year-old King Salman dies, or if he decides to abdicate. MbS suddenly has an overwhelming outpouring of public "support" by nervous allies within the royal family, the WSJ reports further.
US rejects Russian plan for Syria ceasefire at UN Security Council - Russia requested the UN Security Council endorse a ceasefire for Syria, but the United States, a veto-wielding power, refused and called the truce "premature." Questions remain on how the ceasefire will be enforced. Russia and Turkey agreed on a ceasefire for Syria, but the agreement failed to get the backing of the UN Security Council on Friday. A ceasefire endorsement proposed by Russia was rejected when the United States, which is one of the five countries with veto power on the Council.Russian ambassador to the UN, Vassily Nebenzia, had asked the other 14 Security Council members to adopt the agreement, but the United States rejected it saying it and called the deal "premature." Some European nations welcomed the proposal but wanted to amend the statement. Nebenzia said Russia wanted to issue a press statement afterward, "but due to the position of one delegation, it was not possible.'' Several diplomats, speaking on condition of anonymity because the meeting was closed, said that was a reference to the United States. But they added that Russia was unwilling to negotiate on proposals made by France and the United Kingdom. German Ambassador Christoph Heusgen said, "We have to see if this will work. We are concerned about the millions of people who are suffering there and we would [like to] see that this ceasefire leads to a kind of safe zones where people can go back to and they can survive."
Trump’s Harsh Iran Policy Helped Hardliners Win Iran’s Elections - The landslide victory for hardliners in Iran’s recent parliamentary elections confirms that whoever occupies the White House next year won’t have an easy time dealing with Iran.Many Iranians were already angry at President Donald Trump’s unilateral withdrawal from the nuclear accord, imposition of harsh sanctions and the Jan. 3 assassination of the popular military leader Qassem Soleimani. And they showed that anger at the polls. Hardliners, known here as principalists, won 220 of 290 seats in the parliament and got all 30 seats representing Tehran, usually a bastion of more reform-minded voters. The reformists, who advocate closer ties with the United States, were eliminated as a significant parliamentary force. While voter turnout was unusually low, both principalists and reformers came out swinging against Trump. Retiree Hasan Muhamdi, who identifies as a principalist, told Truthout, “We all vote for the love of Soleimani. It’s a punch in the face of Trump!” While Iranian leaders want to avoid direct military confrontation with the U.S., they are likely to encourage local armed groups to attack U.S. and allied targets in the region. Iranian allied rebels in Yemen, for example, claimed credit for the sophisticated drone and missile attack on the ARAMCO oil facility in Saudi Arabia last September. “The people who destroyed ARAMCO could do it again,” said Mohammad Khodadi, deputy minister of Culture and Islamic Guidance, in an interview.The U.S.’s harsh sanctions on Iran and the Soleimani assassination strengthen the hand of the principalists, who proudly uphold the original, hardline principles of the 1979 Iranian Revolution, including its emphasis on theocratic government and staunch opposition to U.S. imperialism. “What the American president did was unify the Iranian people and took things to a different level,” said Nader Talebzadeh — a principalist leader and host of an influential TV show — in an interview withTruthout. “What the American president did was unify the Iranian people.”
Trump Authorizes Military Response After Deadly 'Iran-Backed' Attack - Wednesday's rocket attacks on Camp Taji, which lies just north of Baghdad, claimed the lives of one British and two American soldiers — and to be expected top US defense officials are now pointing the finger at Iran.As if the Mideast region and the world for that matter needs another crisis to worry about, the Pentagon is talking military retaliation. US Defense Secretary Mark Esper said Thursday that President Trump has issued the authority to potentially "do what we need to do."“We're going to take this one step at a time, but we've got to hold the perpetrators accountable,” Esper said. “You don't get to shoot at our bases and kill and wound Americans and get away with it.” And separately Gen. Kenneth McKenzie told a Senate hearing Thursday morning: "The Iranian proxy group Kata'eb Hezbollah is the only group known to have previously conducted an indirect fire attack of this scale against U.S. and coalition forces in Iraq." The major attack had utilized at least 15 Soviet-era rocket artillery and further left a dozen wounded. The top general said the Iran-backed militias were to blame and that the US can identify the culprit with a "high degree of certainty". Later in the day Defense Secretary Mark Esper told reporters at the Pentagon: "I have spoken with the president. He's given me the authority to do what we need to do, consistent with his guidance. And, you know — if that becomes the case," according to Reuters.
US retaliates with missile strikes in Iraq - The U.S. launched airstrikes Thursday against an Iran-backed militia group that hit a military base in Iraq, the Pentagon said. On Wednesday, Iranian-backed militia groups in Iraq killed two U.S. troops and one British soldier. Earlier Thursday top Pentagon officials said “all options are on the table” for a response. “The United States will not tolerate attacks against our people, our interests, or our allies,” Secretary of Defense Mark Esper said in a statement. “As we have demonstrated in recent months, we will take any action necessary to protect our forces in Iraq and the region.” The U.S.-led coalition in Iraq on Wednesday evening announced that 18 Katyusha rockets hit Camp Taji north of Baghdad, killing three and wounding 12. "The death of two US service members at the hands of an Iranian-backed militia demands action," former national security adviser John Bolton tweeted. "Iran's continued capability to strike at our forces through regional proxies demonstrates the need for prompt retaliation, not simply relying on 'maximum pressure.'"
US Moves Patriot Missiles To Iraq - Outraged Baghdad Says Consequences Coming After Airstrikes - - With coronavirus pandemic dominating the world's attention, it's easy to forget that the US is essentially in a state of war with Iran, just Thursday night conducting a major aerial bombing campaign against multiple Iran-backed militia targets across southern Iraq.In response to prior rocket attacks on Camp Taji which killed two Americans on Wednesday the Pentagon declared that “all options are on the table” — suggesting there could be more strikes to come. The Pentagon said it initiated a "proportional" response against five Kata'ib Hezbollah weapons facilities. Iraq's government immediately condemned the attacks as not only unauthorized violations of its airspace, but as having killed and wounded several Iraqi security force personnel. Top US forces general in the region, Marine Gen. Frank McKenzie, brushed Baghdad's condemnation aside, essentially saying it was Iraqi forces' fault for being there. Many officers in the Iraqi Army essentially see Khatib Hezbollah as a de facto extension of national forces. Reuters reports: Iraq condemned overnight U.S. air strikes on Friday, saying they killed six people and warning of dangerous consequences for what it called a violation of sovereignty and targeted aggression against the nation’s regular armed forces. The foreign ministry further summoned the US and UK ambassadors following the attacks. But the Pentagon is not backing down.