US oil supplies at new 18 year low, Strategic Petroleum Reserve at 36½ year low; largest drop in US gasoline and diesel demand since early 2020 lockdown, largest drop in US gasoline production this year; 1.49 million barrels per day of excess oil was produced globally in June, even as OPEC was 1,060,000 bpd short of their production quota..
US oil prices finished lower for the 4th time out of the past five weeks, as a renewed Covid outbreak in China threatened demand while rising inflation in the US & Europe bolstered the case for economy-crushing interest rate hikes...after falling 3.4% to $104.79 a barrel last week on expectations that the coming engineered recession would impact demand, the contract price for the benchmark US light sweet crude for August delivery tumbled as much as 3.9% in early trading on Monday, as new Covid cases continued to climb in Shanghai, but clawed back most of the early losses to settle 70 cents, or 0.7% lower at $104.09 a barrel, as traders balanced the expected drop in demand in China against ongoing concerns over tight supply...oil prices again fell sharply in early trading Tuesday amid the one-two punch of the Covid resurgence and potential new lockdowns in China and of considerable deterioration in the economic outlook for the Eurozone, and then tumbled further as a combination of dwindling liquidity and ongoing concern over China's again restricting travel and closing businesses resulted a loss of almost 8 percent as oil settled $8.25 lower at $95.84 a barrel...oil held those losses in overnight trading after the American Petroleum Institute reported across the board inventory builds, and then fell further early Wednesday after the Labor Department reported the highest consumer inflation in 40 years, bolstering the case for another big Fed interest rate increase, but then steadied to settle 46 cents higher at $96.30 a barrel after EIA data showed the largest weekly fuel inventory build since January....oil fell more than 3% following equity markets lower early Thursday, as traders rapidly repriced the pace of interest rate hikes by the Fed and the ECB in the face of persistently high inflation, but recovered to end just 52 cents lower at $95.78 a barrel, still the lowest settle since April, even as concerns about faltering demand began to overtake supply worries linked to the Russia-Ukraine war...oil prices rose in early Asian trading on Friday amid uncertainty around how aggressive the Fed would be in hiking interest rates to combat rampant inflation, and then rallied further in New York after a U.S. official told Reuters that an immediate Saudi oil output boost was not expected after Biden's visit, and closed $1.81, or nearly 2% higher at $97.59 a barrel, but still finished with a 6.9% loss on the week, triggered by deepening concerns over recession in the US and Europe, as central banks moved aggressively to raise interest rates to rein in excessive consumer demand...
On the other hand, natural gas prices finished higher for a second consecutive week as record heat across the South led to record natural gas deliveries to the electricity generation sector...after rising 5.3% to $6.034 per mmBTU last week because the weekly inventory build fell well short of expectations, the contract price of natural gas for August delivery continued rising on Monday and settled 39.2 cents, or 7% higher at $6.426 per mmBTU, as a brutal heat wave boosted air conditioning demand to record highs in several parts of the country...however, natural gas prices fell on Tuesday amid a broader commodity selloff and followed oil prices down to finish 26.3 cents, or 4.1% lower at $6.163 per mmBTU... the natural gas rally resumed on Wednesday on a drop in daily gas output over the prior few days and on forecasts for hotter weather and greater demand over the next two weeks than had been expected, and prices settled 52.6 cents or 8.5% higher at $6.689 per mmBTU....while traders initially shrugged off a modestly bearish storage report early Thursday and drove natural gas prices higher again much of the day, they reversed course in afternoon trading and prices settled 8.9 cents lower on the day at $6.600 per mmBTU, as falling oil prices again dragged other commodity prices down as well...natural gas prices moved higher again on Friday, drawing strength from record hot temperatures across large portions of the US, which was forecast to continue through the balance of July, and settled 41.6 cents higher at $7.016 per mmBTU, thus finishing 16.3% higher on the week...
The EIA's natural gas storage report for the week ending July 8th indicated that the amount of working natural gas held in underground storage in the US rose by 58 billion cubic feet to 2,369 billion cubic feet by the end of the week, which still left our gas supplies 252 billion cubic feet, or 9.6% below the 2,621 billion cubic feet that were in storage on July 8th of last year, and 319 billion cubic feet, or 11.9% below the five-year average of 2,688 billion cubic feet of natural gas that have been in storage as of the 8th of July over the most recent five years....the 58 billion cubic foot injection into US natural gas working storage for the cited week was a bit less than the average forecast for a 61 billion cubic foot injection from an S&P Global Platts survey of analysts, but more than the 49 billion cubic feet that were added to natural gas storage during the corresponding week of 2021, and a bit higher than the average injection of 55 billion cubic feet of natural gas that has typically been added to our natural gas storage during the same week over the past 5 years....
The Latest US Oil Supply and Disposition Data from the EIA
US oil data from the US Energy Information Administration for the week ending July 8th indicated that despite increases in our oil exports and in the amount of oil going to our refineries, we again had oil left to add our stored commercial crude supplies for the 4th time in 6 weeks, and for the 14th time over the past 33 weeks, because of another large oil withdrawal from the SPR…our imports of crude oil fell by an average of 164,000 barrels per day to an average of 6,675,000 barrels per day, after rising by an average of 841,000 barrels per day during the prior week, while our exports of crude oil rose by 412,000 barrels per day to 3,024,000 barrels per day, which meant that our trade in oil worked out to a net import average of 3,651,000 barrels of oil per day during the week ending July 8th, 576,000 fewer barrels per day than the net of our imports minus our exports during the prior week…over the same period, production of crude from US wells was reportedly 100,000 barrels per day lower at 12,000,000 barrels per day, and hence our daily supply of oil from the net of our international trade in oil and from domestic well production appears to have totaled an average of 15,651,000 barrels per day during the July 8th reporting week…
Meanwhile, US oil refineries reported they were processing an average of 16,640,000 barrels of crude per day during the week ending July 8th, an average of 202,000 more barrels per day than the amount of oil than our refineries processed during the prior week, while over the same period the EIA’s surveys indicated that a net average of 518,000 barrels of oil per day were being pulled out of the supplies of oil stored in the US...so based on that reported & estimated data, the crude oil figures from the EIA for the week ending July 1st appear to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was 471,000 barrels per day less than 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 (+471,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet in order to make the reported data for the daily supply of oil and for the consumption of it balance out, a fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there must have been an omission or error of that magnitude in this week’s oil supply & demand figures that we have just transcribed.... however, since most everyone treats these weekly EIA reports as gospel, and since these figures often drive oil pricing, and hence decisions to drill or complete oil wells, we’ll continue to report this data just as it's published, and just as it's watched & believed to be reasonably accurate by most everyone in the industry...(for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….
This week's 518,000 barrel per day decrease in our overall crude oil inventories left those supplies at 912,201,000 barrels at the end of the week, our lowest total oil inventory level since March 4th, 2004, and therefore at a new 18 year low….our oil inventory decreased this week as 465,000 barrels per day were being added to our commercially available supplies of crude oil, while 983,000 barrels per day of oil were being removed from our Strategic Petroleum Reserve.....that draw on the SPR would have been part of the emergency withdrawal under Biden's "Plan to Respond to Putin’s Price Hike at the Pump", that was expected to supply 1,000,000 barrels of oil per day to commercial interests from now up to the midterm elections in November, in the hope of keeping gasoline and diesel fuel prices from rising further at least up until that time...the administration's previous 30,000,000 million barrel release from the SPR to address Russian supply related shortfalls wrapped up in June, and his earlier plan to release 50 million barrels from the SPR to incentivize US gasoline consumption was completed in May....including those, and other withdrawals from the Strategic Petroleum Reserve under recent release programs, a total of 171,002,000 barrels of oil have now been removed from the Strategic Petroleum Reserve over the past 23 months, and as a result the 485,147,000 barrels of oil still remaining in our Strategic Petroleum Reserve is now the lowest since August 23rd, 1985, or at a 36 1/2 year low, as repeated tapping of our emergency supplies for non-emergencies or to pay for other programs had already drained those supplies considerably over the past dozen years, even before the Biden administration's SPR releases....now the total 180,000,000 barrel drawdown expected over the current six month release program to November will remove almost a third of what remained in the SPR when the program started, and leave us with what would be less than a 20 day supply of oil at today's consumption rate...
Further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports slipped to an average of 6,435,000 barrels per day last week, which was still 1.2% more than the 6,361,000 barrel per day average that we were importing over the same four-week period last year….this week’s crude oil production was reported to be 100,000 barrels per day lower at 12,000,000 barrels per day because the EIA's rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day lower at 11,600,000 barrels per day, while Alaska’s oil production was 26,000 barrels per day higher at 432,000 barrels per day but had no impact on the final rounded national total....US crude oil production had reached a pre-pandemic high of 13,100,000 barrels per day during the week ending March 13th 2020, so this week’s reported oil production figure was 8.4% below that of our pre-pandemic production peak, but was 23.7% above the pandemic low of 9,700,000 barrels per day that US oil production had fallen to during the third week of February of 2021...
US oil refineries were operating at 94.9% of their capacity while using those 16,640,000 barrels of crude per day during the week ending July 8th, up from their 94.5% utilization rate during the prior week, and in line with the historical refinery utilization rate for early summer…the 16,640,000 barrels per day of oil that were refined this week were 3.4% more than the 16,093,000 barrels of crude that were being processed daily during week ending July 9th of 2021, but 3.4% less than the 17,267,000 barrels that were being refined during the prepandemic week ending July 12th, 2019, when our refinery utilization was at a fairly normal 94.4% for early July...
Even with the increase in the amount of oil being refined this week, gasoline output from our refineries was still much lower, decreasing by 1,425,000 barrels per day to 8,921,000 barrels per day during the week ending July 8th, after our gasoline output had increased by 849,000 barrels per day during the prior week…this week’s gasoline production was 9.5% less than the 9,858,000 barrels of gasoline that were being produced daily over the same week of last year, and likewise 9.5% less than our gasoline production of 9,855,000 barrels per day during the week ending July 12th, 2019, ie, during the year before the pandemic impacted US gasoline output....at the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 246,000 barrels per day to 9,855,000 barrels per day, after our distillates output had increased by 243,000 barrels per day during the prior week…even with that big decrease, our distillates output was 4.2% more than the 4,926,000 barrels of distillates that were being produced daily during the week ending July 9th of 2021, but 4.2 less than the 5,361,000 barrels of distillates that were being produced daily during the week ending July 12th, 2019...
Even with the big decrease in our gasoline production, our supplies of gasoline in storage at the end of the week rose for the fourth time out of the past twenty-three weeks, increasing by 5,825,000 barrels to 224,937,000 barrels during the week ending July 8th, after our gasoline inventories had decreased by 2,496,000 barrels during the prior week...our gasoline supplies increased this week because the amount of gasoline supplied to US users decreased by 1,351,000 barrels per day to 8,062,000 barrels per day, the largest drop in gasoline demand since the March 2020 lockdown, but after domestic gasoline supplied had increased by 908,000 barrels per day over the prior two weeks, and even as our imports of gasoline fell by 230,000 barrels per day to 715,000 barrels per day, while our exports of gasoline fell by 175,000 barrels per day to 840,000 barrels per day...but after 19 inventory drawdowns over the past 23 weeks, our gasoline supplies were 4.3% lower than last July 9th's gasoline inventories of 236,535,000 barrels, and about 5% below the five year average of our gasoline supplies for this time of the year…
Similarly, even after the decrease in our distillates production, our supplies of distillate fuels increased for the 7th time in nine weeks and for the 17th time in forty-five weeks, rising by 2,668,000 barrels to 113,803,000 barrels during the week ending July 8th, after our distillates supplies had decreased by 1,266,000 barrels during the prior week….our distillates supplies rose this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 1,014,000 barrels per day to a one year low of 3,368,000 barrels per day, the biggest drop in demand since April 2020, while our exports of distillates rose by 239,000 barrels per day to 1,521,000 barrels per day, and while our imports of distillates rose by 33,000 barrels per day to 137,000 barrels per day....but after forty-three inventory withdrawals over the past sixty-five weeks, our distillate supplies at the end of the week were 20.1% below the 142,349,000 barrels of distillates that we had in storage on July 9th of 2021, and still about 18% below the five year average of distillates inventories for this time of the year…
Meanwhile, even with the increase in our oil exports and our refining, this week's big release of crude from our Strategic Petroleum Reserve meant our commercial supplies of crude oil in storage rose for the 9th time in 16 weeks and for the 22nd time in the past year, increasing by 3,254,000 barrels over the week, from 423,800,000 barrels on July 1st to 427,054,000 barrels on July 8th, after our commercial crude supplies had increased by 8,234,000 barrels over the prior week…after those increases, our commercial crude oil inventories were still about 8% below the most recent five-year average of crude oil supplies for this time of year, but about 25% above the average of our crude oil stocks as of the second weekend of July over the 5 years at the beginning of the past decade, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first topped 400 million barrels....since our commercial crude oil inventories had jumped to record highs during the Covid lockdowns of the Spring of 2020, and then jumped again after last year's winter storm Uri froze off US Gulf Coast refining, our commercial crude supplies as of this July 8th were still 2.4% less than the 437,580,000 barrels of oil we had in commercial storage on July 9th of 2021, and were 19.7% less than the 531,688,000 barrels of oil that we had in storage on July 10th of 2020, and 6.3% less than the 455,876,000 barrels of oil we had in commercial storage on July 12th of 2019…
Finally, with our inventories of crude oil and our supplies of all products made from oil remaining near multi year lows, we are continuing to keep track of the total of all U.S. Stocks of Crude Oil and Petroleum Products, including those in the SPR....the EIA's data shows that the total of our oil and oil product inventories, including those in the Strategic Petroleum Reserve and those held by the oil industry, and thus including everything from gasoline and jet fuel to propane/propylene and residual fuel oil, rose by 14,863,000 barrels this week, from 1,677,795,000 barrels on July 1st to 1,692,658,000 barrels on July 8th, after our total inventories had fallen by 714,000 barrels during the prior week...that big increase still left our total liquids inventories down by 95,775,000 barrels over the first 27 weeks of this year, but now nearly 15 million barrels from a new 13 1/2 year low...
OPEC's Report on Global Oil for June
Tuesday of this week saw the release of OPEC's July Oil Market Report, which includes details on OPEC & global oil data for June, and hence it gives us a picture of the global oil supply & demand situation at a time when parts of China were still under restrictive Covid lockdowns, reducing demand, while at the same time the supply of Russian oil was curtailed by sanctions imposed by the West....in light of those offsetting circumstances, OPEC and aligned oil producers had again agreed to increase their output by 400,000* barrels per day for a eleventh consecutive month, ie the 11th such increase from the previously agreed to July 2021 level, which was in turn part of the fifth production quota policy reset that they've made over the past twenty-five months, all in response to the pandemic-related demand slowdown and subsequent irregular recovery....note that with the course and impact of the Ukraine war and the pandemic still uncertain, we consider the demand projections made in this report to be pretty speculative, and hence will not address any projections beyond the June estimates..
The first table from this month's report that we'll review is from the page numbered 47 of this month's report (pdf page 59), 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 below indicate...for all their official production measurements, OPEC has used an average of production estimates by 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 thereby avert any potential disputes that could arise if each member reported their own figures....with this report, the consultancy Wood Mackenzie and the research and intelligence firm Rystad Energy have been added to OPEC's secondary sources, and the IEA has been omitted...
As we can see on the bottom line of the above table, OPEC's oil output increased by 234,000 barrels per day to 28,716,000 barrels per day during June, up from their revised May production total that averaged 28,482,000 barrels per day....however, that May output figure was originally reported as 28,508,000 barrels per day, which therefore means that OPEC's May production was revised 26,000 barrels per day lower with this report, and hence OPEC's June production was, in effect, just 208,000 barrels per day higher than the previously reported OPEC production figure (for your reference, here is a copy of the table of the official May OPEC output figures as reported a month ago, before this month's revision)...
According to the agreement reached between OPEC and the other oil producers at their Ministerial Meeting on July 18th, 2021, the oil producers party to that agreement were to raise their output by a total of 400,000 barrels per day each month through December 2021, (later bumped up to 432,000 bpd) which was subsequently renewed at monthly meetings to include further 400,000+ barrel per day production increases in January, February, March, April, May, and June of 2022, and which would indicate an increase of 254,000 barrels per day each month from the OPEC members listed above, (now 286,000 barrels per day) with the rest of the current 432,000 barrel per day cartel increase to supplied by other producers. including Russia....so OPEC's increase of 234,000 barrels per day fell short of their expected increase....and while the production decrease in Libya, which has been strangled by political infighting bordering on civil war, was obviously the major reason for the June shortfall. several other OPEC members continue to be short of what they were expected to produce, as we'll see in the next table..
The adjacent table was originally included as a downloadable attachment to the press release following the 28th OPEC and non-OPEC Ministerial Meeting on May 5th, 2022, which set OPEC's and other aligned oil producers' production quotas for June... since war torn Libya and US sanctioned producers Iran and Venezuela are exempt from the production cuts imposed by the joint agreement that governs the output of the other OPEC producers, they are not shown in this list, and OPEC's quota excluding them is aggregated under the total listed for the 'OPEC 10', which you can see was expected to be at 25,864,000 barrels per day in June....therefore, the 24,804,000 barrels those 10 OPEC members actually produced in June were 1,060,000 barrels per day short of what they were expected to produce during the month, with Nigeria and Angola accounting for a large part of this month's shortfall, while only the UAE was able to produce what was expected of them...
+ + +
* Recall that the original 2020 oil producer's agreement was to jointly cut their oil production by 23%, or by 9.7 million barrels per day, from an October 2018 baseline for just two months early in the pandemic, during May and June of 2020, but that initial 9.7 million bpd production cut agreement was extended to include July 2020 at a meeting between OPEC and other producers on June 6th, 2020....then, in a subsequent meeting in early July of that year, OPEC and the other oil producers agreed to ease their deep supply cuts by 2 million barrels per day to 7.7 million barrels per day for August 2020 and subsequent months, which thus became the agreement that governed OPEC's output for the rest of 2020...the OPEC+ agreement for their January 2021 production, which was later extended to include February and March and then April's output, was to further ease their supply cuts by 500,000 barrels per day to a reduction of 7.2 million barrels per day from that original 2018 baseline...then, during a difficult meeting on April 1st of last year, OPEC and the other oil producers that are aligned with them agreed to incrementally adjust their oil production higher each month by a pre-set amount for each country over the following three months, thus extending their joint output cut agreement through July....production levels for August and the following months of last year were to be determined by a July 1st OPEC meeting, but that meeting was adjourned on July 2nd due to a dispute between the UAE and the Saudis over the 2018 reference production levels on which the cuts are based, and a subsequent attempt to restart that meeting on July 5th was called off....so it wasn't until July 18th 2021 that a tentative compromise addressing August 2021's output quotas was worked out, allowing oil producers in aggregate to increase their production by 400,000 barrels per day in August, and again by that amount in each of the following months, and also to boost reference production levels for the UAE, the Saudis, Iraq and Kuwait beginning in April 2022, which is now reflected in the OPEC production quota table you see above, and which now makes the cartel's effective monthly production increase 432,000 barrels per day....OPEC and other producers then agreed to increase their production in January 2022 by a further 400,000 barrels per day in a meeting concluded on the 2nd of December, 2021, and reaffirmed their intention to continue that policy with another 400,000 barrel per day increase in February at a meeting concluded January 4, 2022, and then agreed to stick to that 400,000 bpd oil output increase in March, despite pressure from the US to raise output more quickly, at a meeting on February 2nd....then, at a meeting on March 2nd, OPEC and its oil-producing allies, which included Russia, decided to hold their production increase at that level thru April in an OPEC+ meeting that only lasted 13 minutes, their shortest meeting ever...then on March 31, OPEC and aligned producers agreed to reaffirm the decisions of the prior Ministerial meetings and again limit their production increase for May to the agreed 400,000 barrels per day, because "the current [oil market]volatility is not caused by fundamentals, but by ongoing geopolitical developments"...following that, in an OPEC and non-OPEC Ministerial Meeting held on May 5th, they again "reaffirmed, reconfirmed, and reinterated" the decision of the July 18th 2021 meeting to increase production by 432,000 barrels per day in June of this year, which is the agreement that covers this report's output...however, in a meeting held June 2nd, they agreed to advance the 432,000 barrel per day increase they had already scheduled for September, with that increase to be split evenly between July and August...hence, the production increase now scheduled for those two months is 648,000 barrels per day, which should bring each member's production back to the October 2018 baseline...
Hence OPEC arrived at the production quotas for August 2021 through June of this year after repeatedly readjusting the original 23%, or 9.7 million barrel per day production cut from the October 2018 baseline that they first agreed to for May and June 2020, first to a 7.7 million barrel per day output reduction from the baseline for the remainder of 2020, then to a 7.2 million barrel per day production cut from the baseline for the first four months of this year, which was subsequently raised to an 8.2 million barrel per day oil output reduction after the Saudis unilaterally committed to cut their own production by a million barrels per day during the Covid surge of February, March, and then later during April of last year....under the agreement prior to the current one affecting this and recent months, OPEC's production cut in April 2021 was set at 4,564,000 barrels per day below the October 2018 baseline, which was lowered to a cut of 3,650,000 barrels per day from the baseline with the subsequent comprehensive agreement, which thus set the July production quota for the "OPEC 10" at 23,033,000 barrels per day, with war torn Libya and US sanctioned producers Iran and Venezuela exempt from the production cuts imposed by that agreement....for OPEC and the other producers to increase their output by 400,000 barrels per day from that July 2021 level, each producer would be allowed to initially increase their production by just over 1% per month since that time...for OPEC alone, that meant a 254,000 barrel per day increase for each month from July 2021 to April 2022, at which time the incremental 32,000 barrels per day adjustment they arrived at in July 2021 kicked in....adding together those monthly quota increases since last July, when the quota was at 23,033,000 barrels per day is how they arrived at the 25,864,000 barrels per day quota for OPEC for June that you see on the table above..
The next graphic from this month's report that we'll look at shows us both OPEC's and worldwide oil production monthly on the same graph, over the period from July 2020 to June 2022, and it comes from page 48 (pdf page 60) of OPEC's July Oil Market Report....on this graph, the cerulean blue bars represent OPEC's monthly 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....
After this month's 234,000 barrel per day increase in OPEC's production from their revised production of a month earlier, OPEC's preliminary estimate is that total global liquids production increased by a rounded 1,320,000 barrels per day to average 99.82 million barrels per day in June, a reported increase which came after May's total global output figure was apparently revised down by 250,000 barrels per day from the 98.75 million barrels per day of global oil output that was estimated for May a month ago, as non-OPEC oil production rose by a rounded 1,100,000 barrels per day in June after that downward revision, as 700,000 barrels per day production growth from the US and Russia was only partly offset by a decine totaling 300,000 barrels per day in the output of Norway and Kazakhstan ...
After that 1.32 million barrel per day increase in June's global output, the 99.82 million barrels of oil per day that were produced globally during the month were 5.10 million barrels per day, or 5.4% more than the revised 94.72 million barrels of oil per day that were being produced globally in June a year ago, which was the second month after OPEC and their allied producers began their program of monthly production increases from the 7.2 million barrels per day production cut that had governed their output over the first four months of last year (see the July 2021 OPEC report (online pdf) for the originally reported June 2021 details)...with this month's increase in OPEC's output modest compared to the global increase, their June oil production of 28,716,000 barrels per day amounted to 28.8% of what was produced globally during the month, down from their revised 28.9% share of the global total in May....OPEC's June 2021 production was reported at 26,043,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year produced 2,682,000 barrels per day, or 10.3% more barrels per day of oil this June than what they produced last June, when they accounted for 27.9% of global output...
With the increases in both OPECs and global oil output that we've seen in this report, the amount of oil being produced globally during the month was significantly more than the expected global demand, as this next table from the OPEC report will show us....
The above table came from page 25 of the July Oil Market Report (pdf page 37), and it shows regional and total oil demand estimates in millions of barrels per day for 2021 in the first column, and then OPEC's estimate of oil demand by region and globally quarterly over 2022 over the rest of the table...on the "Total world" line in the third column, we've circled in blue the figure that's relevant for June, which is their estimate of global oil demand during the second quarter of 2022....OPEC has estimated that during the 2nd quarter of this year, all oil consuming regions of the globe have been using an average of 98.33 million barrels of oil per day, which is an upward revision of 150,000 barrels per day from their estimate for 2nd quarter demand of a month ago (that revision is circled in green)...but 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 99.82 million barrels per day during June, which would imply that there was a surplus of around 1,490,000 barrels per day of global oil production in June, when compared to the demand estimated for the month...
In addition to figuring June's global oil supply surplus that's evident in this report, the upward revision of 150,000 barrels per day to second quarter demand that's indicated in green above, combined with the 250,000 barrel per day downward revision to May's global oil supplies that's implied in this report, means that the 560,000 barrels per day global oil output surplus we had previously figured for May would now be revised to a surplus of just 160,000 barrels per day...in addition, the 710,000 barrels per day global oil output surplus we had previously figured for April, in light of the 150,000 barrels per day upward revision to second quarter demand, would now be revised to a surplus of 560,000 barrels per day...
note that in green we have also circled an upward revision of 60,000 barrels per day to OPEC's previous estimates of first quarter demand....for March, that means that the global oil output surplus of 230,000 barrels per day we had previously figured for March would be revised to a surplus of 170,000 barrels per day... however, the upward revision to first quarter demand means that the 10,000 barrels per day global oil output surplus we had previously figured for February would now be revised to a shortage of 50,000 barrels per day, and that the global oil output shortage of 740,000 barrels per day we had previously figured for January would now be revised to a shortage of 800,000 barrels per day, in light of that 60,000 barrel per day upward revision to first quarter demand...
This Week's Rig Count
The number of drilling rigs running in the US increased for the 79th time over the prior 94 weeks during the week ending July 15th, but still remained 4.7% below the prepandemic rig count....Baker Hughes reported that the total count of rotary rigs drilling in the US increased by 4 to 756 rigs this past week, which was also 272 more rigs than 484 rigs that were in use as of the July 16th report of 2021, but was still 1,173 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, a week before OPEC began to flood the global market with oil in an attempt to put US shale out of business….
The number of rigs drilling for oil increased by 2 to 599 oil rigs during the past week, after rigs targeting oil had risen by 2 during the prior week, and there are now 219 more oil rigs active now than were running a year ago, even as they still amount to just 37.2% of the shale era high of 1609 rigs that were drilling for oil on October 10th, 2014, and as they are still down 12.3% from the prepandemic oil rig count….at the same time, the number of drilling rigs targeting natural gas bearing formations was unchanged at 153 natural gas rigs, which was still up by 52 natural gas rigs from the 101 natural gas rigs that were drilling during the same week a year ago, even as they were still only 9.5% of the modern high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008…in addition to rigs targeting oil and natural gas, Baker Hughes now shows four "miscellaneous" rigs now; the new ones include a horizontal rig drilling between 5,000 to 10,000 feet into the Permian basin in Dawson county Texas, and a directional rig drilling between 5,000 to 10,000 feet on the big island of Hawaii....we also have a rig drilling vertically to between 10,000 and 15,000 feet for a well or wells intended to store CO2 emissions in Mercer county North Dakota, and another vertical rig, drilling more than 15,000 feet into a formation in Humboldt county Nevada that Baker Hughes doesn't track...a year ago, there were no such "miscellaneous" rigs running...
The offshore rig count in the Gulf of Mexico was down by 3 to 13 rigs this week, with all of this week's Gulf rigs drilling for oil in Louisiana's offshore waters....that's now four less than the 17 offshore rigs that were active in the Gulf a year ago, when 16 Gulf rigs were drilling for oil offshore from Louisiana and one was deployed for oil offshore from Texas.…in addition to rigs drilling in the Gulf, we also have an offshore rig drilling in the Cook Inlet of Alaska, where natural gas is being targeted at a depth greater than 15,000 feet, while year ago, there were no offshore rigs other than those deployed in the Gulf of Mexico....
in addition to rigs running offshore, we now have 4 water based rigs drilling through inland bodies of water....one is a directional rig targeting oil at a depth greater than 15,000 feet on Grand Isle, Louisiana; others include a directional rig drilling for oil at a depth between 10,000 and 15,000 feet, inland in the Galveston Bay area, and two directional inland water rigs drilling for oil in Terrebonne Parish, Louisiana, one of which is targeting a formation greater than 15,000 feet in depth, while the other is shown drilling to between 10,000 and 15,000 feet... during the same week of a year ago, there was just one such "inland waters" rig deployed...
The count of active horizontal drilling rigs was up by four to 686 horizontal rigs this week, which was also 252 more rigs than the 434 horizontal rigs that were in use in the US on July 16th of last year, but less than half of the record 1,374 horizontal rigs that were drilling on November 21st of 2014....at the same time, the vertical rig count was up by 3 to 30 vertical rigs this week, and those were also up by 12 from the 18 vertical rigs that were operating during the same week a year ago…on the other hand, the directional rig count was down by 3 to 40 directional rigs this week, while those were still up by 8 from the 32 directional rigs that were in use on July 16th of 2021….
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 July 15th, the second column shows the change in the number of working rigs between last week’s count (July 8th) and this week’s (July 15th) count, the third column shows last week’s July 8th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running on the Friday 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 16th of July, 2021...
checking the Rigs by State file at Baker Hughes for the changes in Texas, we first find that a rig was pulled out of Texas Oil District 1, but that a rig was added in Texas Oil District 4, which would have been the natural gas rig added in the Eagle Ford shale, while the rig removed from District 1 was likely pulled out of a basin in that district that Baker Hughes doesn't track, even though most of the drilling in that district typically targets the Eagle Ford...in the Texas oil districts covering the Permian basin, we find that one rig was added in Texas Oil District 7C, which includes the southern counties of the Permian Midland, and that two rigs were added in Texas Oil District 8, which covers the core Permian Delaware, but that a rig was removed from Texas Oil District 8A, which includes the northern counties of the Permian Midland...since that indicates a two rig increase in the Permian basin in Texas, we have to conclude that the two rigs removed from New Mexico had been drilling in the western Permian Delaware for the national Permian count to show no change...Texas also saw rigs added in Texas Oil District 6, apparently in a basin that Baker Hughes doesn't track, and in Texas Oil District 10 of the Texas panhandle, which accounts for one of the rigs added in the Granite Wash basin......the other Granite Wash rig was across the state line in Oklahoma, which also had two rigs added in a basin or basins that Baker Hughes doesn't track...meanwhile, the rig that was added in North Dakota was targeting the Bakken shale in the Williston basin, but the Williston basin count remained unchanged because a Williston basin rig was pulled out of Montana at the same time, which isn't shown above...lastly, there was a natural gas rig pulled out of the Haynesville shale in the northwest part of Louisiana, and three rigs shut down in the state's Gulf of Mexico waters, while a rig was added in the southern part of the state at the same time..
Environmentalists claim there is radiation danger in Martins Ferry but city officials say water is “safe” - News over high radiation levels found near a facility in Martins Ferry continues to stir up a heated debate. A few months ago, the Ohio Valley group CORR claimed radiation levels in the soil and water pose a health risk. But city officials say what you’re hearing isn’t entirely true. Environmentalists and city officials are reacting to CORR’s claims that the soil and drinking water nearby a facility in Martins Ferry isn’t safe. “The citizens again are at risk,” said Dr. Yuri Gorby, a microbiologist.“We are certainly concerned by some of the issues that they raise,” said Paul Stecker, law director for the city.The Ohio Valley Group CORR said they discovered extremely high levels of radiation along North 1st Street, and claim it’s especially worse near the Austin Masters facility. The group says just breathing that in can be dangerous. “If you inhale it and that gets into your lungs, in about 3 weeks, those particulates can be dissolved and be distributed throughout your body,” said Gorby.CORR fears the high levels of radiation in the soil might even contaminate the nearby drinking water. But city officials argue otherwise. “As far as our water goes, we know that that is safe,” said Stecker. The city officials say the water is regularly tested. But as far as the CORR’s other concerns go, city officials are turning to the Ohio EPA and the ODNR for guidance. “We’re working with the experts to determine if there’s experts’ [opinions] we should be taking or not taking.” Meanwhile, CORR and other environmentalists push for something to be done. Martins Ferry Mayor John Davies had no comment on this matter.
Court says FERC can consider gas exports for some pipelines - A three-judge panel cleared the way Friday for the Federal Energy Regulatory Commission to look at planned natural gas exports to justify condemning land to build certain interstate projects. The U.S. Court of Appeals for the District of Columbia ruled that FERC did not violate constitutional protections for property owners or the Natural Gas Act when it granted a certificate for the 256-mile Nexus Gas Transmission pipeline from Ohio to Michigan. The decision came after the D.C. Circuit had previously ordered FERC to explain why it was legal to include export precedent agreements in its analysis of the domestic public need for the project. A portion of the operational pipeline’s gas is sent across the northern border to the Enbridge Gas Dawn Hub in southwestern Ontario, Canada. “FERC could lawfully consider the export precedent agreements because an assessment of the public convenience and necessity requires a consideration of all the factors that might bear on the public interest,” said Judge Neomi Rao, writing the opinion for the court. Rao, a Trump pick, noted that the part of the Natural Gas Act governing the process for approving the construction of natural pipelines — Section 7 — did not include any prohibition on considering export precedent agreements in its analysis. Carolyn Elefant, a private attorney representing officials in Oberlin, Ohio, who challenged the construction of the now-operational pipeline, said the court’s ruling “effectively gutted” the D.C. Circuit’s original ruling in the case in 2019 that had required FERC to explain its reasoning for approving the pipeline. “Nevertheless, we are optimistic that the court’s ruling will be limited going forward,” Elefant said in an email. For example, the court explicitly stated the ruling would not apply to pipelines feeding liquefied natural gas export terminals or pipelines that cross international borders, where all of the natural gas is destined for foreign markets, she said. The Nexus pipeline differs from those projects because, while a portion of its gas is transported to Canada, the pipeline itself is entirely within the United States and much of the gas is also used domestically. Senior Judge David Sentelle, a Reagan appointee, declined to join Rao and Judge Judith Rogers, a Clinton pick, in their ruling that FERC had not violated the Constitution’s Takings Clause, requiring just compensation to property owners when their land is taken for public use. Instead, Sentelle only agreed with FERC’s alternative explanation that the commission could have approved the pipeline even without counting export agreements. Sentelle’s position in the case weakens the effect of the ruling, Elefant said. “Finally, in light of the recent spate of pipeline cancellations due to changes in project need coupled with the Commission’s ongoing revisions to the Certificate Policy Statement,” she said, “we are hopeful that the Commission will take a more deliberative and robust review of proposed pipelines.”
DC Circuit Rules NEXUS Pipeline Approval by FERC was Righteous - Marcellus Drilling News - Last year Big Green lobbyists using the City of Oberlin, Ohio contested the Federal Energy Regulatory Commission (FERC) decision to approve the Enbridge/DTE Energy NEXUS pipeline, a $2 billion, 255-mile pipeline from the Ohio Utica Shale into Michigan that’s been flowing for years connecting to a pipeline that exports some of the gas into Canada (see Oberlin, OH Still Fighting to Shut Down Long-Running NEXUS Pipe). Big Green/Oberlin claimed FERC’s approval of NEXUS was faulty because some gas gets exported to Canada and is not “in the public interest.” A federal court ruled last week against Oberlin, siding with FERC’s decision to approve the NEXUS project.
Ascent Resources Buys Another 27K Utica Acres for $270 Million - Marcellus Drilling News - Ascent Resources, originally founded as American Energy Partners by gas legend Aubrey McClendon, is a privately-held company that focuses 100% on the Ohio Utica Shale. Ascent is Ohio’s largest natural gas producer and the 8th largest natural gas producer in the U.S. There have been plenty of rumors swirling about Ascent, one that says Gulfport Energy is interested in selling to Ascent (see Rumor: Gulfport Energy in Talks to Merge with Ascent Resources) and another that the company is close to launching an IPO (see Ohio’s Largest Shale Driller, Ascent Resources, Preps for IPO). Here’s something that’s not a rumor: The company is buying another 26,800 acres in the Ohio Utica for $270 million.
St. Louis-based Spire Buying 'Responsible' Utica Gas from Ascent - Marcellus Drilling News - In 2016 Laclede Group (later renamed to Spire), a St. Louis-based natural gas utility, said it planned to build a 65-mile pipeline from St. Louis through southwest Illinois and connect to the Rockies Express (REX) and Panhandle Eastern Pipeline (see New Midwest Pipeline to Tap REX’s Marcellus/Utica Gas). The new pipeline was designed to flow low-cost Marcellus and Utica Shale gas from REX to the utility–not only for resale to gas customers, but also potentially for new natgas-powered electric plants. That pipeline, Spire STL, went online in late 2019 (see Spire Pipeline Ready to Flow Marcellus/Utica Gas to St. Louis). Another Spire subsidiary, Spire Marketing, has just brokered a deal with Ascent Resources to buy Ascent’s RSG (certified “responsibly sourced gas”) from the Ohio Utica to flow through Spire STL for resale to Spire’s customers.
Gas line break reported Monday - Personnel from various agencies responded Monday morning after someone called 911 shortly before 11:15 a.m. to report that they had been mowing and had hit a gas line at a location on state Route 374 in the Rockbridge area. According to dispatch records provided by the Hocking County Emergency Management Agency, responding agencies included EMA, Logan Fire Department, Good Hope Volunteer Fire Department, Laurelville Volunteer Fire Department, the Ohio Department of Transportation, and Hocking County EMS. Columbia Gas was informed, and first responders turned the scene over to the gas company around 2:27 p.m.
As Shell's ethane cracker nears startup, people are surveying the Ohio River for plastic nurdles – NPR -Shell plans to begin operations this summer at its new industrial complex along the Ohio River in Beaver County, Pennsylvania. The plant will use ethane produced at the region’s natural gas wells to make tiny polyethylene plastic pellets, which some people call nurdles. They’re used to make many kinds of plastic products. But nurdles can also end up in waterways, which is why environmental groups, working with local researchers, have started searching for nurdles in the water near the plant. They’re trying to establish a baseline of what’s in the Ohio now, and will continue to survey the river after the plant opens, so they can tell if nurdles from the plant are getting into the riversCaptain Evan Clark says he’s pulled out more than a million pounds of trash from Pittsburgh’s rivers over the past 15 years with Allegheny Cleanways, and millions more pounds along the shorelines. He’s amazed at how much of it is plastic. Now, Clark is with the Three Rivers Waterkeeper and regularly leads cleanup groups.“For our volunteers, the eye-opening experience of seeing that such a massive percent of what we pull out of the river is plastics is really eye-opening and educational,” Clark said, standing behind the wheel of the group’s boat. They find things like the plastic film that covers cigarette packs, fleece clothing, grocery store bags, and soda bottles. Clark pulls to the side of the Ohio River, at the boat launch in Monaca, a few miles upriver from Shell’s ethane cracker. Eric Harder, the Youghiogheny Riverkeeper with the Mountain Watershed Association, is among a few others waiting to get on board. “Most people do not know what a nurdle was when I first would tell them about it,” Harder said. Nurdles are the size of a lentil. They’re the raw material used by manufacturers to make other plastic products. It takes more than 350 nurdles for one yogurt cup, and over a thousand nurdles to make a soda bottle. When Shell’s multi-billion dollar ethane cracker opens, it will produce 1.6 million metric tons of plastic pellets a year. “Most people, I tell them that the cracker plant looks like an engineering masterpiece, and it does look amazing, like someone took a long time to design it all,” Harder said. “But it does, you know, make plastics.” When those trillions of tiny plastic bits are transferred onto trains and trucks, they can spill. This has happened in places like Texas and Louisiana, wherenurdles wind up in waterways and on shorelines. “With the nurdles, it’s really important to understand how much of the product might be slipping into our river systems,” said Heather Hulton VanTassel, executive director of Three Rivers Waterkeeper, who is also on the boat. Fish and birds can ingest these microplastics. Researchers have found that other pollutants bind to them in the water. The environmental groups are collecting nurdles now, to build a baseline of plastics in the river, so they can tell if there are any spills from the cracker plant after it opens.
Methane goes from foe to feedstock for PHB production at new Ohio facility | Plastics News - Newlight Technologies Inc. will use captured methane emissions to produce its Aircarbon bio-based material in a 15-year agreement with CNX Resources Corp. at a Hannibal, Ohio, facility.
37 New Shale Well Permits Issued for PA-OH-WV Jul 4-10 | Marcellus Drilling News - For the week of July 4-10, the three Marcellus/Utica states issued 37 permits to drill new shale wells. Pennsylvania led the way, as it typically does, by issuing 25 new permits. Three PA drillers tied with six permits each, all six (in each case) on the same pad: Olympus Energy in Allegheny County, Repsol in Bradford County, and Clean Energy Exploration in Tioga County. Ohio issued five new permits, with four going to Encino Energy for a single pad in Carroll County. West Virginia issued seven new permits, all of them to Antero Resources in Doddridge County but spread across three pads.
Expanding dirty hydrogen in Pennsylvania would be a dangerous mistake | Opinion – PennLive -- No matter the color of our skin or the amount of money we make, we all deserve a future where our communities can thrive, where our children are healthy, and where the land, air, and water we depend on are clean, safe, and beautiful. Unfortunately, Gov. Tom Wolf’s announcement to pursue a regional hydrogen hub in Pennsylvania, a move backed by the fossil fuel industries that put us in the mess we’re currently in, stands in the way of that future.This effort feels like 2012 all over again, when the oil and gas industry claimed that ethane cracker plants would be a silver bullet solution to reinvigorate struggling economies in coalfield communities like ours across Washington County. Competing to attract Shell, Pennsylvania lawmakers enabled the largest-ever subsidy in state history - a tax break valued at $1.65 billion. A decade later, the plant’s home of Beaver County – where Shell promised an economic boom and thousands of new jobs at a plant that has yet to come online – still has boarded up businesses on Main Street, and residents unable to stay and raise their families.Research by the Ohio River Valley Institute shows that since construction on the project began, Beaver County has lost population and jobs.The parallels between the cracker plant and the newly proposed hydrogen hub are disturbing. We can’t be fooled yet again by the same oil and gas billionaires who claim they have our best interests at heart, when they’ve already shown us that their only loyalty is to their pocketbooks.A hydrogen hub that derives hydrogen fuel from natural gas is not a “clean energy solution,” as Gov. Wolf has called it. Instead, since hydrogen in the Marcellus Shale region would be derived from natural gas, a hub would perpetuate the fracking economy. More drilling. More dangerous chemicals that can spill and make us sick, give our kids asthma, or even cause cancer.Supporters also claim the climate-warming carbon byproduct of the process would be captured, transported in pipelines, and stored long-term underground. Carbon capture technology has been around for a long time, and has already shown to be ineffective and uneconomical. Pipelines to transport captured carbon are extremely volatile and can explode. And they have. And underground storage is an awful idea. It can leak and poison our water supply. This is supposed to be our “clean energy” solution? This is not the clean energy future I want for my kids.Last year’s Bipartisan Infrastructure Law made $8 billion available for regional hydrogen hubs. Now states, including Pennsylvania, are chomping at the bit to get their piece of the pie, and sweeten the deal for oil and gas companies. There are already proposals in Harrisburg. Yet the total cost of a hydrogen hub and widespread carbon capture and pipeline buildout would cost many billions of dollars more than what’s available in federal funds. Will it fall on the taxpayers to cover the rest, just like it did with Shell’s ethane cracker? You bet it will.
Appalachian Pure-Play Olympus Certifies All Natural Gas, Midstream Operations - Olympus Energy LLC has become the latest exploration and production (E&P) firm to claim the distinction of producing 100% certified natural gas after an analysis by Project Canary. Pittsburgh independent Olympus operates around 100,000 net acres with more than 10 producing wells in Marcellus, Utica and Upper Devonian plays of southwestern Pennsylvania. Olympus COO Mike Wahl told NGI the certification “adds approximately 140,000 MMcf/d” of certified natural gas to the market. The E&P expects that figure to grow as new production is evaluated by the certification process.Denver-based assessment company Project Canary gave Olympus platinum ratings, which is a designation that its sustainability goals are higher than 90% of comparable companies. Project Canary reported Olympus operations achieved the highest marks for environmental stewardship, including methane intensity, emissions reduction and water recycling. In late 2021, Olympus announced it planned to become the first integrated E&P to complete both upstream and midstream certification. Project Canary reported that the review of Olympus subsidiary Hyperion Midstream LLC began this month.* Project Canary’s assessments also score firms on emergency response, community engagement and well integrity. Continuous monitoring units were installed on each of the Olympus producing well pads and at Hyperion’s pipeline facilities during the review. Project Canary CEO Chris Romer said Olympus’ move to certify all operations represents the market demand for gas with differentiated low-carbon profiles. The process also improves environmental, social and governance (ESG) goals.“Major domestic and international utilities are seeking the premium certified responsibly sourced gas producers like Olympus are offering,” Romer said. “Net-zero requires solutions for low-methane verified environmental attributes and freshwater use, among other ESG markers.”
Washington set to be 2nd East Coast city with gas ban - Washington, D.C., is expected to become the second East Coast city to ban fossil fuel boilers and water heaters in most new buildings, following the unanimous approval of two bills by the City Council this week that are supported by the mayor. When the bills are enacted, the nation’s capital would join New York City in instituting a ban on most fossil fuel heat — an idea that has also spread to several dozen West Coast municipalities and, in a more limited way, across Washington state (Energywire, May 3). Mary Cheh, a D.C. councilmember and Democratic lead sponsor of both bills, called climate change “the single most important environmental issue of our time.” She said the legislation would serve as a blueprint for the district’s climate action, particularly since buildings account for about three-quarters of the district’s emissions. “The technology is there to do this; this bill puts us on a path toward getting it done,” said Cheh in a statement. One of the Washington bills, known as the “Clean Energy DC Building Code Amendment Act,” would prohibit the use of fossil fuels for space and water heat in new commercial buildings — a category that includes residences four stories and up — starting in 2027. By that same year, those buildings would need to be considered “net-zero energy,” meaning they would have to produce or conserve more energy on-site from solar panels or other sources than they consume. The measure would exempt buildings deemed “essential to protecting public health and safety,” which could use fossil fuel for backup power generation. Unlike in some gas-ban cities, however, D.C.’s measure would also include gas stoves, meaning restaurants and residents would have to use electric induction instead of cooking over an open flame. And if a building owner were to carry out “substantial improvements,” or deep retrofits, the energy requirements would kick in. A second bill, called the “Climate Commitment Act,” contains a similar ban on fossil fuel heat for new district-owned buildings, such as schools, starting in 2025. Its provisions would also look beyond the buildings sector. By 2026, all vehicles bought or leased by the district would have to be zero-emissions models, while all of the district’s operations would need to be carbon-free by 2040. Five years later, the entire city would have to go carbon-neutral, with a 60 percent cut in greenhouse gas emissions arriving in 2030, compared with 2005 levels.
Charlotte smelt it. Who dealt it? City left with stink after company’s tank mistake - The strong and foul natural-gas smell that stunk up parts of Charlotte on Thursday morning can be traced to a mistake after an environmental cleanup company destroyed tanks that contained a harmless gas odorant, Piedmont Natural Gas said. A weather event known as a temperature inversion likely spread the stench, city officials said. The odor was expected to dissipate throughout the day,Charlotte-Mecklenburg Emergency Management said in a tweet at 11:22 a.m.The company was destroying mercaptan tanks that were mistakenly reported empty, Piedmont said in a news release. The Charlotte Fire Department said four storage tanks were involved.The leak happened at a site on North Graham Street near uptown, Piedmont spokesman Jason Wheatley told The Charlotte Observer. The utility did not hire the company nor use any of its assets or resources, he said.Wheatley referred other questions to Legacy Environmental Services for comment. A Charlotte spokesman for the company could not be reached by the Observer on Thursday afternoon.Piedmont uses mercaptan, also is known as methanethiol, to give natural gas “a distinctive smell of rotten eggs,” the utility said. Natural gas has no smell. The gas additive also is used to give a scent to pesticides, jet fuels and plastics, according to the Agency for Toxic Substances and Disease Registry.Mercaptan does not pose a danger or require evacuation, Piedmont said. The utility said it is bringing crews in from across the Carolinas to respond to all emergency calls to verify that a natural gas leak is not present. The Environmental Protection Agency has been notified about the leak, according to Charlotte Fire.
U.S. natgas jumps 7% as heat wave boosts air conditioning use (Reuters) - U.S. natural gas futures jumped about 7% to a one-week high on Monday as power generators burned more of the fuel to keep air conditioners humming during a brutal heat wave that has boosted electric demand to record highs in several parts of the country. Texas's power grid operator warned of potential rolling blackouts amid predictions demand would hit all-time highs on Monday and Tuesday as homes and businesses crank up their air conditioners to escape the extreme heat. Power demand also broke records in the Southwest Power Pool (SPP) and in several parts of the U.S. Southeast over the past week. "Supply concerns as a result of high coal to gas fuel switching continue to be the driving force behind the current market’s rally," analysts at Gelber & Associates said in a note. U.S. coal was trading at record highs, making it uneconomical for electric companies to switch from gas to coal for power generation. The jump in gas prices came despite an increase in U.S. gas output to record highs and forecasts for lower gas demand over the next two weeks than previously expected. In what has been an extremely volatile couple of months, front-month gas futures rose 39.2 cents, or 6.5%, to settle at $6.426 per million British thermal units (mmBtu), their higher close since June 29. So far this year, the front-month was up about 72% as much higher prices in Europe and Asia keep demand for U.S. LNG exports strong, especially since Russia's Feb. 24 invasion of Ukraine stoked fears Moscow would cut gas supplies to Europe. Gas was trading around $48 per mmBtu in Europe and $39 in Asia. Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 96.2 bcfd so far in July from 95.3 bcfd in June. That compares with a monthly record of 96.1 bcfd in December 2021. With hotter weather coming, Refinitiv projected average U.S. gas demand including exports would rise from 97.9 bcfd this week to 98.3 bcfd next week. Those forecasts were lower than Refinitiv's outlook on Friday. The average amount of gas flowing to U.S. LNG export plants slid to 11.1 bcfd so far in July from 11.2 bcfd in June. That was down from 12.5 bcfd in May and a monthly record of 12.9 bcfd in March due to the Freeport outage.
U.S. natgas futures fall 4% on oil price plunge - (Reuters) - U.S. natural gas futures fell about 4% on Tuesday as the gas market followed an 8% drop in oil prices. That gas price decline came even though daily gas output dropped and amid forecasts for hotter weather and more demand over the next two weeks than previously expected. The heat has already boosted power demand in several parts of the country to record levels, including in Texas, and caused generators to burn more gas to produce electricity to keep air conditioners humming. Also weighing on gas prices, traders noted the ongoing outage at Freeport LNG's liquefied natural gas (LNG) export plant in Texas has left more gas in the United States for utilities to refill low stockpiles for the winter. Freeport, the second-biggest U.S. LNG export plant, was consuming about 2 billion cubic feet per day (bcfd) of gas before it shut on June 8. Freeport LNG has said the facility could return by October. Some analysts, however, think the plant could remain shut for a longer period. After weeks of rising volatility, front-month gas futures for August delivery fell 26.3 cents, or 4.1%, to settle at $6.163 per million British thermal units (mmBtu). Earlier in the session, gas futures were up almost 6%. Gas market close-to-close volatility over the past 30 days rose to its highest since March. Volatility hit a record high in February. Oil futures were down on a stronger U.S. dollar and a weaker demand outlook. The premium of gas futures for August over September NGQ22-U22 rose to a record high for a third day in a row. So far this year, the front-month is up about 66% as much higher prices in Europe and Asia keep demand for U.S. LNG exports strong, especially since Russia's Feb. 24 invasion of Ukraine stoked fears Moscow would cut gas supplies to Europe. Gas was trading around $51 per mmBtu in Europe and $39 in Asia. Russian gas exports on the three main lines into Germany - Nord Stream 1 (Russia-Germany), Yamal (Russia-Belarus-Poland-Germany) and the Russia-Ukraine-Slovakia-Czech Republic-Germany route dropped from an average of 3.7 bcfd since mid-June to just 1.6 bcfd on Monday with the shutdown of Nord Stream for maintenance. That is down from around 6.5 bcfd in early June and an average of 9.4 bcfd in July 2021. The group operating Nord Stream said the pipe should return around July 21. Analysts, however, the outage could last longer.
Demand for natural gas for electricity generation breaks the historic record - Gas deliveries for the electricity sector reached 803,8 GWh yesterday, surpassing the records of 770 GWh and 764 GWh reached on June 16 and 15, respectively This new record is due to the effects of high temperatures, which lead to an increase in electricity consumption, coupled with low hydro, wind, photovoltaic and solar thermal generation owing to the haze, as well as the increase in electrical exports Yesterday, July 13, demand for natural gas to produce electricity reached 803,8 GWh, surpassing the record of 770 GWh reached on June 16 and the 764 Gwh recorded on June 15. This huge increase in the demand for natural gas for electricity production has been mainly due to the high temperatures recorded as a result of the heat wave, which results in an increase in electricity consumption, accompanied by low hydro, wind and also photovoltaic and solar thermal generation (due to the haze), as well as an increase in electrical exports. This new consecutive increase in demand for electricity generation highlights the coordination of the electricity and gas systems to guarantee supply in a context of energy transition, and the important role played by natural gas as a back-up for renewable energies at times of record demand.Today’s natural gas demand forecast for electricity generation is lower than yesterday’s due to an increase in wind power generation and lower electricity exports.
US working natural gas in underground storage increases by 58 Bcf: EIA | S&P Global Commodity Insights - US natural gas working stocks rose 58 Bcf during the week ended July 8, slightly below market expectations, after ongoing heat wave conditions in Texas and the Southeast kicked gas-fired power demand into high gear. Storage inventories climbed to 2.369 Tcf for the week ended July 8, the US Energy Information Administration reported on July 14. The build was less than an S&P Global Commodity Insights' survey of analysts calling for a 61 Bcf injection, although around the midpoint of a response range of 38-77 Bcf. While a touch below expectations, the weekly injection was more than the 49 Bcf build reported during the corresponding week in 2021 as well as the five-year average injection of 55 Bcf, according to EIA data. As a result, stocks sat 252 Bcf, or 9.6%, below the year-ago level of 2.621 Tcf and 319 Bcf, or 11.9%, less than the five-year average of 2.688 Tcf. US natural gas futures had a mixed reaction to the July 14 storage report, with the NYMEX Henry Hub August contract moving both above and below its prior-day settlement in post-report trading.In the 30 minutes before the report launched, the August contract was trading around $6.75/MMBtu, up around 6 cents from its July 13 settle. In the minutes after the weekly storage report published, the contract fell a few cents to trade around $6.72/MMBtu, before both hurtling up past $6.80/MMBtu and back into the $6.50s/MMBtu in the hours after.The August contract eventually settled at $6.60/MMBtu, down 8.90 cents from its prior settlement, data from CME Group shows. uly has brought scorching temperatures to Texas and the Southeast, spiking gas demand for cooling and reducing gas flows into storage. Month-to-date gas-fired power demand for the two regions has averaged 21.73 Bcf, up 4.6 Bcf, or 27%, from the same time last year. In Texas, the Electric Reliability Council of Texas saw multiple days of peakload record-highs, including July 5 and July 8.This unusually strong call on gas supply has showed up in the weekly storage results for the South Central region, where gas stored in salt caverns saw a net withdrawal of 12 Bcf for the week ended July 8. This pull expanded South Central salt storage's deficit to the five-year average to 24.3%.The net withdrawal from the region's salt-based storage balanced out a 12 Bcf injection into non-salt storage in the South Region, keeping the overall region's storage levels steady at 890 Bcf for a second week in a row.Net withdrawals or unchanged storage levels during injection season are not unheard of in the South Central region, where hot summers often provide high-demand conditions. However, these conditions are more typical of late July and August. The South Central region's typical storage outcome for the week ended July 8 is a net build of 4 Bcf. A forecast by S&P Global's supply and demand model calls for a much lesser draw of 25 Bcf for the week ending July 15, which would widen the deficit to the five-year average back out to 12.3%. A net build of 25 Bcf would be lower than both the five-year average build of 41 Bcf and the corresponding week in 2021's build of 50 Bcf.The same heat wave conditions that elevated gas demand during the week ended July 8 intensified during the week ending July 15, with even higher gas-fired power demand observed.
NYMEX gas futures rebound amid summer heat, near-term technical trading NYMEX front-month natural gas futures saw some upside movement ahead of the weekend, rising 41.6 cents to settle at $7.016/MMBtu on July 15. The strength came mainly from record hot temperatures across large portions of the US, which is forecast to continue through the balance of July. Near-term technically oversold conditions following the previous day's price weakness also contributed. The supply/demand fundamentals are closing the work week rather quietly, with production levels rebounding toward 96 Bcf/d, following a low 94.53 Bcf/d that occurred earlier in the week, thanks to pipeline operational and maintenance issues. Last weekend, dry gas volumes were knocking on the door of 97 Bcf/d. US imports from Canada have declined to around 6 Bcf/d amid hot July temperatures north of the US border. LNG export demand offers a small bright spot as feedgas levels approached 11.5 Bcf/d late during the week. The modest uptick has been aided by Sabine Pass feedgas levels topping 4.5 Bcf/d, while Calcasieu Pass feedgas volumes remain well above 1.5 Bcf/d. On the weather front, the next two weeks are set to bring mercury levels solidly above the five-year average. The week's trading activity in NYMEX gas futures stemmed from a bearish weekly natural gas storage report, as the Energy Information Administration reported, which stopped a rally in NYMEX gas futures in its tracks. The NYMEX August gas contract failed to see follow-through buying after advancing as high as $6.898/MMBtu after the weekly storage report was released. The EIA showed that working gas inventory levels increased 58 Bcf for the week ended July 8, which was 3 Bcf more than the five-year average as the deficit to that benchmark declined to 319 Bcf. Despite a sweltering summer (relative to the longer-term averages), the EIA data reveals that inventory procurements in the last several weeks have outpaced or been at least equal to the five-year period during five of the previous six weeks. Due to torrid heat across the Lone Star State during the reflective storage week, the Southcentral region was the most bullish contributor to the EIA report, with a 0 Bcf build, which was 4 Bcf less than the five-year average of a 4 Bcf injection. At the same time, the cooler Pacific region mitigated the storage data with a 9 Bcf injection, which was 5 Bcf bearish versus its regional five-year average. The Midwest, Mountain, and East all featured relatively neutral injections, which were close to their respective averages. With less than two weeks to go before the NYMEX August gas futures contract expires, the NYMEX September contract is trading at a discount to August as the seasonal temperature calendar typically begins to moderate for many northern tier areas of the US during August. At the end of July 15, the NYMEX September contract settled at $6.926/MMBtu, up 41.5 cents on the day. Similarly, the October contract settled at $6.917/MMBtu on the day.
Ample Summer Heat Spurs Broad Gains for Natural Gas Forwards - A sweltering summer temperature outlook overshadowed ongoing demand destruction from the Freeport LNG terminal outage to send natural gas forwards prices soaring during the July 7-13 trading period, NGI’s Forward Look data show.Fixed price trading for August delivery at benchmark Henry Hub surged $1.179 higher week/week to $6.690/MMBtu. That established the baseline for fixed price gains of $1-plus at most Lower 48 hubs during the period.Based on the latest forecasts Thursday, the back half of July was set to bring “strong to very strong national demand” as a result of widespread summer heat, according to NatGasWeather.Between Saturday and July 27, “unseasonably hot upper high pressure rules most of the U.S. with highs of 90s and 100s besides the far North,” the firm said. “To our view, the weather data can’t be much hotter” during this time frame, implying risks for subsequent model runs to ease back on demand expectations. The impact of the toasty temperatures was particularly evident in the Southeast, where a number of hubs saw even steeper markups, resulting in hefty basis gains week/week.Transco Zone 4 August front-month basis surged to plus-$3.753, a $1.547 swing higher for the period. Basis at Florida Gas Zone 3 similarly jumped $1.652 for the period to finish at a $4.074 premium to the national benchmark.August Nymex futures settled at $6.600 Thursday, off 8.9 cents on the day but up sharply from prices in the mid-$5.00 range just over a week earlier.The July 7-13 trading period included a major bullish storage report miss from the Energy Information Administration’s inventory data for the week ended July 1. That sparked a sizable rally for Nymex futures, a major contributor to the step-change higher in the natural gas forwards market.Coming off a pair of larger-than-expected prints, the lean injection figure that landed on trading desks on July 7 forced a reassessment of what had seemed a significant loosening of the supply/demand balance following the unexpected outage at the 2.0 Bcf/d Freeport liquefied natural gas terminal. August Nymex prices rallied 78.7 cents on the day as bulls regained the momentum.By contrast, the most recent EIA report Thursday, covering the week ended July 8, landed close to pre-report expectations. EIA reported a 58 Bcf injection for the period.The print “suggested last week’s bullish EIA miss was a one-off number and the balance is in fact a little looser than it showed,” NatGasWeather said.
South Central gas storage braces for early start to summer withdrawals - The US South Central storage region could see an early start to mid-summer withdrawals this month as strong power burns and record price premiums east of Henry Hub keep spot gas supply in high demand. For the week ending July 8, Platts Analytics is projecting a net withdrawal from South Central gas storage in the range of 7-10 Bcf, potentially reducing inventory levels there to as low as 880 Bcf. A drawdown at the higher end of that range would expand the region's storage deficit to nearly 150 Bcf below average, or it widest since early April, data from the US Energy Information Administration shows.The projected drawdown to stocks comes ahead of the South Central region's historic mid-July start to the withdrawal season when its salt dome inventories are typically called upon to meet peak-summer gas demand from power generators, and more recently, from the region's LNG export terminals.This summer, though, record demand and surging basis premiums pose an outsized risk of larger drawdowns that could potentially jeopardize the region's pre-winter inventory build.Strong gas demand in the South Central storage region is likely coming mostly major consumer markets concentrated along the Gulf Coast – including coastal Texas, Louisiana, Mississippi and Alabama. Home to five of the US' seven operational LNG export terminals, the Gulf Coast market accounts for about 90% of US feedgas demand. Refineries, petrochemical plants, equipment manufacturers, and other heavy industry along the Gulf Coast also make the region a major industrial gas consumer.While demand from both sectors is higher this summer, the largest annual increase in gas demand this season appears to be coming from power generators. In the US Southeast – which includes East Coast states outside of the South Central region, like Florida, Georgia and the Carolina – gas-fired power demand is up nearly 2.5 Bcf/d summer-over-summer to trend at an average 13.8 Bcf/d from June 1 to date, data from S&P Global Commodity Insights shows.Along with a roughly 2.3 Bcf/d increase in LNG exports and a combined 400 MMcf/d increase in residential-commercial and industrial consumption this summer, demand in the Southeast is now outpacing supply at some downstream locations, fueling previously unseen price premiums. At Transco Zone 3, cash prices surged in July 11 trading to settle at $11.79/MMBtu, or a more-than-$5 premium to Henry Hub. Similar prices at Transco Zone 4 pushed that location's basis premium to the mid-$4 range on July 11. At Florida Gas Zone 3 – among the most premium Gulf Coast hub locations – the cash market has consistently traded in the $9-12 range over the past week, Platts data shows. With strong seasonal gas demand likely to continue across the Gulf Coast in August and September, forward gas markets are already pricing-in steep premiums over the balance of summer.
Spa Creek, Annapolis Diesel Fuel Spill – WNAV --At around 6:45 pm this evening, a large diesel fuel spill occurred south of Acton Cove in Spa Creek. The Annapolis Fire Department has responded to the incident. The U.S. Coast Guard and the Maryland Department of Environment (MDE) are currently working on the recovery of the fuel product in the water. Clean-up operations are expected to continue for another couple of hours. Due to the nature of the incident, residents in the surrounding area will likely continue to smell fuel odors throughout the night. The Annapolis Fire Department asks that people avoid the area while recovery operations are underway.
Colonial Pipeline valve fails, spilling 24,000 gallons of gas in Loudon Co., cleanup underway - First responders were dispatched to a liquid gas leak at the Colonial Pipeline in Loudon County on July 4, according to officials.
Clean up of ruptured pipeline in Loudon ongoing -A valve on a gasoline pipeline operated by Colonial Pipeline Co., ruptured Monday near Sugarlimb Road, later leading to the damage of a natural gas line running through the same area.The original leak was reported in the 9900 block of Sugarlimb about 9 p.m. Monday by a resident who smelled gasoline, Meredith Stone, public information officer for Colonial, said.The leaking valve was repaired within 24 hours and the gas line resumed normal operation, she said.Workers for Colonial struck an unmarked natural gas line nearby Wednesday, Stone said. “We believe the leak is contained and our concern is that the gas does not reach the river,” Stone said. She said she did not know what company operates the natural gas line.
Loudon County Colonial Pipeline spill spreads further than expected (WVLT) - Officials with Colonial Pipeline said Tuesday they had discovered spilled material outside of their Sugarlimb Trap Facility.The Colonial Pipeline workers found the extended spill Monday night. According to a release from the company, officials “detected product approximately 8 feet outside the fence of its Sugarlimb Trap Facility.”The original spill happened on July 4 when a valve on the pipeline failed. Officials were able to repair the pipe and get it functioning again, but are still working on cleanup.“Colonial employees and contractors are on site working 24 hours a day to recover product and implementing proactive measures in an effort to protect Hubbard Branch and the Tennessee River,” Tuesday’s update said. “No product has been detected in surface water.” The company is currently working with the Tennessee Emergency Management Agency, Loudon County Emergency Management Agency and other groups to clean up the spill.
Spire criticized for destroying documents about controversial St. Louis pipeline — Spire is facing more scrutiny over its controversial natural gas pipeline after the utility destroyed documents related to the project’s bidding process. The move drew fresh criticism from Missouri utility regulators, who also said Spire's process to procure fuel lacked transparency, and that the St. Louis-based utility did not select the cheapest option when it chose to buy from its own affiliate. The Spire STL Pipeline has been ensnared in legal trouble for the past year after failing to properly demonstrate it was needed. Some consumer advocates called the destruction of the proposals “suspicious” and perhaps unprecedented. John Coffman, an attorney for the Consumers Council of Missouri who monitors utility issues, said he had never heard of a utility destroying proposals before. “They have to show that it’s cheaper,” Coffman said. “We don’t know what the fair market value is because they destroyed the evidence.” Spire, though, says the destruction of documents was driven by the terms of confidentiality agreements reached with other companies, and noted that pertinent information was eventually provided to regulators. Moreover, the utility pointed to an accompanying report that found the company acted in a “reasonable and prudent” way in its decision-making surrounding the pipeline. Spire’s 65-mile pipeline stretches north from St. Louis County and connects in Illinois to another interstate gas line. It started running in late 2019, but over the past year, the pipeline has been dealt multiple courtroom losses after a unanimous panel of federal judges said that a need for the project was never adequately demonstrated and outlined “plausible evidence of self-dealing” by Spire. The utility has also been blasted for some of its conduct since the pipeline’s completion, particularly for its messaging late last year, when Spire was widely accused of fearmongering about the project’s uncertain future.
12 years later, BP still fighting hundreds of lawsuits over Deepwater Horizon spill - BP has spent billions of dollars since the Deepwater Horizon oil spill, yet 12 years after the disaster, new lawsuits continue to pop up. And it could be a while before they are resolved, according to lawyers involved in the cases. “These cases take a while,” said Elsa De Lima, a Miami-based lawyer who was in Mobile Friday to talk to clients and other who believe they have claims. “You know, I get the question all the time. ‘How are you still litigating this case? This happened all the way in 2010.’” The reason, De Lima said, is that the current round of litigation involves cancer and other diseases that take years to show up. And, she added, it takes a long time to gather evidence and build cases. A wave of suits reached the federal court in Mobile in 2018 and 2019 after a judge ruled that thousands of people were not covered by a medical settlement negotiated after the oil spill. Under the ruling, people must file individual lawsuits. And they have continued to trickle in, including eight in Mobile just since the beginning of the year. Foley resident Richard Becht worked for months as part of the “Vessels of Opportunity” program, which paid people to use their own boats to help clean up the Deepwater Horizon spill that flooded waterways along the Gulf Coast with oil. He said he was working as a subtractor on a dolphin cruise boat. “I worked from the time it started ‘til the time it ended,” he told FOX10 News. Becht, who owns a marine electronics business in Gulf Shores, said he later was diagnosed with prostate cancer. “I didn’t think a lot about it,” he said. “At my age, that was sort of normal. And I was able to get that taken care of through surgery.” About three years ago, though, Becht said he developed another, more virulent form of cancer – acute myeloid leukemia. He said his doctor told him it was not connected to the prostate cancer. With no cancer history on either side of his family, he said he was puzzled. Then Becht saw a lawyer ad on TV that got him to think about his cleanup work. He said he now believes his cancer is connected to the chemicals used to break up the oil in the water. “That’s the only answer I can find, is that I had to be impacted by the benzene in the dispersant,” he said.
As peak hurricane season looms, banks bolster cozy relationship with fossil fuel industry - Over the past several decades, the oil and gas industry promised to bring economic prosperity to the Gulf Coast. Instead, it brought financial instability and increasing climate disasters, and forced local communities to pay the price. As a result of the fossil fuel industry’s pollution, people living in the Gulf Coast face a growing number of climate-driven natural disasters like hurricanes and flooding.As the peak of yet another hurricane season looms, it prompts us to once again ask the questions: Is the oil and gas industry set up to handle the increasing rate and severity of these events? And why do fossil fuel giants and their friends on Wall Street continue to pour money into fracked gas?The fossil fuel industry’s role in climate change and its destructive presence in local communities is common knowledge for residents in the Gulf. But little is known about the other actors quietly bankrolling the fossil fuel industry, without ever being taken to task for their role—the banks that keep the cash flowing to the oil and gas companies making the most devastating impact in the Gulf. But the tide is turning, with activists and investors beginning to pressure big U.S. banks to address their role in the climate crisis.The six largest U.S. banks – JPMorgan Chase, Citigroup, Wells Fargo, Bank of America, Morgan Stanley, and Goldman Sachs – are some of the biggest fossil fuel financiers in the world, pouring $44 billion into the top fracked gas (also called liquefied natural gas or LNG) import and export companies in the last 6 years alone.The worst among them, Morgan Stanley, is the world’s largest banker of LNG companies. That includes here in Louisiana, where the bank helped finance the proposed Plaquemines LNG facility, which, if built, would become one of the largest fracked gas export terminals in the U.S.A report released last month on the potential impacts of the Plaquemines LNG facility –written by the same expert who identified structural flaws in New Orleans’ levees following Hurricane Katrina – showed the proposed 26-foot storm wall surrounding the facility will over-top with water during major storm surges.The facility’s proposed site sits barely 5 feet above sea level, in an area that flooded during Hurricane Ida and stayed flooded for weeks. Giant LNG projects like Plaquemines are clearly not prepared to handle the increasing rate and severity of climate-driven natural disasters. So why are banks putting billions into these risky investments?
US LNG Export Projects Ramp Up In Gap of Closed Freeport Site in Texas - Natural gas markets already are reacting to speculation that startup of the damaged Freeport liquefied natural gas export terminal in Texas, which accounts for 20% of American shipments and now about 10% to Europe, may be further delayed by federal regulators. The facility south of Galveston has been closed since a June 8 explosion and fire. The U.S. Energy Information Administration on July 11 said the outlook for U.S. LNG exports fell by 6% since the incident, with the agency now projecting an average of 10.9 billion cu ft exported per day, down from 11.9 billion foreseen last month. But the agency predicts output could rise to an average of 12.7 billion cu ft per day when Freeport returns to full service in 2023, if the projected date holds.Demand for U.S. feedgas has averaged around 12.17 billion cu ft per day this year up to July 13, 15.4% higher than the same period in 2021, says Platts Analytics, noting the added push from European markets squeezed by Russian gas supply cuts as a result of the Ukraine war.The European Union voted earlier this month to designate natural gas and nuclear power as “environmentally sustainable” in its energy transition, despite environmental advocates' opposition and a longer-term goal to more broadly adopt renewable sources. Freeport LNG said it expects to resume partial plant operation in early October and full production by the end of the year, but new federal conditions for reopening may delay that further, analysts speculate. The U.S. Transportation Dept.’s Pipeline and Hazardous Materials Safety Administration on June 30 told the firm that, after a preliminary investigation, plant conditions require a proposed safety order with remedial actions. The company must hire an independent firm to evaluate LNG storage tank operations, control systems inspection and testing procedures and qualifications and training of certain workers.“Continued operations of the export facility without corrective measures may pose an integrity risk to public safety, property or the environment,” the agency said. The Woodlands, Texas-based fire safety and risk consultant IFO Group LLC has been hired to conduct a root cause failure analysis of the explosion, with a draft report set to be released to the agency and to Freeport LNG in coming weeks.The federal agency's preliminary review suggested that an isolated pressure safety valve created overpressure in 300 ft of vacuum insulated piping, it said. The piping burst and allowed LNG and methane to escape, which caused the explosion and fire. The ruptured pipe had been used to transfer LNG around the facility’s storage area and is located along a rack that supports additional piping, power cables and equipment, the agency said, noting that “much of the other piping in the area was also damaged and will require repairs or replacement before LNG transfer operations can recommence.” The explosion in a section that had been inspected several weeks earlier created a 450-ft-high fireball, according to a Bloomberg report of a filing it says was “briefly posted” July 11 on the Federal Energy Regulatory Commission website. A subequet ENR website review found no such filing. The LNG export plant is within an ecologically sensitive area and near areas used by the public, the pipeline agency said. The U.S. Coast Guard issued an order that restricts all marine cargo operations until Freeport conducts a risk analysis on marine transfers.
Freeport LNG Terminal Explosion Sparked 450-Feet-High Fireball, Report Says - Freeport LNG's liquefied natural gas (LNG) export terminal in Texas experienced an explosion last month that created a massive 450-feet-high fireball and had a section of pipe at the facility under inspection several weeks before the incident, according to Bloomberg.A new filing published on the Federal Energy Regulatory Commission's website sheds light on the accident at the second-largest US LNG export plant, which was consuming about 2 billion cubic feet per day (bcfd) of natural gas before it shut on June 8.IFO Group LLC, a Texas-based fire & explosion, and risk management consultancy, is preparing a release of a report to Freeport and federal regulators by the end of this month about the events that unfolded before the explosion.Contractors performing maintenance work on a storage tank reported hearing unusual sounds the morning of the blast, according to the filing. Plant officials responded by conducting an inspection, but didn't observe any anomalies. The sounds were reported two days after an investigation into a nearby "pipe movement."The explosion happened along a 700-foot section of pipe where LNG had become trapped, causing pressure to build. The ensuing rupture released a cloud of gas that ignited. The fireball lasted for 5 to 7 seconds, while the fire burned for 30 minutes. Contractors with the firm Puffer-Sweiven performed routine tests in April on a pressure safety valve that's part of the same system of pipes that subsequently failed. The equipment passed inspection, but Freeport LNG is investigating if a related valve was left closed after the tests. -- BloombergBloomberg data shows the terminal impacts 20% of all US LNG exports, much of which has been designated to supply-stricken Europe. Freeport LNG has said the facility could reopen by October, but some analysts have pointed out that the facility could remain closed for much longer."The actual process (of reviews, repairs and approvals) will take longer than three months, and potentially take six to 12 months," said Alex Munton, director of global gas and LNG at consultants Rapidan Energy Group.The silver lining is low US stockpiles are being filled up as the export plant in Texas has left more natgas on the grid. This is bad news for Europe.
EIA Slashes 2H2022 Forecast for U.S. LNG Exports in Wake of Freeport Outage - U.S. LNG exports are now expected to drop to 10.5 Bcf/d in the second half of this year following the prolonged outage at the Freeport LNG terminal on the Texas coast, the Energy Information Administration (EIA) said in an updated forecast. The 10.5 Bcf/d estimate for liquefied natural gas exports in the second half of the year, included in the agency’s latest Short-Term Energy Outlook Tuesday, reflects a 14% drop from month-earlier projections. For full-year 2022, EIA expects U.S. LNG exports to average 10.9 Bcf/d before rising to 12.7 Bcf/d in 2023.The agency’s modeling assumes a return to full service at the 2.0 Bcf/d Freeport terminal by January 2023.“Strong natural gas demand and high LNG prices in Europe and Asia drove the continued growth in U.S. LNG exports in the first half of this year,” researchers said. “During the first five months of 2022, the United States exported 71% of its LNG to Europe, compared with an annual average of 34% last year.” Natural gas spot prices at Henry Hub averaged $6.07/MMBtu through the first six months of 2022, according to the latest STEO.“The average price increased in each month from January through May, when it reached $8.14 before declining to $7.70 in June,” researchers said.For the latest STEO, EIA modeled an average spot price of $5.97 at the national benchmark for the second half of 2022, with prices expected to average $4.76 for full-year 2023.Compared with 2021 levels, domestic natural gas consumption is set to increase 2.9 Bcf/d, or 3%, to 85.9 Bcf/d on average this year. Consumption will then ease lower to 85.4 Bcf/d in 2023, EIA projections show.The share of natural gas in the power stack is on track to hold flat at 37% this year, despite prices for U.S. power generators rising from $4.97 in 2021 to $6.35 in 2022, according to EIA’s forecasting.
US oil, gas producers join UN-backed methane emissions reporting program -A trio of natural gas producers have joined the Oil and Gas Methane Partnership 2.0 Initiative as methane emissions measurement and reporting takes deeper root in the US upstream energy sector, the companies said July 14.Pioneer Natural Resources, Devon Energy and ConocoPhillips will join 80 other oil and gas producing companies in OGMP 2.0, a reporting program aimed at making methane emissions more transparent in the global oil and gas sector. The companies' participation in the predominantly European OGMP program speaks to growing support for decarbonization among US oil and gas companies that have thus far lagged European peers in setting hard-and-fast climate commitments."With Pioneer, Devon and ConocoPhillips joining OGMP 2.0, we have significantly increased the participation of U.S.-based companies," OGMP 2.0 manager Giulia Ferrini said. "We hope their membership encourages others to join this global effort aimed at improving methane emissions measurement and transparency, thereby supporting the goals of the Paris Agreement and the Global Methane Pledge."The OGMP program was originally formed at the UN Secretary General's September 2014 Climate Summit in New York and includes member companies with assets representing some 30% of global oil and gas production. The group includes NGOs, along with government members including the UK, the Netherlands, Belgium, Spain, France and Italy – all significant import markets for US LNG.Companies and climate advocates often point to methane emissions reductions as one low-hanging solution the upstream sector can pursue in its attempt to decarbonize. Climate advocacy group Environmental Defense Fund — one of OGMP 2.0's backers — has called methane emissions reduction the "fastest opportunity" available to slow climate change. The group last year published research claiming that widespread rollout of presently available methane emissions control technologies could slow global warming over the next few decades by more than 25%.While estimates of the climate impact of methane emissions cuts can vary, groups such as EDF have championed a number of those emissions control technologies that have started to saturate the industry in recent years. Advanced methane leak detection using drones, infrared imaging and a host of other technologies are key parts of recent decarbonization plans offered by oil and gas producers. The Oil and Gas Climate Initiative — another climate-focused consortium of oil and gas majors and independents — is focusing investments in a $1 billion fund on even more cutting-edge emissions control technologies such as satellite monitoring that could help members achieve near-zero methane emissions by 2030.
Hilcorp, Exxon Mobil, ConocoPhillips top greenhouse gas emitters among U.S. oil and gas companies - Hilcorp Energy, Exxon Mobil, and ConocoPhillips release the most greenhouse gasses among U.S. oil and gas companies, according to a new report published Thursday from several sustainability organizations using data from the U.S. government. The annual report ranks emissions data from the 303 oil and gas companies in the U.S. that report emissions under the EPA's Greenhouse Gas Reporting Program, and aims to bring transparency into emissions reporting, which has historically been hard to measure in a comparable and consistent manner. Nonprofit organizations Clean Air Task Force and Ceres commissioned the sustainability consultancy ERM to develop the report, and it uses government data up through 2020, the most up-to-date emissions data available from the Environmental Protection Agency. Data for 2021 will be released in October. Greenhouse gas emissions include methane, carbon dioxide and nitrous oxide emissions, which differ in their impact on warming. For example, over 100 years, one ton of methane emissions has the same impact on global warming as 29.8 tons of carbon dioxide. In many places, the report ranks companies and regions by so-called "GWP's," or units of global warming potential, which take into account these variabilities. The total units of GWPs do not correlate directly with the production of oil and gas. For example, while Hilcorp Energy is the largest emitter of greenhouse gas units, it is the seventh-largest producer of hydrocarbons. ConocoPhillips is the third-largest emitter of greenhouse gasses and the eighth-largest producer of hydrocarbons. "This new report makes clear what experts have long known: There are clear steps oil and gas producers can take to reduce their methane and other greenhouse gas emissions," Lesley Feldman, senior analyst at Clean Air Task Force, said in a written statement released alongside the new report. "Some are taking those steps while others are not, and federal and state regulations are key to ensuring we can standardize best practices across the industry." To get a sense of company's operational abilities to decarbonize, the report measures emissions intensity, or emissions per unit of energy generated. Total emissions will tend to skew towards the largest producers, while emissions intensity does not. In terms of total greenhouse gas emissions intensity for the 303 companies, Hilcorp Energy ranks 128th, ConocoPhillips ranks 191th and Exxon ranks 238th.
Homes evacuated due to explosion at ONEOK Gas Plant in Oklahoma - Evacuations have been issued after an explosion at a ONEOK plant in Medford.On Saturday afternoon, officials responded to an explosion at a ONEOK plant in Medford. On Facebook, the Grant County Sheriff's Office said the evacuation zone around ONEOK is a two-mile radius at this time. The fairgrounds building in Pond Creek is open for people to go but you cannot use Highway 81 south out of Medford, officials said.The Oklahoma Highway Patrol has closed several roads in Grant County. US-81 at the intersection of Greer and the intersection of Haskell are closed at this time.Additionally, the roadway at US-60/US-81 in Pond Creek is closed. The Oklahoma Department of Transportation is assisting with barricades.
Large fire at Oklahoma gas plant forces major evacuations - - A large fire Saturday afternoon engulfed a natural gas plant in the small northern Oklahoma town of Medford. Video posted to social media showed heavy flames and smoke billowing hundreds of feet into the air. The fire occurred at a "natural gas liquids fractionation facility" operated by ONEOK, a company spokesperson confirmed in a statement to CBS News. ONEOK said it was "unaware of any injuries." All residents within a two-mile radius of the plant were asked to immediately evacuate, the Grant County Sheriff's Office reported. The number of people being evacuated was unclear, although Medford has a population of about 930 people, according to latest U.S. Census data. ONEOK was arranging temporary housing for evacuees at several hotels in the nearby city of Enid, Oklahoma, the sheriff's office said. Authorities did not provide any information on what may have caused the fire. "Our focus continues working with emergency responders to extinguish the fire and the safety of the surrounding community and our employees," ONEOK said in its statement. Medford is located about 15 miles south of the Oklahoma-Kansas border. ONEOK is headquartered in Tulsa.
New Mexico's Oil and Gas Revenues Are Breaking Records and Complicating Budgets - Oil and gas revenues added more than $1.7 billion to New Mexico coffers in the first four months of the year — more than in any other four-month period in state history. A lot more. Records compiled by the New Mexico Tax and Revenue Department show that year-on-year, revenues from January through April more than doubled from $782 million in 2021 — itself a record year. (Records lag by two months to allow producers time to report their production numbers.) This money gusher comes from increasing production in New Mexico’s portion of the Permian Basin — currently the most productive oilfield on the planet — and skyrocketing oil and gas prices brought on by the Russian invasion of Ukraine. State Sen. George Muñoz (D-Gallup), vice chair of the powerful Legislative Finance Committee, says that committee economists peg the state’s likely take from oil and gas at $5.2 billion for the fiscal year — roughly a billion more than last year’s oil and gas revenue. That tally may rise if world oil prices remain high. Mountains of money are generally a good thing for anyone, but the unplanned windfall does come with complications. The first is the kind of money brought in by oil and gas production. Roughly speaking, state government views revenues in two ways: as one-time or recurring income. Recurring money remains fairly steady year after year. For example, people will generally remain employed and use their earnings to buy things, making income and sales taxes a reliable source of steady, recurring revenue for the state. New Mexico was the first state to return to — and then exceed — pre-pandemic oil production levels earlier this year after they cratered in early 2020. However, record-breaking fossil fuel revenue is treated as one-time money: It can’t be counted on to repeat, so it can’t be used to create new programs, add permanent jobs or increase pay for state employees across the board. One-time money can build police stations and water treatment plants and schools, but it can’t pay the people to fill them. And that makes budgeting difficult. “When you have that one-time money surpassing recurring money, it becomes a little topsy-turvy,” Muñoz says. And he says that his committee’s economists are predicting that that is exactly what is about to happen. The second problem stems from the first: This is oil money, and oil money has a roller-coaster history and a murky, finite future.
Energy-Producing States Lag in Latest Economic Numbers -The Pew Charitable Trusts - Amid worries about a possible recession, energy-producing states had the biggest drops in GDP during the first quarter of this year, despite skyrocketing oil and gas prices, new government figures show. The main reason: Energy companies are still struggling to bring back workers and rigs that were idled early in the pandemic. GDP, or gross domestic product, is a measure of economic output. The unofficial definition of a recession is when GDP drops for two consecutive quarters. However, a recession is generally accompanied by a significant rise in the unemployment rate, and U.S. employment remains strong. Labor Department figures released Friday show the economy added 372,000 jobs in June, a larger-than-expected increase. No state has seen a significant spike in joblessness. The states with the largest declines in GDP so far this year, however, are heavy oil, gas and coal producers: Alaska, Louisiana, Montana, New Mexico, North Dakota, Oklahoma, West Virginia and Wyoming all registered decreases of between 4% and 10% in GDP. In addition to labor shortages, energy companies are grappling with supply chain issues and are wary of investing in more production as the United States works to move away from its reliance on fossil fuels, according to Wenlin Liu, chief economist in Wyoming’s state Economic Analysis Division. Wyoming had the largest drop in GDP. “There are many reasons for their slow response to the increasing and high prices, from supply chain restraint, labor force shortages, investor pressure, regulation concerns to uncertainty about the future in terms of climate change regulation,” Liu said.
Whiting tops the bidders in Montana/Dakotas oil and gas lease sale - Just ahead of the planned merger with Oasis Petroleum, Whiting Oil and Gas turned out to be the high bidder in the Bureau of Land Management’s Montana/Dakotas oil and gas lease sale. The sale netted $5.354 million for 19 parcels, of which Whiting’s bids totaled $2.346 million for a 68.53 acre parcel in Mountrail County. Whiting has since merged with Oasis Petroleum. The two are operating under the new name, Chord Energy. There were a total of 23 parcels totaling 3,405 acres in both Montana and North Dakota in the sale. It’s the first of five sales across Wyoming, Montana and the Dakotas. The Bureau of Land Management, in a media release, said the parcels offered for sale were based on recommendations from the Department of the Interior’s Report on the Federal Oil and Gas Leasing Program, as well as other reports issued by the Governmental Accountability Office and Congressional Budget Office, as well as input from Tribal consultation, environmental reviews, and resolution of protests received. The sale was the first to implement an increased royalty rate of 18.75 percent, which the Department said in its report on the program would be more in line with the rates charged by states and private landowners. Royalty rates had not been increased in decades, the Interior’s report noted.
Upstream mergers and acquisitions fall to $12 billion during ‘challenging quarter’ - Enverus Intelligence Research (EIR), a subsidiary of Enverus, an energy data analytics and SaaS technology company, is releasing its summary of Q2 2022 upstream M&A. Overall, Q2 was a challenging quarter for negotiating deals as volatility roiled both commodity and equity markets. Despite that, about $12 billion was transacted in upstream M&A as numerous private equity (PE) firms brought their investments to market looking to cash in on high oil and gas prices; PE sellers accounted for about 80% of the quarter’s deal value. “As anticipated, the spike in commodity prices that followed Russia’s invasion of Ukraine temporarily stalled M&A as buyers and sellers disagreed on the value of assets,” said Andrew Dittmar, director at Enverus Intelligence Research. “High prices, though, also encouraged a rush by PE firms to test the waters for M&A. While not everyone that is going into the market is getting what they deem to be a suitable offer, enough are to drive modestly active upstream M&A.” The Permian Basin was the largest contributing play to deal value, and it remains the main engine of Lower 48 M&A. About one-third of the quarter’s total deal value came from a merger of equals between private Colgate Energy Partners III, which is focused on the Delaware Basin part of the Permian, and public Centennial Resource Development. For the bigger private operators like Colgate, a merger with a similarly sized public counterpart can be an attractive move as it achieves larger scale and a public listing at the same time. Looking beyond the Permian, large multi-region deals for non-operated interests contributed a substantial part of Q2 M&A value. One of these was an agreement between Grey Rock Energy Partners and Paul Ryan-affiliated Executive Network Partnering Corp to form Granite Ridge Resources. The $1.3 billion combination formed a new public non-operated working interest owner with further consolidation plans. It also showed how special purpose acquisition companies or SPACs can be used to circumvent the challenges of IPO markets.
U.S. Officials suggest pipeline company hid problems after oil spill - U.S. prosecutors suspect a Wyoming company of potentially concealing problems with a pipeline that broke in 2015 and spilled more than 50,000 gallons (240,000 liters) of crude into Montana's Yellowstone River, fouling a small city's drinking water supply, court filings show. The government is suing Bridger Pipeline for violations of environmental laws in the 2015 spill, which came after the line buried beneath the Yellowstone became exposed and broke when ice scoured the river bottom near Glendive, Montana. Prosecutors are pursuing similar claims against a related company over a 2016 spill in North Dakota that released more than 600,000 gallons (2.7 million liters) of crude. The accidents came a few years after an Exxon-Mobil oil pipeline broke beneath the Yellowstone during flooding. The spills helped put a national focus on the nation's aging pipeline network, which has continued to suffer high profile accidents including recent spills in Louisiana and California. A survey of Bridger's pipeline on the company's behalf in 2011 included a note that the pipe was buried only 1.5 feet (0.5 meters) beneath the ever-shifting river bottom. That would have put it at heightened risk of breaking. But after the spill, prosecutors alleged, company representatives referenced a second survey when they told federal regulators that the pipeline had been buried at least 7.9 feet (2.4 meters), giving it "adequate cover" to protect against spills. "This raises questions -- which Bridger has yet to answer -- about whether Bridger concealed material facts about the condition of the crossing before the Yellowstone spill," assistant U.S. Attorney Mark Elmer wrote in court documents. Attorneys for Bridger rejected the allegations about conflicting surveys as "conspiracy theories." Pipeline company spokesperson Bill Salvin said the government misunderstood the surveys. "There was adequate depth of cover across the entire crossing," Salvin said. "We think the government is trying to find something that's just not there." Federal prosecutors last month filed a lawsuit with similar claims against a sister company, Belle Fourche Pipeline, over the 2016 North Dakota spill that contaminated the Little Missouri River and a tributary. Both pipeline businesses are part of Casper, Wyoming-based True Companies, which operates 1,800 miles (2,900 kilometers) of line in Montana, North Dakota and Wyoming. Prosecutors allege the spills violated the Clean Water Act and are subject to penalties of up to US$6.6 million in the Montana case and up to US$89.5 million in the North Dakota case.
Biden plan could advance massive Arctic oil project - The Biden administration released an updated analysis of a major Arctic oil and gas project last week that opened the door to approving a scaled-back version of the controversial proposal — a prospect environmentalists slammed as betraying the president’s climate agenda.The Interior Department’s draft supplemental environmental impact statement (EIS) of ConocoPhillips Alaska Inc.’s Willow project was the result of a federal court order last year. The draft, made public late Friday, includes a new alternative that could cut two of five drill sites in an effort to avoid critical habitat for polar bears, migrating waterfowl and caribou herds in the Teshekpuk Lake Special Area.The new alternative outlined in the draft supplemental EIS proposes to eliminate the “northernmost proposed drill site and associated infrastructure” in the lake area, and to defer a decision on a second drill site pending further analysis. Doing so could provide a compromise that authorizes the project to produce roughly 630 million barrels of oil over its 30-year life while reducing the overall footprint and emissions.The project is supported by many in Alaska, including the state’s political leadership, who see it as vital to bolstering the flagging oil and gas industry on the state’s North Slope and, therefore, local economies (Energywire, Jan. 7).Critics opposed to the Willow project in any form said they are concerned that the Bureau of Land Management, which oversees the 23-million-acre National Petroleum Reserve of Alaska where the project would be sited, appears to be preparing to move forward with the project outlined in the new alternative.BLM says the draft supplemental EIS is not a final decision and that it will not make one until it first analyzes public input following a 45-day public comment period that will kick off when the document is published on Friday in theFederal Register.But opponents’ concerns were heightened by the chaotic release of the draft document, which was abruptly yanked from BLM’s Willow project webpage for several hours shortly after it was posted last Friday. A different version of the document was eventually reposted.The original draft supplemental EIS included a section indicating the bureau would not reject the Willow project, in part because Congress has authorized oil production in the NPR-A — established in the 1920s by President Warren Harding as a future petroleum resource for the Navy.The “No Action” alternative in the original version of the draft document — which would block construction of the project — stated that “BLM does not have the authority to select this alternative because [ConocoPhillips Alaska’s] leases are valid and provide the right to develop the oil and gas resources therein.”This sparked immediate outrage from some advocates, who blasted the document as little more than an attempt by BLM to lay the groundwork for project approval.
Biden Administration Signals Support for Controversial Alaska Oil Project - The New York Times — The Biden administration took a key step toward approving a huge oil drilling project in the North Slope of Alaska, angering environmental activists who said allowing it to go forward would make a mockery of President Biden’s climate-change promise to end new oil leases.The ConocoPhillips project, known as Willow and located in the National Petroleum Reserve in Alaska, was initially approved under the Trump administration and was later supported by the Biden administration but was then was blocked by a judge who said the environmental review had not sufficiently considered its effects on climate change and wildlife.On Friday, the Biden administration issued a new environmental analysis.In that analysis, the Department of the Interior said the multibillion-dollar plan would at its peak produce more than 180,000 barrels of crude oil a day and would emit at least 278 million metric tons of carbon dioxide emissions over its lifetime from the burning of the oil produced, as well as from construction and drilling activity at the site.The oil company’s plan calls for five drill sites, a processing facility, hundreds of miles of pipelines, nearly 40 miles of new gravel roads, seven bridges, an airstrip and a gravel mine in a region that is home to polar bears, caribou and migratory birds. Project opponents have argued that the development would harm wildlife and produce dangerous new levels of greenhouse gases.In a statement, the Interior Department said that the new analysis included several options, including a reduction in the number of drilling sites as well as an option for “no action” — or no drilling at all — and did not represent a final decision on the Willow project. The agency will take comments from the public for 45 days and is likely to make a final decision later this year.
Op-Ed: Wait, what? The Biden administration wants to drill on Alaska's North Slope? - The bitter end of the fossil fuel era is playing out in one of the world’s wildest remaining places: Alaska’s North Slope. And it’s not pretty. On Friday, the Interior Department released a draft supplemental environmental impact statement on the Willow project, an oil development on Alaska’s North Slope that Interior says would release as much as 284 million metric tons of carbon dioxide over its 30-year lifetime, and perhaps more. The Biden administration seems to be leaning toward permitting this carbon bomb, which would mock its campaign commitments to ease off on new oil leases — and in fact would represent a continuation of Trump-era efforts to drill big in the far northern tundra. Trump, you may recall, made drilling in Alaska’s Arctic National Wildlife Refuge a priority. But after a fierce campaign by Gwich’in Natives and environmentalists, no big oil companies were willing to bid for leases on that land. Perhaps they were beginning to see the writing on the wall: With the cost of renewables plummeting, it no longer made sense to go to the ends of the world in search of more hydrocarbons. But Alaska’s congressional delegation — especially Republican Sen. Lisa Murkowski — never gave up on expanding oil development. She’s moved her efforts a couple of hundred miles west to what would be a massive extraction: ConocoPhillips’s Willow project, near the village of Nuiqsut and in the National Petroleum Reserve. This time Murkowski appears to have team Biden in her corner, even though the development plan has all the usual horrors: a Texas-based corporation turning Northern Alaska into another industrial sacrifice zone, jeopardizing Indigenous food security (particularly by threatening the Teshekpuk caribou herd), surrounding the people of Nuiqsut with light, noise and chemical pollution, and of course, locking in decades of fossil fuel extraction when scientists tell us we must be doing precisely the opposite. Willow is the biggest oil and gas project pending on U.S. public lands, and that’s using the Biden administration’s estimate of what it would produce, about 600 million barrels of crude oil. Privately, according to the Washington Post, ConocoPhillips is telling investors that its new Arctic “hub” could eventually unlock five times as much: 3 billion barrels.Though ConocoPhillips may use this year’s high gas prices or the energy disruptions caused by the Ukraine war to push the project, those are just industry talking points. By the time the project comes online, modelers are predicting 33% of vehicle sales will be electric. And the current round of climate crises will only be growing. Already more of Alaska has burned so far this year than at this point in time in the last 80 years. Local officials, including native communities, are split: Oil always means money, even if a lot of it goes out of state. But scientists are not split: The International Energy Agency said last year that if we had any hope of meeting the targets the world set in Paris in 2015, there could be no further expansion of fossil fuel infrastructure.
Gas spilled in Sydney fuel leak recovered, says Imperial Oil --The remaining gasoline from a fuel spill in Sydney, N.S., has been pumped into a new container, an Imperial Oil spokesperson said Sunday. On Friday, roughly 600,000 litres of gas leaked out of a storage tank at Imperial Oil. Nearly 60 homes were temporarily evacuated Friday because of the spill. No injuries were reported, and residents returned to their homes in the evening. Imperial Oil spokesperson Keri Scobie said the recovery of the spilled fuel from within a containment area started Saturday night and was completed Sunday morning. The spilled fuel was pumped into an existing empty tank on the compound, Scobie said. Scobie was not certain how much of the 600,000 litres was recovered, as some may have been absorbed in the containment foam and some may have evaporated. She said it was not possible that any gasoline got into the ground as there was gravel and clay in the containment area and that typically absorbs any substance that gets released on site. Now that the remaining fuel has been recovered, Scobie said, remedial work has begun. "We've just got some environmental folks coming in to look at … what sort of impacts are there from an environmental standpoint," she said. That will take us probably over the next couple of days to figure out what that plan looks like for remediation." She said Imperial Oil personnel will be working on site with Nova Scotia Environment and Climate Change staff and regulators. Part of the work of the team, Scobie said, will be determining what to do with the recovered fuel. According to Scobie, on-site monitoring has been taking place since Friday and no community safety or health concerns have been detected. Responding to reports of gas shortages in Sydney on Saturday, Scobie said the supply situation was more likely "related to driver issues" than it was to anything happening at the Imperial Oil terminal.
Cleanup ongoing: Fuel recovered from 600,000 litre gasoline spill at Sydney terminal – The environmental impact of a major gasoline spill at a Cape Breton petroleum distribution terminal could have been worse.In addition to last week’s leakage of about 600,000 litres of gasoline from a punctured tank at Imperial Oil’s Sydney facility, a precautionary power outage resulted in the discharging of roughly 48,000 cubic metres of untreated wastewater from the adjacent Battery Point wastewater treatment plant.“It’s not ideal but it’s not as uncommon as we would like it to be,” said Cape Breton University assistant engineering professor Allison Mackie whose areas of specialty include drinking water and industrial wastewater treatment.“In many locations, when there’s a big rain storm there might be untreated wastewater getting into a body of water. It does still happen. And, of course, we still have untreated wastewater going into Sydney harbour from the Westmount side although plans are in place to deal with that in the near future.“But as for the discharge of untreated wastewater into the harbour, well, I wouldn’t be overly concerned about that unless you go swimming near that location. Fortunately, there are no beaches right around there. Because it went into the ocean there is much less impact than if it had gone into a small lake.” Cape Breton Regional Municipality spokesperson Christina Lamey confirmed that the Battery Point treatment plant was unpowered for 47 hours. Following the spill, Imperial Oil instructed the municipality to shut off the treatment plant’s air-handling units to prevent gasoline fumes from entering the facility. Within a couple of hours, that order had been amended to shut down all power, including the backup generator, to the treatment plant. During the two days without power, an estimated 48,000 cubic metres (48-million litres) of untreated wastewater was discharged into the harbour. Lamey said power was restored to the plant on Monday. “There is nothing more that we can do about what happened on the weekend,” said Lamey.
EU to raise inflation forecasts as officials prepare for a permanent cut to Russian gas— The euro zone economy is expected to face higher inflation both this year and in 2023, officials told CNBC on Monday, while plans are being stepped up for the prospect of a permanent cut to Russian gas supplies. Europe has been under intense pressure in the wake of Russia's invasion of Ukraine, with higher energy costs pushing up inflation across the region. This economic reality is unlikely to change anytime soon, with new forecasts pointing to an upward revision in consumer prices across the bloc. "What we see [is that] economic growth is proving quite resilient this year, still one can expect some downwards revision and even more so for the next year because of many uncertainties and risks," Valdis Dombrovskis, executive vice president at the European Commission, told reporters ahead of a meeting of finance ministers. "Unfortunately, inflation continues to surprise on the upside, so it's once again going to be revised upwards," he added. The European Commission, the EU's executive arm, will present new economic forecasts on Thursday. Back in May, the institution projected a growth rate of 2.7% for this year and 2.3% for next year, both for the EU and the euro area. In terms of inflation in the euro area, the commission said this would hit 6.1% in 2022, before falling to 2.7% in 2023. Higher inflation could add further pressure to the European Central Bank, which is expected to raise rates for the first time in 11 years next week. France's Economy Minister Bruno Le Maire said over the weekend that Europe needed to prepare itself for a total cut-off of Russian gas supplies. Energy analysts believe that the risk of a temporary interruption is high, particularly as Russian gas flows have already dropped by about 60% in recent months.
Shell’s subsea compression project off Norway to assist in keeping up gas supply to Europe - UK-headquartered energy giant Shell has received approval from the Norwegian authorities for a development plan related to its gas subsea compression project in the Norwegian Sea, which is expected to lead to increased gas extraction from this field. Back in September 2021, Shell submitted its plan for development and operation (PDO) for the Ormen Lange wet gas subsea compression project to the Ministry of Petroleum and Energy. As reported at the time, the project is expected to unlock an additional 30-50 billion cubic meters of natural gas, leading to an increase in Ormen Lange’s overall gas recovery rate. In an update on Friday, the Norwegian Ministry of Petroleum and Energy informed that it has approved the plan for the further development of the Ormen Lange field. Terje Aasland, Norway’s Minister of Petroleum and Energy, remarked: “This project will increase recovery from the Ormen Lange field from 75 to 85 per cent, at the same time as gas production from the field is accelerated. This project helps to maintain the gas supply from Norway to our friends in Europe from the middle of this decade.” Moreover, the goal of the project is to increase gas extraction from Ormen Lange by up to 40 billion standard cubic meters (Sm3) of gas and the expected start-up of the project is anticipated in 2025. The project entails the installation of a wet gas compressor system on the seabed at a 900-metre depth close to the wellheads, increasing gas flow from the reservoir into the wells.
“Europe on high alert as Russia temporarily halts gas flows via major pipeline - Europe is bracing for an extended shutdown of Russian gas supplies as maintenance work begins on the Nord Stream 1 pipeline that brings gas to Germany via the Baltic Sea. Operator Nord Stream AG confirmed the work, which is scheduled to run from Monday through to July 21, got underway as planned Monday morning. Russian gas flows via the pipeline are expected to drop to zero later in the day. The Nord Stream 1 pipeline is Europe's single biggest piece of gas import infrastructure, carrying around 55 billion cubic meters of the fuel per year from Russia to Germany. Europe fears the suspension of deliveries could be extended beyond the 10-day timeline, derailing the region's winter supply preparations and exacerbating a gas crisis that has prompted skyrocketing energy bills for households and emergency measures from policymakers. It comes as European governments scramble to fill underground storage with gas supplies to provide households with enough fuel to keep the lights on and homes warm during winter. The EU, which receives roughly 40% of its gas via Russian pipelines, is trying to rapidly reduce its reliance on Russian hydrocarbons in response to President Vladimir Putin's monthslong onslaught in Ukraine. Klaus Mueller, the head of Germany's energy regulator, believes the Kremlin may continue to throttle Europe's energy supplies beyond the scheduled end of the maintenance work. "We cannot rule out the possibility that gas transport will not be resumed afterwards for political reasons," Mueller told CNBC last week..
Gazprom casts doubt on pipeline's quick return to full flow - (AP) — Russian energy company Gazprom appeared to cast doubt Wednesday on the prospects of quickly restoring the flow of natural gas to full capacity through a major pipeline to Western Europe. Gazprom reduced the gas deliveries through Nord Stream 1 to Germany by 60% last month. The state-owned gas company cited technical problems involving a piece of equipment that partner Siemens Energy sent to Canada for overhaul and couldn’t be returned because of sanctions imposed over Russia’s invasion of Ukraine. The Canadian government said over the weekend that it would allow the gas turbine that powers a compressor station to be delivered to Germany, citing the “very significant hardship” that the German economy would suffer without a sufficient gas supply to keep industries running and generate electricity. Gazprom tweeted Wednesday that it “does not possess any documents that would enable Siemens to get the gas turbine engine ... out of Canada.” It added that “in these circumstances, it appears impossible to reach an objective conclusion on further developments regarding the safe operation” of a compressor station at the Russian end of the pipeline, which it said is “of critical importance.” Siemens Energy had no comment on Gazprom's statement. The company previously has said that it wants to get the turbine to its location as quickly as possible and is working on the necessary permits and logistics. Nord Stream 1 runs under the Baltic Sea and is Germany’s main source of Russian gas, which recently has accounted for about 35% of the country's total gas supply. Gas is usually sent onward to other European countries as well. German politicians have dismissed Russia’s technical explanation for last month’s reduction in gas flowing through Nord Stream 1, saying the decision was a political gambit to sow uncertainty and further push up energy prices. Nord Stream 1 has been shut down altogether since Monday for annual maintenance that is scheduled to last until July 21. German officials are concerned that Russia may not resume gas deliveries at all, pointing to a possibility that it might cite another technical detail as a reason to keep the gas turned off.
Gas pipeline shutdown starts amid German suspicion of Russia - (AP) — A major natural gas pipeline from Russia to western Europe shut down Monday for annual maintenance as Germany prepared to give the green light for 10 coal-fired power plants to restart because of concerns that Russia may not resume the flow of gas as scheduled. The Nord Stream 1 pipeline runs under the Baltic Sea from Russia and is Germany's main source of Russian gas. Gas is usually sent onward to other countries, as well. The line is scheduled to be out of action until July 21 for routine work that the operator says includes “testing of mechanical elements and automation systems.” The operator's data showed the gas flow dropping as planned Monday morning. German officials are suspicious about Russia's intentions, particularly after Russia's Gazprom last month reduced the gas flow through Nord Stream 1 by 60%. Gazprom cited technical problems involving a gas turbine powering a compressor station that partner Siemens Energy sent to Canada for overhaul and couldn't be returned because of sanctions imposed over Russia's invasion of Ukraine. Canada said over the weekend that it would allow the part to be delivered to Germany, citing the “very significant hardship” that the German economy would suffer without a sufficient gas supply. German politicians have dismissed Russia's technical explanation for last month's reduction in the gas flowing through Nord Stream 1, saying the decision was a political gambit to sow uncertainty and push up energy prices. German Vice Chancellor Robert Habeck has said he suspects that Russia may cite “some little technical detail” as a reason not to resume gas deliveries through the pipeline after this month's maintenance. The head of Germany's network regulator, the Bundesnetzagentur, said that “no one can say exactly” whether the gas will be switched back on. “We have very varied signals from Russia,” Klaus Mueller told ZDF television. “There are Kremlin spokespeople who say that, in combination with the Siemens turbine, they can deliver significantly more again; but there have also been very martial messages from the Kremlin.” On Sunday, Ukraine's energy and foreign ministries said the return of Nord Stream 1 turbines “is adjusting the sanctions regime to the whims of Russia.” In his nightly video address Monday, Ukrainian President Volodymr Zelenskyy predicted Russia would act again to cut off its supply of natural gas to Europe “at the most acute moment." “This is what we need to prepare for now, this is what is being provoked now,” Zelenskyy said. He added that Canada's decision to allow shipment of the repaired gas turbine would set a dangerous precedent that Russia will exploit "because every concession in such conditions is perceived by the Russian leadership as an incentive for further, stronger pressure."
Germany dims the lights to cope with Russia gas supply crunch --Germany is rationing hot water, dimming its street lights and shutting down swimming pools as the impact of its energy crunch begins to spread from industry to offices, leisure centres and homes.A huge increase in gas prices triggered by Russia’s move last month to sharply reduce supplies to Germany has plunged Europe’s biggest economy into its worst energy crisis since the oil price shock of 1973.Gas importers and utilities are fighting for survival while consumer bills are going through the roof, with some warning of rising friction.As tensions over Russia’s war in Ukraine escalate, officials fear the situation could get worse. On Monday, Russia is shutting down its main pipeline to Germany, Nord Stream 1, for 10 days of scheduled maintenance. Many in Berlin fear it will never reopen.Germany last month took a crucial step towards rationing gas when economy minister Robert Habeck activated the second stage of the country’s gas emergency plan. “The situation on the gas market is tense and unfortunately we can’t guarantee that it will not get worse,” he said on Tuesday. “We have to be prepared for the situation to become critical.”Habeck, who says he is now taking shorter showers, has appealed to the population to save energy — and municipalities and property owners have heeded the call.On Thursday Vonovia, the country’s largest residential landlord, said it would be lowering the temperature of its tenants’ gas central heating to 17C between 11pm and 6am. It said the measure would save 8 per cent in heating costs.A housing association in the Saxon town of Dippoldiswalde, near the Czech border, went a step further this week, saying it was rationing the supply of hot water to tenants. From now on they can only take hot showers between 4am-8am, 11am-1pm and 5pm-9pm.Such measures could become routine in the coming weeks. Helmut Dedy, head of the German Association of Towns and Cities, said the “whole of society” must now cut down on its energy consumption, saving in summer “so we have warm flats in winter”.Dedy appealed to town councils up and down the country to take emergency action. He had a few suggestions: turn off traffic lights at night; shut off hot water in council buildings, museums and sports centres; adjust air conditioners; and stop illuminating historic buildings.Some have already taken measures. The district of Lahn-Dill, near Frankfurt, has switched off the hot water in its 86 schools and 60 gyms until mid-September, a move it hopes will save it €100,000 in energy costs, and Düsseldorf has temporarily closed a massive swimming pool complex, the Münster-Therme. Meanwhile, Berlin has turned down the thermostat on open-air swimming pools, reducing their temperature by 2 degrees. In western Germany, Cologne is dimming its street lighting to 70 per cent of full strength from 11pm.Costs could increase even more as a result of a new law working its way through the German parliament. This would allow the government to impose an emergency levy on all gas consumers to spread the cost of higher prices more evenly. It is designed to prevent gas importers becoming insolvent, a scenario ministers fear could cause a Lehman Brothers-style meltdown of the whole sector. Uniper, the largest importer of Russian gas in Germany, is already in talks with officials on a state bailout that experts say could be as large as €9bn.
Germany Hopes to Outrace a Russian Gas Cutoff and Bone Cold Winter - - Russian natural gas has fired the furnaces that create molten stainless steel at Clemens Schmees’s family foundry since 1961, when his father set up shop in a garage in the western part of Germany. It never crossed Clemens’s mind that this energy flow could one day become unaffordable or cease altogether. Now Mr. Schmees, like thousands of other chieftains at companies across Germany, is scrambling to prepare for the possibility that his operations could face stringent rationing this winter if Russia turns off the gas. “We’ve had many crises,” he said, sitting in the company’s branch office in the eastern city of Pirna, overlooking the Elbe River valley. “But we have never before had such instability and uncertainty, all at once.” Such sentiments are reverberating this week in executive suites, at kitchen tables and in government offices as Nord Stream 1, the direct gas pipeline between Russia and Europe, was shut down for 10 days of scheduled maintenance. Germany, the pipeline’s terminus and a gas transit hub for the rest of Europe, is the largest and most important economy on the continent. And anxiety that President Vladimir V. Putin may not switch the gas back on — as a display of brinkmanship with countries that oppose Russia’s invasion of Ukraine — is particularly sharp. “We have never before had such instability and uncertainty, all at once,” said Clemens Schmees, whose family has owned a foundry since 1961. In Berlin, officials have declared a “gas crisis” and triggered an emergency energy plan. Already landlords, schools and municipalities have begun to lower thermostats, ration hot water, close swimming pools, turn off air-conditioners, dim streetlights and exhort the benefits of cold showers. Analysts predict that a recession in Germany is “imminent.” Government officials are racing to bail out the largest importer of Russian gas, a company called Uniper. And political leaders warn that Germany’s “social peace” could unravel. The crisis has not only set off a frantic clamber to manage a potentially painful crunch this winter. It has also prompted a reassessment of the economic model that turned Germany into a global powerhouse and produced enormous wealth for decades. Nearly every country on the continent is facing potentially profound energy shortages, soaring prices and slower growth. On Thursday, the European Commission cut its growth forecast for this year to 2.7 percent. In another sign of recession anxiety, the value of the euro dipped below the dollar this week.
Russia's squeeze on gas means Germany's energy giant is having to draw supplies from storage - German energy giant Uniper on Friday said it is having to draw down gas from storage facilities, reducing supplies needed for winter even as Europe is experiencing an extreme heatwave. The embattled utility told CNBC in a statement that reducing gas volumes from its own storage facilities was necessary "in order to supply our customers with gas and to secure the Uniper's liquidity." Finnish majority-owner Fortum said last week that Uniper submitted a bailout application to the German government after running into extreme financial distress due to a scarcity of gas and soaring prices. Germany's economy ministry said Friday that there is still no timeframe for government assistance, according to Reuters. Speaking to reporters at a press conference on July 8, Uniper CEO Klaus-Dieter Maubach warned that drawing down gas supplies from its storage facilities was a possibility due to the "enormous decrease" of imported gas from Russia. It comes even as Europe is sweltering amid a heat wave that has seen temperatures exceed 40 degrees Celsius (104 degrees Fahrenheit) in several countries. Droughts and wildfires have been recorded in Spain and Portugal and sweltering temperatures have spread to the U.K. and France. Climate scientists have repeatedly made clear that human-caused global heating is making heat waves more likely and more intense. As scorching temperatures spread across the region, European policymakers remain focused on preparations for when the cold weather returns. Governments are scrambling to fill underground storage with gas supplies to provide households with enough fuel to keep the lights on and homes warm during winter. 'Really tough' few months ahead Uniper was the first German energy company to sound the alarm over soaring energy bills in the wake of Russia's onslaught in Ukraine. The company has received only 40% of Russian contracted volumes in recent weeks and has been forced to source the replacement volumes at significantly higher prices. What's more, annual maintenance on the Nord Stream 1 pipeline — the European Union's biggest piece of gas import infrastructure — has fueled fears of further disruption to gas supplies.
Europe’s Insatiable Thirst For LNG Is Causing Blackouts In Developing Countries - In June, the European Union imported more liquefied natural gas from the United States than pipeline gas from Russia for the first time ever. The unprecedented shift came as the EU scrambled to fill up its gas storage facilities ahead of the next heating season in fear Russia could turn off the gas tap at any moment. It also pushed LNG prices sky-high, making it unaffordable for developing countries."Because of the Ukraine war, every single molecule that was available in our region has been purchased by Europe, because they're trying to reduce their dependence on Russia," Pakistan's Petroleum Minister Musadik Malik said earlier this month as quoted by the Wall Street Journal.Pakistan has been suffering from blackouts because of insufficient LNG supplies that the country needs to keep its power plants going. And the reason for the insufficient supplies is that Europe can pay more for the commodity, so traders are sending their cargos there, including cargos originally destined for Pakistan and other Asian countries.According to data from Wood Mackenzie cited by the Wall Street Journal, while Europe's LNG imports soared 49 percent from the start of the year to mid-June, Pakistan's imports fell by 15 percent during the same period, those to India shed 16 percent, and China's LNG imports fell by more than a fifth."The European gas crisis is sucking the world dry of LNG," Valery Chow, head of Asia Pacific gas and LNG research at Wood Mackenzie, told the WSJ. "Emerging markets in Asia have borne the brunt of this and there is no end in sight."Not everyone seems to be quite so pessimistic. Reuters reported in late June that demand for LNG from Asia is on the rebound, with one analyst forecasting a decline in European Union LNG imports over the second half of the year."There has been a growing imbalance between Asia and Europe, with European stocks growing at the expense of Asian inventories," Reuters quoted Capra Energy managing director Tamir Druz as saying."We expect LNG imports for the EU, Turkey and the UK over the second half of 2022 to be lower than what we've seen in the first six months, with a drop of about 16%, or 10 million tonnes," Druz added."Asia is already in preparation for winter, with LNG vessels being snapped up on multi-month charters, as charterers fear being caught without shipping capacity during crunch months," said another analyst, Kaushal Ramesh from Rystad Energy. That might be the case, but Pakistan last week failed to attract any bids in a $1-billion tender for liquefied natural gas, the WSJ noted in its report, and India has turned to more coal-fired generation to keep the lights on. In Bangladesh, like in Pakistan, blackouts have had to be enforced.
Spain Calls On Firms To Minimize LNG Imports From Russia - Spain has called on its companies to seek to lower imports of LNG from Russia, while the Spanish government looks to help other EU member states with energy and power supply this year, Energy Minister Teresa Ribera said.“It is desirable that traders seek to minimise imports of Russian gas and diversify the contracts they may hold,” Ribera said at a press briefing as carried by Reuters.Unlike most of the EU, Spain does not depend on Russian pipeline gas, but it has the highest number of LNG import terminals in Europe—six.Imports of LNG from Russia represented nearly 12 percent of Spain’s gas imports in May, compared to a 6.6 percent share of Russian LNG in May 2021, according to Reuters estimates.Spain is now urging importers to minimize exposure to Russian LNG contracts while at the same time adopting some energy-saving measures in order to help other EU markets with power supply.In May, the Spanish government passed a decree limiting the use of air conditioning in public buildings as part of a strategy to conserve energy and reduce Europe’s dependence on Russian gas. Spain itself does not depend on gas from Russia, but its government is working to increase energy efficiency as the European Union looks to reduce reliance on Russian gas by two-thirds by the end of this year alone.While Spain has six LNG import terminals, it is not well connected via pipelines to other countries, limiting European access to LNG imports.Since the Russian invasion of Ukraine, companies have been studying plans for possible offshore pipeline connections from Spain to Italy. In May, energy infrastructure operator Snam of Italy signed a memorandum of understanding (MoU) with Spanish energy and transmission system operator Enagas for a feasibility study on an offshore pipeline between Spain and Italy. Snam and Enagas will jointly mandate a technical feasibility study aimed at the potential construction of an offshore pipeline connecting Spain with Italy, “which would be beneficial to further diversify energy supply towards our country as well as Europe,” the Italian company said.
New pipeline from Greece to Bulgaria offsets Russian gas cut - (AP) — The leaders of Greece and Bulgaria on Friday marked the completion of a new pipeline that will supply natural gas from Azerbaijan to Bulgaria, whose vital supply of Russian gas was cut off in April amid the fallout over Russia's invasion of Ukraine. Greek Prime Minister Kyriakos Mitsotakis stressed the importance of the new link as an alternative supply line for Bulgaria, as neighboring Greece jockeys to become a regional energy transport hub. “This isn't just a gas pipeline, but a crucial south-north energy bridge,” Mitsotakis said during a ceremony in northeastern Greece. He added that Europe needs to coordinate its response to “Moscow’s conscious choice to turn natural resources into a lever of political pressure, into a raw blackmail.” “It is something our Bulgarian neighbors already know very well,” Mitsotakis said. In late April, Russia cut off gas supplies to Bulgaria after it refused a demand by Moscow to pay gas bills in rubles, Russia’s currency. Relations between the two former Soviet bloc allies have tanked in recent months, and last month Bulgaria ordered the expulsion of 70 Russian diplomats, triggering an angry response from Moscow. Bulgaria’s acting prime minister, Kiril Petkov, highlighted the pipeline’s key role in ending Russia’s gas monopoly in his country. "Thus, for the first time, our country will have real terrestrial access to alternative energy sources other than the Russian ones,” Petkov said. The 182-kilometer (115-mile) pipeline will run from the northeastern Greek city of Komotini to Stara Zagora in central Bulgaria. It starts with an initial capacity of 3 billion cubic meters of gas a year, and the prospect of future expansion to 5 billion cubic meters. Commercial deliveries are expected to start by Oct. 1. Greece is looking to serve as an energy hub for the Balkans, using fossil fuels from the Caspian Sea and the southeastern Mediterranean, and, potentially renewable energy from Egypt, to supply the region amid the fallout of the war in Ukraine.
Deep-sea pipelaying to carry Turkey's Black Sea gas begins -- rkey has started work on laying the deep-sea section of a pipeline to carry its over 540 billion cubic meters (bcm) natural gas reserves from the Black Sea. Pipeplaying vessel Castorone began work on the section Sunday after the shallow-water section of the pipeline was completed earlier. Work at Turkey's newly discovered Sakarya Gas Field in the Black Sea continues 24/7 as the project is expected to unlock Turkey's foreign dependency in the energy sector, according to Energy Minister Fatih Dönmez. Since its launch, the project has passed important milestones on a daily basis as onshore and offshore works continue at a breakneck pace. More than 5,000 personnel are working round-the-clock at the Sakarya Field, the site of Turkey's largest natural gas discovery, to start pumping to the national grid by Q1 2023. Multiple teams from the Turkish Petroleum Corporation (TPAO) are carrying out onshore and offshore works to connect the Sakarya Gas Field to the Natural Gas Processing Facility at Filyos, a town in northern Turkey's Zonguldak. To that end, the 325-meter, 56,529-ton Castorone anchored off Filyos on July 6 and took over work on the deep-sea section after pipelaying in shallow waters was completed by the vessel, Castoro 10. Large sections of the offshore pipeline, each measuring 12 meters in length, were loaded onto support vessels at Filyos Port before being transfered to Castorone, which remained approximately 500 meters offshore. The giant vessel is scheduled to complete the pipelaying works by the beginning of autumn.
Azerbaijan discloses gas exports to Europe for 1H2022 --A total of 5.4 billion cubic meters of Azerbaijani gas was exported to Europe in the first half of 2022, Azerbaijan’s Minister of Energy Parviz Shahbazov tweeted, Trend reports. Shahbazov noted that Azerbaijan exported 4.3 billion cubic meters of gas to Türkiye, while 1.5 billion cubic meters – to Georgia in the reporting period. In the first half of 2022, Azerbaijan boosted gas exports by 25.7 percent compared to the same period of 2021, and the country’s gas output increased by 15.1 percent reaching 23.4 billion cubic meters.
Harbour Energy's Offshore Well in Indonesia Hits 'Material Gas Accumulation' --Oil and gas company Harbour Energy has completed the drilling of the Timpan-1 exploration well located 150 kilometers offshore Indonesia, encountering "a material gas accumulation." The well, in a water depth of 4,245 feet (1293.8 meters). was drilled to a total vertical depth of 13,818 feet (4211.7 meters) subsea. "The well encountered a 390-foot (118.8m) gas column in a high net-to-gross, fine-grained sandstone reservoir with associated permeability of 1-10 mD. A full data acquisition program has been completed including wireline logging, 240 feet of core recovered and a drill stem test," Harbour Energy said. "The well flowed on test at 27 mmscfd of gas and 1,884 bopd of associated 58 degrees API condensate through a 56/64 inch choke. While the well has encountered a material gas accumulation, further work will be required to establish commerciality and the full potential of this play across the license," the company added. Gary Selbie, President Director, Indonesia, said, "We are encouraged by the result of this play-opening exploration well and potentially building on our successful operating history in Indonesia. "We look forward to working with our partners and the Government of Indonesia to determine the potential for commercialization of this important discovery." The Timpan-1 exploration well was drilled on the Andaman II license offshore North Sumatra, Indonesia. The partners in the license are Premier Oil Andaman Limited, a Harbour Energy company (40 percent, operated), bp (30 percent), and Mubadala (30 percent).
Japan eyes ‘gas saving’ scheme amid increasing LNG supply concerns: METI - Japan’s Ministry of Economy, Trade and Industry intends to introduce a scheme asking city gas consumers and large end-users to conserve gas usage in times of serious LNG supply disruptions, a METI source said July 11, amid increasing concerns over LNG supply from Russia. METI discussed the idea of “gas saving” measures during a working group under its electricity and gas policy subcommittee July 11, when expert committee members pointed out the need for such emergency measures in the event of Russian LNG supply disruptions. The METI working group intends to compile an interim policy report “as soon as possible” with an eye to implementing the scheme by the winter demand season, the source said. Once implemented, it will be the first of its kind measure for gas usage in Japan, although there are various types and levels of saving measures for electricity use in the country. “As the global LNG procurement environment is increasingly becoming severe, should there be any disruption in [LNG] procurement from long-term contracts, a basic response is to avert any shortage in the supply and demand [balance] by working out the security and procurement of LNG with the maximum possible effort,” METI said in its documents presented at the working group. If there is any tightness in the supply-demand balance for LNG even after efforts to ensure LNG supply security, METI intends to consider introducing a scheme to reduce gas usage via voluntary efforts without hindering consumers’ life and economic activities, as well as the steps to be taken beyond voluntary gas-saving efforts if the situation is still not resolved, according to the documents.
China's first commercial storage handles 10 bcm of natural gas – CGTN --Over 10 billion cubic meters of natural gas has so far been injected into Dazhangtuo, China's first underground commercial gas storage, Xinhua News Agency reported on Sunday. Located in the Binhai New Area, north China's Tianjin, Dazhangtuo was put into operation in 2000. It caters to the peak seasonal demand as well as emergency needs. It has delivered clean energy to Beijing and its surroundings for 22 years. "Ten billion cubic meters of natural gas is equivalent to an annual gas consumption of 50 million households," Wang Jian, a manager at the storage facility, told Xinhua. It is one of the 10 storage facilities in Dagang oilfield natural gas storage cluster owned by China National Petroleum Corp (CNPC), one of China's top three oil giants. With a total storage capacity of 7.68 billion cubic meters and working volume of 3.46 billion cubic meters, the cluster is expected to provide 2.3 billion cubic meters of natural gas during winter, CNPC told Xinhua. China's domestic gas output exceeded 200 billion cubic meters for the first time last year, and the target will be 230 billion cubic meters by 2025, the China Economic Weekly said, citing a report released by China's National Development and Reform Commission.
Gas pipelines to be laid across NE states: Teli --Union Minister of State for Petroleum and Natural Gas, Rameswar Teli on Monday said that gas pipelines would be laid across all the North eastern states. He said the project to lay the gas pipeline would be executed by Indradhanush Gas Grid Ltd (IGGL) which is a joint venture of Indian Oil, ONGC, GAIL, Oil India, and Numaligarh Refinery, “Under this project Meghalaya too is included. This pipeline will extend till Shillong and we want the work to start as soon as possible,” Teli said. Stating that recently tenders for five blocks were invited, the Union Minister however said, Meghalaya was not included but soon tender for the state will also be invited. On a frequent hike in prices of fuel in the country, Teli said is correlated to the increase in the crude oil prices in the international market. “We import 83 percent of oil and gas from abroad and if there is an increase of prices in the international market we also hike the prices of fuel and gas,” he said. Teli also said that the government is trying to explore new petroleum and oil in various parts of the country. “We have come to know that in the Northeast petroleum and gas is available. In Nagaland through exploration, we have found that there is oil and petroleum. We have also come to know that the same is also available in Meghalaya,” Teli said. The central government, he said would soon begin exploration works in the region.“If oil and gas is available within the country we can control its prices,” Teli the Minister of State for Petroleum and Natural Gas said.
India's oil imports from Russia surged 15% through June as it doubled down on cheap energy - Indian imports of Russian oil surged through the month of June as it continued to snap up energy on the cheap. Reuters reported India scooped up 950,000 barrels per day last month, which accounts for almost a fifth of all its imports. India is the world's third biggest oil consumer after China and the United States. India has been an active buyer of Russian oil even after the country invaded Ukraine. Russian crude oil is priced at a huge discount relative to the Brent international benchmark price, following Western sanctions.While Europe and other Western countries have either banned Russian imports or simply avoided it, competitive prices have lured Asian buyers, especially in China and India. The two now account for 50% of Russia's seaborne oil exports, Reuters said. According to Reuters, India's imports from Russia rose 15.5% in June from May. At the same time, its share of oil from Iraq and Saudi Arabia dropped 10.5% and 13.5%, respectively. Russian oil sales to India and China are bringing in huge profits for the country. In May alone, Russia's oil export revenue jumped to $20 billion, taking Moscow's energy earnings to pre-war levels. To that effect, its energy sales are on track to hit $285 billion this year. While Russia revels in its profits however, Western economies have been tremendously suffering as soaring oil and gas prices from reduced supply have triggered high levels of inflation and threats of a recession, specifically in Europe, which is highly dependent on Russia for energy.
Pursuing Its National Interest in the New Multipolar World: India to Boost Sakhalin-1 Oil Output by Jerri-Lynn Scofield -- This week brought yet another key development in India’s pursuit of its national interest in the emerging multipolar world. Russia is nationalizing the interests of U.S. and Japanese shareholders in its Sakhalin-1 oil project, but making an exception to allow India’s OVL to maintain its stake and continue with further work. In addition, there’s speculation that other Indian companies may be invited in to replace the departing U.S. and Japanese concerns.As The Economic Times – India’s pink paper – reported yesterday in India explores to expand footprints in oil fields in far East Russia:[Oil and Natural Gas Corporation (ONGC)] is deploying additional manpower to play a bigger role in operating the Sakhalin-1 oil field following ExxonMobil’s withdrawal, according to news reports.The company has a 20% stake in this energy project, located in Russia’sFar East.According to reports, ONGC’s overseas investment arm OVL has offered to send more personnel with suitable expertise to partially fill the void, after US energy giant ExxonMobil announced in March its intention to exit oil and gas operations in Russia due to Western sanctions.ONGC also expressed hopes that its stake in the Russian project will not be affected in case of the possible re-organization of Sakhalin-1 by Moscow, just as had happened with the neighboring Sakhalin-2 project. Thus, as the heat and hot water get switched off out across Europe and gas prices climb upward just in time for November’s mid-terms, Indian companies are poised to benefit further from the cack-handed sanctions policy of the U.S.-led alliance. The West is facing the prospect of shuttering businesses while meanwhile Indian companies are jumping in – supported by the Modi government – to take advantage of new opportunities now opening up.
Japan Will Aim to Keep Stake in Russia's Sakhalin-2, Nikkei Says -- Japan will seek to maintain its stake in the Sakhalin-2 natural gas project in Russia’s far east, the Nikkei newspaper said, after President Vladimir Putin signed a decree transferring rights to a new Russian company just over two weeks ago. The decree gave stakeholders a month to say whether they’ll take a holding in the new company. The Japanese government has proposed to trading companies with stakes in the existing operator that they remain as shareholders after the transfer, the paper reported, without saying where it got the information. Prime Minister Fumio Kishida met with Minister for Economy, Trade and Industry Koichi Hagiuda on Friday, the Nikkei said. Hagiuda subsequently told reporters that they had agreed the stake should be maintained. Putin Swoop on Gas Plant Risks Forcing Foreign Partners Out (2) Before the transfer, the project was 27.5% owned by Shell, 12.5% by Mitsui & Co and 10% by Mitsubishi Corp. Japan relies on Russia for about 9% of its LNG, and almost all imports from the nation are Sakhalin-2 supplies. Kishida is pushing for as many as nine of Japan’s nuclear reactors to be operating this winter as the country faces a severe energy crunch.
Oil majors face output slump, deep losses if Russia stops Kazakh pipeline - Western energy majors will cut output and lose billions of dollars if Russia, as is feared, suspends a pipeline that is almost the only export route for oil from land-locked Kazakhstan, company sources, traders and analysts say. The closure of the CPC pipeline that carries oil from Kazakhstan to the Black Sea Russian export terminal in the port of Novorosiisk would shut in more than 1% of global oil supply, exacerbating what is already the most severe energy crunch since the Arab oil embargo in the 1970s. The pipeline, which runs through Russian territory and is owned by a consortium of Western, Asian, Russian and Kazakh companies, has been in the spotlight since Russia on Feb. 24 invaded Ukraine in what Moscow calls a “special military operation”. Last Wednesday, a court in Novorossiisk ordered CPC to suspend operations for 30 days, citing concern about oil spill management. A Russian court on Monday overturned the ruling against CPC and instead fined it 200,000 roubles ($3,300). The sources, however, said they still thought major disruption likely. Pipeline co-owner Russia has said all stoppages are driven by technical issues. Storm damage in March has already interrupted flows through the 1.3 million barrels per day (bpd) oil artery, operated by the Caspian Pipeline Consortium. Major oil companies, including Chevron, Exxon Mobil, Shell and Italy’s Eni, in addition to several Russian and Kazakh firms have stakes in the CPC. Western companies also hold stakes in Kazakh oilfields. The CPC pipeline is the route for nearly all Kazakh oil exports. Three sources at Western oil companies operating in Kazakhstan, asking not to be named because of the sensitivity of the issue, said they expected a prolonged CPC pipeline suspension. One trader at a Western major said such an outage would result in a decline of 50 million tonnes of oil per year (1 million bpd) because land-locked Kazakhstan has limited alternative export routes. Many Western companies have exited operations in Russia, with oil majors among the first to leave in the days after the conflict began. Western sanctions have disrupted Russian exports and pushed up energy prices. In response, Russia made steps towards seizing oil and gas projects Sakhalin 1 and 2, where Shell and Exxon have stakes. A Western executive familiar with CPC operations said Sakhalin was “a definite sign of things to come for CPC”.
Kazakhstan Oil Exporters Relieved as Russian Court Lifts Ban on Pipeline – Pipeline politics continues to grab headlines in Kazakhstan. When a Russian court ordered the Caspian Pipeline Consortium (CPC) to halt operations, citing administrative violations, on July 6, Kazakhstani exporters wondered how would they send oil to their foreign customers, as 80 percent of the country’s exports travel through the pipeline.Political and business pressure helped reverse the court’s decision on July 11, as the 30-day suspension was re-negotiated into a fine equivalent to just $3,250. The oil industry in Kazakhstan sighed in relief.Built in 2001, the CPC is a semi-private, international pipeline, running from Kazakhstan’s Caspian region to the Russian port of Novorossiysk on the Black Sea. Its corporate structure is split between two companies, one Kazakhstani and one Russian.The Russian court targeted the documentation regarding the Oil Spill Response Plan of the Russian company, saying the shortcomings represented an environmental threat. The potential one-month suspension of operations at the pipeline – which would have by default involved the Kazakhstani section as well – would have been a massive blow to the government’s budget and the companies’ bottom line. U.S. major Chevron owns 15 percent in CPC. On July 6, the day of the court decision, Chevron’s share price dropped by 3.5 percent on Wall Street..The reversal of the potentially crippling suspension into a symbolic fine on July 11 is perhaps a strong indicator that the pressure on the pipeline is principally political.Just a week before the original sanction, CPC had paid the equivalent of $86.3 million in environmental fines for a 2021 spill in Russia.Environmental damage claims are among the preferred methods of political pressure on hydrocarbon companies and projects. Both the Russian and the Kazakhstani governments have used environmental fines to extract additional revenue from oil and gas consortia or to acquire stakes in the projects.This was the case for the Kashagan offshore oilfield in Kazakhstan’s section of the Caspian Sea in the first decade of the 2000s. The same applied in 2012, when an environmental fine was turned into the sale of a stake in theKarachaganak gas and condensate field in northern Kazakhstan. The rocky relations and public frictions between Russia and Kazakhstan since the start of the war in Ukraine have undoubtedly contributed to the acrimonious management of the issues concerning CPC. In March, a storm allegedly caused massive disruptions at the pipeline’s marine terminal; now the Russian court system essentially flexed its muscles, touting a disruption that would choke Kazakhstan’s main export vector. The old Russian route from Atyrau to Samara could only pump a maximum of 15 million tons per year, which pales in comparison to the 65 million tons that CPC can pump. Still, the Russian route remains the most economically viable as the pipeline to China can only carry 10 million tons of Kazakhstani oil (another 10 million tons are booked by Russian suppliers through the Kazakhstani pipeline system) and its expansion via rail would entail massive transportation costs, according to industry specialists.
Hedge funds bet on Brazil oil and gas output surging 122%— Hedge funds and other investors looking to cash in on Brazil’s surging oil and gas output are turning to a new breed of drillers as an alternative to turmoil-wracked Petroleo Brasileiro SA, the state-owned producer that’s had four CEOs since early 2019. Gerval Investimentos, the family office for the controlling shareholders of steelmaker Gerdau SA, is among the asset managers backing so-called junior producers. Last month, it doubled its holdings in 3R Petroleum Oleo e Gas SA — a company with less than a 60th of the market value of Petrobras, as the government-owned oil giant is known — to about 12%. Among others betting on the space are hedge funds Atalaya Capital, Vinland Capital, Mar Asset Management and XP Asset Management. With crude prices still near a lofty $100 a barrel after Russia’s invasion of Ukraine spurred sanctions and strangled global supplies, drillers like 3R Petroleum offer a new way to wager on soaring output from Brazil — a country that’s set to add more production through 2026 than any other outside of the US and OPEC. Since 2019, Petrobras has sold off more than 100 oil and gas fields to about a dozen junior companies, some created specifically to buy those assets. While the state-owned producer is still Brazil’s biggest by far, its CEOs have come under fire from President Jair Bolsonaro as he tries to tackle high fuel prices. The recent management shakeups and the threat of more upheaval in an election year have some oil investors looking elsewhere. They see massive profit potential in the juniors, which promise to deliver substantial increases in output from fields long neglected by Petrobras. Brazil’s oil regulator, ANP, says production from those assets will jump 122% by 2025 after eight years of declines. “Brazilian oil juniors are good investment alternatives,'' said Marcos Peixoto, a Sao Paulo-based portfolio manager at XP Asset Management. “These firms are poised for significant output growth and shares look attractive even assuming a scenario of lower oil prices.'” Until 1997, when its official monopoly ended, Petrobras was the sole oil and gas producer in Brazil. Even today, the Brazilian Independent Oil and Gas Producers Association has only 19 members, compared with about 9,000 independent drillers in the US. But with money flowing in from investors, juniors are expected to account for 8.8% of Brazil’s production by 2024, up from 7.2% currently, according to consultant Wood Mackenzie.
Libya to reopen oil fields and export terminals after reaching deal with protestors— Libya’s government, National Oil Corp. and protesters have reached an agreement to reopen oil fields and export terminals, officials said. The agreement will be announced later on Friday, the officials said, asking not the be named because the information isn’t public. The deal follows a pledge from the new head of Libya’s National Oil Corp. to end a blockade and double crude production to 1.2 million barrels a day within a week. Libya, a member of the Organization of Petroleum Exporting Countries, has seen its production plummet by about 50% in recent months due to a power struggle between rival governments, while chronic under-investment in infrastructure has also curtailed output. The slump has exacerbated a supply shortage in oil markets, putting upward pressure on prices that have added to inflation across the globe. “The first step I will take is to return to previous oil production rates before the closure, and it will be within a week,” NOC Chairman Farhat bin Qadara said in an interview with Bloomberg, hours after replacing long-serving oil boss Mustafa Sanalla. Libya’s energy facilities have been at the heart of the nation’s political conflicts, with different groups shutting down oil output for various political and economic demands. In the most recent incident, protesters pressed for the dismissal of Sanalla. A rift between Sanalla and the oil ministry that was reinstated by the Tripoli-based government of Prime Minister Abdul Hamid Dbeibah last year has been another major source of uncertainty.
Libya lifts exports production ban on all oil fields and ports -- LIBYA’S government, National Oil Corp (NOC) and protesters have reached an agreement to reopen oil fields and export terminals, officials said on Friday (Jul 15). The deal was announced at a press conference in Benghazi and follows a pledge from the new head of Libya’s NOC to end a blockade and double crude production to 1.2 million barrels a day within a week. Libya, a member of the Organization of Petroleum Exporting Countries, has seen its production plummet by about 50 per cent in recent months due to a power struggle between rival governments, while chronic under-investment in infrastructure has also curtailed output. The slump has exacerbated a supply shortage in oil markets, putting upward pressure on prices that has added to inflation across the globe. “The first step I will take is to return to previous oil production rates before the closure, and it will be within a week,” NOC Chairman Farhat bin Qadara said in an interview with Bloomberg, hours after replacing long-serving oil boss Mustafa Sanalla. Libya’s energy facilities have been at the heart of the nation’s political conflicts, with different groups shutting down oil output for various political and economic demands. In the most recent incident, protesters pressed for the dismissal of Sanalla. A rift between Sanalla and the oil ministry that was reinstated by the Tripoli-based government of Prime Minister Abdul Hamid Dbeibah last year has been another major source of uncertainty. Oil Minister Mohamed Oun has repeatedly called on Dbeibah to oust Sanalla, trying without success to unseat him at least once over the past year. Dbeibah finally decided to replace him, and a government force was sent to NOC headquarters on Wednesday to install the new board. Sanalla refused to leave and argued in a televised speech in the evening that Dbeibah’s government lacked legitimacy. In a video circulated on social media on Thursday, employees were seen rallying at the entrance of the headquarters to prevent members of the handover commission from entering. Later, Bin Qadara was able to enter the building with a government force, and Sanalla left.
Saudi Arabia agrees to increase oil production levels, will help 'stabilize markets,' White House says - The White House on Friday said Saudi Arabia has committed to increasing oil production in July and August—a move that will help "stabilize markets considerably." The commitment from Saudi Arabia came after bilateral meetings between President Biden and administration officials and King Salman bin Abdulaziz al Said and Crown Prince Mohammed bin Salman, as well as Saudi Ministers. "Saudi Arabia has committed to support global oil market balancing for sustained economic growth," the White House said. "We have welcomed the increase in production levels 50 percent above what was planned for July and August." "These steps and further steps that we anticipate over the coming weeks have and will help stabilize markets considerably," the White House said. Also in the meetings, the White House said Biden welcomed the singing of a bilateral Partnership Framework for Advancing Clean Energy, with new Saudi investments to "accelerate the energy transition and combat the effects of climate change." The White House said the framework "focuses particularly on solar, green hydrogen, nuclear, and other clean energy initiatives." "By building upon existing collaboration between energy experts in our countries, we seek to enhance our efforts to tackle climate change and advance greater deployment of clean energy resources around the world," the White House said, noting the partnership "will leverage public and private sector collaboration to advance the deployment of clean energy solutions while accelerating research, development, and demonstration of innovative technologies needed to decarbonize the global economy and achieve net-zero emissions."
US not expecting Saudi Arabia to immediately boost oil output -— The United States does not expect Saudi Arabia to immediately boost oil output and awaits the outcome of an Opec+ meeting on August 3, the US national security adviser said yesterday, lowering expectations as US President Joe Biden visits the kingdom. “I don’t think you should expect a particular announcement here bilaterally because we believe any further action taken to ensure that there is sufficient energy to protect the health of the global economy, it will be done in the context of Opec+,” Jake Sullivan said. Earlier yesterday, a US official had also told Reuters that Washington was not expecting any immediate output rise as a result of the visit. Biden landed in Jeddah yesterday on a trip that is designed to reset the US relationship with the kingdom and during which energy supply, human rights and security cooperation are on the agenda. The US could secure a commitment that Opec+ will boost production in the months ahead, which could send a signal to the market that supplies are coming if necessary. Saudi Arabia, alongside the United Arab Emirates, holds the bulk of spare capacity within the Opec+ group, an alliance between the Organisation of the Petroleum Exporting Countries and other exporters, notably Russia. Soon after his landing, Biden met and shook hands with the Saudi king and held a meeting with Crown Prince Mohammed bin Salman and other ministers, including energy minister Prince Abdulaziz bin Salman. But the kingdom has repeatedly indicated it would not act unilaterally. O Brent crude prices are trading around US$100 (RM444.90) a barrel, having fallen from a 14-year high of US$139.13 in March as investors weigh the impact on demand of Covid-19 lockdowns in top importer China and recession fears. “Saudi Arabia prefers to manage the market through the Organisation of the Petroleum Exporting Countries and allied producers (Opec+), not through unilateral moves,”
Biden to end Middle East trip with no announcement on increasing oil supply— President Joe Biden will leave the Middle East this week with no announcements on increasing oil supply before a scheduled meeting of producers next month, people familiar with the matter said. Biden, who came to office vowing to turn the world’s biggest oil exporter into a “pariah” over the 2018 killing of Washington Post columnist Jamal Khashoggi, said he decided to make the trip to advance US interests and try and curb soaring gasoline prices, which have hurt him politically ahead of mid-term elections. Biden heads to Saudi Arabia from Israel later on Friday, where he’ll meet with King Salman bin Abdulaziz and his son, Crown Prince Mohammed Bin Salman, the nation’s de-facto ruler. He will meet other leaders from the oil-exporting Persian Gulf on Saturday. Officials from the US and Saudi governments have been in close contact on the issue of energy markets, and discussions will continue regarding output from members of the OPEC+ cartel, one of the people said, asking not to be named because the deliberations aren’t public. Biden officials privately say agreements have been reached but no details will be announced until the next scheduled meetings of OPEC+ next month. “I don’t think you should expect a particular announcement here bilaterally because we believe any further action taken to ensure that there is sufficient energy to protect the health of the global economy will be done in the context of OPEC+,” Jake Sullivan, Biden’s national security advisor, told reporters on the flight to Jeddah.
Saudi Arabia doubles Q2 Russian fuel oil imports for power generation - - Saudi Arabia, the world's largest oil exporter, more than doubled the amount of Russian fuel oil it imported in the second quarter to feed power stations to meet summer cooling demand and free up the kingdom’s own crude for export, data showed and traders said. Russia has been selling fuel at discounted prices after international sanctions over its invasion of Ukraine left it with fewer buyers. Moscow calls the war in Ukraine a "special military operation". The increased sales of fuel oil, used in power generation, to Saudi Arabia show the challenge that US President Joe Biden faces as his administration seeks to isolate Russia and cut its energy export revenues. While many countries have banned or discouraged purchases from Russia, China, India and several African and Middle Eastern nations have increased imports. Biden is due to visit Saudi Arabia later this week, when he is expected to seek an increase in oil supply to global markets from the kingdom to help lower oil prices that have aggravated inflation worldwide. There is little spare capacity for Saudi and others to increase production in the short term. Saudi Arabia has also maintained its cooperation with Russia in the alliance of global producers known as OPEC+. The two are the de facto leaders of respectively OPEC and non-OPEC producers in that group. Data obtained by Reuters through Refinitiv Eikon ship tracking showed Saudi Arabia imported 647,000 tonnes (48,000 barrels per day) of fuel oil from Russia via Russian and Estonian ports in April-June this year. That was up from 320,000 tonnes in the same period a year ago. For the full year 2021, Saudi Arabia imported 1.05 million tonnes of Russian fuel oil.
OPEC sees global oil demand reaching 102.99 mil b/d in 2023 | S&P Global Commodity Insights --OPEC continued to project strengthening oil demand growth for the rest of this year, providing the producer bloc and its allies support to keep increasing supplies as many countries seek alternatives to Russian fuel after its invasion of Ukraine. OPEC's analysts kept 2022 oil demand at 100.29 million b/d, up 3.36 million b/d from 2021, in the organization's closely watched monthly oil market report released July 12. In its first forecast for 2023, OPEC sees demand rising another 2.70 million b/d to 102.99 million b/d for the year, with the 100 million b/d mark exceeding throughout the year. The data come as OPEC, Russia and allies are aiming to restore output to prepandemic levels by August. The increased supplies have not been enough for a few consuming countries, including the US, which has repeatedly called on the producer group to supply more crude oil. US President Joe Biden is scheduled for a trip to Saudi Arabia July 14-16 for a meeting with Persian Gulf leaders, and the oil market is expected to be a subject of discussion. "Oil demand in 2023 is expected to be supported by a still solid economic performance in major consuming countries, as well as improved geopolitical developments and containment of COVID-19 in China," OPEC said. The projection of world GDP growth of 3.2% in 2023 "assumes that the ramifications of the pandemic, geopolitical developments in Eastern Europe and global financial tightening amid rising inflation do not negatively impact the 2023 growth dynamic to a major degree." For 2023, gasoline and diesel are expected to lead oil demand growth. Jet fuel will continue to recover as domestic and international travel picks up while business travel continues to lag, according to OPEC. Light distillates will be supported by capacity additions including NGLs plants in the US, propane dehydration plants in China and steady petrochemicals margins, it said, repeating the same outlook it gave for light distillates for 2022. While non-OPEC liquids production is forecast to climb 1.71 million b/d in 2023, OPEC's NGLs and non-conventional output is set to increase only 50,000 b/d compared with 110,000 b/d in 2022, the analysis showed.
OPEC Remains 1 Million Bpd Below Target - The ten OPEC producers in the OPEC+ pact pumped 24.8 million barrels per day (bpd) of crude oil in June, OPEC data showed on Tuesday, with production falling 1 million bpd short of the target levels. All 13 OPEC members produced 28.716 million bpd in June, up by 234,000 bpd from May, according to secondary sources used by OPEC to track production in itsMonthly Oil Market Report (MOMR). The 10 producers in the OPEC+ pact, however, produced 24.8 million bpd, which was 1 million bpd below OPEC’s own target of 25.864 million bpd for the ten members for June. Iran, Libya, and Venezuela are exempted from the production pact. Libya saw the biggest decline in output in June, as its production fell to below 1 million bpd in each of the months in the second quarter due to continued unrest, protests, and port blockades.Top OPEC producer Saudi Arabia naturally raised its crude oil production by the most in June compared to May. Yet, per OPEC’s secondary sources, even the Saudis were lagging behind their quota for June. Saudi Arabia’s oil production rose by 159,000 bpd to 10.585 million bpd, OPEC said. To compare, the Saudi target was 10.663 million bpd, so the Kingdom was 78,000 bpd below its quota last month using secondary source figures. But Saudi Arabia self-reported to OPEC that its production figures were indeed in line with its target—10.646 million bpd.The UAE, the only other OPEC producer apart from Saudi Arabia believed to have spare capacity to boost production—slightly exceeded its target as it produced 3.083 million bpd, versus a 3.075 million bpd quota.Iraq, OPEC’s second-largest oil producer, was 75,000 bpd below its target, according to OPEC’s secondary sources. The biggest laggard for several months has been Nigeria. Its oil production averaged 1.238 million bpd in June, while its quota was 1.772 million bpd.This month and next, the targets for the OPEC-10 are even higher as OPEC+decided to accelerate the rollback of the cuts and have those completely unwound by the end of August. Saudi Arabia has a 10.833 million bpd target for July, and 11 million bpd for August.
Oil Price Crash Undermines OPEC's Optimistic Demand Forecast - Global oil demand is expected to slow down from 3.36 million bpd of growth this year to a growth of 2.7 million bpd in 2023, OPEC said on Tuesday in its first demand estimates for next year. These demand estimates appear particularly optimistic on Tuesday morning as concerns about an economic slowdown and renewed Covid lockdowns in China sent oil prices crashing by more than 7%.Solid economic growth in major consuming countries, improved geopolitical developments, and containment of COVID outbreaks in China are set to support global oil demand in 2023, the cartel said in its closely-watched Monthly Oil Market Report (MOMR) published today.Although the annual pace of growth is expected to slow to 2.7 million bpd next year from 3.36 million bpd this year, total world demand in 2023 is expected to average a record high at 103 million bpd, up from 100.29 million bpd expected for 2022. Currently, OPEC sees global oil demand in the fourth quarter of 2023 at as high as 105.4 million bpd.OPEC assumes that the global economy will grow in 2023 and that COVID, the war in Ukraine, or monetary policy tightening will not impact economic growth “to a major degree.” OPEC’s estimates of global oil demand also assume that major economies revert back towards growth.“Nevertheless, uncertainty to the forecast remain to the downside, with much depending on the course of the pandemic and related measures, global financial tightening in the light of growing inflation, and the resolution of the ongoing geo-political issues in Eastern Europe,” OPEC said.Last month, in its first outlook for 2023, the International Energy Agency (IEA) said that oil demand growth was set to accelerate next year, with global demand averaging a record 101.6 million bpd and exceeding pre-COVID levels.“While higher prices and a weaker economic outlook are moderating consumption increases, a resurgent China will drive gains next year, with growth accelerating from 1.8 mb/d in 2022 to 2.2 mb/d in 2023,” the IEA said in its Oil Market Reportfor June.In terms of supply, OPEC said today it expects U.S. liquids production growth of 1.1 million bpd in 2023, mainly from crude in the Permian and non-conventional natural gas liquids (NGLs).
Recession Fears Can't Curb The Commodity Boom - Last week, Brent crude fell below $100 per barrel for the first time in months. So did West Texas Intermediate. Copper dropped to the lowest in almost two years. It looked like inflation had done its evil deed. A recession was coming, and demand for commodities was about to plunge. And then both oil and copper rebounded. It lasted all of one day, although the price of copper has been fluctuating with the flow of news from China and the prospects of its economy for the rest of the year and the medium term. The latest copper price rebound was, in fact, attributed by some to the possibility that the Chinese government would provide additional stimulus to keep the economy going at a healthy pace.The rebound in oil, however, was easy to see coming despite the notorious uncertainty of oil markets. And the reason it was easy to see coming was fundamentals. Whatever happens in the speculative market, the fact that the global supply of oil is tight while demand is very much alive and still rising cannot be ignored.The Financial Times out it quite clearly. In an article from earlier this week addressing the price drop across commodities, the authors said that “Hedge funds have been central to the recent price declines across commodities — selling out of long, or positive, positions in certain commodities and often replacing them with bearish wagers.”If the big scare of 2020 and 2021 was Covid, this year has two: Russia’s Vladimir Putin and recession. And it is increasingly looking like the latter is overtaking the former in terms of scare value.Talk about recession is all over the news. Central banks are being targeted with criticism for tightening monetary policy too fast, accelerating recessionary pressure. It was only a matter of time before hedge funds decided to play it safe and start selling out. But, and this is the important bit, this has nothing to do with fundamentals. Fundamentals are why oil was up a day after the dip.Just how much nothing market price movements have to do with actual demand and supply sometimes was recently highlighted by Wells Fargo. According to the bank’s investment strategy division, the United States, the world’s largest oil consumer, is already in a recession.“There’s the technical part of the recession, but then there’s the meaningful deterioration in consumption and employment,” Wells Fargo Investment Institute’s senior global market strategist Sameer Samana told Bloomberg this week. “The technical part is a first half story and the brunt of the unemployment and consumption is the second-half,”
Yellen says price cap on Russian oil is 'one of our most powerful tools' to address inflation— A cap on Russian oil prices will be crucial to help bring down inflation as U.S. consumer inflation soared to a 40-year high of 9.1% this week, U.S. Treasury Secretary Janet Yellen said on Thursday. Speaking before the start of the Group of 20 finance ministers and central bank governors meeting in Bali, Yellen said efforts must be expended to rein in two key economic fallouts from the Russia-Ukraine crisis — that is, high fuel prices and rising food insecurity which are sweeping across the U.S. and globally. High energy costs contributed heavily to the spike in U.S. inflation this week, she added. "We're seeing negative spillover effects from [the Russia-Ukraine] war in every corner of the world, particularly with respect to higher energy prices, and rising food insecurity," Yellen said. A price cap on Russian oil is one of our most powerful tools to address the pain that Americans and families across the world are feeling at the gas pump and the grocery store right now. She said the U.S. will continue conversations with other countries to see "what we can do together to help others around the world impacted by Russia's war." It includes addressing food insecurity, and the design and implementation of a price cap on Russian oil, she added. "A price cap on Russian oil is one of our most powerful tools to address the pain that Americans and families across the world are feeling at the gas pump and the grocery store right now. A limit on the price of Russian oil will deny Putin revenue his war machine needs." As Washington bans Russian oil and European countries look to cut Russian oil use, prices of oil have surged. Crude oil prices rose above $120 a barrel in March after the Russia-Ukraine war started. Economists have warned that further bans could propel prices to as high as $175 a barrel.
Putting a price cap on Russian oil won't solve energy supply issues, Indonesian minister says - Capping Russian oil prices won't solve the world's energy problems, said Indonesian Finance Minister Sri Mulyani Indrawati on Friday. Prices are high because demand outstrips supply, which has been disrupted, and a price ceiling will not resolve that, she said. "Putting a cap definitely is not going to solve the problem, because it is about the quantity which is not adequate, comparing to the demand which is in place," she told CNBC's Martin Soong at the Group of 20 meeting of finance ministers and central bank governors in Bali, Indonesia. As the U.S. and European nations move toward winter, demand for energy will increase further, she added. Her comments came a day after U.S. Treasury Secretary Janet Yellen said a price cap is "one of our most powerful tools" to fight inflation. The U.S. and other G-7 countries are considering a cap on Russia's oil prices in a bid to limit funds flowing into the Kremlin's war chest while lowering the cost of energy for consumers. But analysts have questioned whether such a plan would work, since Russia could choose not to sell at the price set by the U.S. and its allies. In addition, countries such as India and China, which have been snapping up oil from Russia, may not agree to the price cap.
OPEC's First 2023 Outlook Shows No Relief for Oil Market Squeeze - OPEC’s first oil-market outlook for 2023 suggests no relief for squeezed consumers, with more crude needed from the group even though most members are already pumping flat out. The Organization of Petroleum Exporting Countries expects global oil demand growth to exceed the increase in supplies by 1 million barrels a day next year. To fill the gap, OPEC would need to significantly hike production, but members are already falling far behind the volumes needed right now due to underinvestment and political instability. For the latest headlines, follow our Google News channel online or via the app. ADVERTISING Crude prices are holding above $100 a barrel as the world’s oil fields and refining facilities fail to keep pace with the post-pandemic rebound in fuel demand. That’s exacerbating a cost-of-living crisis and threatening to tip the global economy into recession. President Joe Biden is urging Middle East producers to ease the crisis by opening the taps. He will visit the region this week with a planned stop in OPEC leader Saudi Arabia, but many analysts expect Gulf exporters to ration their remaining spare production capacity carefully. If Biden does persuade Riyadh and the neighboring United Arab Emirates to provide some extra supply, the move will likely be formalized at the next meeting of OPEC and its partners on Aug. 3, according to RBC Capital Markets LLC. The report published by OPEC’s Vienna-based research department on Tuesday indicates the supply crunch will persist. Global demand will expand by 2.7 million barrels a day next year, bolstered by growth in emerging economies, while supplies outside OPEC will increase by 1.7 million a day, according to the cartel’s analysis. Gasoline and diesel fuel will drive the growth in consumption. To balance supply and demand, OPEC would need to provide an average of 30.1 million barrels a day in 2023. That’s 1.38 million a day more than the cartel’s 13 nations pumped in June. OPEC has been reviving production halted during the pandemic, with a final tranche scheduled for next month. Yet the group is pumping well below its collective target because nations such as Angola and Nigeria have seen their capacity eroded by insufficient investment and operational problems. Troubled member Libya has suffered a collapse in its production collapse amid renewed political unrest. Because of this supply shortfall, fuel inventories in industrialized nations are shrinking rapidly, dropping to 312 million barrels below the five-year average in May. OPEC’s assessment of 2023 fits in with the prevailing view across the petroleum industry, with the Paris-based International Energy Agency -- which represents consuming nations -- also predicting that supplies will remain under strain.
Explaining The Disconnect Between Physical And Paper Oil Markets - A couple of days ago, Saudi Arabia shocked oil punters after it hiked oil prices for its biggest market, Asia, in the middle of one of the biggest oil crashes this year. State producer Saudi Aramco hiked its key Arab Light crude grade for Asian customers by $2.80 a barrel from July's level to a premium of $9.30 a barrel over the regional Oman/Dubai quotes, bringing it just shy of the record $9.35 a barrel premium seen in May. The increase in the country's official selling price (OSP) came just hours before the futures market went into a tailspin, with Brent and WTI both crashing nearly 10% on Tuesday. Indeed, benchmark Brent futures have slumped 11.3% just two days after the price hike, ostensibly on weak demand and recession fears.On a certain level, Saudi Arabia's 'mad' decision to hike prices in this environment appears to make sense.After all, refining margins have gone amok, with the profit from making a barrel of gasoil at a typical Singapore refinery hitting an all-time high of $68.69 on June 24. Although the margin has since retreated to $41.80 a barrel at the close on Wednesday, it's still almost 4x higher than the $11.83 at the end of last year, and a staggering 550% above the profit margin at the same time in 2021.But the fact that the physical market for crude (bullish) doesn't seem to match the futures market (bearish) suggests there is a serious disconnect between the two.At this juncture, it's important to make the distinction between the physical market for crude and the crude futures market.Physical (also known as cash) market prices are determined by the supply and demand for physical crude. Here traders buy oil from the producer and sell it to the refiner for immediate delivery. Physical buyers and sellers have a direct pulse on the market and may feel immediately when it is well supplied, or not.Futures prices, on the other hand, are determined by the supply and demand for crude futures positions. Futures markets provide traders with a means to bet on crude prices at certain points in the future, and also allows physical market participants to hedge their position and, therefore, minimize risk. The ongoing disconnect between physical crude and futures markets can mainly be pinned on worsening fears of a serious economic slowdown that might curtail oil demand. Months of dwindling liquidity, alongside heavy technical selling as well as hedging activity by oil producers, have all contributed to the oil futures selloff. However, the biggest driver has been concern about a possible recession and an overly hawkish Fed, which have served to undermine the idea of oil prices being a means of hedging against inflation. Saudi Aramco does not disclose the pricing formula that it employs to set its OSPs; however, experts think it's a fairly technical process that takes into account refining margins, the relative price between Oman/Dubai and Brent, and the actual volumes being sought by refining customers.The big problem with using a technical process to determine your OSP as the Saudis do is that the price cannot quickly adapt to the highly unusual circumstances in the current global oil market.Lower Brent prices will encourage refiners in Asia that can easily switch crude grades to buy more oil from suppliers such as West African producers, including Angola and Nigeria, that price against the global benchmark. Further, Asian refiners that have no qualms about buying highly discounted Russian Urals will also jump ship, thus leaving Saudi crude and the Middle East grades that price against it less desirable.
Oil steadies as China COVID fears face tight supply concerns (Reuters) - Oil prices were little changed on Monday as markets balanced an expected drop in demand due to mass testing for COVID-19 in China against ongoing concerns over tight supply. Brent futures for September delivery gained 8 cents, or 0.1%, to settle at $107.10 a barrel, while U.S. West Texas Intermediate (WTI) crude fell 70 cents, or 0.7%, to settle at $104.09. With the U.S. Federal Reserve expected to keep raising interest rates, open interest in New York Mercantile Exchange (NYMEX) futures CL-TOT fell on July 7 to its lowest since October 2015 as investors cut back on risky assets. Last week, oil speculators cut their net long futures and options positions on the NYMEX and Intercontinental Exchanges to their lowest since April 2020. “The oil market is being pulled in two directions with exceedingly tight physical fundamentals set against forward-looking demand concerns and signs of price-induced demand destruction,” analysts at EBW Analytics said in a note. The market was rattled earlier in the session by news that China had discovered its first case of a highly transmissible Omicron subvariant in Shanghai that could lead to another round of mass testing, which would hurt fuel demand. Also putting pressure on oil was a rise in the U.S. dollar against a basket of other currencies to its highest since October 2002. A stronger dollar reduces demand for oil by making the fuel more expensive for buyers using other currencies. Euro zone finance ministers said the fight against inflation was the current priority despite dwindling growth in the bloc, as they were informed of a deteriorating economic outlook by the European Commission. The market remains jittery about plans by Western nations to cap Russian oil prices, with Russian President Vladimir Putin warning that further sanctions could lead to “catastrophic” consequences in the global energy market. JP Morgan said the market was caught between concern over a potential halt to Russian supplies and a possible recession. “Macro risks are becoming more two-sided. A 3 million barrel (bbl) per day retaliatory reduction in Russian oil exports is a credible threat and if realized will drive Brent crude oil prices to roughly $190/bbl,” the bank said in a note. “On the other hand, the impact of substantially lower demand growth under recessionary scenarios would see the Brent crude oil price averaging around $90/bbl under a mild recession and $78/bbl under a scenario of a more severe downturn.” Questions also remain about how long more crude will flow from Kazakhstan via the Caspian Pipeline Consortium (CPC). Supply has continued so far on the pipeline, which carries about 1% of global oil, with a Russian court overturning an earlier ruling suspending operations there.
Oil tumbles towards $100, as renewed COVID-19 lockdowns in China and recession fears depress demand outlook Crude oil extended losses on Tuesday, with the global benchmark tumbling towards $100 a barrel, as COVID-19 lockdowns in China and recession worries take center stage. Brent crude futures were last down 2.25% $1.04.68. while WTI crudefell 2.47% to $101.32 a barrel. The slide in oil prices stems from a combination of both demand and supply-side pressures that have come into play recently. In China, about 30 million people have been placed under strict lockdown rules after the country reported 352 new COVID-19 cases on Sunday, per Bloomberg. The virus flare-up has forced the country to impose lockdown restrictions in at least six cities to curb the infection from spreading, and oil is paying the price for it as restrictions tear away at demand. "A rise in Covid cases in Shanghai will not be helping sentiment, particularly given that China continues to pursue its zero-Covid policy, which creates a fair amount of demand risk for the market," ING strategist Warren Patterson said.Meanwhile, concerns that the US and Europe may soon slump into a recession are growing as both regions suffer from soaring inflation and high interest rates as energy prices surge. "Markets remain torn between recession fears in the US, Europe, and China torpedoing growth and thus, oil consumption, and the still very tight supply/demand reality of the physical market," OANDA market analyst Jeffrey Halley said. Other factors that have added to the bearishness in oil include the halt in flows of Russian natural gas to parts of Europe via the Nord Stream 1 pipeline which is undergoing seasonal maintenance. French minister Bruno Le Maire is one of a number of European leaders that have expressed concern that the shutdown could become permanent as Russia finds ways to retaliate against Western sanctions.
Oil Futures Slump on Fear of China Lockdown, EU Recession -- Oil futures fell sharply on Tuesday amid a one-two punch of a fresh COVID-19 resurgence in China, unnerving investors over another demand-sapping lockdown in the world's second-largest economy, and considerable deterioration in the economic outlook for the Eurozone after the start of annual maintenance on Nord Stream 1 -- the single largest pipeline carrying Russian gas into continental Europe exacerbated concerns over an energy crisis, further weakening the euro against U.S. dollar. An economic survey out of Germany, the Eurozone's largest economy, showed a remarkable deterioration in business activity across energy-intensive and export-oriented industries in July. Index of expectations for the next six months has fallen to -53.8 from -28 in the previous month, with experts citing inadequate energy supplies behind the sudden drop in economic activity. Germany reported its first monthly trade deficit since 1991 at the end of the second quarter as manufacturers struggled to absorb surging costs for imports and softer demand for their products in Asia. Germany has greenlighted the restart of 10 coal-fired power plants this month because of concerns over Russia's intentions, particularly after Moscow reduced gas flows through Nord Stream 1 by 60% since the beginning of the invasion. Recession concerns are weighing heavily on the euro, which neared parity with the U.S. dollar in index trading for the first time since 2002. The U.S. dollar index traded 0.41% higher at 108.270 in early index trade Tuesday, with the euro eroding further to 1.00625. With uncertainly skewed to the downside, Organization of the Petroleum Exporting Countries in its Monthly Oil Market Report released this morning downgraded its second quarter demand projections to 98.33 million bpd from 99.33 million bpd seen in the first quarter. For the year, however, global oil demand growth is projected to remain unchanged from the previous month's assessment at 3.4 million bpd... Further weighing on the complex, outbreak of Omicron subvariant BA.5 in China raised the threat of another government clampdown on economic activity in Asia's largest economy. More than 2,300 locally transmitted cases have been reported nationwide in the past seven days, with infections again on the rise in the commercial and manufacturing powerhouse of Shanghai, a city of 26 million. Compounding fears over more lockdowns, bank runs are being reported across China that are further fueling anxiety over the world's second-largest economy, with protests emerging in the communist country after depositors were unable to withdraw their funds. Video on Twitter shows a throng of men in white and black violently storming a large gathering of protestors seeking the return of their deposits. Near 7:30 AM ET, NYMEX August West Texas Intermediate futures fell below $100 bbl, down $4.76, and ICE August Brent futures started the session more than $4 bbl lower at $102.65 bbl. NYMEX August RBOB futures plummeted 15.86 cents to $3.3034 gallon, while August ULSD futures declined 9.89 cents to $3.6692 gallon.
China Lockdowns Stoke Recession Fears As Oil Plummets Almost 8% - Analysts in the previous session remarked that sentiment remains sour within the crude market sector, and this proved again true on Tuesday with recession fears causing oil prices to plummet to a three-month low. Specifically, a combination of dwindling liquidity and ongoing concern over China reacting to a handful of new Covid cases by restricting travel and closing businesses yet again resulted in West Texas Intermediate shedding almost 8 percent to settle under $96 per barrel for the first time since early April. Brent settled $7.61, or 7.1 percent lower, at $99.49 per barrel, its lowest since April 11; WTI plummeted $8.25, or 7.9 percent, at $95.84. Since their peak this year in March, Brent and WTI have declined 29 and 27 percent respectively. Rebecca Babin, senior energy trader at CIBC Private Wealth Management, pointed out that, "The decimation of other commodities has also reduced risk appetite for crude even in a supply-constrained market." Recession fears have caused hedge funds and other money managers to sell the equivalent of 110 million barrels in the six most important petroleum-related futures and options contracts in the week to July 5. And yet, the idea of demand destruction remains purely hypothetical: Tuesday also saw premiums for North Sea oil bid at the highest since at least 2008, a solid show of strength, while Fatih Birol, executive director of the International Energy Agency, said nations "might not have seen the worst" of the global energy crunch. Additionally, the Organization of Petroleum Exporting Countries (OPEC) said in a report released on Tuesday that it expects global oil demand growth to exceed the increase in supplies by 1 million barrels a day next year. The cartel went on to forecast that global demand will expand by 2.7 million barrels per day (bpd) next year, bolstered by growth in emerging economies, while supplies outside OPEC will increase by 1.7 million bpd. The report also stated that, "In 2023 expectations for healthy global economic growth amidst improvements in geopolitical developments, combined with expected improvements in the containment of COVID-19 in China, are expected to boost consumption of oil."
WTI Holds Big Losses After API Reports Across-The-Board Inventory Builds -Oil prices tumbled to 3-month lows on the back of China's renewed lockdowns (demand) and anxiety over tomorrow's US CPI print, which has prompted hedge funds to reduce exposure dramatically into what appears more and more a binary outcome.“The volatility in commodity markets increases the stakes for putting money to work,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Management. “The decimation of other commodities has also reduced risk appetite for crude even in a supply-constrained market.”A surging dollar is also acting as a headwind for oil bulls.For now, traders are watching API's inventory data for any signal that could break WTI's technical levels...API
- Crude +4.762mm (+1.4mm exp)
- Cushing +298k
- Gasoline +2.927mm (-200k exp)
- Distillates +3.262mm (+900k exp)
API reported inventory builds across both crude and products along with another rise in stocks at Cushing... WTI hovered around $95.75 ahead of the API data, just above its 200DMA... WTI dipped a little on the print then rebounded to unchanged on the data - holding the big losses on the day...
Crudes Gain Ahead of CPI After IEA Warns of Energy Squeeze -- After Tuesday's sell-off triggered by recession fears in the Eurozone and persistent inflation in the United States, West Texas Intermediate futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange rebounded higher in overnight trade after the International Energy Agency trimmed its 2022 and 2023 demand projections only modestly, citing a stronger-than-expected rebound in China and emerging markets, while warning that ongoing risks to the supply side will keep the physical market tight for the foreseeable future. Although high fuel prices have started to dent demand in Europe and the U.S., global oil consumption is still expected to grow by 1.7 million barrels per day (bpd) this year and 2.1 million bpd in 2023, according to estimates from the Paris-based IEA. The driver behind the resiliency is a stronger-than-expected demand rebound in emerging and developing economies led by China as it starts to emerge from COVID-19 lockdowns. It must be noted, however, that persistent COVID-19 flare-ups coupled with China's "zero-COVID" policy stand to undermine this optimistic scenario. China's nationwide seven-day average infections climbed by 2,300 -- the fastest pace since May. In Europe, it's difficult to see how a recession can be avoided as geopolitical tensions with Russia ratchet up that are worsening a growing trade deficit and surging inflation that reached a record-high 8.6% in June. Forecasts for both inflation and economic growth across the Eurozone are being rapidly revised as EU prepares itself for the potential total cutoff of Russian gas supplies. On the supply side, IEA revised slightly higher its oil production estimates for the remainder of the year due to Russia's surprisingly strong performance. The agency raised 2022 Russia oil output forecast by 240,000 bpd to 10.61 million bpd. While world oil production is expected to grow by roughly 1.8 million bpd through December, rising short-term risks to oil output in Kazakhstan, Libya, and elsewhere have put the spotlight on spare capacity, which now is held primarily by Saudi Arabia and the United Arab Emirates. Their combined buffer could fall to just 2.2 million bpd in August with the full phase out of record OPEC+ cuts. IEA warned that global oil inventories remain critically low, with recent builds concentrated in China, where refiners reduced runs due to weaker demand amid COVID lockdowns. As an EU embargo on Russian oil is set to come into full force at the end of the year, the oil market may tighten once again. U.S. dollar pulled back slightly from a fresh 20-year high 108.420 reached Tuesday overnight, trading 0.13% lower against a basket of foreign currencies. WTI August contract gained $0.73 to trade near $96.50 bbl. U.S. crude benchmark nosedived $8.25 bbl on Tuesday for one of the largest one-day declines of the year. International crude benchmark Brent for September edged back above $100 bbl, up $0.59. NYMEX August RBOB futures declined 3.34 cents to $3.2312 gallon, while front-month ULSD advanced than 6 cents to $3.7323 gallon.
WTI Shrugs Off Large Inventory Builds, Gasoline Demand Tumbles --Oil prices are flat this morning, after bouncing back from some ugliness overnight, hovering around unchanged from last night's surprise API-reported inventory builds across the board. This morning's US CPI report prompted some volatility but that was quickly rejected.Recent weakness in oil prices has reflected Chinese cities imposing more lockdowns and curbs on movement to try to contain the spread of the latest highly contagious Omicron variant and has also been hindered by a strong dollar.A worsening macroeconomic outlook and fears of recession are weighing on market sentiment, while there are ongoing risks on the supply side. For now, weaker-than-expected oil demand growth in advanced economies and resilient Russian supply has loosened headline balances," the IEA said in its influential Monthly Oil Market Report.For now, the machines are watching for demand destruction, targeting that 200DMA technical level for WTI ($93.32)... DOE
- Crude +3.254mm (+1.4mm exp)
- Cushing +316k
- Gasoline +5.825mm (-200k exp)
- Distillates +2.668mm (+900k exp)
After API reported across-the-board inventory builds (and sizable ones too), the official DOE data confirmed with even larger product builds... The one big caveat to this seemingly big build is that crude stockpiles including the release from the strategic reserve actually contracted by 3.63 million barrels. The big question in the market is what happens when the government is no longer releasing about a million barrels a day in few months. There were builds across every sub-component in the energy complex... except the SPR, which saw a 6.8mm drain last week to its lowest level since 1985...
Oil rebounds after sell-off despite U.S. stock build, big inflation figure - Oil prices rose on Wednesday, recovering from the previous day's massive sell-off, despite a hike in U.S. oil inventories and after U.S. inflation figures bolstered the case for another big Federal Reserve interest rate increase. Brent crude ended the day 8 cents higher at $99.57 per barrel, while U.S. West Texas Intermediate crude settled 46 cents higher at $96.30 per barrel. Investors have been selling oil of late on worries that aggressive rate hikes to stem inflation will slow economic growth and hit oil demand. Prices fell by more than 7% on Tuesday in volatile trade to settle below $100 for the first time since April. However, the physical market remains tight. Key benchmarks, such as Forties crude and U.S. Midland crude, are trading at premiums to the futures market, painting a different picture than what is happening in futures. "Although I don't rule out more downside surprises, I believe the recent sell-off could be getting a little overdone," said Jeffrey Halley of brokerage OANDA. This week, both the Organization of the Petroleum Exporting Countries and International Energy Agency, in monthly reports, warned that demand was weakening, particularly in the largest world economies. U.S. oil inventories rose more than expected in a mild respite from the tightness in markets. U.S. commercial crude stocks rose by 3.3 million barrels, government data showed, versus expectations for a modest draw in stocks. Investors remain concerned about recent weakness in fuel demand worldwide that is also emerging in the United States. "Demand issues are catching up to high prices. The U.S. dollar is causing downside pressure on all commodities. There's been a shift in mentality over the last couple of weeks," said Tony Headrick, energy markets analyst at CHS Hedging. U.S. consumer prices accelerated to 9.1% in June as gasoline and food costs remained elevated, cementing the case for the Federal Reserve to hike interest rates by 75 basis points later this month. Brent is down sharply since hitting $139 in March, which was close to the all-time high in 2008. Renewed COVID-19 curbs in China have weighed on the market this week. The decline in crude futures has yet to be reflected in the strong physical oil market. Forties crude, one of the grades underpinning Brent futures, was bid at a record high premium to the benchmark of plus $5.35 a barrel on Tuesday. U.S. Midland crude was at a premium of $1.50 a barrel to WTI, also reflecting tightness but that grade was below premiums reached in late February after Ukraine was invaded.
Oil, Equity Futures Sink as Recession Chatter Grows Louder - Following equity markets lower, oil futures fell more than 3% Thursday as investors rapidly repriced the pace of interest rate hikes by the U.S. Federal Reserve and European Central Bank in the face of persistently high inflation, which is seen denting the global economy and fuel demand. West Texas Intermediate and Brent wiped out nearly all the gains triggered by the Russian invasion of Ukraine on Feb. 24 when the oil contracts traded in a roughly $95 to $99 barrel (bbl) range. At the heart of the sell-off is the narrative of demand destruction that is quickly taking an upper hand against Russian oil sanctions and perception of a tight physical oil market. On Wednesday, Bureau of Labor Statistics released their consumer price index for June that showed inflation in the United States is becoming ever more entrenched in the economy, with prices increasing at the fastest clip in 41 years. More than 80% of investors now expect the Federal Open Market Committee will hike interest rates by a historic full percentage point when the board meets in two weeks, according to CME's FedWatch Tool. Futures markets priced in just a 7% chance for a 100-basis point interest rate hike before the June CPI release. In Eurozone, money markets are also positioning for interest rate increases in September by ECB that has so far maintained its base rate into negative territory. The Bank of Canada shocked markets Wednesday by leading the way for other major central banks, raising its base rate by a 1%. Not surprisingly, rapid repricing in the face of monetary tightening and the hotter-than-expected inflation report once again stoked fears about a looming recession in the United States and elsewhere. Economists at Bank of America now see a contraction in U.S. growth this year followed by a moderate recovery. In the fourth quarter, BOA see real GDP 1.4% below the year-earlier level. Data from Federal Reserve Bank of Atlanta last updated July 8 show second quarter GDP already fell into contraction, down a negative 1.2%. Near 7:30 a.m. EDT, the U.S. dollar surged 0.74% against a basket of foreign currencies to a fresh 20-year high 108.6 to further pressure the front-month WTI contract that fell more than $3 to $93.24 bbl nearly five-month low on the spot continuous chart overnight. The international crude benchmark Brent contract for September declined $2.41 to $97.17 bbl. NYMEX August RBOB futures declined 10.68 cents to $3.1269 gallon, while front-month ULSD slid more than 6 cents to $3.5741 gallon.
Oil Dips in Volatile Trade as Pendulum Swings on Fed’s Upcoming July Hike - Crude prices fell on Thursday after swinging more than $7 a barrel as markets from oil to equities debated whether the Federal Reserve will impose a record rate hike to curb runaway U.S. price pressures or continue to prioritize growth over inflation.New York-traded West Texas Intermediate, or WTI, crude settled down 52 cents, or 0.5%, at $95.78 per barrel. WTI’s low of the day was $90.58 versus its peak of $97. The U.S. crude benchmark has lost 10% since the start of July.London-traded Brent crude settled down 47 cents, or 0.5%, at $99.10 a barrel. The global crude benchmark registered a session low of $95.42 versus a high of $101.21. For July, Brent is down 9%. Crude prices rebounded from their lows after Fed Governor Chris Waller said the central bank can’t overdo rate hikes despite shocking price pressures. Waller said he would support a 75-basis point hike at the Fed’s upcoming July 27th decision on rates, over market bets for a 100-basis point increase.The remarks from one of the Fed’s more hawkish members calmed investors who had been on tenterhooks since the Consumer Price Index for the year to June came in on Wednesday at a new four-decade high of 9.1%.The CPI data was followed up on Thursday with the Producer Price Index’s 11.3% rise during the year to June — the largest such increase since a record 11.2% jump registered during the 12 months to March 2022.St. Louis Fed President James Bullard, known as being a super hawk, also soothed investors by opting for a 75-bps hike in the upcoming July 27th decision on rates.Yet, both Waller and Bullard said they would be open to doing more on rates if data called for it.“For me, a 75-basis point increase at this meeting puts us to neutral,” Waller said. “However, if incoming data over the next two weeks shows that demand remains strong, I would incline toward a bigger rate hike.”“Neutral” is Fed speak for getting inflation back to its target of 2% a year.Bullard said it was plausible for the Fed funds rate to be “higher than 4% by the end of the year if data continues to come in in an unfavorable way”. Fed funds rates are currently at a high of 1.75%.
Oil prices climb amid questions over scale of US rate hike | Deccan Herald - Oil prices rose in early Asian trading on Friday amid uncertainty around how aggressive the US Federal Reserve will be in hiking interest rates to combat rampant inflation. Brent crude futures for September delivery rose 80 cents, or 0.8%,to $99.90 a barrel by 0007GMT, while WTI crude rose 69 cents, or 0.7%,to $96.47 a barrel. The Fed's most hawkish policymakers on Thursday said they favoured another 75-basis-point interest rate increase at the US central bank's policy meeting this month, not the bigger rate raise that traders had raced to price in after a report Wednesday showed inflation was accelerating. The Fed rate hike is expected to follow a similar move by the Bank of Canada, which surprised the market on Wednesday with a 100-basis-point increase. The rate hike uncertainty, along with weak economic data, caused both benchmark contracts to drop at one stage on Thursday to below the Feb. 23 close,the day before Russia invaded Ukraine in what Moscow calls "a special military operation". Still, both Brent and WTI had clawed back nearly all losses by the end of the trading session. US President Joe Biden will on Friday fly to Saudi Arabia, where he will attend a summit of Gulf allies and call for them to pump more oil. However, spare capacity at members of the Organization of the Petroleum Exporting Countries is running low, with most producers pumping at maximum capacity, and it is unclear how much extra Saudi Arabia can bring into the market quickly.
Oil rises 2% as no immediate Saudi output boost expected - Oil gained 2.5% on Friday after a U.S. official told Reuters that an immediate Saudi oil output boost was not expected, and as investors question whether OPEC has the room to significantly ramp up crude production. The comment during U.S. President Joe Biden's Middle East visit comes at a time when spare capacity at members of the Organization of the Petroleum Exporting Countries (OPEC) is running low. Brent crude futures settled at $101.16 a barrel, rising $2.06, or 2.1%, while West Texas Intermediate crude settled at $97.59 a barrel, gaining $1.81, or 1.9%. Brent crude futures for September delivery rose $2.06 to settle at $101.16 a barrel, a 2.08% gain. Both benchmarks saw their biggest weekly percentage drops in about a month, largely on fears earlier in the week that a nearing recession would chop away at demand. Brent lost 5.5% in its third weekly drop, while WTI was down 6.9% in its second weekly decline. Biden, prompted by energy and security interests, arrived in Jeddah on Friday and had been expected to call for Saudi Arabia to pump more oil. But the United States does not expect Saudi Arabia to immediately boost oil production and is eyeing the outcome of the next OPEC+ meeting on Aug. 3, a U.S. official told Reuters. "If the market was expecting an announcement between President Biden and (Saudi Crown Prince) Mohammed Bin Salman that oil production was going to be increased, they were sorely disappointed," The United States could still secure a commitment that OPEC will boost production in the months ahead in hopes that it will provide a signal to the market that supplies are coming if necessary. Meanwhile, the U.S. oil rig count, an early indicator of future output, inched up by two to 599 this week to their highest since March 2020, energy services firm Baker Hughes Co said. Also signalling more oil supply on the horizon was Libya's oil chief, who said crude output will resume after meeting groups that have blockaded the country's oil facilities for months. Lifting force majeure on production could mean a return of 850,000 barrels per day. Concerns that the Fed might opt for a full 100 bps rate rise this month and weak economic data had led to Brent and WTI shedding more than $5 on Thursday to below the closing price on Feb. 23, the day before Russia invaded Ukraine, though both contracts clawed back nearly all the losses by the end of the session. Analysts, however, expect continued pressure on oil from concerns over the global economy. Bearish market sentiment has also followed renewed COVID-19 outbreaks in China, which have hampered a demand recovery. China's refinery throughput in June shrank nearly 10% from a year earlier, with output for the first half of the year down 6% in the first annual decline for the period since at least 2011, data showed on Friday.
WTI, Brent Futures Post Weekly Losses on Recession Fears -- Oil futures settled Friday's session higher, though all petroleum contracts registered week-on-week losses. These were triggered by deepening concerns over recession in the United States and European Union as central banks move aggressively to raise interest rates to rein in excessive consumer demand. U.S. retail sales increased by 1% in June, according to the data released Friday from the Commerce Department, topping expectations for a 0.8% month-on-month gain. The figures likely reflected the impact of decades-high inflation rather than an acceleration in spending activity. Still, there were no signs that the American consumer is pulling back on spending either. Nine of the 13 retail categories showed increases last month, according to the report, including furniture stores, e-commerce and sporting-goods stores. That comes despite consumer prices gaining at the fastest clip since 1981 in June, which sparked a debate as to whether the Federal Reserve would consider an unprecedented full percentage-point interest-rate hike later this month. Fed Gov. Christopher Waller suggested this week that markets are overestimating the potential for a 1% increase in federal funds rates but added the central bank will be data-driven in making its rate decision. This sentiment was supported by Atlanta Federal Reserve President Raphael Bostic who said on Friday that moving interest rates "too dramatically" could undermine the positive trends still seen in the economy and add to the already large amount of uncertainty. Friday afternoon, 69% of investors expect the Federal Open Market Committee will hike interest rates by 75 basis points when the board meets in two weeks, according to CME's FedWatch Tool. Futures markets price in just 30.9% chance for a 100-basis point interest rate hike. Not surprisingly, rapid re-pricing of the Fed's rate hike and hotter-than-expected inflation report stoked fears of economic downturn, with some analysts suggesting the U.S. has already entered a mild recession. Atlanta's GDPNow model estimates economic growth in the second quarter contracted to -1.5% as of today, down from -1.2% seen on July 8. Limiting gains for the oil complex, overnight data out of China showed the world's second-largest economy expanded at just 0.4% in the second quarter, missing estimates for 1% growth and 4.4% below the increase reported in the first three months of the year. This was the weakest performance since the first quarter of 2020, when China's economy came to a near standstill as it battled to contain the initial coronavirus outbreak that started in Wuhan province. Absent of effective vaccine, Beijing resorted to harsh lockdowns and movement controls to limit the viral spread in the nation of 1.4 billion people. At settlement, West Texas Intermediate August contract rallied $1.81 to $97.59 per barrel (bbl). International benchmark Brent for September delivery advanced more than $2 to $101.16 per bbl. NYMEX August RBOB futures gained 2.64 cents to $3.2132 per gallon, while front-month ULSD added 4.96 cents to $3.6990 per gallon.
OPEC faces a near-impossible production task next year— OPEC producers will need to pump crude at the fastest pace in five years in 2023 if they are to balance oil supply and demand. Capacity constraints suggest they may struggle. The latest forecasts from the International Energy Agency, the US Energy Information Administration and the Organization of Petroleum Exporting Countries all show global oil demand rising strongly again in 2023, despite growing fears over mounting inflation and weakening economic growth. A lack of investment in new crude production capacity means that the OPEC group of producers will need to pump more to meet that demand. All three forecasters see global oil demand increasing by at least 2 million barrels a day next year, taking it back above the 2019 level for the first time since the Covid-19 pandemic struck in early 2020. The forecasters at the producer group are much more bullish about oil demand than their counterparts in the IEA and EIA. Combining growth estimates for 2022 and 2023, they see an increase over the two years of more than 6 million barrels a day. That compares with 3.9 million barrels a day seen by the IEA and 4.3 million barrels a day from the EIA. The latest report from OPEC assumes that neither the Covid pandemic, the Russian invasion of Ukraine, nor global financial tightening amid soaring inflation undermines economic growth to a significant degree and that major economies “revert back towards their growth potentials.” It does note, though, that the uncertainties around its forecast “remain to the downside.” OPEC sees that growth taking global oil demand to 103 million barrels a day on average in 2023. The IEA and EIA see the figure at 101.3 million barrels and 101.6 million barrels a day respectively. Those demand numbers put growing pressure on the OPEC countries to pump more, even as most of them are already producing as much as they can.
UK warship seizes “advanced Iranian missiles” bound for Yemen - Last Thursday, in a glimpse into the British government’s support for the barbaric House of Saud, the Royal Navy reported that one of its warships had seized Iranian weapons, including surface-to-air-missiles and engines for cruise missiles, from smugglers in international waters south of Iran in January and February. The US Navy destroyer USS Gridley supported frigate HMS Montrose in February’s operation. A navy spokesperson said that “the seized packages were returned to the UK for technical analysis which revealed that the shipment contained multiple rocket engines for the Iranian produced 351 land attack cruise missile and a batch of 358 surface-to-air missiles.” While it did not state the missiles’ intended destination, it said the 351 cruise missile, with a range of 1,000 km, is often used by Yemen’s Houthi group to target Saudi Arabia and the United Arab Emirates (UAE). This was hailed as “proof” of Iran’s support for Yemen’s Houthi rebels which the UN have designated as “terrorists.” The Houthis have been fighting a Saudi-led coalition after they forced Yemen President Abdrabbuh Mansur Hadi to flee the capital Sana’a in 2014 and took control of the north of the country. Both the Houthis and Iran have long denied Tehran’s support for the Houthis in the seven year-long war. The world’s media has barely reported this act of piracy on the high seas. The Royal Navy’s operations followed the US Navy’s seizure last December in the Arabian Sea of a large cache of assault rifles and ammunition being smuggled by a fishing ship from Iran that was probably bound for Yemen’s Houthi rebels. A US Navy statement said it had confiscated 8,700 illicit weapons in 2021 across the 2.5 million-square-mile area its 5th Fleet patrols, including the strategically important Red Sea and the Persian Gulf The US Navy said the boat was sailing along a route “historically used to traffic weapons unlawfully to the Houthis in Yemen.” It added, “The direct or indirect supply, sale or transfer of weapons to the Houthis violates UN Security Council Resolutions and U.S. sanctions.” The Biden administration lifted the terrorist designation imposed on the Houthis in the last days of the Trump administration in 2021. But in February it issued fresh sanctions on members of a network it claimed worked with a branch of Iran’s Islamic Revolutionary Guard Corps (IRGC) smuggling petroleum and other commodities around the Middle East, Asia and Africa to help fund the Houthis. Days later, the UN Security Council extended its arms embargo on some Houthi leaders to the entire group after they claimed responsibility for several drone and missile assaults on the UAE and Saudi Arabia in January. The British-drafted resolution called on all countries “to increase efforts to combat the smuggling of weapons and components via land and sea routes, to ensure implementation of the targeted arms embargo.” This was aimed at helping the US and UK’s medieval allies, who reject even the most basic norms of bourgeois democracy and ban all forms of opposition and dissent as they struggle to keep a lid on slave-labour wages and conditions, mass poverty and seething discontent. The resolution ignored the countless crimes committed by the Saudi-led coalition against its impoverished southern neighbour Yemen in the seven-year-long war. These have deliberately targeted the civilian population, with numerous horrific attacks on civilian infrastructure and buildings—crimes under the Fourth Geneva Convention—and the inflicting of mass starvation. These crimes followed the launching of Saudi Arabia’s air, land and sea assault on Yemen in March 2015, aided by its fellow despots in the region and covertly by the US and Britain, following the ouster of the Hadi government. Saudi Arabia hoped to restore its puppet to power and maintain the rule of the Gulf despots across the peninsula amid seething social tensions. Since then, Yemen has fragmented amid fighting by numerous competing militias, whose loyalties have repeatedly changed. In April, after a series of attacks on the UAE and Saudi Arabia’s oil installations earlier this year claimed by the Houthis, and Hadi’s resignation, Saudi Arabia and the UAE agreed a still fractious ceasefire. The Saudi-led war has killed nearly 400,000 people both directly and indirectly through hunger and disease and forced more than 4.2 million people to flee their homes. It has wrecked Yemen’s economy, causing the collapse of the currency and soaring inflation. The pandemic and the impact of anti-Russian sanctions in a country almost wholly dependent on imported food have exacerbated what the UN has described as the world’s worst humanitarian disaster.
White House: Iran preparing to send Russia drones for Ukraine war - The United States believes that the Iranian government is preparing to provide Russia with hundreds of drones in order to help Moscow with its ongoing assault on Ukraine, White House national security adviser Jake Sullivan told reporters on Monday. “Our information indicates that the Iranian government is preparing to provide Russia up to several hundred UAVs [unmanned aerial vehicles], including weapons-capable UAVs, on an expedited timeline,” Sullivan said at a press briefing. Sullivan said that the Iranians are preparing to train Russian forces to use the unmanned aerial vehicles as early as this month. It’s unclear if any have been delivered to the Russians at this point in time. The national security adviser disclosed the information to exhibit the difficulty Russia is experiencing in sustaining its own weapons stockpile as Russian President Vladimir Putin’s war in Ukraine comes close to entering its sixth month. Sullivan made the comments when briefing reporters on President Biden’s upcoming trip to the Middle East. Biden is expected to depart for the trip later this week, traveling to Israel and then Saudi Arabia. Iran and its nuclear program are expected to be topics of discussion during Biden’s travel. The Biden administration has sought to return to the Iran nuclear deal that former President Trump withdrew from during his tenure but has thus far been unable to strike a deal.
White House Says Iran Supplying "Several Hundred" Armed Drones To Russia - In a truly unexpected and entirely bizarre development, the White House has announced that the US has intelligence showing that the Iranian government is preparing to transfer combat drones to Russia in order to help with the ongoing offensive against Ukraine.As revealed for the first time in a Monday afternoon White House press briefing previewing President Biden's upcoming Middle East trip, the transfer doesn't just involve a symbolic few drones in order for Tehran to merely defiantly thumb its nose at Washington, but allegedly will include "up to several hundred" unmanned aerial vehicles.White House national security adviser Jake Sullivan told reporters, "Our information indicates that the Iranian government is preparing to provide Russia with up to several hundred UAVs, including weapons-capable UAVs on an expedited timeline." This marks the first time that Iran has been accused of helping Russia amid its ongoing assault on Ukraine. The new charge is unusual and curious given Russia already maintains an advanced drone program, and in general its military is considered high-tech and is deemed rival to other major superpowers like the US and China, especially in the area of hypersonic weapons technology. Naturally, this leaves some pundits wondering why Russia would need a whole large fleet of drones from Iran of all countries.Sullivan told reporters that the drone transfer will even include training Russian troops on how to use them: "Our information further indicates that Iran is preparing to train Russian forces to use these UAVs with initial training sessions slated to begin as soon as early July," he said.The US national security adviser did attempt to provide a possible motive or reason why Iran and Russia would make such an unusual deal, per Axios:Sullivan said it's proof that Russia's efforts to overtake Ukraine are "coming at a cost to the sustainment of its own weapons." It's just "one example of how Russia is looking to countries like Iran for capabilities that ... have been used before we got the ceasefire in place in Yemen, to attack Saudi Arabia," he noted.