oil prices fell for a second week on concerns about weakening demand, even as the Saudis committed to cutting their production by an additional million barrels per day, beginning in July….after falling 1.3% to $71.74 a barrel last week on recessionary Chinese data and mixed messages from OPEC+ oil producers, the contract price for the benchmark US light sweet crude for July delivery surged over 2% on global markets on Monday, after Saudi Arabia announced an additional voluntary production cut of 1 million barrel per day beginning in July, but pared those gains in the US afternoon session as traders balanced deeper production cuts by Saudi Arabia against a US survey showing that services -- the largest sector of the US economy -- was teetering on the brink of recession. and settled just 41 cents higher at $72.15 a barrel as the rally that the Saudis had hoped would boost the price of oil fizzled out....oil prices sank in Asian trading Tuesday as traders mulled the week demand outlook following the prior day's rally, and opened lower in New York as concerns over global economic growth outweighed Saudi Arabia’s pledge to increase its output cuts, but pared thoseearly losses to settle 41 cent lower at $71.74 a barrel after the U.S. EIA forecast that oil inventories across industrialized countries would fall in each of the next five quarters…oil prices edged higher in early trading Wednesday after data from the American Petroleum Institute reported U.S. commercial crude oil inventories had unexpectedly declined last week, then extended those gains after the official data from the EIA confirmed the API figures, with a smaller crude draw but larger product builds, and finished the session 79 cents higher at $72.53 a barrel amid dollar weakness as traders pointed to the highest US refinery runs since 2019 as a harbinger of strong summer demand to come...oil prices slipped in Asian trading Thursday, as worries over weakening Chinese demand and US stockpile data outweighed Saudi Arabia’s announcement it would slash output in July, but rallied in early New York trading, supported by market expectations that the Fed would pause interest rate hikes at its meeting next week, before selling off sharply and settling $1.24 lower at $71.29 a barrel following unconfirmed reports suggesting the U.S. and Iran had made substantial progress towards reaching a nuclear agreement that could spur on Iranian oil exports...oil prices fell in early Asian trade on Friday, as traders remained more concerned about oil demand than they were about supply. in light of the eurozone’s recession, a decline in Chinese manufacturing activity, and shrinking manufacturing activity in the U.S., and continued lower as demand concerns outweighed the prospect of tighter supplies while traders remained sceptical that the US and Iran could strike a nuclear deal, and settled down $1.12 at $70.17 a barrel, thus finishing 2.2% lower on the week as disappointing Chinese data added to doubts about demand growth after Saudi Arabia's decision to cut output.
Meanwhile, US natural gas prices finished higher for the sixth time in nine weeks on forecasets for hotter weather and increased cooling demand during the second half of June… after falling 10.1% to $2.172 per mmBTU last week following an oversized injection of gas into storage amid strong production and weak weather related demand. the contract price of US natural gas for July delivery opened 9 cents higher on Monday, as updated forecasts for the back half of June called for the arrival of summer heat in the Southern part of the country and hovered around the $2.270 level through midday before settling 7.3 cents higher at $2.245 per mmBTU on forecasts for low wind power, warmer weather, higher air conditioning demand, rising exports to Mexico and a jump in global gas prices....US natural gas prices opened 4 cents lower on Tuesday after traders digested the updated bullish weather forecasts overnight, but went on to trade slightly higher through the rest of the session before settling with a 1.7 cen\t gain at $2.262 per mmBTU, on a drop in daily well output, as low wind power kept forcing generators to burn more gas to produce electricity...natural gas prices then opened 6 cents higher on Wednesday, as traders focused on the impending wave of cooling demand and settled with a 6.7 cent gain to $2.329 per mmBTU on the session as the hot weather outlook boosted power demand prospects...natural gas traded in a narrow range early Thursday, then briefly jumped to an intraday high of $2.380 after a bullish storage report hit the wire but settled just 2.3 cents higher at $2.352 per mmBTU, supported by forecasts for warmer weather that would lift cooling demand....however, the five day string of higher natural gas prices came to an end on Friday on forecasts for less demand over the next two weeks than had been expected as July gas settled 9.8 cents lower at $2.254 per mmBTU, but still finished 3.8% higher on the week...
The EIA's natural gas storage report for the week ending June 2nd indicated that the amount of working natural gas held in underground storage in the US increased by 104 billion cubic feet to 2,550 billion cubic feet by the end of the week, which left our natural gas supplies 562 billion cubic feet, or 28.3% above the 1,988 billion cubic feet that were in storage on June 2nd of last year, and 352 billion cubic feet, or 16.1% more than the five-year average of 2,197 billion cubic feet of natural gas that were in working storage as of the 2nd of June over the most recent five years…note, however, that the often cited national average obscures the fact that gas supplies are still 32.2% below normal for this date in the Pacific states, while 29.3% and 24.3% above normal in both the East and Midwest regions of the country at the same time...also note that a total of 118 billion cubic feet were injected into storage this week, but that 14 billion cubic feet of what was stored was reclassified from working gas to base gas, which would not be considered available for use ..thus the total 118 billion cubic foot injection into US natural gas working storage for the cited week was more than the 113 billion cubic feet addition to supplies that was expected by industry analysts surveyed by Reuters, and it was much more than the 99 billion cubic feet that were added to natural gas storage during the corresponding week of 2022, as well as more than the average of 100 billion cubic feet addition to natural gas storage that has been typical for the same May 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 June 2nd showed that even after a big drop in our oil exports, we had to pull oil out of our stored commercial crude supplies for the 7th time in eleven weeks, and for the 16th time in the past 41 weeks, essentially due to the loss of new oil supplies that the EIA could not account for... Our imports of crude oil fell by an average of 817,000 barrels per day to 6,400,000 barrels per day, after rising by an average of 1,367,000 barrels per day the prior week, while our exports of crude oil fell by an average of 2,440,000 barrels per day to 2,475,000 barrels per day, which combined meant that the net of our trade in oil worked out to a net import average of 3,925,000 barrels of oil per day during the week ending June 2nd, 1,623,000 more 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 200,000 barrels per day higher at a three year high of 12,400,000 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 averaged a total of 16,325,000 barrels per day during the June 2nd reporting week…
Meanwhile, US oil refineries reported they were processing an average of 16,647,000 barrels of crude per day during the week ending June 2nd, an average of 481,000 more barrels per day than the amount of oil that our refineries processed during the prior week, while over the same period the EIA’s surveys indicated that an average of 331,000 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 provided by the EIA for the week ending June 2nd appear to indicate that our total working supply of oil from net imports, from oilfield production and from storage was 9,000 barrels per day more 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 [-9,000] 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 was a minor error in the week’s oil supply & demand figures that we have just transcribed….However, since last week’s “unaccounted for crude oil” was at [+1,945,000] barrels per day, that means there was a 1,954,000 barrel per day difference between this week's oil balance sheet error and the EIA's crude oil balance sheet error from a week ago, and hence the changes to supply and demand from that week to this one that are indicated by this week's report are complete nonsense...However, since most oil traders respond to these weekly EIA reports as accurate, and since these weekly figures therefore 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 reliable 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)….(NB: there is also a more recent twitter thread from an EIA administrator addressing these errors, and what they hope to do about it)
This week's 331,000 barrel per day decrease in our overall crude oil inventories came as an average of 64,000 barrels per day were being pulled out of our commercially available stocks of crude oil, while 267,000 barrels per day of oil were being pulled out of our Strategic Petroleum Reserve at the same time, the tenth straight draw on the SPR this year, wherein government owned oil is being sold into the domestic markets as part of an earlier budget balancing withdrawal mandated by congress....as a result of that withdrawal, the 353,569,000 barrels of oil that still remain in our Strategic Petroleum Reserve is now the lowest since September 9th, 1983, or at a new 39 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 big SPR releases of last year. However, those Biden administration releases amounted to about 42% of what was left in the SPR when they took office, and that left us with what is now less than a 19 day supply of oil at the current consumption rate.
Further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports rose to an average of 6,582,000 barrels per day last week, which was 3.5% more than the 6,357,000 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 200,000 barrels per day higher at a three year high of 12,400,000 barrels per day because the EIA's rounded estimate of the output from wells in the lower 48 states was 200,000 barrels per day higher at 12,000,000 barrels per day, while Alaska’s oil production was 12,000 barrels per day higher at 430,000 barrels per day, but still added the same 400,000 barrels per day to the rounded national total as it did last week...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 still 5.3% below that of our pre-pandemic production peak, but was 27.8% 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 95.8% of their capacity while using those 16,647,000 barrels of crude per day during the week ending June 2nd, up from their 93.1% utilization rate during the prior week, and a utilization rate that's above normal for the 1st week of June... The 16,647,000 barrels per day of oil that were refined this week were 1.6% more than the 16,387,000 barrels of crude that were being processed daily during week ending June 3rd of 2022, but 1.7% less than the 16,938,000 barrels that were being refined during the prepandemic week ending May 31, 2019, when our refinery utilization rate was at 91.8%, close to normal for this time of year...
With the increase in the amount of oil being refined this week, the gasoline output from our refineries was also higher, increasing by 94,000 barrels per day to 10,065,000 barrels per day during the week ending June 2nd, after our gasoline output had decreased by 344,000 barrels per day during the prior week. This week’s gasoline production was 0.2% more than the 10,041,000 barrels of gasoline that were being produced daily over the same week of last year, and also 0.2% more than the gasoline production of 10,049,000 barrels per day during the prepandemic week ending May 31st, 2019. Meanwhile, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 203,000 barrels per day to 5,243,000 barrels per day, after our distillates output had increased by 165,000 barrels per day during the prior week. With those increases, our distillates output was 4.8% more than the 5,001,000 barrels of distillates that were being produced daily during the week ending June 3rd of 2022, but 3.0% less than the 5,404,000 barrels of distillates that were being produced daily during the week ending May 31st, 2019...
With this week's increase in our gasoline production, our supplies of gasoline in storage at the end of the week rose for the third time in sixteen weeks, and by the most since February, increasing by 2,745,000 barrels to 218,815,000 barrels during the week ending June 2nd, after our gasoline inventories had decreased by 207,000 barrels during the prior week. Our gasoline supplies rose this week even though the amount of gasoline supplied to US users rose by 120,000 barrels per day to 9,218,000 barrels per day because our imports of gasoline rose by 140.000 barrels per day to 973,000 barrels per day, while our exports of gasoline rose by 37,000 barrels per day to 988,000 barrels per day. Even after thirteen gasoline inventory decreases over the past sixteen weeks, our gasoline supplies were 0.3% above last June 3rd’s gasoline inventories of 218,184,000 barrels, but about 8% below the five year average of our gasoline supplies for this time of the year…
Meanwhile, with this week's big increase in our distillates production, our supplies of distillate fuels increased for the fourth time in thirteen weeks, rising by a six month high of 5,074,000 barrels to 111,731,000 barrels during the week ending June 2nd, after our distillates supplies had increased by 985,000 barrels during the prior week. Our distillates supplies rose by more this week even though the amount of distillates supplied to US markets, an indicator of our domestic demand, increased by 168,000 barrels per day to 3,8146,000 barrels per day, because our exports of distillates fell by 577,000 barrels per day to an 17 month low of 876,000 barrels per day, while our imports of distillates fell by 27,000 barrels per day to 172,000 barrels per day.... Even after 65 inventory withdrawals over the past one hundred and six weeks, our distillate supplies at the end of the week were 2.5% above the 106,392,000 barrels of distillates that we had in storage on June 3rd of 2022, but are still about 16% below the five year average of our distillates inventories for this time of the year...
Finally, even after the big decrease in our oil exports, the loss of new oil supplies that the EIA could not account for meant that our commercial supplies of crude oil in storage fell for the 8th time in 24 weeks and for the 24th time in the past year, decreasing by 452,000 barrels over the week, from 459,657,000 barrels on May 26th to 459,205,000 barrels on June 2nd, after our commercial crude supplies had increased by 4,489,000 barrels over the prior week. Even after several large oil supply increases in the weeks following the Christmas refinery freeze offs, our commercial crude oil inventories are now 2% below the most recent five-year average of commercial oil supplies for this time of year, but are around 28% above the average of our available crude oil stocks as of the last weekend of May over the 5 years at the beginning of the past decade, with the apparent disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first topped 400 million barrels. After our commercial crude oil inventories had jumped to record highs during the Covid lockdowns of the Spring of 2020, then jumped again after February 2021's winter storm Uri froze off US Gulf Coast refining, but then fell in the wake of the Ukraine war, our commercial crude supplies as of this June 2nd were 10.2% more than the 416,758,000 barrels of oil we had in commercial storage on June 3rd of 2022, but were still 3.1% less than the 474,029,000 barrels of oil that we still had in storage in the wake of winter storm Uri on June 4th of 2021, and are now 14.7% less than the 538,065,000 barrels of oil we had in commercial storage on June 5th of 2020, after the initial pandemic precautions had left a lot of oil unused…
This Week's Rig Count
The number of drilling rigs active in the US decreased for the thirteenth time in the past seventeen weeks during the week ending June 9th, and is now 12.4% below the prepandemic rig count, despite increasing ninety-nine times over the past 140 weeks... Baker Hughes reported that the total count of rotary rigs drilling in the US fell by 1 rig to 695 rigs over the past week, which was 38 fewer rigs than the 733 rigs that were in use as of the June 3rd report of 2022, and was also 1,234 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 was up by one to 556 oil rigs during the past week, after the number of rigs targeting oil had fallen by a three year max of fifteen rigs during the prior week, leaving twenty-four fewer oil rigs active now than were running a year ago, as they amount to just 34.6% of the shale era high of 1609 rigs that were drilling for oil on October 10th, 2014, and while they are still down 18.6% from the prepandemic oil rig count of 683….at the same time, the number of drilling rigs targeting natural gas bearing formations was fell by two to 135 natural gas rigs, which was also down by 16 natural gas rigs from the 151 natural gas rigs that were drilling during the same week a year ago, as they now amount to just 8.4% of the modern high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008….
In addition to those rigs specifically targeting oil and natural gas, Baker Hughes shows that four rigs they've labeled as "miscellaneous" are still drilling this week: those include a directional rig drilling to between 10,000 and 15,000 feet into a formation in Beaver county Utah, a directional rig drilling to between 5,000 and 10,000 feet on the big island of Hawaii, a directional rig drilling to between 5,000 and 10,000 feet into a formation in Lake county California that Baker Hughes doesn't track, and a directional rig drilling to between 5,000 and 10,000 feet into a formation in Pershing county Nevada, also into a formation unnamed by Baker Hughes. While we haven't seen any details on any of those wells, in the past we've identified various "miscellaneous" rig activity as being for exploration rather than production, for carbon dioxide storage, and for utility scale geothermal projects....Four such rigs operating at once is unusual; a year ago, there were two such "miscellaneous" rigs running...
The offshore rig count in the Gulf of Mexico was unchanged at 20 rigs this week, with 18 of those rigs drilling for oil in Louisiana's offshore waters, and two drilling for oil in Texas waters....the Gulf rig count is still up by 6 from the 14 Gulf rigs running a year ago, when all 14 Gulf rigs were drilling for oil offshore from Louisiana…but since there was a rig drilling offshore from Alaska during the same week a year ago, the national total of 20 rigs drilling offshore is up by 5 rigs from the national offshore count of 15 a year ago..
In addition to rigs running offshore, there are still two inland water based deployed this week...one is a vertical rig drilling for natural gas to between 10,000 and 15,000 feet on a lake in Jefferson Parish Louisiana, while the other is a directional rig drilling for oil at a depth of between 10,000 and 15,000 feet through an inland body of water in Lafourche Parish, Louisiana...a year ago, there was just one such rig drilling on inland waters...
The count of active horizontal drilling rigs was down by 3 to 625 horizontal rigs this week, which was 43 fewer rigs than the 668 horizontal rigs that were in use in the US on June 10th of last year, and only 45.5% of the record 1,374 horizontal rigs that were drilling on November 21st of 2014…at the same time, the directional rig count was down by one to 51 directional rigs this week, but those were up by 13 from the 38 directional rigs that were operating during the same week a year ago....on the other hand, the vertical rig count was up by three tot 19 vertical rigs this week, while those were still down by 8 from the 27 vertical rigs that were in use on June 10th of 2022…
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 June 9th, the second column shows the change in the number of working rigs between last week’s count (June 2nd) and this week’s (June 9th) count, the third column shows last week’s June 2nd 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 10th of June, 2022...
once again, we'll start by checking the Rigs by State file at Baker Hughes for the changes Texas...in the Permian basin, we find that there were two rigs pulled out of Texas Oil District 7C, which includes the counties overlying the southern Permian Midland, and there was another rig as a rig pulled out of Texas Oil District 8A, which includes the counties of the northern Permian Midland,...since the Texas Permian rig count was thus down by three while the national Permian count was down by two, we can therefore conclude that the rig that was added in New Mexico was set up to drill in the far western Permian Delaware in the southeast corner of that state...elsewhere in Texas, there were also three rigs pulled out of Texas Oil District 6, two of which were natural gas rigs pulled from the Haynesville shale; however, the Haynesville shale rig count was only down by one because a Haynesville rig was added in northwest Louisiana at the same time...also in Texas, the Eagle Ford shale saw the removal of a natural gas rig, leaving just two, and the addition of an oil rig, which now number 56; however, since those changes offset one another, they don't show up in the tables...
in Oklahoma, there was the addition of two oil rigs in the Cana Woodford, but since the state total is only up by one, a rig must have been removed from another basin in the state that's not tracked by Baker Hughes...likewise, the rig pulled out of Colorado was also removed from a basin not tracked by Baker Hughes, while the rig added in Utah was targeting the Uintah basin, which is another major basin also not tracked by Baker Hughes..
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8 Ohio State Land Locations Nominated for Utica Shale Drilling | Marcellus Drilling News -- Last week shale drillers could, for the first time, begin to apply for permits to drill under (not on top of) Ohio state lands and state parks under newly formulated rules established by the Ohio Oil & Gas Land Management (OGLM) Commission (see Ohio State Lands Now Open for O&G Leasing – Virtual Ribbon-Cutting). Mike Chadsey, director of public relations for the Ohio Oil and Gas Association, said, “State lands leasing is open – cut the ribbon and see who’s interested.” It turns out there are quite a few interested… Yesterday we brought you the news that eight nominations were received on the first day the doors opened (see 8 Cos. Bid to Drill Under OH State Land, Applications Anonymous). Today, we have copies of the eight nominating applications received (minus the identity of the companies making the nominations).
Gas companies pitch fracking state park and two wildlife areas under new law - cleveland.com– Fossil fuel companies formally asked the state to open thousands of acres beneath one state park and two wildlife reserves for oil and gas exploration, new filings posted Monday show. While state law shields their identities from disclosure, public notices on the Ohio Department of Natural Resources website show the drillers’ interest in broad swaths of Salt Fork State Park, Zepernick Wildlife Area and Valley Run Wildlife Area, all in eastern Ohio. These mark the industry’s first steps toward fracking state lands since a recent state law passed by Republicans essentially force-started a dormant system created in 2011 to allow for drilling under state parks. The eight notices, all filed on the first day of the new legal system’s existence last week, trigger a 45-day public comment period. Then the Oil and Gas Land Management Commission, where two of four members are recommended by the industry, decides whether to accept the “nominations” to open the land to drilling and start a public bidding process.Gov. Mike DeWine said when he signed the recent state lands drilling expansion into law that he wouldn’t allow for any surface interruptions in state parks. Companies can drill vertically thousands of feet underground on plots adjacent to state parks and pivot 90 degrees to reach underneath them. From the well bore, they can use the process of hydraulic fracturing or “fracking” to pump a high-pressure mixture of water, sand and chemicals to free the oil and gas from shale. Three of eight nominations seek rights for thousands of acres at Salt Fork in Guernsey County – 21,000 acres of land that were previously the subject of a rejected, $2 billion leasing offer from Encino Energy.Three other nominations seek 302 acres of the Valley Run Wildlife Area, a 304-acre expanse of rolling foothills in Carroll County. According to its website, the park is largely undeveloped and known for hunting, hiking and birding. Another seeks about 66 acres of Zepernick Wildlife Area, a 521 acre preserved space in Columbiana County.The state will release information regarding who submitted the bids or how much money they offered only after the OGLM approves a nomination and selects the best offer. According to Ohio Department of Natural Resources spokesman Andy Chow, the state received a ninth application to drill under state lands on Monday that has not yet been posted online. Environmentalist and conservation organizations opposed the idea, warning of irreversible aesthetic and environmental damage to untouched land in the state. A lawsuit challenging the legislative maneuvers to pass the recent drilling expansion, which include stuffing the idea into an unrelated bill in the closing days of the two-year General Assembly, is ongoing in Franklin County.
Ohio District Becomes Prime Tourist Destination Due to O&G Development After overcoming efforts to limit fossil fuel development on public lands in Ohio, communities across the state are experiencing extraordinary benefits from oil and natural gas production royalties. The latest example of this is taking place in the Muskingum Watershed Conservancy District (MWCD), as it’s becoming a record-setting tourist attraction due to investments in campgrounds and other amenities funded by oil and natural gas revenues.To date, MWCD has invested close to $200 million stemming from energy revenues in upgrades to its facilities through a Master Plan redesign. This includes efforts to build new campgrounds, renovate aging spaces, add new playgrounds, sports courts, and trails. Likely in response to these upgraded recreational facilities, in 2021 the district saw a record-breaking 5 million-plus visitors, and projects that even more tourists will continue to visit its district. Given the success of MWCD’s Master Plan, the district recently signed its largest oil and natural gas lease to date to develop 7,300 acres of land in the Utica Shale basin. The five-year contract will result in around 15 wells, with the possibility to add additional wells in an optional three-year extension. MWCD will receive $5,500/acre, paid over five years, and gross royalty of 20 percent.This partnership clearly shows the possibilities to collaborate with the industry while developing assets that will bring both direct and indirect benefits to the surrounding communities. Naturally, this requires a strong will to collaborate and accountability on both sides. For example, as part of the Tappan Lake lease, MWCD can review the erosion control, construction and reclamation plans, and demand water testing for Tappan or any freshwater sources on MWCD lands within 3,000 feet of the well site.
New Gas-Fired 1,875-MW Plant Comes Online in Ohio -- A new natural gas-fired power plant has entered commercial operation in Ohio. The 1,875-MW Guernsey Power Station, in Guernsey County in southeastern Ohio, is sourcing gas from the Marcellus and Utica shale plays, two of the most-prolific natural gas production areas in the U.S. GE Vernova’s Gas Power division on June 7 said the plant is powered by GE’s HA Class turbine technology. The company touts the $1.7 billion Guernsey facility as the latest gas-fired plant replacing coal-fired generation in the PJM regional transmission organization territory, which covers all or part of 13 states, including Ohio, and the District of Columbia. Construction of the plant began in 2019. PJM officials in a recent report, titled “Energy Transition in PJM: Resource Retirements, Replacements & Risks,” said the retirement of coal-fired generation in that market could outpace new power generation resources. The grid operator said the expected increase in power demand in the region could create concerns about resource adequacy and grid stability across PJM, meaning more baseload power sources are expected to be needed. “In 2022, coal-fired plant retirements accounted for approximately 89% of retired capacity in the PJM region and as more and more coal-fired plants are retired, the need for thermal resources and the essential reliable and flexible power they provide is crucial for grid stability and to help meet the increasing demand for power,” said Ross D. Ain, president of Caithness Energy, the plant’s developer, in a news release. “GE’s gas turbines are among the largest and most-efficient gas turbines in the world, and operating flexibility may be considered as the key feature of [the] Guernsey plant.” Ain said the Guernsey site “had a benefit of a very large natural gas pipeline running across the site and a very large electric transmission line, and those were key elements of building a plant of this size.”
Grant to provide new space for learning in Salineville - (WKBN) – Wednesday was a big day in Columbiana County that celebrated a project to give one village in the county a new look. The Utica Shale Academy in Salineville received a $2.35 million Appalachian Community Grant. The money will be used to build a new building. The Utica Shale Academy helps train students for the gas industry, heavy equipment production and even robotics. As many as 150 students graduated from the school in the last three years. Utica Shale Academy Director Bill Watson believes the new space will help better prepare the students while providing more opportunities. “Basically, we’re going to make sure that you’re both socially prepared and from a trading standpoint prepared,” said Watson. “Obviously, it allows us to give opportunities to kids normally don’t get them and hopefully change the footprint of what Appalachian or region looks like,” he added. The three aspects of the grant were downtown revitalization, workforce development and health and well-being. The Utica Shale Academy won the award by demonstrating an approach to all three. John Carey is the director of Ohio’s Office of Appalachia. He walked through Salineville and took a tour of the property downtown to see and learn how the grant would be spent. “And with this grant, we think we’ll see an impact sooner than later, and that’s one of the reasons why Utica Shale was awarded,” said Carey. The grant comes from a new program and uses ARPA federal dollars. It includes restrictions, but developing the workforce is eligible. The first round for the grant was very competitive. The state had $50 million to give out and $350 million worth of applications. The grant was awarded in March and the Governor’s Office of Appalachia said one reason Salineville was chosen, is because its project is ready to go.
Utica Shale Academy Expanding with $2.35M Grant - – The Utica Shale Academy will be able to expand its programming and footprint in Columbiana County thanks to a $2.35 million grant through Ohio’s Appalachian Community Grant Program. Utica Shale is an Ohio Dropout Recovery School, which works primarily with at-risk students. But the expansion also will allow it to help others with evening programs. “It will basically give kids a cutting edge opportunity to learn in-demand Ohio jobs and not go into debt,” Utica Shale Academy Superintendent William Watson said. “Those are the things we are really focused on, students leaving high school ready to work. … We want to get back to the fact that you don’t have to go to four-year college. … There’s room here in Ohio for every pathway, and they can all flourish.” John Carey, director of the Governor’s Office of Appalachia, toured the school’s campus Wednesday, where 52 students recently graduated after receiving industry credentials. Carey said the Utica Shale Academy project was one of four projects selected from 40 applications. He credited its successful application to having a shovel-ready project. The school plans to break ground in late July or early August. Carey said he was excited to hear the Shale Academy’s plans, and he looks forward to returning when the plans are underway. “They’re going to expand their programming, and they’re going to have some new facilities to be able to deliver more services to more students,” Carey said. Carey said the Utica Shale Academy’s many partnerships, which allow it to help a number of different students, and the fact the school’s expansion project will benefit the village of Salineville as a whole weighed into the decision to fund the project. Watson has plans and drawings ready for the new facility, which will provide space to offer more virtual welding to help get students interested, even those who might not think it is a good fit for them. Additionally, Watson said the school works with young people from families affected by the opioid epidemic. “Statistics show that you’re 85% more likely to not relapse if you are given some type of skilled training and you find a meaningful job,” The new facility will be next to the indoor-outdoor welding facility, where students learn hands-on with welding equipment, even out in the elements. But Watson said the virtual reality welding can reduce by 75% the amount of time it takes for students to learn the needed skills before they use the actual welding equipment. “It gives live, real-time feedback, where it is really hard to have 30 or 40 instructors right there giving feedback. … Once they gain the right skill sets as far as muscle memory, it transitions and translates real well,” Watson said.
David 1, Goliath 0 - Union County Daily Digital -- Chalk one up for the underdog. After 3 1/2 years of legal wrangling, appeals, arguments, briefs and court appearances, the ongoing saga of what will be the disposition of a one-half mile gas line that was proposed by Columbia Gas to run through the Renner/Bailey property southeast of Marysville has come to a close. In a 63-page decision by the Ohio Third Court of Appeals handed down in May, a three-judge panel ruled that not only did Columbia Gas negotiate in bad faith – upholding the Union County Court of Common Pleas ruling – but also denied that Columbia Gas has the right to seek obtaining property in question via eminent domain, which overruled the lower court’s decision. What this means is that the Bailey/Renner parcels will remain pipeline-free and the huge energy conglomerate will have to look elsewhere to build the pipeline spur. The father and son team of Don and Patrick Bailey, who own the property, have fought the pipeline proposal tooth and nail since they first learned of it 3 1/2 years ago. Not only does the ruling protect the Bailey/Renner property, it will also protect development on other Ag Easements granted by the ODA all across Ohio, Mr. Bailey continued. “It sets a precedent that preserved farmland is a public good,” he said. To put it in the broadest of layman’s terms, at issue was approximately one-half mile of is what is known as the Marysville Connector of the Northern Loop, a high-pressure gas pipeline which Columbia Gas and its parent company, NiSource, intends to build. The Baileys were first offered money by Columbia Gas for an easement (which was refused) and then threatened with eminent domain proceedings in court by that would allow the construction over the Bailey’s objections. The Bailey’s pointed to a 2003 agreement with the Ohio Department of Agriculture that granted the Bailey/Renner properties a permanent Agricultural Easement, meaning that no governmental entities nor private companies may gain access to the properties for the purposes of construction without the owner’s consent. This Ag Easement has already survived two challenges, the first by the City of Marysville and then by a private company, both of which were rebuffed and staunchly opposed by the Ohio Department of Agriculture. But in a baffling change of heart, both the ODA (which Union County-native Dorothy Pelanda served as Director until January of this year) and the Ohio Power Siting Board were quick to give the green light to Columbia Gas to run the pipeline through the protected Bailey/Renner farmland, the ODA reversing its stance when the properties were twice threatened with similar predicaments since the Ag Easement was first granted. The consent for the pipeline to be run through the Bailey/Renner property not being given by the owners, Columbus Gas, no doubt emboldened by the lack of resistance to its plan by the ODA and OPSB, followed through its threat and sued the Baileys (who filed a countersuit) in Union County County of Common Pleas for the right to build the pipeline where it pleased. There the judge said that Columbia Gas negotiated in bad faith and ruled in favor of the Baileys in this particular case, but also said that Columbia Gas still had the right to pursue the land through eminent domain proceedings, which it did when it appealed the decision to the Ohio Third District Court of Appeals. With Court of Appeals ruling that Columbia Gas had no such right, the Baileys’ position was affirmed and their farmland will remain untouched.
Ohio Justices To Hear $40M Oil Drilling Contract Fight – Law360 - The appeals court ruled that they drilled outside an Appalachian area "commonly known" as the Utica Shale in violation of their oil and gas leases.
Unrelated Explosions at OH Utica Well Pad, WV Brine Plant | Marcellus Drilling News -- We have two explosions and resulting fires to tell you about–neither related to the other, except they happened two days apart and maybe one hour’s drive apart (as the crow flies). The first was an explosion and fire at the Fairmont Brine Processing facility in Fairmont (Marion County), WV, on May 30. The second was an explosion and fire at a Utica Shale well pad owned by Utica Resources near Lore City (Guernsey County), OH, on June 1. Both appear to be accidents. The only injury reported was a minor injury at the Utica well pad site (a worker on-site refused treatment). The main concern was that the brine treatment plant may have stored or handled radioactive material. The WV Dept. of Environmental Protection (DEP) tested and found no radioactive contamination had spread from the fire.
25 New Shale Well Permits Issued for PA-OH-WV May 29-Jun 4 | Marcellus Drilling News -- New shale permits issued for May 29-Jun 4 in the Marcellus/Utica finally went higher again last week. There were 25 new permits issued, up from the dismal 8 new permits issued the previous week. Last week’s permit tally included 13 new permits for Pennsylvania, 6 new permits for Ohio, and 6 new permits in West Virginia. EQT scored the most new permits with 7 issued in Greene County, PA. Close behind in the #2 position was Antero Resources, with 6 new permits issued in Ritchie County, WV. Antero Resources, Ascent Resources, Belmont County, Bradford County,Chesapeake Energy,, EQT Corp, Greene County (PA), Guernsey County,, Range Resources Corp, Ritchie County, Southwestern Energy, Washington County
Abandoned Oil and Gas Wells Emit Carcinogens and Other Harmful Pollutants, Groundbreaking Study Shows - On a cloudy late-winter morning in 2004, Charles and Dorothy Harper were babysitting their 17-month-old grandson, Baelee, when the furnace in their rural Western Pennsylvania home revved up. The newly retired pastor and his wife did not realize that flammable gas had infiltrated the basement of the house, which they had recently built. Around 9 a.m. that dreary March morning, a massive explosion leveled the house and left three lifeless bodies buried in the rubble along a country road about 80 miles northeast of Pittsburgh. There were 16 known gas wells within 3,000 feet of the Harpers’ home. Natural gas from a well that was being drilled had entered the basement through the couple’s well water, a marshal with a local fire department told The Pittsburgh Tribune Review at the time. Officials knew this, the marshal said, because they tested the victims’ blood and lung tissue after recovering their bodies and found methane—a potent climate-warming compound that is the main constituent of natural gas. Yet a new study suggests that residents of the nation’s fossil-fuel producing regions could be facing a different threat: carcinogens and other toxic air contaminants spewing from millions of wells that are no longer even operating. In a study in the journal ACS Omega, researchers have reported the discovery of harmful volatile organic compounds, or VOCs, leaking from 48 abandoned wells in Western Pennsylvania. Scientists have long known from studies of active drill sites that oil and gas wells produce a wide range of hazardous air pollutants. Yet until now, no independent researchers had systematically measured toxic air contaminants from any of the more than 3 million abandoned oil and gas wells scattered across the nation. In the study, researchers with the nonprofit research and policy institute PSE Healthy Energy measured both the emission rates and the concentrations of harmful VOCs coming from abandoned wells in the heart of the nation’s largest gas field, the Marcellus Shale. “Our study is the first to thoroughly identify that there is a benzene hazard associated with abandoned wells,” Many were releasing benzene, a well-established cause of cancer, along with compounds that damage the nervous, immune and respiratory systems, the researchers reported. They found air concentrations as high as 250 parts per million—250,000 times the California safety threshold of 0.001 parts per million, which public health experts use as a gold standard because it tends to protect the most vulnerable populations, such as children.The U.S. Environmental Protection Agency classifies benzene as a known human carcinogen for every route of exposure, whether inhaled, ingested or absorbed through the skin, and the World Health Organization has concluded that no safe level of exposure to benzene exists..
MVP 'Grateful' for Debt Deal Assist, Looking Toward 2023 Completion - Mountain Valley Pipeline LLC (MVP) developers expect to have the long-delayed and oft-challenged natural gas pipeline in service by the end of this year thanks to a major assist from provisions included in the bipartisan debt ceiling deal signed by President Biden.
MVP developers: Project completion expected by end of 2023 (WV News) — The Mountain Valley Pipeline is expected to be complete by the end of the year thanks to provisions included in the debt ceiling dealing negotiated in Congress, according to its developers. The natural gas pipeline project, first announced nearly a decade ago, could be in operation by this winter, said Natalie Cox, director of communications and corporate affairs for Equitrans Midstream Corp.
WV Enviro Groups Call MVP Greenlight a Terrible Precedent -A 300-mile-long fracking pipeline project slated to cross numerous streams and rivers in West Virginia and Virginia got a major boost over the weekend when President Joe Biden signed the debt-ceiling bill. Peter Anderson, Virginia policy director for the group Appalachian Voices, said one more Clean Water Act permit is needed for the Mountain Valley Pipeline to complete construction. Lawmakers slipped permission for it into theFiscal Responsibility Act of 2023. "Congress would be directing the U.S. Army Corps of Engineers to go ahead and issue authorization for Mountain Valley Pipeline on the Clean Water Act, within 21 days of the bill's passage," Anderson pointed out.The pipeline is expected to cost around $6 billion. One study by the advocacy group Oil Change International found the pipeline would spew more than 89 million metric tons of carbon dioxide into the atmosphere, akin to adding 26 new coal-fired power plants. Supporters, including Sen. Joe Manchin, D-W.Va., argued the project will keep energy costs lower for consumers.Cindy Rank, chair of the Extractive Industries Committee for the West Virginia Highlands Conservancy, added the bill goes further, and attempts to remove litigation as an option for groups and citizens who oppose the project."It sets a terrible precedent for just about any other, especially major projects that may be coming down the line," Rank contended. "None of them are easy. All of them have problems. And problems have to be dealt with legally."Anderson added the pipeline's construction could increase natural-disaster risks for neighboring communities."Almost three quarters of the proposed path involves building on slopes that are either considered moderately susceptible or highly susceptible to landslides presents a real public safety issue," Anderson outlined.He noted the pipeline has already been cited by regulators in multiple states for more than 500 instances of water quality and other environmental violations related to sediment runoff.
What's next for the court cases challenging Mountain Valley Pipeline? -Although the Mountain Valley Pipeline won fast-tracked approval from Congress last week, environmental groups are still exploring possible legal challenges to prevent it from moving forward. President Joe Biden on Saturday signed the Fiscal Responsibility Act, which includes a measure that directs federal agencies to approve permits within 21 days for the 303-mile natural gas pipeline that will supply gas from the Marcellus and Utica shale fields to southern Virginia. The measure also includes a provision that removes judicial authority to review any federal approvals, and mandates that any challenges to the broader law be heard in the U.S. Court of Appeals for the District of Columbia. Most legal challenges to the project have been heard in the Richmond-based U.S. 4th Circuit Court of Appeals. The constitutionality of the provision removing the 4th Circuit’s authority to review permits is what is seen as a possible legal avenue for a challenge, said David Sligh, conservation director for Wild Virginia, one of several environmental groups that have been involved in lawsuits over the pipeline. Three cases over pipeline permits remain active in the 4th Circuit: one against the U.S. Fish and Wildlife Service over impacts to endangered species and two against the U.S. Forest Service and Bureau of Land Management over sediment and erosion issues related to the project. Mountain Valley Pipeline has filed motions to dismiss all three cases, citing the Fiscal Responsibility Act. “Because the plain language of the Act now divests this Court of jurisdiction over this petition and separately moots Petitioner’s claims, the Court must dismiss the Petition,” wrote George P. Sibley III, a lawyer for Mountain Valley Pipeline, in one of the motions. Sligh said environmental groups are considering challenging the Fiscal Responsibility Act’s provision eliminating judicial review of agency approvals as a breach of the separation of powers clause. “A lot of us believe that the law that was passed could be unconstitutional,” said Sligh. A potential stay of the project during such a legal challenge is also among the options being considered to prevent it from continuing, said Victoria Higgins, Virginia director for Chesapeake Climate Action Network, another environmental group involved with litigation against the project. “We will explore every avenue to try to delay the project and end the project,” said Higgins.
Debt-ceiling deal wildly profitable for mystery trader | Fortune - The US government’s move to greenlight a 300-mile natural gas pipeline as part of legislation to stave off a Treasury default shocked just about everyone, except for a mystery trader who somehow appears to have seen it coming. On Wall Street, analysts had mostly expected vague promises on energy permits to be included in a bill to raise the US debt ceiling. Yet, options trading suggests something bigger may have been in the offing. On May 24 — several days before an agreement was announced — a huge bullish bet was made on Equitrans Midstream Corp., data compiled by Bloomberg show. The company is deeply involved in the long-delayed Mountain Valley Pipeline. The wager involved snapping up 100,000 call options on the firm’s stock. It proved prescient and wildly profitable within just a few days. On May 27, White House and Republican lawmakers reached a deal that would give the long-delayed Mountain Valley Pipeline the final approvals needed to complete the project. Throughout April and much of May, negotiators from the White House and Congress went back and forth on broad-stroke parameters of an agreement. Almost until the very end, the details were closely held and in flux. Doubts lingered over whether a deal would be reached before the US was scheduled to run out of money in early June. The legislation, which was signed into law by President Joe Biden on Saturday, forced action on permits for the project. On paper, the bet appears to have earned $7.5 million through Friday. It has some asking whether more than skill and luck played a role. “My questions are: Who’s the trader? How sophisticated are they? And what are their connections to the government?” said Donald Sherman, chief counsel at the ethics watchdog Citizens for Responsibility and Ethics in Washington. He added the bet raises the specter of whether the parameters of the debt deal had somehow leaked out ahead of time. Digging into whether a trade is improperly based on confidential information is notoriously difficult, especially when it involves market-moving news from inside the government. The rules are also rife with gray areas and ambiguities. Officials, including members of Congress, are barred from trading on confidential information they learned in their position. But if, for example, someone overhears a Congressional staffer loudly mention a piece of information on the train, they’re likely in the clear.
Gulf Coast LNG Exporters Say Nitrogen from Permian Feed Gas Challenges Industry - Major U.S. LNG exporters and project developers on the Gulf Coast are exploring how to tackle the costly problem of rising nitrogen and heavy hydrocarbon levels from Permian Basin feed gas..
A new energy battleground: Insurance for LNG terminals - Environmentalists have been pushing insurance companies for years to stop writing policies for fossil fuel companies. Now, they’re opening a new front in their fight — natural gas exports. A coalition led by Public Citizen and Rainforest Action Network is launching a campaign to get insurers to stop covering liquefied natural gas terminals along the Gulf Coast. Exhibit A for the groups will be Freeport LNG, about 70 miles south of Houston. The facility had an explosion nearly a year ago, and campaigners have obtained an insurance certificate showing that some of the world’s largest insurers have issued policies to the Texas export facility. While those companies haven’t committed to stop insuring all fossil fuel companies, they do have broad goals for net-zero greenhouse gas emissions. Covering giant LNG export terminals, in the environmentalists’ opinion, violates at least the spirit of those goals. “Insurers aren’t going to make changes to how they cover fossil fuels, and especially LNG, on their own,” said Kerrina Williams, an organizer with Public Citizen, a consumer advocacy group. “Pressuring the industry to make the changes is vital to slowing climate change.” The groups want to make it difficult, or at least much more expensive, for LNG exporters to get insurance for the facilities that take natural gas, refrigerate it to temperatures so low it turns into a liquid and load it onto ships. They want insurance companies to stop underwriting new plants and the expansion of existing ones. The insurers and the exporters themselves defend LNG as a valid — and needed — part of the transition to lower-emissions energy.
US natgas up 3% on hot weather forecasts, soaring global prices (Reuters) - U.S. natural gas futures rose about 3% on Monday on forecasts for low wind power, warmer weather and higher air conditioning demand over the next two weeks than previously expected, rising exports to Mexico and a jump in global gas prices. The amount of U.S. power generated by wind so far this week dropped to just 6% of the total versus a recent high of 12% during the week ended May 12, according to federal energy data. The amount of power generated by gas has risen to 44% so far this week, up from around 40% in recent weeks. When power generators burn more gas to produce electricity to meet rising air conditioning use, there is less of the fuel available to go into storage for the peak winter heating season. That helps boost prices. That U.S. price increase occurred despite near record output and a drop in the amount of gas flowing to liquefied natural gas (LNG) export plants due to maintenance. Front-month gas futures for July delivery on the New York Mercantile Exchange rose 7.3 cents, or 3.4%, to settle at $2.245 per million British thermal units (mmBtu). Even though gas prices rose about 3% last week, speculators cut their net long futures and options positions on the New York Mercantile and Intercontinental Exchanges for the first time in three weeks, according to the U.S. Commodity Futures Trading Commission's Commitments of Traders report. In the spot market, low demand due to mild weather cut next-day gas prices for Monday at the U.S. Henry Hub benchmark in Louisiana to $1.74 per mmBtu, their lowest price since October 2020 for a second day in a row. In Northern California, next-day gas at the PG&E Citygate fell to $2.51 per mmBtu, its lowest since July 2020. Around the world, meanwhile, gas futures soared over 25% at the Dutch Title Transfer Facility (TTF) benchmark in Europe to more than $9 per mmBtu, on low LNG sendout and outages. So far this year, gas prices at TTF and the Japan Korea Marker benchmark in Asia have collapsed more than 60%. On Friday, gas at TTF was trading at a 25-month low of around $7 per mmBtu, while JKM held near a 24-month low near $9. Data provider Refinitiv said average gas output in the U.S. Lower 48 states has eased to 102.4 billion cubic feet per day (bcfd) so far in June, down from a monthly record of 102.5 bcfd in May. Meteorologists projected the weather in the Lower 48 states would remain mostly near through June 13 before turning hotter than normal from June 14-20. Refinitiv forecast U.S. gas demand, including exports, would ease from 95.9 bcfd this week to 95.3 bcfd next week on expectations wind power will remain low this week. Those demand forecasts were higher than Refinitiv's outlook on Friday.
US natgas falls 4% on low demand outlook, futures volatility drops (Reuters) - U.S. natural gas futures dropped about 4% on Friday on forecasts for less demand over the next two weeks than previously expected, while mild weather so far this year cut historical volatility in futures to a 13-month low. A big part of what has kept U.S. demand depressed in recent weeks is a drop in the amount of gas flowing to U.S. liquefied natural gas (LNG) export plants due to maintenance work at several facilities and the pipelines connected to them. Friday's price decline came despite a decrease in U.S. gas output, a jump in global gas prices, near record exports to Mexico and as U.S. generators burn more gas to produce electricity due to a reduction in wind and solar power output related in part to smoke from wildfires in Canada. The amount of U.S. power generated by solar slid to just 4% of the total so far this week versus an average of 5% over the past month, according to federal energy data. Wind power also dropped to 5% of total generation this week versus a recent high of 12% during the windy week ended May 12. That forced power generators to boost the amount of electricity produced by gas to 45% this week, up from around 40% in recent weeks. Front-month gas futures for July delivery on the New York Mercantile Exchange fell 9.8 cents, or 4.2%, to settle at $2.254 per million British thermal units (mmBtu). On Thursday, the contract rose for a fifth day in a row to settle at its highest since May 24. After prices rose during the prior five trading days, the front-month was still up about 4% for the week after easing less than 1% last week. Mild weather so far this year has cut historic or actual 30-day close-to-close volatility to 62.2%, its lowest since May 2022. On a daily basis, historic volatility hit a record high of 177.7% in February 2022 and a record low of 7.3% in June 1991. Around the world, however, gas futures remained volatile. Prices at the Dutch Title Transfer Facility (TTF) benchmark in Europe jumped as much as 24% earlier in the session to around $10 per mmBtu on Friday after dropping about 13% on June 6 and soaring 25% on June 5. So far this year, gas prices at TTF and the Japan Korea Marker (JKM) benchmark in Asia have collapsed by more than 55%. TTF fell to a 25-month low near $7 per mmBtu last week, while JKM matched a 24-month low of around $9 on Friday.
Pipeline Company Must Face $65,800 Fine Over Repair Violations
- Company claims penalties violate due process
- Circuit majority affirms penalty for slow repairs
A Michigan-based pipeline company will face civil penalties for violating federal regulations by failing to make timely repairs to its petroleum pipeline, a Sixth Circuit majority decided.The US Department of Transportation’s Pipeline and Hazardous Materials Safety Administration fined Wolverine Pipe Line Co. $65,800 for failing to reduce the operating pressure of its pipeline after a dent was discovered and failing to complete additional repairs within 180 days.According to court documents, Daniel Cooper, Wolverine’s only risk management specialist was informed of a dent and metal loss in one of Wolverine’s pipeline segments on June 10, 2015, via email. Cooper ...
Texas Permian Natural Gas, Oil Permitting Up in May, but State Overall Sees Declines - New natural gas and oil drilling permits almost doubled in May in one portion of the Permian Basin in Texas, but overall, activity was down sharply in the state.
America is going through an oil boom — and this time it's different — America's oil industry is booming — in a surprising way. It doesn't look much like the booms of the past, when companies would scramble to pump as much oil as possible and the region would attract so many workers it became impossible to find housing and free hotel rooms. Instead, a sector infamous for its booms and busts is finally learning how to embrace the one thing they've never been known for: moderation. Hold That Drill: Why Wall Street Wants Energy Companies To Pump Less Oil, Not More ENERGY Hold That Drill: Why Wall Street Wants Energy Companies To Pump Less Oil, Not More This shift is doing a lot of good in the Permian, America's most prolific oil basin. Oil companies are raking in profits, and the steadier work has also been good for workers across the region. But the economic, geopolitical and climate implications are more complicated. Last year, Russia's invasion of Ukraine sent crude prices soaring well past $100 a barrel, and that meant producers were making money hand over fist. Prices have since fallen, but they remain at or above their pre-pandemic levels. Significantly, they've consistently been high enough for most producers to drill new wells at a profit. The most recent survey from the Dallas Federal Reserve found that the average Permian producer can break even on a new well when WTI (a key reference price for oil prices) is trading at $61 a barrel. And currently, prices are well above that level. The result: Big profits for companies and higher employment and wages for workers in the Permian Basin. In previous boom times, more than 500 drilling rigs were operating simultaneously across the Permian as oil companies chased high oil prices. All those wells contributed to a huge growth in oil supply, which then led to a huge oversupply, which then inevitably led to ... huge price crashes and a resulting collapse in drilling activity. Boom, bust. Boom, bust. But last year, despite prices topping $100 a barrel, rig counts stayed in the mid-300s. They held there as prices dropped. And that's where they remain today, more or less leveling off.
Navajo Nation criticizes Chaco decision - Navajo Nation officials criticized the U.S. Department of the Interior for protecting a swath of Chaco Canyon in northwestern New Mexico from new oil and gas leasing for the next 20 years. Interior Secretary Deb Haaland announced the protection for Chaco Culture National History Park on the Navajo Nation Friday. Navajo Nation President Buu Nygren and Speaker Crystalyne Curley criticized the decision in a statement, saying it undermines the tribe’s sovereignty. Nygren says the tribe wanted a five-mile area protected, while Haaland created a 10-mile buffer, which he says impacts thousands of Navajo Nation allotment owners. He’s called on the Biden administration to reverse the decision.
Hundreds of Barrels of Oil Estimated to Have Spilled Into Garfield County Creek - The Oklahoma Corporation Commission said an estimated 500 barrels of a crude oil mixture spilled into a creek in Garfield County.About 3 miles of Ninemile Creek, located between Hillsdale and Kremlin, were contaminated, Matt Skinner, the director of Public Information at the Oklahoma Corporation Commission, said.Skinner said the Corporation Commission got a report at around 8:30 a.m. Friday that the spill had occurred.It originated from a facility owned by Nemaha Environmental Services, a company that disposes of drilling mud, a fluid that helps with the drilling of wells.The company was storing crude oil and other materials that were separated from the drilling mud during the disposal process, Skinner said. But rain may have caused the storage area to overflow or created enough pressure to damage the dike around it, causing the crude oil mixture to spill into the creek, Skinner explained.Skinner said there were sightings of dead fish after the spill.A cleanup company extracted about 70 barrels of the crude oil mixture from the creek as of Friday night, said Skinner. But up to 500 barrels of oil were estimated to have gotten into the water, Skinner added. He said it was unclear how long the cleanup would take.Staff from the Corporation Commission were on site to ensure proper protocols were being followed during the containment and cleanup process, Skinner said.Newt Roberts, a farmer who lives near the area of the spill, said some neighboring farmers were concerned about their cattle drinking the contaminated water from the creek, prompting them to relocate their livestock to other pastures. “It did go across three different farms for us,” Roberts said. “It’ll cost the farmer because if he’s renting that pasture, he’s paying rent and not getting to use it.” Roberts said his own cattle are safe. He added that he has never seen another oil spill in his 30-plus years of living in the area. “I just couldn’t believe how much oil had run down the creek,” Roberts said. “The cleanup is going to be very timely and costly.”
Oil spill contaminates 3 miles of Ninemile Creek near Enid early Friday - Local officials and farmers are still dealing with the aftermath of a major oil spill north of Enid, where hundreds of barrels of oil mixture are estimated to have spread across Ninemile Creek in north-central Oklahoma. The oil spill was first reported Friday around 8:30 a.m. near West Keowee Road and North Garland Road in northern Garfield County. Nemaha Environmental Services, an Enid-based company, owns a drilling mud disposal operation at the site between Kremlin and Hillsdale. “What caused this spill was torrential rain, which caused the area to overflow or develop a problem with the dike, but that’s all pending our investigation,” said Matt Skinner, a spokesman for the Oklahoma Corporation Commission, the lead agency looking into the spill. The spill, which stretches for nearly three miles, is a mixture of crude oil and other substances extracted from the drill mud, officials said. The Oklahoma Corporation Commission originally estimated Friday that 500 barrels of oil mixture had spilled into the creek, but Skinner said Tuesday the actual estimate is closer to 1,000 barrels. As of Tuesday evening, Skinner said cleanup crews and skimmers have recovered 630 barrels. The spill is of great concern to local farmers surrounding Ninemile Creek, according to Josh Byrd, a photographer hired by residents to record aerial footage of the contaminated area with his drone. “Their land that they usually use for grazing and cattle is just not usable right now, because they don’t want their cattle to get into that mess,” Byrd said. “It’s very thick and black.” Byrd said the farmers also are concerned about contamination issues potentially affecting tributaries that flow into neighboring bodies of water, such as the Arkansas River and Keystone Lake. “It’s gone past just being a serious problem for a few local farmers, to being a major problem for the state, especially if it gets into the Keystone Lake,” Byrd said.
Does Oil and Gas Production Consume Too Much Water? --A multiwell oil and gas project proposed for a drought-ridden Denver suburb would require 4.4 trillion gallons of water — enough to fill 6,679 Olympic-sized swimming pools. Crestone Peak Resources Operating LLC asked state regulators on April 28 for permission to drill 164 wells in Colorado’s third largest city, where residents are facing water restrictions prompted by declining reservoir levels. Lakes that the Denver suburb of Aurora relies on are only 63% full. Some residents are using dish water to sustain their plants. Now, as water used in oil and gas production is increasing, arid Western states are asking if the industry is using too much of a precious resource. “Why are the citizens asked to bear the brunt of the drought when we see oil and gas operators using so much water?” asked Kevin Chan, who leads the grassroots group Save the Aurora Reservoir opposed to the project, at a March hearing of the state House Energy & Environment Committee on a bill seeking to reduce freshwater use by the fossil fuel industry.Four of five of the nation’s top oil-producing states are in the arid West, where water supplies hit historic lows in 2022 due to global warming, a 1,200-year megadrought and record population growth. A wet winter did not provide equally for Colorado’s eight river basins, with central and southern regions reporting reservoirs as low as 35% of capacity this spring. With growth across the West expected to continue, lawmakers fromColorado to New Mexico to Texas have passed laws since 2019 requiring consortiums of energy officials, scientists, regulators and others to figure out how to reuse and recycle contaminated frack water (known as produced water). Energy companies require an average of 15 million gallons of water to frack a single well — a process by which water, chemicals and sand are injected at high pressure to open cracks in shale, releasing oil and gas. Reuse already occurs in some regions: In the Piceance Basin on Colorado’s Western Slope, Terra Energy Partners LLC treats and reuses most fracking water. In others, it doesn’t. Operators in the Denver-Julesburg Basin on the eastern side of the Rockies, the state’s largest oil play, permanently dispose of all but a fraction of the polluted water. Overall, oil and gas companies in Colorado more than doubled their use of freshwater in extraction activities in the last decade, even as production fell, found the nonprofit FracTracker Alliance in a May report. Water used per well is increasing in other oil-producing states as well, statistics show. Energy companies have emphasized that other users consume more water than they do — agriculture relies on more than 80% of such supplies to irrigate crops, and municipalities use around 11%.
Hourly Pay for Shale Workers Tops $43 | Rigzone Wages for US oil workers climbed above $43 an hour for the first time ever as unemployment held steady in the shale patch for explorers looking to arrest slower production growth. Average hourly earnings for front-line oil-and-gas workers rose 0.7% in April from the previous month to $43.28, according to a Labor Department report released Friday. Compared with a year ago, pay is up 12%. The relative strength in shale employment data bucked an overall national trend in the economy that saw the jobless rate jump and paycheck growth ease. While wages in the shale patch have been forecast to continue increasing — albeit at a slower pace — over the next couple of years, explorers are already beginning to report cost deflation for key equipment as demand for oilfield services weakens. That could ultimately lead to a cooling off in workers’ earnings, too. The jobless rate in oil and natural gas held at 1.8% in May on an unadjusted basis, government figures show. That compares with an unemployment rate of 4.1% a year earlier. The overall number of workers employed in the industry totaled 119,000 in May, down 3.2% from last year’s peak.
Exxon bets new ways to frack can double oil pumped from shale wells - Exxon Mobil is betting that a better way to frack will double the amount of oil it can pump from shale fields. “There’s just a lot of oil being left in the ground,” Chief Executive Officer Darren Woods said Thursday at the Bernstein Strategic Decisions conference. “Fracking’s been around for a really long time, but the science of fracking is not well understood.” Hydraulic fracturing, or fracking, is the process of blasting water, sand and chemicals underground to break apart rock and keep it propped open for oil to flow out. Though the technology gave rise to the U.S. shale boom, only about 10 percent of the oil in a reservoir is recovered using current techniques. Better drilling and fracking methods may prove critical as output growth from shale fields slows. Exxon is working on two specific areas to improve fracking, Woods said. It wants to be able to frack more precisely along the well so that more oil-soaked rock is getting drained. It also wants to keep the cracks open longer to boost the flow of oil. Sand is the primary method today to prevent fractures from closing up. “That in my mind is where the first wave of technology will come into that field,” Woods said. “We think we’ve got some promising technologies to employ there that will significantly improve our recovery.”
Supreme Court won’t review ruling barring offshore fracking in California -- The U.S. Supreme Court on Monday declined a request by the oil industry to review a lower court ruling barring fracking off California’s shore. In 2014, the Environmental Defense Center (EDC) sued to halt offshore fracking in federal waters off the Golden State. Four years later, Judge Philip S. Gutierrez of the Central District of California, a George W. Bush appointee, found the federal government had violated the Endangered Species Act and Coastal Zone Management Act by issuing fracking permits for the area. Last year, a three-judge federal appeals court upheld the ruling but also went further than the Central District, finding that the Interior Department also failed to conduct required environmental reviews under the National Environmental Policy Act. “The agencies also should have prepared a full [environmental impact statement] in light of the unknown risks posed by the well stimulation treatments and the significant data gaps that the agencies acknowledged,” the appeals court wrote. The plaintiffs in the case hailed the Supreme Court’s decision in a statement Monday. “The Supreme Court was right to reject the oil industry’s latest attempt to allow fracking and acidizing in our waters with zero meaningful environmental review,” Maggie Hall, senior attorney at EDC, said in a statement. “The Santa Barbara Channel is one of the most ecologically rich and important regions in the world. As the climate crisis escalates, ending these destructive extraction practices is a matter of survival — not just for the whales, otters and other animals in the Channel, but for all life on earth.” “Access to the vast energy resources offshore is essential for meeting the growing demand for affordable, reliable energy while achieving our climate goals,” said Holly Hopkins, vice president of upstream policy at the American Petroleum Institute (API), the intervenor-defendant in the case. “API will continue to work with policymakers to advance opportunities that allow for the safe and responsible development of the Outer Continental Shelf.”
US Supreme Court Rejects Big Oil Challenge to Offshore Fracking Ban in California - The U.S. Supreme Court on Monday rejected a call from several fossil fuel companies to hear their challenge to a lower court ruling handed down a year ago, which prohibited fracking in federal waters off the coast of California.The 9th U.S. Circuit Court of Appeals last June upheld a decision to bar the issuing of permits for offshore fracking, finding that the U.S. Department of the Interior had violated the Endangered Species Act (ESA), the National Environmental Policy Act, and the Coastal Zone Management Act when it allowed fracking in offshore gas and oil wells in the Pacific.In the original case, the ruling was the result of three separate lawsuits filed by the Center for Biological Diversity (CBD) and the Wishtoyo Foundation, the Environmental Defense Center (EDC) and Santa Barbara Channelkeeper, and the state of California, challenging the federal government.Earlier this year, fossil fuel companies ExxonMobil and DCOR, LLC were joined by the American Petroleum Institute in intervening in the case, filing a petition for certiorari in an effort to overturn the 9th Circuit ruling.Despite the history of the case, the Biden administration opposed the fossil fuel companies' move, with Solicitor General Elizabeth Prelogarwriting in a Supreme Court brief last week that "the court of appeals' decision does not warrant this court's review.""California's amazing coast and vulnerable marine life deserve this victory, which will protect the ecosystem from the many dangers of offshore fracking," said Kristen Monsell, oceans legal director at CBD. "The fracking ban will help prevent more toxic chemicals from poisoning fish, sea otters, and other marine life."EDC filed its lawsuit after finding in 2014 through several Freedom of Information Act requests that the federal government had issued more than 50 permits without conducting environmental reviews or a public comment process.CBD published a report that same year showing that offshore fracking near Los Angeles and Santa Barbara posed a serious risk to marine species that could be exposed to toxic chemicals as well as increasing air pollution and the chance of an earthquake. At least 10 chemicals that were routinely used in fracking operations off the California coast before the 9th Circuit ruling was handed down were found to be harmful and even deadly to marine animals including sea otters and fish.
State considering changes after activists press for action on leaky oil wells - Activists pushing state and regional regulators for a more robust response to the discovery of leaky oil wells in Arvin and Lamont won tentative offers Tuesday for neighborhood-level notifications about the findings and, possibly, new sampling of local air quality. Talk of additional action on the matter came during an online meeting Tuesday afternoon involving environmental justice advocates and representatives of several state agencies involved with a methane task force set up by Gov. Gavin Newsom. It follows last week's announcement that state inspectors found methane leaking from 27 wells — 40% of those checked. During Tuesday's discussion, a representative of the California Air Resources Board said the state needs to figure out a better way to carry out notifications. "So, it's definitely something noted," Heather Quiros, assistant chief of CARB's enforcement division, said in reference to local notifications. She added later, "It's something we definitely want to have conversations about." When EJ advocates asked whether the state officials would be taking air quality samples in residential areas, as they did when leaks were discovered last year in Bakersfield, Quiros responded, "It's something that can be done." No formal commitments were made in either instance. Methane leaks have been a sensitive topic after a pipeline leak in Arvin sickened residents in 2014 and resulted in the evacuation of about three dozen neighbors. As was the case when oil well leaks were discovered last year in dozens of sites around Bakersfield, state officials downplayed the risk to safety and health. They have pointed out that methane leaking into the atmosphere generally does not present an explosion risk unless it is enclosed. Likewise, they have noted uncontrolled methane releases don't usually present health problems in such conditions because the potent greenhouse gas tends to disperse quickly. When EJ advocates asked whether there has been testing for carcinogenic volatile organic compounds that sometimes accompany methane releases at oil wells, they were told by state representatives that no such sampling has taken place in the Arvin-Lamont area in response to the discovery of the leaks. Three of the wells found to have been leaking late last month are located near Arvin High School. Activist Jesus Alonso said people he has spoken with about the methane leaks "are really outraged that this information has not been (put) out yet." "What can I say to them?" he asked. "What can I share with them?" Fifteen of the 27 wells were found to have been leaking methane at rates exceeding 50,000 parts per million, which if not dispersed can be enough to ignite. State officials on Tuesday's call said they were unable to determine how long the wells had been leaking.
Two LNG Terminals Completed in Philippines --Two liquefied natural gas (LNG) projects have wrapped up construction in the Philippines, opening up importation to meet growing energy demand in Southeast Asia’s second most populous country. The facility by AG&P International Pte. Ltd. and Linseed Field Power Corp. in Batangas Bay has already started supplying a power plant in Batangas province while the other terminal owned by FGEN LNG Corp. is set to receive its first LNG cargo later this year, according to a press release by the Department of Energy (DOE) Friday. The LNG fed to the Ilijan combined cycle plant enabled the power station to resume supply to the electricity grid Thursday, the department said. The 1,200-megawatt mill, owned by a Philippine subsidiary of Korea Electric Power Corp. and operated by Filipino conglomerate San Miguel Corp., ceased operation June 2022 after the fuel supply stopped from the depleting Malampaya gas field. “All these developments are positive signals reflecting the continuous interest of the private sector in investing in critical infrastructures that will allow the country to import and utilize imported LNG and complement the available gas from the Malampaya reservoir to meet the country's growing energy demand”, Friday’s announcement noted. In April the country received its first-ever LNG supply from abroad, as announced by AG&P. The Singapore-based AG&P signed last year a 15-year deal with the Abu Dhabi National Oil Co. to supply the former with LNG, as announced by AG&P February 23, 2022.
DOE’s fossil gas projects in Batangas alarm green group — An environmentalist group has expressed alarm over the growing number of gas-fired power plant projects in Batangas following the completion of two more liquefied natural gas (LNG) facilities in the province. The Protect the Verde Island Passage (Protect VIP) network was dismayed that the Department of Energy’s (DOE) announcement on the two LNG terminals in Batangas “appears insensitive to the thousands of affected communities who are still reckoning with the oil spill in the Verde Island Passage (VIP),” said Fr. Edwin Gariguez, lead convenor of the group, in a statement on Sunday. According to Gariguez, the fossil gas projects in Batangas “goes against the need to protect this globally significant marine corridor blessed with incomparable beauty and biodiversity and whose marine wealth provides sustenance and livelihood to millions of Filipinos.” On June 2, the DOE announced that the completion of the two LNG facilities would “add to and secure the supply of natural gas for its power plants in Batangas.” Another facility built by FGEN LNG Corp. (FGEN LNG) in Batangas City would be delivering its first LNG cargo in the later part of this year, the DOE added. The FGEN LNG terminal inside its First Gen Clean Energy Complex in Batangas aims to supply the power needs of gas-fired plants in the country, mainly within the Luzon grid. But Gariguez said the numerous fossil gas projects in Batangas could mean “more shipping lane traffic in the VIP and more toxic cargo plying our waters,” endangering the resource-rich passage, similar to what happened on Feb. 28 when oil tanker MT Princess Empress, which was carrying 800,000 liters of industrial fuel, sank off the waters of Oriental Mindoro, which is within the VIP corridor, and caused a massive oil spill. “DOE’s pursuit of new energy sources must not come at the expense of our environment and people, specifically when we are teeming with abundant renewable energy sources waiting to be tapped,” he emphasized.
Mindoro oil spill significantly controlled— The recent oil spill in Oriental Mindoro is still ongoing but has been significantly controlled, Environment and Natural Resources chief Toni Yulo-Loyzaga said Monday. "So, sa ngayon po ongoing pa rin ang oil spill. I would say that it has been significantly controlled from the day that it happened. I think the biggest realization here is from the date of release of some substance like oil, that oil will travel (where) the wind and the current will take it," Yulo-Loyzaga said in a press conference. "Over the course of time there is a portion of the oil that will evaporate, there is a portion that will not (that's) what we are trying to keep track off so we can anticipate how we can protect our ecosystems. Our (coral) reef, our sea grasses, our mangoves, significantly po, in terms of volume under control na po siya," she added. Yulo-Loyzaga noted that they are in the last phase of clean up as earlier said by the National Task Force on Oil Spill Management. "As of the moment, there are ongoing operations, the spill is still ongoing. As far as our latest information, the private contractors of the ship owners were working on capping the last remaining leaks doon po sa vessel na 'yun," she said. "So, they have to bring in a specialized ROV to actually take over from the work that was done by the partners from Japan and the US na talaga pong significantly nag-decrease po 'yung leakage because they were able to practice. So, ongoing pa rin 'yung hazard management on the side." The oil extraction is expected to be completed within 20 to 30 days if weather conditions permit, they added. The MT Princess Empress ran aground off the coast of Pola, Oriental Mindoro on February 28. It was carrying some 800,000 liters of industrial oil as cargo and fossil fuel in its engine. The oil spill has so far left P58.137 million worth of damage and losses to fisheries, affected more than 27,500 fisherfolk, and caused 15 local government units to declare a state of calamity. More than 42,000 families have been affected from over 100 affected areas in Oriental Mindoro, Palawan, Antique, and Batangas.
IOPC Funds will help meet Philippine tanker oil spill claims - The International Oil Pollution Compensation (IOPC) Funds has agreed to work with the Shipowners’ Club on meeting mounting claims from a tanker spill off the Philippines. At a recent IOPC Funds meeting, it was agreed that claims resulting from the sinking of the 1,143-dwt Princess Empress (built 2022) are likely to exceed the shipowner’s limitation of liability agreed under international conventions. Crew rescued but fuel spilt as new tanker sinks off Philippines Read more “The 1992 Fund Executive Committee decided to authorise the director to make payments in respect of losses arising out of this incident. The committee also authorised him to sign an agreement on interim payments with the club, which would apply retrospectively,” the London-based IOPC Funds said after its meeting. In March, the Princess Empress sank in poor weather off Oriental Mindoro in the Philippines with 800,000 litres of fuel oil as cargo onboard. The wreck lies at a depth of 400 metres. The subsequent oil spill led to a ban on local fishing and polluted coastlines, including environmentally sensitive areas. In TV coverage of a government hearing into the incident, the owner of the tanker, RDC Reield Marine Services, said it paid $22,000 in premium for the vessel’s insurance cover. Article continues below the advert The protection and indemnity policy for the tanker, which covers claims related to third-party damage, was placed with the Shipowners’ Club, a member of the International Group of P&I Clubs. The owner insisted that the ship is new and not, as has been widely reported, an old vessel that has been rebuilt. Frizie Tee, vice president of RDC Reield Marine Services, told the hearing: “We sincerely apologise to the communities, the local and national government and the agencies. Elements beyond human control such as weather disturbance in the area resulted in this unfortunate event.” Around 41,000 families have been reported affected by the spill and Philippine Peso 611m ($10.8m) has been paid out in livelihood support so far. The Shipowners’ Club and the IOPC Funds have established several joint claims offices in the region. The estimated cost of environmental damage has been put at Peso 9.4bn. The initial insurance costs of the incident will be met by the Shipowners’ Club, but costs over $10m will be placed with the International Group’s claims pool. Sums that exceed the shipowner’s limitation under the 1992 Civil Liability Convention and the 2006 Small Tanker Oil Pollution Indemnification Agreement are met by the IOPC Funds.
Guyana suspends order over ExxonMobil dispute-- An appeal court judge in growing oil producer Guyana today suspended an order by a lower court that US major ExxonMobil provide by 10 June an unlimited guarantee to cover any oil spill at its Liza 1 project on the deepwater Stabroek block. The suspension of the order will prevent the company from losing its permit for the Liza-1 well that is producing about 150,000 b/d. But the appeal court judge ordered ExxonMobil to make a $2bn security deposit within 10 days. The dispute will be adjudicated by the country's full court of appeal on a date to be set. Neither the company nor the government — that opposed the order for an unlimited guarantee — has commented on today's ruling. Both had sought a stay of the order to suspend the company's permit to operate for failing to provide an unlimited guarantee which will safeguard against the dangers of an oil spill. ExxonMobil and its partners already have "the right measures" in place to prevent, mitigate and pay for a clean-up in the event of an oil spill, the company argues. The challenge to ExxonMobil's Liza 1 project was filed in September 2022 by environmental lobbies that contended the company was not providing adequate guarantees to compensate for any oil spill. ExxonMobil was involved in "a disingenuous attempt" to reduce its obligations under its environmental permit for the Liza 1 project, Guyana's high court had ruled. The company had been allowed to do this because of "the omissions of a derelict, pliant and submissive environmental protection agency," it said. The dispute involves only the company's Liza 1 project and not Liza 2 that is also on the Stabroek block. ExxonMobil started production in 2019 from Stabroek in which it has a 45pc stake, with US independent Hess holding 30pc. Chinese state-owned CNOOC unit Nexen has a 25pc share. The consortium is the only producer in the country. The consortium's crude output in the first quarter averaged 378,340 b/d against 121,100 b/d in the corresponding 2022 period.
Blend of WTI, Brazilian grades undercuts Nigerian crude in fresh blow to sector | S&P Global Commodity Insights --WTI Midland, the light sweet US grade, is being blended with heavy Brazilian grades to produce a cheaper Nigerian lookalike, which is undercutting the Nigerian crude grades in Europe and pushing down buying interest for Nigerian cargoes, multiple trading sources told S&P Global Commodity Insights. In recent months traders have struggled to offload cargoes of Nigerian crude as buyers in India and China moved to buy more heavily discounted Urals crude, now even European refiners have begun looking elsewhere for crude oil. In turn this has pushed Bonny Light, Nigeria's flagship crude grade to 50 cents/b discount to Dated Brent on June 6. The discount has narrowed slightly over the last few days but has averaged a discount to Dated Brent over April, May and so far in June. "WAF is losing out to alternatives in Europe - [WTI] Midland and Brazilian [grades] have been consistently undercutting [differentials, and sellers of Nigerian barrels] just cannot find demand in Europe," one trader said. Blending of the grades at European refineries produces crude with the low sulfur quality of Nigerian grades, but with enough heavy Brazilian content to ensure not too much naphtha is produced, sources said. This is latest blow to Nigeria's embattled oil sector, with production falling in recent years due to security, underinvestment and technical issues at ageing wells. African crudes popular with refiners in Asia have been undercut in recent months by cheap Russian barrels, due to the price cap imposed on Russian oil by Western countries following the war in Ukraine. Indian and Chinese refiners, in particular, have become hooked on Russia's Urals grade, according to data from S&P Global Commodities at Sea. "I don't think Nigeria can sustain competition with WTI Midland mixed with Brazil, [it's been a] long time now since we have seen Europe able to absorb Nigerian exports," a second trader said. Sources hinted that blending of WTI and Brazilian grades to make a more affordable Nigerian substitute grade had been occurring for some weeks, leading to a material decline in demand for the country's crude. "Nigerian [grades] like Bonga, Forcados and Escravos are struggling - lots of availability indeed," a third trader said. Sellers have already observed a noticeable reduction in the amount of WAF crude being purchased by some European refiners. "We've seen some usual WAF buyers have underbought by 100,000 barrels/day now," said a fourth trader, adding that "when you don't have India buying as well [that is] putting pressure on the market." The lack of Indian demand over the last six months in combination with the competition from the blended WTI Midland and Brazilian barrels is driving the continued bearish sentiment, sources said. "The fall will be inevitable," another trader said, referring to Nigerian crude differentials.
Putin Gains Influence in Oil Rich Libya -- While the US ponders whether to reopen its embassy in Libya, Vladimir Putin’s new ambassador is preparing to take up his post in the capital, extending Russian influence across an oil-producing nation on the doorstep of Europe. Russia’s Wagner Group, a private military company controlled by Putin ally Yevgeny Prigozhin, already has access to key oil facilities and supported last year’s monthslong blockade that hit exports at the height of the energy crisis triggered by the invasion of Ukraine. Moscow’s decision to reestablish its diplomatic presence in Tripoli — western seat of the United Nations-backed government — is the clearest sign yet that Putin is looking to make inroads beyond his traditional support for military commander Khalifa Haftar in the east. The developments have prompted concern in the US, which has dispatched a slew of senior officials to counter Putin’s advances in an OPEC member that European governments are courting as a potential alternative to Russian energy. They include CIA chief William Burns, who visited Libya in January, speaking to rival governments in east and west and later meeting officials in neighboring Egypt, which has also supported Haftar. Top of the US agenda is a bid to oust an estimated 2,000 Wagner mercenaries who supported Haftar’s failed 2019-2020 campaign to capture Tripoli and have since helped bolster his grip on oil supplies in a country that’s home to 40% of Africa’s reserves.
OPEC+ sticks to 2023 production target, Saudi Arabia sets further cuts -The influential Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, on Sunday made no changes to its planned oil production cuts for this year, as coalition chair Saudi Arabia announced further voluntary declines. OPEC+ also announced in a statement that it will limit combined oil production to 40.463 million barrels per day over January-December 2024. Previously, the alliance agreed to a 2 million barrels-per-day decline in October. Some OPEC+ members also announced some voluntary drops of just over 1.6 million barrels per day in April. Russia's Deputy Prime Minister Alexander Novak said Sunday that all voluntary cuts, which were initially set to expire after 2023, will now be extended until the end of 2024, in comments reported by Reuters.Asked whether Russia, hit by Western sanctions, will carry out its pledge to cut output, UAE oil minister Suhail al-Mazrouei on Sunday acknowledged there were discrepancies between figures supplied by Moscow and the independent Russian production estimates of analysts and trade publications. "Some of the things that we have seen from Russia on a technical basis just ... [don't] add up from some of the independent sources, and we will be reaching out to those independent sources," he said during a press briefing after the OPEC+ meeting. Saudi Arabia's energy ministry said Riyadh will implement an additional voluntary one-month 1 million-barrel-per-day cut starting this July, which can be extended. This will bring the kingdom's total voluntary declines to 1.5 million barrels per day over the period, reining in its production to 9 million barrels. The Saudi energy minister described the kingdom's additional 1 million barrel-per-day voluntary reduction as a "Saudi lollipop" and stressed it will implemented. "We have always honored our commitments," he said during the Sunday press briefing. He left unanswered whether the kingdom will extend its voluntary reduction beyond July. The move by the 23-country alliance follows contentious talks that dragged well into the night on Saturday, as well as a more-than four-hour Sunday meeting of the alliance's Joint Ministerial Monitoring Committee, which recommends, but does not implement, policy. At stake for OPEC+ is a battle to reconcile an outlook of tighter supply in the second half of the year, current macro-economic and inflationary concerns, and intergroup diplomacy.
Saudi to Cut Output by 1MM BPD in Solo OPEC+ Move - Saudi Arabia will make an extra 1 million barrel-a-day oil supply cut in July, taking its production to the lowest level for several years after a slide in crude prices. The bold move by the most important member of the OPEC+ coalition came at the cost of ceding ground to two key allies: Russia, which made no commitment to cut output deeper, and the United Arab Emirates, which secured a higher production quota for 2024. Oil prices advanced on Monday. Saudi Energy Minister Prince Abdulaziz bin Salman said he “will do whatever is necessary to bring stability to this market.” As oil prices are hammered by a softer economic outlook, especially in China, achieving this means shouldering the burden of cuts. The rest of the 23-nation group offered no additional action to buttress the current market, but did pledge to maintain their existing cuts until the end of 2024. The kingdom is doubling down after the previous round of curbs — agreed just two months ago — failed to deliver a sustained price rally. The Organization of Petroleum Exporting Countries announced a surprise supply reduction of about 1.6 million barrels a day in early April, but since then weak economic data from China have weighed on oil futures, which fell 11% in New York in May. West Texas Intermediate jumped almost 5% early in the session on Monday before paring some gains to trade above $73 a barrel. Global benchmark Brent climbed toward $78 a barrel. Next month’s additional cut could be extended, but the Saudis will keep the market “in suspense” about whether this will happen, Prince Abdulaziz said. The minister has repeatedly sought to hurt bearish oil speculators, warning them to “watch out” in the buildup to Sunday’s meeting. “For the near term, crude prices will largely depend on a test of wills between stability-seeking Saudi Arabia and bearish paper traders.” The Saudi effort to bolster the price of its most important export requires the sacrifice of further market share. Global oil demand is forecast to hit a record high this year, but the additional cuts announced on Sunday will bring Saudi production to about 9 million barrels a day in July, the lowest since June 2021 when output was still recovering from the depths of the Covid-19 pandemic. The main winner from the weekend’s OPEC+ talks was the United Arab Emirates, which gets a boost to its production limit for next year at the expense of some African members, which were asked to give up part of their unused quotas. Energy Minister Suhail Al Mazrouei thanked his colleagues for the increase and expressed the country’s loyalty to the cartel.
China slowdown drives Saudi oil production cut - The most significant feature of the decision by Saudi Arabia to cut its production of oil by 1 million barrels a day in July, with a possible extension, is what it says about assessments of the prospects for the world economy. The driving force of the decision, announced following the OPEC+ meeting in Vienna on Sunday, is that the much-touted “recovery” of the Chinese economy after the lifting of anti-COVID heath measures is not taking place, leading to a further slowdown in the world economy and sending down the price of oil. The meeting was held two months after the cartel, which includes many of the world’s major oil producers, announced production cuts to try to sustain prices. But these measures have proven largely ineffective, and the oil price has fallen by 12 percent since the middle of April, touching $70 a barrel at one point last week. Crown Prince of Saudi Arabia Mohammad bin Salman Al Saud [Photo by en.kremlin.ru / CC BY 4.0] Saudi Arabia, under the direction of Crown Prince Mohammed bin Salman, has embarked on a major investment and infrastructure program to try to lessen its dependence on oil production. But the program, which has so far failed to attract significant international investor support, depends on oil revenue to be carried out. The Wall Street Journal has reported that in recent months Saudi policymakers have been warned that “the kingdom needs elevated oil prices for the next five years to keep spending billions of dollars on ambitious projects that have so far attracted meagre investment from abroad.” According to the International Monetary Fund, Saudi Arabia needs an oil price above $80 a barrel to balance its budget and fund major projects. But as the world economy slows—the IMF has forecast that global growth this year will reach its lowest point, apart from the COVID-19 recession, since the financial crisis of 2008-2009—recessionary trends are exerting downward pressure on oil prices.
OPEC lowers its oil output target for 2024 - OPEC+ has reached a deal to extend output cuts into 2024, after the oil cartel and its allies met on Sunday to try to agree further reductions in production. Saudi Arabia will make an additional voluntary cut as part of the deal. Its energy ministry said that the kingdom will extend its 500,000 barrels per day (bpd) voluntary oil cut until the end of 2024, according to the state news agency. Iraq said it will extend its voluntary cut of 211,000 bpd until the end of 2024. Iraq's Deputy Prime Minister for Energy Affairs and Minister of Oil Hayan Abdulaghani Abdulzahra Alsawa (2nd right) arrives for the 35th OPEC (Organization OF Petroleum Exporting Countries) and non-OPEC ministerial meeting in Vienna, Austria, on June 4, 2023. There are growing signs that major oil producers led by Saudi Arabia and Russia are considering slashing production further when they meet on in a bid to prop up prices. (Photo by JOE KLAMAR / AFP) Iraq's Deputy Prime Minister for Energy Affairs and Minister of Oil Hayan Abdulaghani Abdulzahra Alsawa (2nd right) arrives for the 35th OPEC (Organization OF Petroleum Exporting Countries) and non-OPEC ministerial meeting in Vienna, Austria, on June 4, 2023. There are growing signs that major oil producers led by Saudi Arabia and Russia are considering slashing production further when they meet on in a bid to prop up prices. (Photo by JOE KLAMAR / AFP) (Agence France-Presse (AFP)/AFP) The Oman energy ministry stated that it will extend voluntary oil production cut by 40,000 bpd until the end of next year. Though the details of the size of the overall supply cuts by OPEC members are not available, Reuters reported that the oil cartel has lowered its oil output target for next year by 1.4 million bpd versus current output targets. The next OPEC and non-OPEC Ministerial Meeting will be held on Sunday 26 November 2023, in Vienna, the oil cartel said in a statement. According to reports, formal talks were delayed by at least three hours due to members discussions on the side lines about production baselines, from which country quotas and reductions are derived. Top OPEC members lead by Saudi Arabia were trying to persuade under-producing African nations such as Nigeria and Angola to have more realistic output targets, Reuters reported. However, OPEC's production cuts in the past months have not helped in pushing up prices. Oil prices have lost almost 15% after Saudi Arabia announced major supply reductions in April. Prices went up by $9 per barrel to above $87 only to plunge under pressure from concerns due to a recession. Brent prices settled at $76 on Friday.
OPEC cuts Nigeria’s oil output by 20.7% to 1.38 mb/d --THE Organisation of Petroleum Exporting Countries and its allies, popularly known as OPEC+ has slashed Nigeria’s oil output, excluding condensate by 20.7 per cent to 1.38 million barrels per day, mb/d, from 1.74 mb/d in order to achieve stability in the global market.The decision expected to take effect from January 2024 was taken at the crucial meeting of the 49th Meeting of the Joint Ministerial Monitoring Committee (JMMC) and the 35th OPEC and non-OPEC Ministerial Meeting, in Vienna, Austria, monitored by Vanguard, yesterday.Under the organisation’s new voluntary adjustment programme obtained by Vanguard, Saudi Arabia will produce 10.48 mb/d, apparently the highest to be produced by a single nation while Sudan will produce 64,000 bpd, the least.The programme further indicated that OPEC members states, whose collective output stood at almost 25 mb/d still account for a bulk of the global oil output while non-OPEC countries account for 15.5 mb/d.However, OPEC+ stated in a statement that, it remains committed to achieving stability despite many issues and problems in the global market.It stated: “In light of the continued commitment of the OPEC and non-OPEC Participating Countries in the Declaration of Cooperation (DoC) to achieve and sustain a stable oil market, and to provide long-term guidance for the market, and in line with the successful approach of being precautious, proactive, and pre-emptive, which has been consistently adopted by OPEC and non-OPEC Participating Countries in the Declaration of Cooperation, the Participating Countries decided to reaffirm the Framework of the Declaration of Cooperation, signed on 10 December 2016 and further endorsed in subsequent meetings; as well as the Charter of Cooperation, signed on 2 July 2019.” It also agreed to, “Adjust the level of overall crude oil production for OPEC and non-OPEC Participating Countries in the DoC to 40.46 mb/d, starting 1 January 2024 until 31 December 2024, which to be distributed as per the attached table.
OPEC’s Smallest Producer Sees Crude Oil Exports Drop To Zero - Equatorial Guinea, a small West African country and OPEC’s smallest oil producer, did not export any crude oil in May due to output declines and no new projects to replace lost production, Petro-Logistics said on Thursday. So last month, Equatorial Guinea’s crude oil exports hit zero, according to the crude flows tracking firm.Equatorial Guinea, which became a member of OPEC in 2017, pumped an average 289,000 barrels per day (bpd) of crude back in 2015.By April this year, production had shrunk to 59,000 bpd, which was still up by 11,000 bpd compared to March, according to secondary sources in OPEC’s latest Monthly Oil Market Report (MOMR) from May. In the first quarter of 2023, Equatorial Guinea’s crude oil production averaged 54,000 bpd, down from 90,000 in the third quarter of 2022 and an average of 98,000 bpd for the full year 2021.Back in 2021, the country with around 1.45 million residents received half of all its export revenue from petroleum export revenue, according to OPEC data.ExxonMobil, currently the largest oil producer in the country, plans to stop pumping crude in Equatorial Guinea and exit the country after its license expires in 2026, Reuters reported at the end of 2022, citing sources close to the plans.
Oil prices surge as Saudi Arabia announces voluntary output cut Crude oil prices surged over 2% globally on Monday with Saudi Arabia announcing an additional voluntary cut of 1 million barrel per day (bpd) in July. The August contract of Brent on the Intercontinental Exchange was currently 2.10% higher at $77.73 per barrel, and the July contract of West Texas Intermediate (WTI) was at $73.38 a barrel, higher by 2.29% from its previous close. Saudi Arabia’s energy ministry Prince Abdulaziz bin Salman said the country may extend the production cut going ahead and “will do whatever is necessary to bring stability to this market“. The move gains significance as Saudi Arabia is the largest supplier among the members of the Organization of the Petroleum Exporting Countries (Opec). The decision is likely to take the country’s output to 9 million bpd in July from over 10 million bpd in May. Ravindra V. Rao, head of commodity research at Kotak Securities said: “WTI Crude oil futures edged higher after Saudi Arabia surprised markets with an additional 1 mbpd for the month of July, on top of Saudi Arabia’s existing voluntary cut of 0.5 mbpd announced in April. The kingdom also said the latest cut could be extended depending on market conditions. This brings Saudi Arabia’s total production levels to around 9 mbpd in July compared with 10.5 mbpd in April." In case crude oil prices increase, upstream companies like ONGC and Oil India would benefit from higher realizations and cash accruals on crude oil sales, while the marketing profits of oil marketing companies would decline or turn to losses depending upon the extent of the rise, he added. For the Indian economy, an increased crude rate would imply a higher import bill and forex outgo besides having an inflationary impact. With regard to the global economy a higher crude price would lead to inflation thereby accentuating recessionary trends," Volatility in international crude oil prices plays major role for the Indian economy as the country imports around 85% of its energy requirement and cost of energy imports is a major part of the country’s import bill.
Oil Pares OPEC-Fueled Gains as Traders Assess US Macros - Oil futures pared back OPEC-fueled gains during Monday's afternoon session as traders balanced deeper production cuts by Saudi Arabia against weakening macroeconomic data in the United States, showing services -- the largest sector of the economy -- is teetering on the brink of recession. Figures released this morning by the Institute of Supply Management showed business activity in U.S. service industries declined to the lowest level since December 2022 when it briefly dipped into recession. At 50.3%, the U.S. service index is barely in expansion territory, with 50 separating expansion and contraction. "There has been a pullback in the rate of growth for the services sector. This is due mostly to the decrease in employment and continued improvements in delivery times, which are in many ways a product of sluggish demand," said Anthony Nieves, Chair of the Institute for Supply Management, adding that "the majority of respondents indicate that business conditions are currently stable; however, there are concerns relative to the slowing economy." U.S. manufacturing sector, which accounts for a large percentage of diesel fuel consumption, contracted in May for the seventh straight month and is now at the lowest level since the early days of the COVID pandemic in May 2020. The index has already been below 50 for longer than in most mid-cycle slowdowns, generally eight months or fewer, though not as long as in most recessions, which average 11 months or more. Against these headwinds, Saudi Arabia announced a unilateral 1 million bpd production cut effective in July, taking its crude output to a multiyear low, while all members of the OPEC+ alliance agreed to extend voluntary output adjustments of 3.6 million bpd through the end of 2024. The bold move will likely deepen a widely expected supply deficit in the later part of the year, with Rystad Energy estimating a deficit as large as 3 million bpd by the third quarter. What's more, Saudis want to keep the "market in suspense," and will review additional production cuts each month without any forward guidance on the plans to either reverse production cuts or extend them. The UAE production ceiling has been revised higher by 200,000 bpd beginning from January 2024. The Emiratis have emerged as a clear winner of the weekend negotiations, with Abu Dhabi lobbying for a higher output ceiling for over two years.. As for Russia, a country battered by Western sanctions but managed to sustain its pre-war level of crude exports, secured no revisions to its production quotas until the end of 2024 despite its leadership role in OPEC+. Russia has aggressively recaptured market share from its Saudi partner in Asian markets by selling discounted oil barrels. Russian Deputy Prime Minister Alexander Novak attempted to reassure the market that Moscow is "delivering on its oil output commitments and has already achieved the targeted cuts." At settlement, West Texas Intermediate July futures added $0.41 to $72.15 bbl after hitting a five-week high on the spot continuous chart of $75.06 bbl. August Brent contract gained to $76.71 bbl, up $0.58 bbl, also paring an advance to a five-week spot high at $78.73 bbl. NYMEX RBOB July futures advanced $0.0237 to $2.5244 gallon and NYMEX ULSD futures gained $0.0206 to $2.3775 gallon.
Oil prices sink after Saudi-driven rally- Oil prices sank Tuesday as dealers mulled the weak demand outlook after having rallied the previous day on output cuts from key crude producer Saudi Arabia. Europe's Brent oil contract and US counterpart WTI crude fell more than two percent, one day after bouncing on news that Riyadh slashed daily output by one million barrels for July in a bid to prop up prices. The announcement came at a weekend meeting of the 23-nation OPEC+ oil producers' alliance, which also agreed to continue its current production cuts until the end of next year. Saudi glow fades "Oil prices are under pressure... as the glow from Saudi's supply cut fades and the reality of the sluggish demand backdrop sets in," Asian and European stock markets mostly fell as investors also digested a surprise interest rate increase from the Reserve Bank of Australia (RBA). That sparked talk that global central banks were not yet done hiking to combat stubbornly-high inflation. The RBA lifted its main rate by 25 basis points to 4.1 percent, which was the highest level since May 2012. In reaction the Australian dollar jumped more than one percent against the greenback, which traded mixed against the euro and yen. "The RBA's surprise decision...(was) a warning that the major central banks are not done tightening yet," "That, combined to the overbought conditions in stock markets, weighs on sentiment. "We will likely step into a period of profit taking after such a breathtaking and unexpected rally." The tepid equities performance came after a global advance stumbled Monday, with a below-par read on US services sector activity hinting at weakness in a key area of the economy.
Concerns Over Global Economic Growth Outweighed Saudi Arabia's Pledge Over the Weekend to Increase its Output Cuts - The oil market erased Monday’s gains and retraced almost 62% of its move from a recent low of $67.03 to its high of $75.06 on profit taking. Concerns over global economic growth outweighed Saudi Arabia’s pledge over the weekend to increase its output cuts by 1 million bpd to 9 million bpd in July. The market seemed to focus on the risk to demand, with recession concerns increasing as the U.S. service sector barely grew in May. The oil market sold off to a low of $70.13 in overnight trading. However, the market held support at its 62% retracement level at $70.10 and traded back above the $72.00 to a high of $72.33 by mid-day. The July WTI contract later settled in a sideways trading range and ended the session down 41 cents at $71.74, ending a three-day rally. The product markets ended the session mixed, with the heating oil market settling down 97 points at $2.3678 and the RB market settling up 3.99 cents at $2.5643. In its Short Term Energy Outlook, the U.S. EIA increased its 2023 world oil demand growth forecast by 30,000 bpd to 1.59 million bpd. The agency cut its oil demand growth estimate for 2024 by 20,000 bpd to 1.7 million bpd. Total world oil demand is estimated at 101.01 million bpd in 2023 and 102.71 million bpd in 2024. Meanwhile, total world oil output in 2023 is exepcted to increase by 1.52 million bpd to 101.37 million bpd and increase by 1.32 million bpd to 102.69 million bpd in 2024. OPEC crude oil production is forecast to fall by 570,000 bpd to 28.1 million bpd in 2023 and increase by 280,000 bpd to 28.38 million bpd in 2024. The EIA also reported that U.S. oil production increased by 720,000 bpd to 12.61 million bpd in 2023 and by 160,000 bpd to 12.77 million bpd in 2024. U.S. petroleum demand in 2023 is forecast to increase by 150,000 bpd to 20.43 million bpd and by 260,000 bpd to 20.69 million bpd in 2024. In regards to prices, the EIA forecast the price of Brent crude will average $79/barrel in the second half of 2023, $79.54/barrel for all of 2023 and $84/barrel in 2024. S&P Global Commodities at Sea is estimating U.S. gasoline imports jumping to 1.2 million b/d in the week ending June 2nd and up from 833,000 b/d reported by the EIA for the previous week. The ship tracking service also estimates U.S. exported 1.1 million b/d of gasoline during the same week, while distillate exports from the U.S. remained strong at 1.2 million b/d. Citi said Saudi Arabia's pledge to deepen output cuts is unlikely to underpin a sustainable price increase into the high $80s-low $90s. Analysts at Citi said weaker demand and stronger non-OPEC supply by year end, potential recessions in the U.S. and Europe, and lower growth in China could push prices lower rather than higher this year and in 2024. Analysts said prices are expected to be range-bound, with Brent averaging $81/barrel through the year. Meanwhile, HSBC also maintained its Brent price forecast of $93.50/barrel for the second half of the year, predicting negative macroeconomic factors would offset some of the support from the cuts. However, UBS and Barclays were slightly more upbeat. UBS analysts forecast Brent prices at $95/barrel by end-2023 with a supply deficit seen increasing above 2 million bpd. They added the global market balance is likely to remain in a "meaningful deficit" following the broader OPEC+ agreement to extend voluntary cuts to end-2024. Barclays expected the voluntary reduction by Saudi Arabia to slightly increase the deficit in the second half of the year.
Oil Pares Losses after EIA Forecasts Lower OECD Stocks (DTN) -- Oil futures trimmed midmorning losses during the afternoon session Tuesday after U.S. Energy Information Administration forecasted oil inventories across industrialized countries would fall in each of the next five quarters, putting upward pressure on oil prices in late 2023 and early 2024. In its Short-term Energy Outlook released this afternoon, EIA revised higher its price forecast for Brent crude to $79.54 bbl for this year, up from $78.65 bbl seen a month ago and to $83.51 bbl in 2024. The revisions follow Sunday's (6/4) announcement by OPEC+ to extend 3.6 million bpd in production cuts through the end of 2024 and a unilateral output cut of 1 million bpd unveiled by Saudi Arabia. As a result of these curbs, OPEC's crude oil production is now expected to fall by 600,000 bpd in 2023 and then increase again by 300,000 bpd in 2024, which is still lower than EIA's previous forecast for output growth of 600,000 bpd for next year. Oil inventories held in countries that are part of the Organization for Economic Cooperation and Development are seen gradually falling through the third quarter 2024 before reversing the downtrend. Despite the extension of OPEC+ production cuts, EIA still forecasts global oil production would increase 1.5 million bpd in 2023 and by 1.3 million bpd in 2024, primarily because of growth from non-OPEC producers. The oil complex came under selling pressure early in the session as investors refocused on weak demand fundamentals, particularly in the Western economies, where manufacturing industries fell into contraction last year and so far, have shown few signs of improvement. In China, factory activity fell sharper than expected in May on a combination of weaker domestic and international demand that will continue to be a culprit for Chinese factories now facing a "downward spiral." The official manufacturing purchasing managers' index fell to a five-month low of 48.8, the National Bureau of Statistics said last week, down from 49.2 in April, and below the 50-point mark that separates expansion from contraction. At settlement, West Texas Intermediate July futures softened $0.41 to $71.74 bbl after trading near five-week spot high $75.06 bbl in the immediate reaction to the announcement of the Saudi-led cuts. The August Brent contract settled the session at $76.29 bbl, down $0.42 bbl, also paring an advance from a five-week spot high at $78.73 bbl. Moving in the opposite direction, NYMEX RBOB July futures advanced $0.0399 to $2.5643 gallon and NYMEX ULSD futures softened $0.0097 to $2.3678 gallon.
WTI Extends Gains Above Pre-Saudi-Cut Levels As Biden Drains SPR For 10th Straight Week-- Oil prices are holding overnight gains, back above pre-Saudi-cut levels, as a weaker dollar and stronger China imports data buoyed black gold bulls. “There are many uncertainties, as usual, when it comes to the oil market, and if I have to pick the most important one it’s China,” International Energy Agency’s executive director Fatih Birol said in an interview with Bloomberg TV on Wednesday. “Of more than 2 million barrels a day of growth we expect this year in global oil demand, 60% is set to come from China.” Big builds for products reported by API overnight are not a good sign for demand but there was a modest crude draw. API
- Crude -1.71mm (+1.1mm exp)
- Cushing +1.535mm
- Gasoline +2.417mm (+200k exp) - biggest build since Feb 2023
- Distillates +4.50mm (+1.0mm exp) - biggest build since Dec 2022
DOE
- Crude -452k (+1.1mm exp)
- Cushing +1.72mm
- Gasoline +2.75mm (+200k exp) - biggest build since Feb 2023
- Distillates +5.074mm (+1.0mm exp) - biggest build since Dec 2022
The official data confirmed API with a small Crude draw but large product builds... For the 10th straight week, the Biden admin drained the SPR (-1.8mm barrels last week to a fresh 40-year low)... US Crude Production rose last week to its highest since April 2020 despite US drilling activity is in free-fall and showing no signs of slowing. The number of active oil and gas drilling rigs has fallen by 59 in the last five weeks, after falling another 15 in the week to June 2 – all of which were oil-focused rigs WTI was trading around $72.50 ahead of the official data and extended gains after...
The Oil Market Retraced Some of its Previous Losses on Wednesday Amid Unexpected Draws Reported in Crude Stocks - The oil market retraced some of its previous losses on Wednesday amid unexpected draws reported in crude stocks. The crude market traded sideways in overnight trading as it traded towards the $72.00 level on the opening following the release of the API data which showed an unexpected draw of 1.7 million barrels in crude stocks. The market posted a low of $69.88 in overnight trading before it bounced higher and never looked back. The oil market was further supported by the EIA report, which showed a draw in crude stocks of over 450,000 barrels on the week. The crude market rallied to a high of $73.19 by mid-day before it erased some of its gains and traded in a sideways trading range ahead of the close. The July WTI contract settled up 79 cents at $72.53 and August Brent contract settled up 66 cents at $76.95. The product markets also ended the session higher, with the heating oil market settling up 3.4 cents at $2.4018 and the RB market settling up 7.69 cents at $2.6412. The EIA reported that U.S. crude oil stocks unexpectedly fell in the week ending June 2nd as refiners increased crude runs by 482,000 bpd and refinery utilization rates increased by 2.7% percentage points to 95.8%, the highest level since August 2019. The EIA reported that U.S. crude oil field production increased by 200,000 bpd to 12.4 million bpd, the highest level since April 2020. Meanwhile, U.S. crude stocks in the SPR fell by 1.8 million barrels on the week to 353.6 million barrels. IIR Energy reported that U.S. oil refiners are expected to shut in 347,000 bpd of capacity in the week ending June 9th, increasing available refining capacity by 78,000 bpd. Offline capacity is expected to decrease to 65,000 bpd in the week ending June 16th. The Association of American Railroads reported that its weekly railcar loadings on major U.S. railroads in the week ending June 7th increased by 0.4% to 219,289. The number of railcar loadings transporting petroleum and petroleum products increased by 6.6% to 9,078. The OECD said global economic growth will increase only moderately over the next year as the full effects of central bank rate hikes are felt, softening the increase from lower inflation. The OECD said the world economy is set to grow 2.7% this year, up from its previous forecast of 2.6% in March. It said that would be the lowest annual rate since the 2008-2009 global financial crisis with the exception of the pandemic-hit year of 2020. Growth would then accelerate only slightly next year to 2.9%, unchanged from March's forecast, as the impact of rate hikes by major central banks over the last year increasingly drags on private investment, starting with housing markets. The OECD forecast that inflation in the Group of 20 major economies would fall from 7.8% last year to 6.1% this year and 4.7% in 2024. The OECD forecast the U.S. economy would grow 1.6% this year before slowing to 1% in 2024, with the lagged effect of rate hikes hitting the world's biggest economy particularly hard. It had previously foreseen U.S. growth of 1.5% this year and 0.9% in 2024.
Oil Gains as US Refinery Rates Surge Ahead of Summer Demand – New York Mercantile Exchange oil futures and Brent crude traded on the Intercontinental Exchange settled Wednesday's session higher following the weekly inventory report from the U.S. Energy Information Administration showing domestic refiners boosted runs to the highest level since January 2020 following a lengthy maintenance season, partially offsetting a 200,000-barrels per day jump in domestic crude-oil production. While the U.S. dollar sold off early in the session, the greenback recovered in the afternoon and ultimately settled above the 104.00-level against the basket of foreign currencies. Traders expect further volatility in currency markets ahead of next week's highly-anticipated Federal Open Market Committee meeting scheduled for June 14. NYMEX West Texas Intermediate futures for July delivery advanced $0.79 bbl to $72.53 bbl. The front month August contract for the Brent international crude benchmark gained $0.66 to $76.95 bbl. NYMEX RBOB July futures rose $0.0525 to $2.6167 gallon and ULSD July futures gained $0.0243 to $2.3921 gallon. Wednesday's inventory report from the U.S. Energy Information Administration was mostly supportive for the oil complex, showing a surprise draw in commercial crude inventories accompanied by a jump in refinery run rates as refiners prepare for summer driving season. Crude-oil inputs at U.S. refiners surged 481,000 bpd during the first week of June to average 16.6 million bpd, according to the EIA weekly inventory report. The surge follows a prolonged maintenance season that, coupled with unplanned outages, heavily depressed refinery run rates over the past two months. U.S. refinery run rates jumped 2.7% from the previous week to 95.8%, compared to expectations for a modest 0.5% gain. Commercial crude-oil inventories, meanwhile, fell by 452,000 bbl to 459.2 million bbl, and are now 2% below the five-year average, the EIA said. Analysts had expected crude stockpiles to rise by 1.1 million bbl. The drop came despite a 1.9-million-barrel transfer of crude oil last week from the nation's Strategic Petroleum Reserve to the commercial side. Oil stored at Cushing, Oklahoma, the delivery point for West Texas Intermediate, increased by 1.7 million bbl from the previous week to 40.6 million bbl. U.S. crude-oil production jumped by 200,000 bpd to 12.4 million bpd, the highest level since March 27, 2020, according to the EIA. In the gasoline complex, commercial gasoline inventories rose by 2.7 million bbl to 218.8 million bbl, compared with analysts' expectations of just a 200,000-bbl increase. Gasoline supplied to the U.S. market -- a measure of demand -- rose 120,000 bpd during the first week of June to 9.218 million bpd. Four-week average gasoline consumption that smooths out weekly volatility averaged 9.2 million bpd, up by 3.5% from the same period last year. Over the past four weeks, motor gasoline product supplied averaged 9.2 million bpd, up by 1.8% from the same period last year. Diesel stockpiles, meanwhile, built by 5.1 bbl to 111.7 million bbl, and are now about 68% below the five-year average, the EIA said. Analysts had forecast distillate inventories would rise by 1 million bbl last week. Demand for middle of the barrel fuels firmed 168,000 bpd to 3.814 million bpd.
The Market Rallied to its High Early in the Morning Before it Sold Off Sharply on a Report of Progress Toward a Deal Between the U.S. and Iran - The oil market posted an outside trading day, with the market rallying to its high early in the morning before it sold off sharply on a report of progress toward a deal between the U.S. and Iran. The market traded mostly sideways in overnight trading and breached its previous high of $73.19 as it posted a high of $73.28. The market was supported by market expectations of a potential pause to U.S. interest rate hikes by the Federal Reserve at its meeting next week. However, the market erased its gains and sold off sharply by $3.50 to a low of $69.03 on a report that the U.S. and Iran was nearing a temporary deal that would offer some sanctions relief in return for Iran reducing its uranium enrichment activities. The market later bounced off its low and retraced 62% of its earlier losses after the White House called the news report on a deal between the U.S. and Iran false. The July WTI contract settled down $1.24 at $71.29 and the August Brent contract settled down 99 cents at $75.96. The product markets settled in negative territory, with the heating oil market settling down 1.2 cents at $2.3898 and the RB market settling down 2.85 cents at $2.6127. The White House denied a media report that it was near an interim deal that would see Iran curtail its nuclear program in exchange for sanctions relief. A spokesperson for the National Security Council said “This report is false and misleading.” Colonial Pipeline Co is allocating space for Cycle 35 on Line 1, its main gasoline line from Houston, Texas to Greensboro, North Carolina. The current allocation is for the pipeline segment north of Collins, Mississippi. An Enbridge executive said the coming expansion of the Canadian government-owned Trans Mountain pipeline will reduce crude oil flows on Enbridge Inc.'s Mainline oil pipeline. The expansion, which is expected to begin operations in early 2024, initially will reduce Enbridge's Mainline volumes by 200,000 to 300,000 bpd. Enbridge's Mainline carries up to 2.85 million barrels per day of oil from Alberta, Canada, to Manitoba and onto markets in the U.S. A Pioneer Natural Resources executive said global demand for crude oil is continuing to increase but supply growth remains limited. Pioneer Executive Vice President, Beth McDonald, said the impact of recessionary fears on global crude oil also will be offset by Chinese demand. Enterprise Products Partners' Sea Port crude oil export terminal could begin operations between the second half of 2026 and early 2027. Phillips 66 is shutting its fluid catalytic cracking unit at its 285,000 bpd Bayway refinery in Linden, NJ for about two weeks for repairs. Repairs are set to start early next week. The IMF urged the U.S. Federal Reserve and other global central banks to “stay the course” on monetary policy and remain vigilant in fighting inflation.
Oil Slides on Reports of US-Iran Nuclear Deal Progress -- New York Mercantile Exchange oil futures and Brent crude traded on the Intercontinental Exchange settled Thursday's session with sharp losses following unconfirmed reports suggesting the U.S. and Iran have made substantial progress towards reaching a nuclear agreement that could spur on Iranian oil exports.Although the White House quickly dismissed media reports of a breakthrough, oil futures still ended the session lower as markets assessed the potential for a nuclear deal to be reached in the coming weeks. Israel's Haaretz and other regional outlets cited high-ranking Israeli officials who said the talks are moving forward more quickly than expected, with the possibility for the two sides to reach an agreement as early as June. Iran could restore about 1 million bpd of crude-oil production within months of a deal, traders and analysts said last year before talks broke down. It could be back to full capacity of about 3.7 million bpd by next year. The Persian Gulf country's oil exports already climbed to about 1.3 million bpd in November, and last month held near the highest in four years, according to data from Vortexa Ltd. The deal supposedly includes a concession from Iran to stop the process of enriching uranium to higher levels. In return, the regime in Tehran expects the alleviation of the international sanctions spearheaded by the United States. In the first stage, this would include the releasing of some $20 billion in Iranian assets from frozen bank accounts outside of Iran -- located in South Korea, Iraq, and at the International Monetary Fund. The situation remains fluid.In financial markets, investors continue to reassess the future path of the federal funds rate after some Federal Reserve officials suggested the central bank will pause interest rate hikes in future meetings to allow the economy to absorb the full cycle of monetary tightening. Money markets are now pricing in a 66% chance the Fed will resume rate hikes when it meets again in July with either a 25 or 50 basis point move to the upside. For next week's meeting, however, investors bet there will be no change in the federal funds rate that currently stands in a 5% to 5.25% target range.The U.S. dollar index, meanwhile, sold off hard this afternoon, shedding 0.69% against a basket of global currencies to settle at 103.316. NYMEX WTI July futures dropped $1.24 to $71.29 bbl. The front month August contract for the Brent international crude benchmark shed $0.99 to finish at $75.96 bbl. NYMEX RBOB July futures declined $0.0285 to $2.6127 gallon and ULSD July futures weakened $0.0120 to $2.3898 gallon.
Oil Prices Headed For Weekly Loss Despite Saudi Arabia’s Production Cut -- Crude oil was heading for the second week of losses in a row despite the additional production cut Saudi Arabia announced at last Sunday’s OPEC+ meeting.In morning trade in Asia today, Brent crude was changing hands for less than $76 per barrel and West Texas Intermediate was trading at below $71. Both were down from close on Thursday. It appears that traders are still more concerned about oil demand than they are about the adequacy of supply. With news like Germany’s and the eurozone’s recession, a decline in Chinese manufacturing activity instead of continued expansion, and shrinking manufacturing activity in the U.S., demand worry is quite justified. Even the possibility that the Federal Reserve might not announce another rate hike at its next meeting on June 13-14 did nothing to change the dominant sentiment on the oil market.Earlier this week, these new developments prompted Energy Aspects to revise its forecast for oil prices, slashing them by $15 for the second half of the year. As reasons for the revision, the consultancy cited higher interest rates, the inclusion of a U.S. crude into the Brent basket, and the supply differences in sour and sweet crudes.According to Energy Aspects, OPEC is reducing the production of predominantly sour crudes, while Brazil and the United States are expanding the production of sweet crudes that make up both the Brent crude and WTI benchmarks.One additional factor that affected prices this week specifically was a news report that the U.S. and Iran were close to reaching a deal on sanctions and Iran’s nuclear program. Both sides promptly denied the report, which stopped the oil price slide but did not reverse it.There are some expectations that with the start of summer driving season in the U.S. prices will start climbing higher again but any climb could be tempered by demand indications from China.
Oil Posts Second Weekly Decline as Demand Concerns Overshadow Saudi Cut (Reuters) - Oil prices fell more than a dollar a barrel on Friday to record a second straight weekly decline, as disappointing Chinese data added to doubts about demand growth after Saudi Arabia's weekend decision to cut output. Brent crude futures fell $1.17, or 1.5%, to settle at $74.79 a barrel, while the U.S. West Texas Intermediate crude fell $1.12, or 1.6%, to $70.17 a barrel. Both benchmarks lost more than $3 on Thursday after a media report that a U.S.-Iran nuclear deal was imminent and would result in more supply. Prices pared losses after both countries denied the report, ending about a dollar a barrel lower. "The Saudi cut lifted prices slightly, and then the chatter of the potential return of Iranian barrels saw a large drop. Long investors are likely on the sidelines until larger oil inventory declines become visible," Oil prices had risen early in the week, buoyed by Saudi Arabia's pledge over the weekend to cut more output on top of the cuts agreed earlier with the Organization of the Petroleum Exporting Countries and its allies. However, a rise in U.S. fuel stocks and weak Chinese export data have weighed on the markets. "As we move deeper into the summer driving season in the Northern Hemisphere, demand will be a key factor in determining whether limited inventories must drive prices higher, or soft demand leads to lower prices," China's factory gate prices fell at the fastest pace in seven years in May and quicker than forecasts, as faltering demand weighed on a slowing manufacturing sector and cast a cloud over the fragile economic recovery. Some analysts expect oil prices to rise if the U.S. Federal Reserve pauses hiking interest rates at its next meeting over June 13-14. The Fed's decision may also influence Saudi Arabia's next move, analysts said. "The important thing is that despite those changes (Saudi, US-Iran) to output, oil remains below $80, no doubt much to the disappointment of the Saudis," "What comes next may well depend on the inflation data and interest rate decisions over the coming weeks,"
An oil state hired the biggest PR firms to buff its climate image. It didn’t help. -One of the world’s wealthiest oil states is engaged in a wide-ranging public relations and lobbying campaign to cast itself as an environmental leader before it hosts the United Nations’ next climate talks in November.But the United Arab Emirates’ efforts are colliding with a barrage of criticism from lawmakers and environmentalists in both the U.S. and Europe, who scoff at the idea that the oil-flush nation is committed to helping shift the world off planet-heating fossil fuels.Amid the negative headlines, the UAE’s government has signed — and abruptly terminated — long-term contracts with at least two strategic communications firms, even as it offers fat pay packages to veteran PR executives to assist with the effort, according to interviews and Justice Department documents.The communications offensive, which began as far back as 2019, seeks to persuade U.S. officials and the American public that the Persian Gulf state’s plan to expand oil and gas drilling is compatible with international efforts to slash the use of fossil fuels — the main cause of rising temperatures worldwide.During the past decade, the UAE has spent more than $1 million on direct climate-focused advocacy and paid millions more to advisory firms and think tanks helping to polish its green credentials, an analysis by POLITICO’s E&E News of federal disclosure filings found. No other host nation has invested as much time and money to shape its image ahead of the annual climate negotiations.In contrast, the United Kingdom didn’t disclose hiring any American PR or lobbying firms for climate advocacy the year it hosted the 2021 U.N. summit in Glasgow, Scotland, according to past filings under the Foreign Agents Registration Act. During that gathering — when UAE won the right to host this year’s talks — the Emiratis paid two firms more than $314,000 for their U.S.-focused climate influence efforts.Much of the criticism of the UAE’s role this year has focused on Sultan Ahmed al-Jaber, the Emiratis’ climate envoy and CEO of its state-owned oil company, who will serve as the summit’s president. In that position, he will take a lead role crafting the initial negotiating text and guide a final deal with top diplomats at the gathering, known as COP 28.“To have the COP be basically run by the fossil fuel industry sets the bar very, very high for accomplishments,” Sen.Sheldon Whitehouse (D-R.I.) said in an interview earlier this year. “The people running the UAE COP need to do something to show that this is going to be different.”
Iran Reopens Embassy in Saudi Arabia - On Tuesday, Iran reopened its embassy in Saudi Arabia after a seven-year closure, the result of the normalization deal between Tehran and Riyadh that was brokered by China. During a ceremony at the embassy in Riyadh, Iranian Deputy Foreign Minister Alireza Bigdeli hailed the ties between the two nations. “We consider today an important day in the relations of the Islamic Republic of Iran and the Kingdom of Saudi Arabia,” he said. “The cooperation between the countries is entering a new era.”The opening of the Iranian embassy coincided with US Secretary of State Antony Blinken’s arrival in Saudi Arabia. Blinken is expected to meet with Crown Prince Mohamed bin Salman, and his visit comes as the Biden administration is pushing for a normalization deal between Saudi Arabia and Israel.A Saudi-Israeli normalization deal now seems unlikely as Riyadh is focusing on boosting ties with Iran and also recently restored diplomatic relations with Syria. A major aspect of the US and Israeli push for normalization deals with Gulf Arab states is to form an anti-Iran alliance in the region, but Tehran is looking to get ahead of Israel.Iran’s naval commander said last week that Tehran was working to form a naval alliance with Arab states, including the UAE and Saudi Arabia. The comments came after the UAE withdrew from a US-led maritime coalition in the region.However, the Saudis are currently in a good position to extract concessions from the US in exchange for a normalization deal with Israel. According to media reports, Saudi Arabia is seeking stronger security guarantees from the US and wants assistance in developing a civilian nuclear program.
Iran Says It Will Form Naval Alliance With Gulf Arab States - Iran’s navy commander said Friday that Tehran was working to form a naval alliance with several Gulf Arab states, including Saudi Arabia, the UAE, Bahrain, Qatar, and Iraq. “The countries of the region have today realized that only cooperation with each other brings security to the area,” Iranian Navy Commander Shahram Irani said. In response to Irani’s comments, the spokesman for the US Navy’s Bahrain-based Fifth Fleet said Iran forming such an alliance “defied reason” and blamed Tehran for the current tensions in the region. “It defies reason that Iran, the number one cause of regional instability, claims it wants to form a naval security alliance to protect the very waters it threatens,” said spokesman Cmdr. Tim Hawkins.The US recently stepped up its military activity in the Persian Gulf after Iran seized two oil tankers in the region. Missing from the US rhetoric about the issue is the fact that the Iranian actions came after the US seized a tanker carrying Iranian oil and stole its cargo.While the Gulf countries Iran is looking to build an alliance with have a history of being close to the US, diplomatic relationships are shifting in the region. Iran and Saudi Arabia are looking to cooperate more closely after signing a surprise China-brokered normalization deal, and Abua Dhabi and Tehran are also working to forge stronger ties.
White House Says Iran Is Helping Russia Build a Drone Factory -As part of a "deepening" military partnership between Iran and Russia amid the war in Ukraine, US intelligence officials believe Tehran is assisting Moscow in building a drone manufacturing plant that may be operational next year, the White House said on Friday. American officials claim hundreds of Iranian drones were transported to Russia via the Caspian Sea last month.The drones are "shipped across the Caspian Sea, from Amirabad, Iran, to Makhachkala, Russia, and then used operationally by Russian forces against Ukraine," said National Security Council spokesman John Kirby. "As of May, Russia received hundreds of one-way attack [unmanned aerial vehicles], as well as UAV production-related equipment, from Iran," Kirby added.The Islamic Republic insists that it has not provided drones to Russiasince the Kremlin launched its invasion last year.According to Kirby, the alleged drone factory will be built in the Alabuga special economic zone in the Russian republic of Tatarstan. The White House released a satellite photo that purports to show an industrial site, 600 miles east of Moscow in the Yelabuga region, where Russia will "probably" conduct the "domestic production of Iranian designed UAVs."Tehran is said to be providing materials necessary for building the plant as well. The extent of the evidence presented is this photograph and a color coded map showing the ostensible shipping route from Iran to Russia across the Caspian Sea.This story was originally reported in the Wall Street Journalmonths ago, citing foreign officials "aligned" with Washington, but no new or significant evidence appears to have been presented, although media reports portray this declassification as significant.Kirby went on to warn Iran and Russia will be held “accountable" for violating UN Security Council Resolution 2231 that endorsed the Joint Comprehensive Plan of Action, the Iran nuclear deal, which the US illegally exited five years ago.Although, according to the Arms Control Association, this claim is in dispute because the restrictions on weapons Kirby is referring to are related to "importing or exporting nuclear-capable delivery systems or certain components that could be used to develop nuclear-capable delivery systems."A report published by the Stockholm International Peace Research Institute about the UN arms embargo on Iran explains "restrictions on supplies of major arms to and all arms from Iran expired in October 2020."Additionally, for months, officials have warned Iran was considering selling Russia hundreds of ballistic missiles, but administration officials have now said they lack any evidence of deals taking place.The US is also releasing an advisory so other countries and foreign business entities can "better understand the risks posed by Iran’s UAV program and the illicit practices Iran uses to procure components for it," Kirby said. This should "help governments and businesses put in place measures to ensure they are not inadvertently contributing to Iran’s UAV program," Kirby added.Reports this week revealed the US and Iran are engaged in direct talks nearing an interim deal which would see Tehran regain access to $20 billion in frozen assets as well as restart some oil exports. ThoughCongressional hawks along with the Israelis remain strongly opposedto any potential deal with Iran.
US Launches Second Airstrike in Somalia Within a Week - US Africa Command (AFRICOM) announced that it launched an airstrike in Somalia on June 1, marking the second US bombing in the country within a week and the third since May 20.AFRICOM said the strike was launched about 37 miles southwest of Kismayo, a port city in southern Somalia. The command claimed the strike killed three al-Shabaab fighters and that its “initial assessment” found no civilians were harmed, but the Pentagon is notorious for undercounting civilian casualties.The last US airstrike was launched on May 26 and came after al-Shabaab attacked an African Union base housing Ugandan troops. Uganda said on Saturday that 54 of its soldiers were killed in the attack. The US said its airstrike destroyed military equipment that al-Shabaab took from the base. AFRICOM said that the US strike on May 20 wounded one al-Shabaab member. The May 20 airstrike marked the first known US bombing in the country claimed by AFRICOM since February 21.US airstrikes in Somalia escalated toward the end of 2022 and at the beginning of 2023 as the US-backed Mogadishu-based government launched an offensive against al-Shabaab. The US has also stepped up military aid and training of the Somali government’s military.
BRICS currency gambit a timely warning to the buck - On the sidelines of the recent BRICS gathering in Cape Town, South Africa, officials contemplated as rarely before the five most dangerous words in economics: things are different this time.For years now, Brazil, Russia, India, China, South Africa and other emerging economies hoped to break the dollar hegemony that complicates geopolitical calculations. In Cape Town, BRICS foreign ministers presided over what might be remembered as the moment the anti-dollar movement grew genuine legs.In the lead-up to the confab, BRICS members urged the bank that the grouping set up to study how a joint currency might work — logistics, market infrastructure and how sanctions against Russia play into things.Equally important is the flurry of foreign exchange arrangements popping up that exclude the dollar: China and Brazil agreeing to settle trade in yuan and reals; France beginning to conduct some transactions in yuan; India and Malaysia increasing use of the rupee in bilateral trade; Beijing and Moscow trading in yuan and rubles.The 10-member Association of Southeast Asian Nations (ASEAN) is joining forces to do more regional trade and investment in local currencies, not dollars. Indonesia, ASEAN’s biggest economy, is working with South Korea to ramp up transactions in rupiah and won.Pakistan is angling to begin paying Russia for oil imports via yuan. The United Arab Emirates is talking with India about doing more non-oil trade in rupees.Over the weekend, Argentina announced it plans to double its currency swap line with China to roughly US$10 billion. It’s partly desperation as Argentina’s foreign currency reserves evaporate amid 109% inflation that has its central bank in damage control mode. But it’s also a sign of the rising anti-dollar movement in South America.“Despite America’s likely opposition, de-dollarization will persist, as most of the non-Western world wants a trading system that does not make them vulnerable to dollar weaponization or hegemony,” says Frank Giustra, co-chair of the International Crisis Group. “It’s no longer a question of if, but when.” For now, the five BRICS nations are pooling $100 billion of foreign currency to act as a financial shock absorber. The funds can be tapped in emergencies, allowing members to avoid going to the International Monetary Fund. Since 2015, the BRICS bank has approved more than $30 billion of loans for infrastructure, transportation and water.The BRICS currency issue has been gaining greater traction since mid-2022, when the 14th BRICS Summit was held in Beijing. There, Russian President Vladimir Putin said the BRICS were cooking up a “new global reserve currency” and were open to expanding its usage more widely.In April, Brazilian President Luiz Inacio Lula da Silva threw his support behind a BRICS monetary unit.“Why can’t an institution like the BRICS bank have a currency to finance trade relations between Brazil and China, between Brazil and all the other BRICS countries?” he asked. “Who decided that the dollar was the trade currency after the end of gold parity?” The focus, Brazilian Finance Minister Fernando Haddad says, must be phasing out the use of a third currency.“The advantage is to avoid the straitjacket imposed by necessarily having trade operations settled in the currency of a country not involved in the transaction,” he told reporters.Lula may get his answers in August when the BRICS summit of heads of state is held in Johannesburg. The desire for a BRICS version of the euro might get a boost from countries like Egypt,Indonesia, Turkey and Saudi Arabia joining.
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