US oil prices finished higher for a fourth straight week after China reacted to weak economic data with a promise of fiscal stimulus, and on growing evidence of coming supply shortages...after rising 2.1% to at $75.42 a barrel last week as moderating inflation reduced the risk of interest rate hikes and the IEA and OPEC both forecast a widening oil supply deficit for the second half of this year, the contract price for the benchmark US light sweet crude for August delivery fell around 1% in early Asian trade on Monday after major Libyan oilfields resumed production following a brief shutdown, and after China reported their second-quarter economic growth was below expectations, then gapped lower as markets opened in New York as traders fretted about weak consumer demand in China and the possible impact on fuel demand, but briefly rallied to a high of $76.09 following a Reuters news alert that Saudi Arabia was extending its voluntary output cut, but tumbled again after the Reuters story was pulled and settled $1.27 or 1.7%, lower at $74.15 a barrel, dragged down by doubts over the strength of demand in the world's second biggest oil consumer...oil prices edged slightly higher in early Asian trading on Tuesday over hopes that the Chinese government would unveil fiscal stimulus measures to jumpstart the sluggish economy, then picked up the pace after figures from Saudi Arabia showed a sizable drop in its seaborne crude flows during May. and settled $1.60 higher at $75.75 a barrel after China said it would act to support economic growth in the world's biggest oil importer...oil prices rose again on global markets early Wednesday, boosted by China‘s pledge to support economic growth, on tighter supply from Russia and on lower weekly U.S. crude oil inventories then powered even higher in early New York trading after the American Petroleum Institute report showed a smaller-than-expected drawdown in U.S. commercial crude stockpiles but a sizable drop in refined fuel supplies, but erased most of its gains on the release of the EIA inventory report, which showed a lower than expected draw from crude stocks and settled 40 cents lower on the session at $75.35 a barrel, as profit-taking set in amid pressure from a stronger dollar and weaker than exprected retail sales...oil prices were slightly higher in thin trading volumes in London on Thursday, as traders assessed a mixed picture in the U.S. and China’s efforts to revitalize its sagging economic growth, then traded in and out of positive territory durign the New York session, bouncing higher after Ukraine said it would consider any ship heading for Russian Black Sea ports as a potential target, and finished with a gain of 28 cents at $75.63 a barrel as falling oil inventories in Cushing, Oklahoma and signs of weakening crude exports from Saudi Arabia and Russia offset a rallying U.S. dollar index as trading in the August oil contract expired, while the more actively traded contract for the benchmark US crude for September delivery settled 36 cents higher at $75.65 a barrel...now quoting prices for the September contract, oil prices edged higher in Asia on Friday, buoyed by evidence of tightening supplies and economic stimulus in slow-recovering China, then rose about 1 percent in European trading amidst fears of lower supplies from Russia and signs of declining inventories, then chased the stock market higher in US trading to settle with a $1.42 gain at $77.07 a barrel as traders shrugged off pressure from a rallying U.S. dollar and re-assessed the outlook for tighter supplies on the global market...oil prices thus finished 2.2% higher on the week, while the September oil contract, which had finished the prior Friday priced at $75.32 a barrel, finished 2.3% higher...
Natural gas prices also finished higher, after two weekly decreases, on a bullish storage report as the record setting heat dome in the Southwest was forecast to expand northeastward.....after falling 1.7% to $2.539 per mmBTU last week on lower demand from LNG export facilities and on moderating temperature forecasts for the densely populated Northeast, the contract price of US natural gas for August delivery opened Monday's trading slightly higher, but sank to an intraday low of $2.484 by 9:45 AM, on calls for reduced heating demand in the short-term, then battled back to settle only 2.7 cents lower at $2.512 per mmBTU, on rising output and forecasts for less hot weather over the next two weeks than was previously expected...however, natural gas prices opened nearly ten cents higher on Tuesday, then steadied as traders balanced hefty cooling demand in much of the country against healthy a storage balance, and settled 11.7 cents higher at $2.629 per mmBTU on forecasts for the weather to remain hotter-than-normal through early August, especially in Texas....prices opened lower on Wednesday but managed to trade around Tuesday's close for most of the day as traders digested updated weather forecasts, before settling 2.6 cents lower at $2.603 per mmBTU, on forecasts for less demand this week mostly due to ongoing maintenance work at several LNG export facilities...apparently anticipating a bullish storage report, natural gas prices opened nearly ten cents higher on Thursday and never looked back, closing 15.4 cents or nearly 6% higher at $2.757 per mmBTU, possibly on a bet on increased demand from Russian fertilizer production, and bolstered by a bullish government inventory report, lighter production and forecasts for intense heat in August...natural gas prices gave some of that gain back on Friday, falling 4.4 cents to $2.713 per mmBTU, as forecasts for less demand next week than had been expected offset lower daily output and hotter-than-normal weather through early August from Texas to California, but still ended 6.9% higher for the week...
The EIA's natural gas storage report for the week ending July 14th indicated that the amount of working natural gas held in underground storage in the US had increased by 41 billion cubic feet to 2,971 billion cubic feet by the end of the week, which left our natural gas supplies 575 billion cubic feet, or 24.0% above the 2,396 billion cubic feet that were in storage on July 14th of last year, and 360 billion cubic feet, or 13.8% more than the five-year average of 2,611 billion cubic feet of natural gas that were in working storage as of the 14th of July over the most recent five years… however, natural gas supplies are still 13.4% below normal for this date in the region defining the Pacific states, while 16.6% and 15.4% above normal in both the East and Midwest regions of the country at the same time....the 41 billion cubic foot injection into US natural gas working storage for the cited week was lower than the 48 billion cubic feet addition to supplies that was expected by industry analysts surveyed by Reuters, but was more than the 35 billion cubic feet that were added to natural gas storage during the corresponding week of 2022, while less than the average of 45 billion cubic feet addition to natural gas storage that has been typical for the same early July week over the past 5 years…
The Latest US Oil Supply and Disposition Data from the EIA
US oil data from the US Energy Information Administration for the week ending July 14th showed that after a big jump in our oil exports and a big decrease in oil supplies that the EIA could not account for, we had to pull oil out of our stored commercial crude supplies for the 11th time in seventeen weeks, but for just the 12th time in the past 30 weeks, even after a big jump in our oil imports.....Our imports of crude oil rose by an average of 1,294,000 barrels per day to 7,174,000 barrels per day, after falling by an average of 1,158,000 barrels per day the prior week, while our exports of crude oil rose by an average of 1,670,000 barrels per day to average 3,814,000 barrels per day, which combined meant that the net of our trade in oil worked out to a net import average of 3,360,000 barrels of oil per day during the week ending July 14th, 376,000 fewer barrels per day than the net of our imports minus our exports during the prior week. Over the same period, production of crude from US wells was reportedly unchanged at 12,300,000 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 15,660,000 barrels per day during the July 14th reporting week…
Meanwhile, US oil refineries reported they were processing an average of 16,585,000 barrels of crude per day during the week ending July 14th, an average of 75,000 fewer barrels per day than the amount of oil that our refineries were processing during the prior week, while over the same period the EIA’s surveys indicated that an average of 101,000 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 July 14th appear to indicate that our total working supply of oil from storage, from net imports and from oilfield production was 823,000 barrels per day less than what our oil refineries reported they used during the week. To account for that obvious disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a [ +823,000 ] 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 an error of that magnitude in the week’s oil supply & demand figures that we have just transcribed....Moreover, since last week’s “unaccounted for crude oil” figure was at [+1,415.000] barrels per day, that means there was a 592,000 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 off by that much, and therefore useless...However, since most oil traders respond to these weekly EIA reports as if they were 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 had hoped to do about it)
This week's 101,000 barrel per day decrease in our overall crude oil inventories came as an average of 101,000 barrels per day were being pulled out of our commercially available stocks of crude oil, while the amount of oil in our Strategic Petroleum Reserve was unchanged....however the 346,758,000 barrels of oil that still remain in our Strategic Petroleum Reserve are still the lowest since August 19th, 1983, or at a 39 1/2 year low, as repeated tapping of our emergency oil 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 6,668,000 barrels per day last week, which was 2.5% more than the 6,508,000 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 1unchanged at 12,300,000 barrels per day because the EIA's rounded estimate of the output from wells in the lower 48 states was unchanged at 11,900,000 barrels per day, while Alaska’s oil production was 11,000 barrels per day lower at 406,000 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 6.1% below that of our pre-pandemic production peak, but was 26.8% 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 94.3% of their capacity while using those 16,585,000 barrels of crude per day during the week ending July 13th, up from their 93.7% utilization rate during the prior week, and a utilization rate that's within the normal range for mid-July... The 16,585,000 barrels per day of oil that were refined this week were 1.6% more than the 16,319,000 barrels of crude that were being processed daily during week ending July 15th of 2022, but 3.9% less than the 17,267,000 barrels that were being refined during the prepandemic week ending July 12th, 2019, when our refinery utilization rate was at 94.4%, also within the normal range for this time of year...
With the decrease in the amount of oil being refined this week, the gasoline output from our refineries was also lower, decreasing by 584,000 barrels per day to 9,523,000 barrels per day during the week ending July 14th, after our refineries' gasoline output had decreased by 158,000 barrels per day during the prior week. This week’s gasoline production was still 1.7% more than the 9,368,000 barrels of gasoline that were being produced daily over the same week of last year, but 3.4% less than the gasoline production of 9,855,000 barrels per day during the prepandemic week ending July 12th, 2019. At the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 54,000 barrels per day to 5,032,000 barrels per day, after our distillates output had increased by 236,000 barrels per day during the prior week. Even so, our distillates output was little changed from the 5,031,000 barrels of distillates that were being produced daily during the week ending July 15th of 2022, but was 6.1% less than the 5,361,000 barrels of distillates that were being produced daily during the week ending July 12th, 2019...
With this week's decrease in our gasoline production, our supplies of gasoline in storage at the end of the week fell for the sixteenth time in twenty-two weeks, decreasing by 1,066,000 barrels to 218,386,000 barrels during the week ending July 14th, after our gasoline inventories had decreased by just 4,000 barrels during the prior week. Our gasoline supplies fell by more this week because the amount of gasoline supplied to US users rose by 99,000 barrels per day to 8,855,000 barrels per day, and as our imports of gasoline fell by 62,000 barrels per day to 717,000 barrels per day, while our exports of gasoline fell by 47,000 barrels per day to 1,073,000 barrels per day . After sixteen gasoline inventory decreases over the past twenty-two weeks, our gasoline supplies were 4.4% below last July 15th’s gasoline inventories of 228,435,000 barrels, and still about 7% below the five year average of our gasoline supplies for this time of the year…
Meanwhile, even with this week's decrease in our distillates production, our supplies of distillate fuels increased for the ninth time in nineteen weeks, but rising by just 13,000 barrels to 118,194,000 barrels during the week ending July 14th, after our distillates supplies had increased by 4,815,000 barrels during the prior week. Our distillates supplies rose by so much less this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 700,000 barrels per day to 3,669,000 barrels per day, and even as our exports of distillates fell by 75,000 barrels per day to 1,424,000 barrels per day while our imports of distillates fell by 8,000 barrels per day to a three year low of 63,000 barrels per day.....With 34 inventory increases over the past sixty-one weeks, our distillates supplies at the end of the week were 5.1% above the 112,508 000 barrels of distillates that we had in storage on July 15th of 2022, but are still about 14% below the five year average of our distillates inventories for this time of the year...
Finally, with the big increase in our oil exports, our commercial supplies of crude oil in storage fell for the 12th time in 29 weeks and for the 24th time in the past year, decreasing by 708,000 barrels over the week, from 458,128,000 barrels on July 7th to 457,420,000 barrels on July 14th, after our commercial crude supplies had increased by 5,946,000 barrels over the prior week. With that modest decrease, our commercial crude oil inventories are still about 1% above the most recent five-year average of commercial oil supplies for this time of year, and also remain about 32% above the average of our available crude oil stocks as of the second week of July 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, only to jump again following the Christmas 2022 refinery freeze offs, our commercial crude supplies as of this July 14th were 7.2% more than the 426,609,000 barrels of oil we had in commercial storage on July 15th of 2022, and were 4.0% more than the 439,687,000 barrels of oil that we still had in storage on July 16th of 2021, but are 14.8% less than the 536,580,000 barrels of oil we had in commercial storage on July 17th of 2020, after early 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 eleventh time in twelve weeks during the week ending July 21st, and are now 15.6% below the prepandemic rig count, despite increasing ninety-six times during the 123 weeks of the post pandemic recovery... Baker Hughes reported that the total count of rotary rigs drilling in the US fell by 6 rigs to 669 rigs over the past week, which was 89 fewer rigs than the 758 rigs that were in use as of the July 22nd report of 2022, and was also 1,260 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 down by seven to 530 oil rigs during the past week, after the number of rigs targeting oil had decreased by three rigs during the prior week, leaving 69 fewer oil rigs active now than were running a year ago, as they now amount to just 32.9% of the shale era high of 1609 rigs that were drilling for oil on October 10th, 2014, while they are now down 22.4% from the prepandemic oil rig count of 683….at the same time, the number of drilling rigs targeting natural gas bearing formations fell by 2 to 131 natural gas rigs, which left natural gas rigs down by 24 from the 155 natural gas rigs that were drilling during the same week of 2022, as they now amount to just 8.2% 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 now reports that eight rigs they've labeled as "miscellaneous" are drilling this week, up from 5 such "miscellaneous" rigs last week.. new miscellaneous rigs include a directional rig drilling to more than 15,000 feet into an area of major offshore oil fields in Keathley Canyon, offshore from Louisiana, a vertical rig drilling to between 5,000 and 10,000 feet into a formation in Beaver county Utah, and a vertical rig drilling to more than 15,000 feet into a formation in Lincoln county Wyoming...other miscellaneous rigs operating this week included a vertical rig targeting the Marcellus at between 10,000 and 15,000 feet in Monongalia county West Virginia; 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. We've recently learned that the deeper Beaver county Utah well is for a utility scale geothermal project, and we suspect that's also the case with new shallower well and the drilling in Hawaii, in the past we've also identified various "miscellaneous" rig activity as being for exploration rather than production and for carbon dioxide storage...
The offshore rig count in the Gulf of Mexico was unchanged at 18 rigs this week, and included the aforementioned "miscellaneous" rig in Keathley Canyon, 15 rigs drilling for oil in Louisiana's offshore waters, and two drilling for oil in Texas waters....the Gulf rig count is now up by 4 from the 14 Gulf rigs running a year ago, when all 14 Gulf rigs were drilling for oil offshore from Louisiana…while there are no rigs drilling off our other shores this week, there were two rigs drilling offshore from Alaska during the same week a year ago, so the national total of 18 rigs drilling offshore is thus up by 2 rigs from the national offshore count of 16 a year ago..
In addition to rigs drilling offshore, there are still four inland water based deployed this week, all in Louisiana...those include a directional rig drilling for oil at a depth of between 10,000 and 15,000 feet through an inland body of water in Saint Mary Parish; a directional rig drilling for oil at a depth of between 10,000 and 15,000 feet in Vermilion Parish, a directional rig drilling for oil at a depth of less than 5,000 feet on inland waters in Lafourche Parish, and a directional rig drilling for oil at over 15,000 feet through an inland body of water in Terrebonne Parish Louisiana...the directional rig drilling for oil at a depth of between 5,000 and 10,000 feet in Lafourche Parish last week was removed this week...a year ago, there were also four such rigs drilling on inland waters...
The count of active horizontal drilling rigs was down by 6 to 600 horizontal rigs this week, which was also 87 fewer rigs than the 687 horizontal rigs that were in use in the US on July 22nd of last year, and only 43.7% 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, while those were up by 11 from the 40 directional rigs that were operating during the same week a year ago....on the other hand, the vertical rig count was up by one to 18 vertical rigs this week, while those were down by 13 from the 31 vertical rigs that were in use on July 22nd 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 July 21st, the second column shows the change in the number of working rigs between last week’s count (July 14th) and this week’s (July 21st) count, the third column shows last week’s July 14th 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 22nd of July, 2022...
With the big drops in Texas and in the Permian basin, we'll again start by checking the Rigs by State file at Baker Hughes for the changes in Texas Permian...there we find that there were three rigs pulled out of Texas Oil District 7C, which overlies the southern Permian Midland, that another rig was pulled out of Texas Oil District 8, which overlies the core Permian Delaware, and yet another rig was pulled out of Texas Oil District 8A, which includes the counties over the northern Permian Midland, while a rig was added in Texas Oil District 7B, which includes a county or two over the far eastern Permian Midland, thus accounting for the four rig decrease in the Permian this week...further checking the deployment in the Permian, we find that oil rigs deployed in the basin were down by 3 to 323, while Permian basin natural gas rigs were down by one to 10...since we noted last week that all Permian natural gas rigs were drilling in New Mexico, that means that New Mexico lost the natural gas rig, and hence must have added an oil rig at the same time..
Elsewhere in Texas, there was a rig pulled out of Texas Oil District 2, and there was another rig pulled out of Texas Oil District 4, which together account for the drop of two oil rigs in the Eagle Ford shale, while there was another oil rig pulled out of Texas Oil District 10, which account for the decrease in the Granite Wash basin...
IN other states, Louisiana saw a natural gas rig pulled out of the Haynesville shale in the northwest quadrant of that state, and also saw an oil rig pulled out of Lafourche Parish that had been drilling from an inland body of water...meanwhile, the rig added in Oklahoma was targeting a basin not specifically tracked by Baker Hughes...since the Permian basin and Haynesville shale natural gas rig removals account for the natural gas changes this week, that Oklahoma rig addition had to have been targeting oil...
DUC well report for June
Monday of this week saw the release of the EIA's Drilling Productivity Report for July, which included the EIA's June data on drilled but uncompleted (DUC) oil and gas wells in the 7 most productive shale regions (click tab 3)....that data showed an decrease in uncompleted wells nationally for the 34th time out of the past 36 months, as both drilling of new wells and completions of drilled wells fell in June, and remained well below the average pre-pandemic levels...for the 7 sedimentary regions covered by this report, the total count of DUC wells decreased by 24 wells, falling from a revised 4,828 DUC wells in May to 4,804 DUC wells in June, which was also 9.1% fewer DUCs than the 5,287 wells that had been drilled but remained uncompleted as of the end of June of a year ago...this month's DUC decrease occurred as 933 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during June, down by 42 from the 975 wells that were drilled in May, while 957 wells were completed and brought into production by fracking them, down from the 1,000 well completions seen in May, but up by 10 from the 947 completions seen in June of last year....at the June completion rate, the 4,804 drilled but uncompleted wells remaining at the end of the month represents a 5.0 month backlog of wells that have been drilled but are not yet fracked, up from the 4.8 month DUC well backlog of a month ago, and up from the 7 1/2 year low of 4.4 months of eight months ago, despite a completion rate that is now more than 15% below 2019's pre-pandemic average...
Oil basin DUCS fell in May while natural gas basin DUCs were a bit higher, as two out of the seven basins covered by this report saw DUCs increase....the number of uncompleted wells in the Permian basin of west Texas and New Mexico decreased by 20, from 877 DUC wells at the end of May to 857 DUCs at the end of June, as 460 new wells were drilled into the Permian basin during June, while 480 already drilled wells in the region were being fracked....at the same time, DUC wells in the Bakken of North Dakota were down by 10 to 515 by the end of June, as 70 wells were drilled into the Bakken during June, while 80 of the drilled wells in the Bakken were being fracked.....in addition, DUCs in the Eagle Ford shale of south Texas decreased by 4, from 485 DUC wells at the end of May to 481 DUCs at the end of June, as 92 wells were drilled in the Eagle Ford during June, while 96 of the already drilled Eagle Ford wells were fracked...on the other hand, DUC wells in the Niobrara chalk of the Rockies' front range increased by 6, rising from 715 at the end of May to 721 DUC wells at the end of June, as 108 wells were drilled into the Niobrara chalk during June, while 102 Niobrara wells were completed....Meanwhile, the number of uncompleted wells remaining in Oklahoma's Anadarko basin remained at 744 DUC wells at the end of June, as 51 wells were drilled into the Anadarko basin during June, while 51 Anadarko wells were completed....
among the natural gas producing regions, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, decreased by six wells, from 716 DUCs at the end of April to 710 DUCs at the end of June, as 95 new wells were drilled into the Marcellus and Utica shales during the month, while 101 of the already drilled wells in the region were fracked....on the other hand, the uncompleted well inventory in the natural gas producing Haynesville shale of the northern Louisiana-Texas border region rose by 10, from 766 DUCs in April to 776 DUCs by the end of June, as 57 wells were drilled into the Haynesville during June, while just 47 of the already drilled Haynesville wells were fracked during the same period....thus, for the month of June, DUCs in the five major oil-producing basins tracked by this report (ie., the Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) decreased by 28 to 3,318 DUC wells, while the uncompleted well count in the major natural gas basins (the Marcellus, the Utica, and the Haynesville) increased by 4 to 1,486 DUC wells, although as this report notes, once into production, more than half the wells drilled nationally will produce both oil and gas...
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Ohio commission considers state park drilling requests under expedited timeline - A state commission will soon decide whether to greenlight drilling for natural gas under Ohio state parks, wildlife areas, and other state-owned lands.Ohio’s Oil & Gas Land Management Commission is currently considering a dozen applications to extract natural gas from state property under new rules adopted pursuant to a state law that requires it to expedite such requests. Public comments on the first batch of proposals, which include parcels at Salt Fork State Park and Valley Run and Zepernick wildlife areas, are due July 20. Comments on proposals affecting Wolf Run State Park and other parcels are due July 28 or Aug. 11. Rulings could come in the next few months.The commission was created under a 2011 state law that gave agencies the option of directly leasing state property for oil and gas drilling until the commission had leasing procedures in place. A last-minute amendment to an unrelated bill this spring would have automatically mandated agency leases for drilling until the commission adopted procedures and lease terms. A lawsuit by groups opposing that law is pending in the Franklin County Court of Common Pleas.Meanwhile, the commission adopted those rules in May, along with a lease form that took effect on May 28. Drilling proposals started coming in two days later.Gov. Mike DeWine said in January that his administration’s policy against new surface drilling in state parks would continue. However, the new procedures allow applications for horizontal drilling under parks from well pads situated just beyond the surface boundaries of parks and wildlife areas.“A frack rig right outside the park borders is still going to have a major effect on the experience in that park,” said Cathy Cowan Becker, a co-founder of Save Ohio Parks.People come to Ohio parks and wildlife areas for hiking, camping, swimming, boating, fishing and other activities, Becker said, and their use and enjoyment would be adversely affected by lights, noise, increased traffic and air emissions from well pads. Ohio has also had multiple accidents relating to oil and gas. A July 5 oil spill reached the Tuscarawas River, and a July 11 methane leak 20 miles north of the Zepernick Wildlife Area required the evacuation of 450 people.“What if this had happened next to a state park or wildlife area?” Becker said. “How will the ODNR and [Ohio Environmental Protection Agency] evacuate an entire park full of campers, hikers, swimmers, hunters, and tourists? How will the air and water pollution affect these pristine spaces?”Even without accidents, drilling fracked gas from state parks or wildlife areas would affect the resources and habitats there, said environmental scientist Randi Pokladnik. Horizontal fracturing of a formation to get natural gas to flow out requires millions of gallons of water, plus smaller amounts of potentially toxic chemical mixtures whose makeup is kept secret.Those massive amounts of water must come from somewhere. And even if the water did not directly come from a lake where people swim, boat or fish, withdrawing the necessary quantities could lower water levels throughout an area, Pokladnik said. Dust and silt from well pad construction and traffic could also negatively impact species in streams, such as hellbenders, she added.Huge amounts of water do flow back up after fracking, along with substantial concentrations of salt and some radioactive compounds. Trucks transport much of the flowback water to injection wells, where it’s removed from the water cycle, but massive spills have happened, including one in Noble County in 2021. Smaller amounts of wastewater also come up when wells are in production.“We’re open to considering presentations from anyone,” commission chair Ryan Richardson said at the May 15 meeting when the procedures for picking parcels were finalized. And Pokladnik did make a short presentation at the commission’s June 28 meeting. FracTracker’s Great Lakes Program Coordinator Ted Auch also spoke, as well as emergency response and hazardous materials expert Silverio Caggiano, a former battalion chief at the Youngstown Fire Department.By then, the comment period was already running on some of the parcel nominations. One commissioner didn’t show up, another was late, and those who were there “didn’t ask me anything about the issues related to the forest ecosystem,” Pokladnik said.
Decisions on Drilling Under OH State Parks Coming “Next Few Months” | Marcellus Drilling News - In early June, 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). So far, at least 12 applications have been received by the OGLM to drill under state lands, including Ohio’s Salt Fork State Park (seeTiny Group Protests Fracking Under Ohio’s Salt Fork State Park). When will the OGLM decide whether (or not) to award contracts for drilling? We have an answer.
OH Court to Rule on Challenge of Law Allowing Drilling Under Parks | Marcellus Drilling News -- In January, Ohio House Bill (HB) 507 became law with the signature of Gov. Mike DeWine (see OH Gov. Signs Bill Expanding Drilling in State Parks, NatGas “Green”). The new law allows shale drilling under (but not on top of) Ohio state-owned land. HB 507 encourages (pushes for) more drilling under state-owned land. Even though drilling on state-owned land is about to become a reality thanks to this law, it was another provision of HB 507 that torqued off the Big Green Left even more–officially recognizing natural gas energy as “green” energy. It still bothers them, and they’ve gone to court to get it changed.
Declaring gas ‘green’ violated Ohio constitution, groups argue An Ohio court is set to rule on whether legislators violated the state constitution with late additions to a poultry bill that labeled natural gas as “green energy” and changed prior law to accelerate oil and gas drilling from state parks and wildlife areas.Multiple drilling proposals are now pending, with public comments due on the first batch of parcels by July 20. While the court case has not blocked those proposals, the litigation could eliminate the “green energy” label and affect how lawmakers pass future bills.Briefing wrapped up last month on environmental groups’ request for the Franklin County Court of Common Pleas to declare lawmakers’ passage of House Bill 507 violated two constitutional requirements. One says “no bill shall contain more than one subject.” The other requires each house in the General Assembly to consider each bill on three different days unless two-thirds of the respective house suspends the rule.HB 507 began as a two-page bill to reduce the number of chicks sold in lots from six to three. The bill swelled to 88 pages by the time the Senate passed it on Dec 7, just one day after multiple amendments were proposed for the first time, including the natural gas provisions plus other amendments ranging from the use of pesticides on private property to towing cars in conservancy districts.Gov. Mike DeWine noted the expansion of the bill’s subjects when he signed HB 507 into law on Jan. 6: “While the bill initially involved agricultural issues, amendments were added regarding drilling and natural gas issues.”“The purpose of the one-subject rule is to protect the rights of Ohioans to participate in the democratic process by making it clearer what bills the state legislature is working on,” said attorney Claire Taigman at Earthjustice, which is acting as counsel for the Buckeye Environmental Network, Ohio Valley Allies, Sierra Club and Ohio Environmental Council.And while the state Senate held three hearings on the bill before the December amendments, those hearings dealt only with the poultry provision and some food safety amendments added by the House.The substitute bill reported out by the Senate Agriculture and Natural Resources Committee on Dec. 7 was a “vitally altered” bill, the environmental groups said in their brief. Instead of having more hearings and time for public comment, the bulk of the bill’s text “went from non-existent to enacted” in less than a week. Spokesperson Steve Irwin said the Office of the Ohio Attorney General does not have any additional comments for this article beyond its court filings. The state’s briefclaimed HB 507 satisfies both the one-subject and three-consideration rules.“Land use, energy development, protection of natural resources, and conservation are undeniably linked to agriculture,” the state’s lawyers wrote, arguing that the single-subject rule was satisfied.And those claimed links meant no more hearings were needed under the three-consideration rule, the state’s lawyers argued. “From its introduction until its enactment, HB 507 had a common purpose of amending Ohio’s agriculture laws,” the brief said.Taigman is not buying it.“No definition of ‘Agriculture,’ including the one in Ohio statutory law, encompasses mineral extraction activity such as gas production and development,” she said. The state’s argument also “defeats the entire purpose of the one-subject rule because there is no way for a person to know what subjects a bill actually covers when a category is so broad and vague.”
Kinder Morgan Projecting 20 Bcf/d of U.S. Natural Gas Demand Growth by 2028 Kinder Morgan Inc. (KMI) is forecasting U.S. natural gas demand to grow by about 20 Bcf/d or 20% between 2023 and 2028 to roughly 121 Bcf/d, Executive Chairman Rich Kinder said Wednesday. “We expect 13.5 Bcf/d of that growth to come from LNG and Mexico exports, with moderate growth in the power, residential and commercial sectors,” Kinder said during the midstream giant’s second quarter earnings call. Kinder, who co-founded the firm in 1997, explained that, “while we’re bullish about the long-term future of Kinder Morgan, the single most important reason for optimism is the role natural gas will play in this country and around the world in the coming decades.”
Strs Ohio Cuts Position in Kinder Morgan, Inc. - Strs Ohio (State Teachers Retirement System of Ohio) trimmed its position in shares of Kinder Morgan, Inc. by 1.8% during the first quarter, according to its most recent Form 13F filing with the SEC. The firm owned 896,949 shares of the pipeline company’s stock after selling 16,818 shares during the period. Strs Ohio’s holdings in Kinder Morgan were worth $15,705,000 at the end of the most recent reporting period.
Chester, Pa., Residents Fight Proposed LNG Facility - Democrats in Pennsylvania had promised to cut greenhouse gas emissions, but former Gov. Tom Wolf and members of his administration met with Penn America Energy to help shepherd its plans as early as 2016. Republican lawmakers, for their part, formed the Philadelphia LNG Export Task Force in November 2022 to study plans for the proposed facility. The task force is stacked with industry executives, including one from the American Petroleum Institute, which launched a global campaign to promote liquefied natural gas as “clean” energy in 2020.Once the plan for the LNG facility became public, community members, including Mayfield, were barred from testifying at public hearings. Instead, the task force hosted presentations byindustry players, including former Rep. Tim Ryan, D-Ohio, who now co-chairs an industry-funded nonprofit advocacy group that pushes for natural gas.The proposed facility could have terrifying consequences for a city already burdened with intense health and economic disparities brought on in part by other energy facilities like the Covanta incinerator, Mayfield said. “This thing is so scary to me,” she said of the LNG proposal. “Out of all the things we’ve ever fought outside of the incinerator, the safety issue for this thing is dangerous to me.”With President Joe Biden intensifying the quest to make the U.S. the world’s biggest exporter of liquefied natural gas, similar scenes are playing out in old industry towns across the nation. Residents in Florida’s North Port St. Joe were surprised last year when they learned that their efforts to restore the community were running up against secret plans by officials and energy executives to build a new liquefied natural gas facility. Environmental groups failed to stop another liquefied natural gas facility in Louisiana’s Plaquemines Parish, south of New Orleans. And community organizers in Gibbstown, New Jersey, across the river from Chester, have been fighting another proposed liquefied natural gas export terminal since 2019; the project is currently on hold after a federal agency declined to renew its permit earlier this year.The Biden administration has amplified calls to expand the production of liquefied natural gas to ease a shortage in Europefollowing Russia’s invasion of Ukraine. The Republican lawmaker who started the task force to explore the proposed liquefied natural gas plan in Chester said she did so after the Russian invasion with hopes that Pennsylvania could help fill the void. Some environmental groups, though, have described the Ukraine war as a false pretense to ramp up fossil fuel production. The groups criticized Biden for echoing calls to boost liquefied natural gas production made by former President Donald Trump and leaving Trump-era regulatory rollbacks in place.
800,000 Tons of Drilling, Frack Waste Unaccounted for in NY-PA-OH | Marcellus Drilling News - Researchers with the University of Pittsburgh (Pitt) recently published a study in the journal Ecological Indicators. The study’s intent was to measure whether or not frack waste dumped in local landfills has radiation that is leaking out in groundwater (leachate) from those facilities. Research like this, if legitimate (and accurate), is a good thing. We need to know if the waste we’re dumping is causing a problem. But a funny thing happened during the study. The researchers found a big problem with recordkeeping.
Study finds 800,000 tons of drilling, fracking waste unaccounted for in NY, PA, Ohio -- Sanitary landfills in Pennsylvania can accept the liquid waste byproducts of drilling and fracking for oil and gas as long as it is "immobilized," mixed with wood chips or sawdust, for example.This waste can contain high levels of heavy metals, like arsenic; salts such as chloride and bromide; and naturally occurring radioactive materials.Sanitary landfills are those designed to let waste decompose; they are not necessarily designed to manage radioactive waste.A collaborative research study led by Daniel Bain, University of Pittsburgh associate professor of geology and environmental science, analyzed records as well as soil samples to better understand the effects of disposing of this waste in facilities that were not built to contain radioactive waste.The team, in an article written in Ecological Indicators by Lauren Badertscher, then a masters student at Duquesne University and now with the EPA, found that poor records and a lack of monitoring are a barrier to fully understanding the impact of this method of immobilized oil and gas waste disposal.Sediment samples taken upstream and downstream from 17 facilities that treat water from landfills in New York, Ohio and Pennsylvania—all states that accepted such waste in 2019, when the samples were taken—often showed elevated levels of radium, implicating the wastewater as a its source.Discharge permits for these landfills do not commonly require monitoring of materials found in oil and gas waste.The research team sought out reports to the Pennsylvania Department of Environmental Protection Oil and Gas Division from oil and gas wells, indicating that they shipped wastewater to sanitary landfills in New York, Ohio and Pennsylvania.They also analyzed records from the environmental agencies of New York, Ohio and Pennsylvania documenting the acceptance of oil and gas wastewater.When the researchers compared the two, they found that, at the very best, there was still a 30% discrepancy between records of what was sent and what was received.Almost half of the landfills examined had either a record of shipment or a record of receipt, but no associated record on the other end in 2019. When totaled, these gaps in record keeping leave over 800,000 metric tons of oil and gas waste unaccounted for.Researchers concluded that insufficient regulatory recordkeeping and a lack of mandatory monitoring and testing are a barrier to fully understanding the impact on local water systems of sanitary landfills accepting wastewater resulting from drilling and fracking for oil and gas."The mismatch in regulatory records creates the potential for contamination," Bain said. "And while we don't have the data to unambiguously tie increases in stream sediment radium to disposal of these wastes in landfills, the observations clearly indicated we should really start scrutinizing, and probably rethink, the disposal of oil and gas waste in landfills."
11 New Shale Well Permits Issued for PA-OH-WV Jul 3-9 | Marcellus Drilling News - New shale permits issued for Jul 3-9 in the Marcellus/Utica saw a dramatic decrease after posting a dramatic increase the week before. There were 11 new permits issued last week, way down from the 39 issued the previous week. Last week’s permit tally included a scant 3 new permits in Pennsylvania, 3 new permits in Ohio, and 5 new permits in West Virginia. The top permittee for the week was Northeast Natural Energy, receiving 5 permits in Monongalia County, WV. ASCENT RESOURCES | BUTLER COUNTY | CNX RESOURCES | GUERNSEY COUNTY | JEFFERSON COUNTY (OH) | LOLA ENERGY | MONONGALIA COUNTY | NORTHEAST NATURAL ENERGY / SOUTHWESTERN ENERGY | WESTMORELAND COUNTY July 14, 2023
17 New Shale Well Permits Issued for OH-WV (Not PA) Jul 10-16 - Marcellus Drilling News - We’re trying not to sound too PO’d (personally offended) here, but once again, in what seems to be an every month or two occurrence, the Pennsylvania Dept. of Environmental Protection’s (DEP) online oil and gas permitting database is throwing an error. So, we are left with no permit numbers for PA for the week of July 10-16. Neither the Ohio Dept. of Natural Resources (ODNR) reporting system nor the West Virginia DEP reporting system have these problems. It is only the PA DEP that routinely goes “off the air.” Why is that? [Rant over] Even without PA’s numbers, OH and WV combined issued 17 permits last week, versus the pathetic 11 total from the prior week that included PA. ANTERO RESOURCES | ASCENT RESOURCES | BELMONT COUNTY | COLUMBIANA COUNTY | GULFPORT ENERGY | HILCORP ENERGY | JEFFERSON COUNTY (OH) | NOBLE COUNTY | WETZEL COUNTY
Gas Production From Utica, Marcellus Projected to Decline - Youngtown Business Journal – Production of natural gas across the Utica/Point Pleasant and Marcellus shale is expected to decline next month, according to the latest data from the U.S. Energy Information Administration. Natural gas output from horizontal wells drilled across eastern Ohio, Pennsylvania and West Virginia – collectively called the Appalachian basin – is projected to decline from 35.345 billion cubic feet a day in July to 35.329 billion cubic feet per day during August, a difference of 16 million cubic feet per day, EIA said in its monthly drilling report. Oil production across Appalachia is expected to remain flat at 147,000 barrels of oil per day over the next month, EIA reported. During the first quarter, Columbiana County reported a significant increase in oil production because of four wells that were recently placed into production in Hanover Township. The wells target the Utica/Point Pleasant shale formation in eastern Ohio. Three of the other six major shale formations in the country project lower natural gas production in August. The Anadarko in Oklahoma projected a decline of 64 million cubic feet per day. The Eagle Ford in Texas expects a drop of 42 million cubic feet per day. The Haynesville shale in Texas and northwestern Louisiana projects gas production to drop by 50 million cubic feet per day. Total production among the seven major shale plays is expected to decline by 100 million cubic feet per day in August. Collectively, these shale regions project oil production to drop by 18,000 barrels per day, according to EIA’s report.
EIA July DPR: Shale Gas Production Predicted to Drop in August | Marcellus Drilling News - The latest monthly U.S. Energy Information Administration (EIA) Drilling Productivity Report (DPR) for July issued yesterday (below) shows the EIA believes shale gas production across the seven major plays tracked in the monthly DPR for August will *decrease* production from the prior month of July. This is the first month-over-month decrease prediction for the combined seven plays since December. EIA says combined natgas production will slide by 100 MMcf/d (million cubic feet per day). The Marcellus/Utica, called “Appalachia” in the report, is predicted to slump by 16 MMcf/d in August from July.
The Reason PA Shale Production has Flatlined? No Pipelines -Marcellus Drilling News -Last week we told you that the shale production situation in Pennsylvania has caught the eye of the number crunchers at the U.S. Energy Information Administration (see EIA Observes M-U Gas Production Flat, Key PA Counties in Decline). Production in PA, overall, is flat and possibly decreasing. Nationally, production is up in other plays and states. So why is PA’s production flatlining? In a phrase, lack of pipelines.
An Export Terminal for Natural Gas is Essential in Southeast PA – DV Journal - Earl Baker -When I was in the Senate of Pennsylvania, representing Chester County years ago, and serving as xhairman of the labor and industry committee, we became aware of the Marcellus Shale, the massive natural gas play that spans a sizeable portion of Pennsylvania. At the time, we did not realize its full potential, although we knew it was something good for our state and wanted to know more about it. Fast forward to today, when Pennsylvania is the second top producer of natural gas, behind only Texas. The policy decisions made so many years ago are now hitting us squarely as a region, state and nation. Our future depends on our ability to take the product of the Marcellus Shale, natural gas, and get it to those who need and want it. In its liquefied form, or LNG, can be shipped stored and used for production. Although Pennsylvania is a major producer of natural gas, exporting LNG to Europe and other distant markets is not happening within the state. To do this efficiently, we need a Southeast Pennsylvania LNG shipping depot, and on a scale that’s capable of serving the world. We need bipartisan cooperation to make this happen, however, and there is a lot to say favorably about the current governor and the General Assembly’s intent. Earlier this year, a Philadelphia LNG Export Task Force was formed with bipartisan support to come up with concrete aims and suggestions that will be captured in a final report expected later this year. As my friend Jeff Kotula, president of the Washington County (near Pittsburgh) Chamber, major drilling source in the state, likes to say, about Pennsylvania, “The power to prosper is under our feet!” Only Texas has more natural gas than we do, and when you add our two states, only Saudi Arabia has more than the US. Pipelines are valuable to get the drilled gas from its production areas in Ohio, West Virginia and Western Pennsylvania. The west to east pipeline is invaluable. In fact, pipelines are more efficient than trucks or railroad cars, which are also used to ship gas. Additional pipeline capacity may be needed to move natural gas to the southeast region of Pennsylvania to ship overseas. Having an LNG export facility will help address the need for energy as the Russian invasion of Ukraine continues and rebalancing of energy supplies occurs. Like the beginning of the shale revolution, we must have reasonable policies in place to encourage natural gas drilling and infrastructure for transporting exporting LNG from the southeast. Developing and shipping our resources will make Pennsylvania even more prosperous.
Aborted Epiphany PA Wastewater Plant Resurrected w/PENNVEST Loan | Marcellus Drilling News --We love a good “back from the dead” story. In 2017 Epiphany Water Solutions (aka Epiphany Environmental, LLC) filed for a permit to build a centralized oil and gas wastewater treatment facility in Coudersport (Potter County), PA (see Shale Wastewater Treatment Plant Planned for Potter County, PA). The Pennsylvania Dept. of Environmental Protection (DEP) held a public hearing on the proposed facility in January 2018. From that time on, the environmental left launched a smear campaign to defeat it, which subsequently happened in April 2018. But what’s this? Epiphany has just received a $6.1 million loan from the Gov. Shapiro administration to build a similar (same?) plant several counties away–in Clarion County, PA.
Iroquois Natural Gas Upgrades in New York, Connecticut Facing Delays as Permits Languish - Iroquois Gas Transmission LP’s natural gas compression upgrade project, designed to supply New York City with an additional 125 MMcf/d, may be delayed as it awaits required air permits from state agencies, according to Iroquois management. Iroquois in 2020 filed applications for two Air State Facility permits with the New York Department of Environmental Conservation (DEC). The permits would allow the company to add 24,000 hp of compression and associated facilities at the existing Dover and Athens stations as part of an Enhancement by Compression (ExC) project. DEC has “not yet made a final determination regarding the project’s consistency with Section 7 of the Climate Leadership and Community Protection Act (Climate Act),” a spokesperson told NGI. The law requires.
House GOP Pushes Back on Radical ESG by BlackRock, Others --Marcellus Drilling News - As we point out in another story today about Olympus Energy selling its “responsible gas” via a deal with Tenaska, what the left means by ESG (Environment, Social, Governance) and what the shale industry means by ESG, are two different things. When companies like BlackRock talk about forcing the companies they invest in to toe the line with respect to ESG, it means forcing those companies to divest from fossil energy. Republicans in the U.S. House of Representatives are pushing back hard against investor ESG nonsense because it threatens the retirement funds of this country’s massive middle class.
Mountain Valley Pipeline developers escalate legal fight over project to Supreme Court wvgazettemail.com In 2018, United States Supreme Court Chief Justice John Roberts issued an opinion finding the court must resist any effort by lawmakers to “seize the judicial power” for themselves.Now Mountain Valley Pipeline developers are asking Roberts to find that Congress didn’t violate the U.S. Constitution by passing a law prohibiting judicial review of federal approvals of the pipeline being challenged in court to force the project’s completion.
Manchin, GOP deputy whip back request for Supreme Court to intervene over Mountain Valley pipeline Lawmakers from both parties are calling on the Supreme Court to intervene over the Mountain Valley Pipeline, which would stretch from northwestern West Virginia to southern Virginia, but it has faced legal opposition from environmentalists. Democratic Sen. Joe Manchin (W.Va.) and Republican Chief Deputy Whip Guy Reschenthaler (Pa.) have filed amicus briefs with the Supreme Court in support of the controversial pipeline, which was approved in the debt limit deal earlier this year. Last week, the 4th Circuit Court of Appeals in Richmond, Va., granted a stay on construction of the Mountain Valley Pipeline, a natural gas project championed by Manchin. The deal to raise the debt ceiling in June included a provision approving the pipeline and transferring jurisdiction over the matter to a Washington, D.C., appeals court. In response, the company behind the pipeline filed an emergency request Monday asking Chief Justice John Roberts to intervene, citing the provision in the debt deal. Roberts has the option of either deciding on the matter himself or putting it to the court for a full vote. Manchin filed the brief in support of the request Tuesday, while Reschenthaler filed his own Wednesday. “It’s a shame when members of Congress have to ask the Supreme Court to intervene to maintain the credibility of the laws that we have passed and the President has signed, but I am confident that the Court will uphold our laws and allow construction of [the Mountain Valley Pipeline] to resume,” Manchin said in a statement. Reschenthaler added in his own statement Wednesday that “[t]he Fourth Circuit judges are not supreme rulers and lawful orders issued by the legislative and executive branches must be followed. Congress was well within its power to restart the Mountain Valley Pipeline construction and usher in a new era of energy independence for the region.” “Instead of halting the pipeline, I urge the Supreme Court to plug up the ludicrous activism seeping out of the lower court so American families can enjoy lower energy costs, substantial land royalties, and most importantly — law and order in America,” he added.
MVP appeals construction delay to the U.S. Supreme Court -The U.S. Supreme Court is being asked to overrule a decision that stopped construction of the Mountain Valley Pipeline, which remains stuck in a legal quagmire.Attorneys for Mountain Valley filed an emergency appeal late Friday afternoon that seeks to reverse two stays issued earlier this week by the 4th U.S. Circuit Court of Appeals.With the Supreme Court on its summer recess, the case is expected to go to Chief Justice John Roberts, who could either decide the matter himself or refer it to the full court, lawyers said.The appeal states that a three-judge panel of the Fourth Circuit issued “two extraordinary stay orders” that defy the clear language of a law passed by Congress last month that was expected to fast-track completion of the natural gas pipeline. “Congress has made clear that there is a paramount national interest in expeditious completion of the pipeline,” the 35-page filing states. “And Congress was equally clear that the Fourth Circuit may not exercise jurisdiction” over two lawsuits that were filed before the law was passed.The Fourth Circuit gave no reason for its decisions, issued Monday and Tuesday, that ordered a halt to construction just as work crews were returning to Southwest Virginia.But a key question – which now may be decided by the nation’s highest court – is whether Congress violated the separation of powers outlined in the U.S. Constitution by asserting its power over that of the courts, according to earlier legal filings.
Pipeline project is now at center of constitutional question: Can Congress halt judicial review? - WV MetroNews - Construction on the Mountain Valley Pipeline has been halted again because of a big constitutional question: Can the legislative branch forbid the judicial branch from reviewing whether the project is in line with federal environmental laws? Late last week, the pipeline’s developers asked Chief Justice John Roberts to intervene on the question. Lawyers for Mountain Valley Pipeline asked Roberts for an emergency reversal of an appeals court stay. Their argument was that Congress had been clear, that the pipeline could not be held up any longer by the courts. “The court of appeals lacked jurisdiction to grant the relief it ordered (or any other). Even assuming that court had jurisdiction, Congress has ratified the underlying agency actions and superseded any provision of law that could have conceivably served as a basis for relief,” lawyers for the pipeline wrote in their application for Roberts to intervene. “The court of appeals’ stay orders flew in the face of this recent, on-point, and emphatic congressional command that the remaining construction of the Mountain Valley Pipeline must proceed without further delay because ‘construction and operation of the [Project] is required in the national interest.'” The application for the chief justice ratchets the question up a big notch after a three-judge panel of the Fourth Circuit Court of Appeals issued a stay of pipeline construction last week. That took place in two related cases where a national environmental organization challenged whether Congress had overstepped its authority. The appeals judges consolidated the two cases brought by the Wilderness Society and set oral arguments for 10 a.m. July 27 at the Lewis F. Powell Jr. Federal Courthouse in Richmond, Va. The appeals judges in the case are Roger Gregory, James Wynn and Stephanie Thacker, a West Virginian. The pipeline’s developer, Equitrans Midstream, is asking for a decision at the Supreme Court level even before that, though, saying any slowdown in the court system imperils the likelihood of finally completing the project before winter sets in. Senator Shelley Moore Capito, R-W.Va., agreed that the Supreme Court predicted last week that the Supreme Court would wind up with the pipeline case. Capito, who has supported the pipeline’s completion, contended congress was on solid ground by mandating the approval of the project’s remaining permits in legislation that was signed by President Biden. “This was gone over with a fine-tooth comb by all the constitutional lawyers here. It was signed by the president of the United States and, I’m sure, gone over by his constitutional lawyers as well,” Capito said to reporters during an online news briefing. “I think we will see a challenge of the stay in the Supreme Court, although I don’t think that’s been issued yet, and I think it will be successful.” Capito contended the appeals judges have disrupted the pipeline’s progress too often to be taken at face value. “The Fourth Circuit has shown more than a few times, particularly in this process, that they are working on an agenda here. You’re supposed to have a system that you have random judges out of the 15 judges,” Capito said. “Every time mountain valley pipeline comes before that court, they have the same three judges who are who issue the same decisions, which is stay. They’re obviously opposed to this, and they’re working on a political agenda.”
Biden, Manchin, GOP Lawmakers Defend Gas Pipeline Challenged by Environmental Group - A legal battle over the construction of a new natural gas pipeline in West Virginia has raised common ground between President Joe Biden’s administration, Sen. Joe Manchin (D-W.Va.), and a group of Republican lawmakers. The deal to increase the U.S. debt limit last month included a provision to approve the construction of the Mountain Valley Pipeline, a natural gas project set to run between Virginia and West Virginia. An environmental group known as the Wilderness Society has challenged the pipeline’s construction, winning a July 11 order from the Fourth Circuit Court of Appeals that halts the pipeline’s construction for now. The developers behind the Mountain Valley Pipeline project have since asked (pdf) the U.S. Supreme Court to overturn the Fourth Circuit Court’s decision and allow the pipeline to go forward. On Tuesday, Mr. Manchin filed a “friend of the court” amicus curiae brief (pdf) backing the Mountain Valley Pipeline’s request. Mr. Manchin’s amicus brief was followed the next day by an amicus brief (pdf) brought by nine Republican lawmakers. In their brief, Sen. Shelley Moore Capito (R-W.Va.) and Reps. Guy Reschenthaler (R-Pa.), Jeff Duncan (R-S.C.), Bill Johnson (R-Ohio), John Joyce (R-Pa.), Mike Kelly (R-Pa.), Dan Meuser (R-Pa.), Carol Miller (R-W.Va.) and Alex Mooney (R-W.Va.) all expressed their support for overturning the appeals court order and letting the pipeline project proceed. On Friday, the Biden administration also weighed in, lending its support for the pipeline project. Writing on the administration’s behalf, U.S. Solicitor General Elizabeth Prelogar argued (pdf) that the deal cut during the passage of the debt limit bill, the Fiscal Responsibility Act of 2023, had taken the power to stop the pipeline’s construction out of the jurisdiction of the lower courts. The relevant section of the debt limit bill states, “No court”—up to and including the Fourth Circuit—”shall have jurisdiction to review any action taken by [the relevant agencies] that grants … any … approval necessary for the construction and initial operation at full capacity of the Mountain Valley Pipeline.” Ms. Prelogar added that the Wilderness Society’s legal challenges “cannot succeed because Congress ratified the agency actions that they challenge and superseded any provision of law inconsistent with the issuance of those approvals.” NTD News reached out to the Wilderness Society for comment but the did not receive a response by the time this article was published.
As Mountain Valley Pipeline Debate Continues, Who Really Wants It? - West Virginia Public Broadcasting : West Virginia Public Broadcasting (podcast & transcript) Congress tried to have the last word on the Mountain Valley Pipeline, requiring all federal permits to be issued for the 300-mile natural gas pipeline in a deal lawmakers approved last month. However, the Fourth U.S. Circuit Court of Appeals stepped in to block new construction on the project. Ultimately, the pipeline may get built. The pipeline’s builders have asked the U.S. Supreme Court to intervene, and a decision may come before the end of this month.But some energy analysts question whether the pipeline is even needed. Curtis Tate spoke with Suzanne Mattei of the Institute for Energy Economics and Financial Analysis for her perspective. This interview was edited for clarity and length.
- Tate: Who is pushing for this pipeline? Where is the gas ultimately going?
- Mattei: We’ve said from the start, that this was not a good idea. This was a very expensive pipeline, going through very sensitive terrain. And that there was not a compelling need. There was not a big line of people saying we need this gas, bring this gas to us; the pipeline was driven by gas producers. So you know, when you think about energy need, there’s two ends of it. Someone has energy resources, they feel a need to extract those and sell them someplace to make money. But do the customers need it? Are they begging for it? This pipeline was not driven by utility need, it was driven by supplier need. That was our view, when we first analyzed the pipeline project back in 2016. And we haven’t really seen anything to change our view of that at this point.
- Tate: What should have happened? Could any particular agency have given the project a more thorough examination?
- Mattei: This project should have been much more thoroughly examined from the get go at the Federal Energy Regulatory Commission, which is supposed to actually evaluate need and alternatives. They’re the ones that are supposed to really do that right from the start. And they never did. So there was a whole lot of debate that just never happened. I saw the same problem with the Williams pipeline that was supposed to run from Pennsylvania to New York. And the good thing there was that the state public service commission did its own evaluation of alternatives in connection with deciding whether they were going to allow ratepayers to have to pay for the capital expenses of the pipeline, and that’s how it was stopped.
Gas developer hits brakes on hotly contested LNG terminal - For the past year, residents in Port St. Joe, Florida have been fighting to stop a liquefied natural gas terminal from being built on the town’s Gulf Coast shore. Now, community members say they’re breathing a sigh of relief.Nopetro Energy, the Miami-based company that had proposed constructing the LNG terminal, said it was no longer moving forward with the $100-million-plus project.According to the company, Nopetro “conducted due diligence” last year on the potential LNGsite — a 60-acre waterfront lot that for many decades hosted the town’s paper mill. The land is just a mile away from the historically Black neighborhood in the northern part of Port St. Joe, where residents are still grappling with the toxic legacy left behind by the St. Joe Paper Company.Nopetro, whose stated mission is to “end petroleum dependency,” had proposed building a “small-scale” terminal to compress and chill fossil gas, then load it onto cargo ships bound for countries in the Caribbean and Central and South America. The project would have initially exported about 3.86 billion cubic feet of LNG per year, with the potential to expand.After completing its review, the company “decided to no longer pursue the opportunity, purely due to market conditions,” Ed Hart, Nopetro’s senior vice president of supply, said in a statement provided to Canary Media this week.The decision comes as the United States is exporting record-breaking amounts of LNG, a trend that threatens not only the country’s own goals for cutting planet-warming emissions but international climate targets as well. Nearly all of that LNG moves through large-scale export terminals in the U.S. Gulf Coast, though in recent years developers have pushed to build more smaller-scale facilities that serve specific markets.Hart said that Nopetro made up its mind “many months ago” to halt plans for an LNG facility in Port St. Joe. The project’s opponents say they only learned of Nopetro’s decision earlier this week after local outlets like the Port St. Joe Star newspaper reported the development. Still, some observers had anticipated the move. In May, the St. Joe Company, which owns the former paper mill site, said in a shareholder meeting that Nopetro hadn’t signed a lease agreement for the LNG facility.Community activists counted Nopetro’s about-face as a victory.
North American Natural Gas, Oil Prices ‘Firming Up’ and E&Ps Eyeing Long Term, Says Halliburton CEO - - Worldwide demand for natural gas and oil remains solid, demonstrating the “critical” role that fossil fuels continue to play in the economy, according to Halliburton Co. CEO Jeff Miller. However, to sustain the long-term energy demand, it’s going to take “sustained capital investment,” he told investors on Wednesday during the second quarter 2023 conference call. “Commodity prices remain attractive,” Miller said. “When I talk to customers, they expect to work more, not less, and many of their activity plans extend into the next decade. Customers are settling in for a long-duration upcycle.”
Maximum Extraction: Shale Development Enters a New Era - Today’s unconventional oil and gas developments bear scant resemblance to those of a decade ago, and experts designing new technologies say things will look even more different in the next few years.That’s because the focus of operators has shifted from maximizing production to maximizing shareholder distribution and reducing debt, said Ryan Duman, Wood Mackenzie’s director of upstream research.“That has shifted the focus to technologies that improve efficiency,” he told Hart Energy.Partly, that stems from operators acquiring step-out acreage and adding to their inventories between 2016 and 2019.“Now, they need to find the most efficient way to harvest what they already have, and that means doing more with less,” Duman said.For many companies, that has meant exploring ways to leverage automation software and AI to streamline operations.“Using data captured in real time, 24/7, provides a clearer picture of operations, which leads to better decision-making,” Duman said.Operators are using operational data to fine-tune processes and are applying advanced analytics to real-time data, monitoring the performance of tools and equipment, and decreasing downtime through predictive maintenance.“The market demand for ESG reporting is another driver that has made operators more bullish for technology such as electric equipment, on-site gas turbines to generate electricity, no-bleed pneumatics, and lower-emitting kits,” he said, noting that reducing the environmental footprint of operations and improving economics are sometimes competing priorities.Despite the challenges, Duman said the industry overall has embraced ESG, and companies are making changes that allow them to market themselves attractively to investors.“They are reducing methane and flaring, and the cost of the technologies that are helping them achieve those goals is more than offset with incremental revenue gains,” he said.Wood Mackenzie will continue to watch refracturing and EOR technologies, which Duman believes are ripe for greater innovation.“Because of the potential benefits associated with 45Q [tax] credits, there is going to be a push for CCUS development as well,” he said, referring to carbon capture, utilization and sequestration. “This tends to make sense from a core competency standpoint because companies can leverage in-house knowledge.”
Mercuria Jumps on Zefiro's Carbon Credit Trading Program Using Abandoned Wells - Zefiro Methane Corp., which plugs orphaned and abandoned oil and gas wells in North America to create carbon credits, has pre-sold some of the portfolio to trader Mercuria Energy America LLC. Zefiro’s current projects include plugging abandoned or orphaned wells in the Appalachian Basin and Texas-Louisiana-Mississippi Salt Basins.“For too long, investors have not had routine access to reduction activities that display proven pathways to reducing harmful oil and gas emissions,” said Mercuria Energy’s Adam Raphaely, managing director for Trading. The transaction with Zefiro allows Mercuria to align “with the core principles of many of our customers,” while also “fostering innovative projects.”
Louisiana Regulators Cite Venture Global for Unauthorized Emissions at Calcasieu Pass LNG - The Louisiana Department of Environmental Quality (DEQ) has ordered Venture Global LNG Inc. to better comply with its air permits and state regulations after a series of unauthorized emissions occurred at its Calcasieu Pass export terminal last year. The company could face steep fines following a compliance order and notice of potential penalty DEQ issued late last month following inspections and a review of the findings. Venture Global reported the release of 180,099 pounds of natural gas that occurred over three days in January 2022. The discharge resulted during the commissioning of a liquefied natural gas storage tank. Instead of flaring the gas as originally planned, DEQ’s compliance order noted that a roof vent was used on the tank to release the gas.
Company confirms funding for massive gas terminal at Port of Brownsville After years of delays, an industrial developer said this week that it has secured funding to proceed with construction of a massive new gas liquefaction plant and export terminal in the wild greenfields and wetlands of the Rio Grande delta.Houston-based NextDecade says it has secured $5.9 billion in financing from international partners to begin work on the terminal’s first three compressors to liquify natural gas from Texas’ shale fields for export on global markets.When completed, five giant compressor units, each designed to process 5.4 million metric tons of liquified natural gas per year, will make the 750-acre Rio Grande LNG facility among the largest gas export terminals in the world.Its location in the Port of Brownsville — the last major deepwater port in Texas that remains without large fossil fuel projects — will complete the energy sector’s coastal sprawl from Louisiana to Mexico. Once constructed in several years, Rio Grande LNG will join the growing Gulf Coast energy export boom, which has pushed oil and gas production in Texas to record high levels.In the Wednesday announcement, NextDecade CEO Matt Schatzman called the financing agreement “a landmark event reflecting years of hard work and dedication by NextDecade’s employees, shareholders, construction partners, equipment suppliers, and customers.”One of the project funders, Abu Dabi-based Mubadala, called the deal “the largest greenfield energy project financing in U.S. history.”Seven such LNG export terminals have cropped up on U.S. coastlines in the last seven years, according to the Energy Information Agency. Another three are under construction and another 11 have been approved by federal regulators.Along with the Rio Grande terminal, the planned Rio Bravo Pipeline will deliver 4.5 billion cubic feet of Permian gas per day to the South Texas coast, where compressor trains at Rio Grande LNG will super-cool the gas to minus-260 degrees Fahrenheit and then load it onto ocean-going tankers for sale overseas. The facility will occupy 750 acres of greenfield, including 182 acres of wetlands, on a 984-acre waterfront tract.Initially scheduled for completion in 2023, yearslong delays have plagued the project. Campaigns by local activists and indigenous leaders prompted three French banks, SMBC Group, BNP Paribas and Société Générale, to withdraw their financial commitments. Three nearby municipalities of Laguna Vista, South Padre Island and Port Isabel adopted resolutions opposing the project.A federal court ordered regulators to modify the conditions of their approval following challengesby local organizers who hoped to preserve the Rio Grande Delta as the last major inlet on the Gulf Coast of Texas still free from fossil fuel facilities like refineries, chemical plants and terminals.“The oil and gas companies and the politicians can’t find it in their hearts to keep the industry in an industrial space,” said Lela Burnell, the daughter of a shrimper in the Port of Brownsville and the plaintiff in multiple lawsuits against plans for Rio Grande LNG. “Why do they feel like they need to just inundate and take over the whole coast? They don’t want to leave one spot where there is a sanctuary or a safe zone for nature.”
TotalEnergies Makes Final Investment Decision on Rio Grande LNG | Rigzone - TotalEnergies SE and its partners have made a final investment decision to develop the first phase of the Rio Grande LNG natural gas liquefaction project in South Texas, the company said in a news release. The first phase of the Rio Grande LNG project involves three liquefaction trains with a total capacity of 17.5 million tons per annum (mtpa) and capital expenditure of $14.8 billion, according to the news release. Plant commissioning is targeted for 2027, and TotalEnergies will offtake 5.4 Mtpa of LNG from the production of this phase for 20 years. The French energy company is partnered with Global Infrastructure Partners, NextDecade, GIC, and Mubadala for the project. The project will be financed by equity contributions from the partners and by a debt contribution from an undisclosed “international banks’ consortium”, according to the release. Bechtel has been given the engineering, procurement, and construction contract. TotalEnergies will acquire a 16.67 percent stake in the joint venture in charge of the project’s first phase and will allot $1.1 billion in equity contributions. The company will also hold a 17.5 percent stake in NextDecade for a total amount of $219 million. TotalEnergies acquired the first tranche of 5.06 percent in June and is set to increase the stake to 12.47 percent “in the next few days”, according to the release. It will acquire the third tranche of 5.03 percent before the end of 2023. According to the company website, TotalEnergies is the world’s third-largest LNG player with a market share of around 12 percent and a global portfolio of about 50 million tons per year. It targets to increase the share of natural gas in its sales mix to close to 50 percent by 2030. In a separate news release, TotalEnergies said it started production in the first phase of Azerbaijan’s Absheron gas and condensate field in the Caspian Sea. The company is partnered with the State Oil Company of the Republic of Azerbaijan (SOCAR) for the project. The first phase connects a subsea production well to a new gas processing platform, which is linked to SOCAR’s existing facilities in Oil Rocks. It has a production capacity of 141.3 million cubic feet (4.0 million cubic meters of gas) per day and 12,000 barrels a day of condensate. The gas will be sold in the domestic market in Azerbaijan, according to the release.
Borderlands: $18B LNG export terminal project moves forward at Texas seaport -- Energy producer NextDecade Corp. said on Wednesday it’s moving ahead with construction of a multibillion dollar liquefied natural gas export terminal at the Port of Brownsville in South Texas.The Houston-based company’s Rio Grande LNG terminal at the port will consist of five compressor units once completed, with each designed to process 5.4 million metric tons of LNG per year, making the 984-acre facility among the largest LNG exporters in the world.“We look forward to delivering this important LNG project that will supply the world with reliable and lower-carbon intensive LNG,” Matt Schatzman, NextDecade’s chairman and CEO, said in a news release. “Now our focus turns to safely constructing Phase 1 on time and on budget.”The Rio Grande LNG terminal project’s total cost for the first phase is $18.4 billion. NextDecade said it has secured almost $6 billion in financing from international partners to begin work on the project’s first three compressors to LNG from Texas’ shale fields for export on global markets.Houston-based NextDecade Corp.’s Rio Grande LNG terminal will be among the largest gas export terminals in the world once completed. (Image: NextDecade)NextDecade’s partners in the project include French oil giant TotalEnergies and financial investors Global Infrastructure Partners, GIC and Mubadala Investment Co.The company did not specify a completion date for the first phase of the project during Wednesday’s announcement. NextDecade initially planned to begin construction of the Rio Grande LNG terminal last year, with a target completion date of 2026.Officials for the Port of Brownsville said the Rio Grande LNG terminal will transform South Texas and the state’s trade with the world.Located 277 miles south of San Antonio at the southernmost tip of Texas along the Gulf of Mexico, the Port of Brownsville is the only deep-water seaport located along the border, making it a major trade channel between Texas and Mexico.“The Rio Grande LNG facility will be a true game-changer for our community, representing a generational achievement,” Eduardo A. Campirano, the port’s director and CEO, said in a news release. “Its impact will be enormous, significantly benefiting the energy industry of Texas.”
U.S. Continues to Drive Global LNG Supply Additions, GIIGNL Says - The United States is likely to become the world’s largest LNG exporter this year, according to the International Group of Liquefied Natural Gas Importers (GIIGNL). (see global table) The United States added 8.4 million tons (Mt) of new volumes to global supply last year, or nearly one-half the 16.9 Mt added by other LNG producers across the world, according to GIIGNL’s annual report. The country was the third largest LNG exporter in 2023 (75.4 Mt), behind Australia (78.5 Mt) and Qatar (79 Mt). Russia was the fourth largest exporter at 32 Mt. U.S. LNG supplies grew by 12.6% year/year in 2022, driven by the ramp up of Train 6 at the Sabine Pass LNG terminal and the commissioning of the Calcasieu Pass plant, both in Louisiana. GIIGNL said the U.S. gains would have been stronger without prolonged...
NextDecade’s $18.4B Path to FID Weighing on Prospects for Other U.S. LNG Export Projects - NextDecade Corp.’s recent decision to move ahead with the Rio Grande LNG project in South Texas came with a staggering $18.4 billion price tag that could ultimately rise further as five export projects are now underway along the Gulf Coast. The company crossed the finish line by completing what it said was the “largest greenfield energy project financing in U.S. history” for the first 17.6 million metric tons/year (mmty) phase of Rio Grande. Project costs were driven by a host of factors that have been exacerbated in the post-pandemic era, including inflation, supply chain issues, labor shortages and a competitive market crowded with more than 20 proposed export projects in the United States alone. Similarly sized 15 mmty projects that came online in 2019, such as the...
US natgas prices jump 5% as brutal heatwave lingers (Reuters) - U.S. natural gas futures jumped about 5% on Tuesday on forecasts for the weather to remain hotter-than-normal through early August, especially in Texas. That price increase came despite rising output, forecasts for less demand next week than previously expected and lower than usual amounts of gas flowing to U.S. liquefied natural gas (LNG) export plants due to ongoing maintenance outages. Power demand in Texas hit a record high on Monday and will likely break that on Tuesday as homes and businesses keep air conditioners cranked up to escape another brutal heatwave, according to the Electric Reliability Council of Texas (ERCOT), the state's power grid operator. Extreme heat boosts the amount of gas generators burn to produce power for cooling, especially in Texas, which gets most of its electricity from gas-fired plants. In 2022, about 49% of the state's power came from gas-fired plants, with most of the rest coming from wind (22%), coal (16%), nuclear (8%) and solar (4%), according to federal energy data. Front-month gas futures for August delivery on the New York Mercantile Exchange rose 11.7 cents, or 4.7%, to settle at $2.629 per million British thermal units (mmBtu). On Monday, the contract closed at its lowest since June 20 for a third day in a row. Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 101.6 billion cubic feet per day (bcfd) so far in July, up from 101.0 bcfd in June. That compares with a monthly record of 101.8 bcfd in May. Meteorologists forecast the weather in the Lower 48 states would remain hotter-than-normal through at least Aug. 2. Refinitiv forecast U.S. gas demand, including exports, would hold near 108.6 bcfd this week and next. The forecast for next week was lower than Refinitiv's outlook on Monday. Gas flows to the seven big U.S. LNG export plants rose to an average of 12.7 bcfd so far in July from 11.6 bcfd in June. That, however, remained well below the monthly record of 14.0 bcfd in April due to ongoing maintenance at several facilities, including Cheniere Energy Inc's Sabine Pass in Louisiana and Corpus Christi in Texas. Gas was trading around $9 per mmBtu at the Dutch Title Transfer Facility (TTF) benchmark in Europe and $11 at the Japan Korea Marker (JKM) in Asia. That puts global gas prices down about 65% so far this year after hitting record highs in 2022, due to mild winter temperatures and above-average storage inventories in the northern hemisphere. U.S. gas futures were down about 42% so far this year. In 2022, roughly 69%, or 7.2 bcfd, of U.S. LNG exports went to Europe as shippers diverted cargoes from Asia to get higher prices. In 2021, when prices in Asia were higher, just 35%, or about 3.3 bcfd, of U.S. LNG exports went to Europe. With the return of higher gas prices in Asia this year, analysts said they expect U.S. LNG exports to Asia will increase. But that has not happened yet. Just 19%, or 2.1 bcfd, of U.S. LNG exports went to Asia during the first half of 2023, while 70%, or 8.0 bcfd, went to Europe.
US natgas prices jump 6% on small storage build, hot weather forecasts (Reuters) - U.S. natural gas futures jumped about 6% to a two-week high on Thursday on a smaller-than-expected storage build, a drop in daily output and forecasts for higher demand next week than previously expected and hotter-than-normal weather through early August, especially in Texas. The U.S. Energy Information Administration (EIA) said utilities added 41 billion cubic feet (bcf) of gas into storage during the hotter-than-normal week ended July 14. That was lower than the 48-bcf build analysts forecast in a Reuters poll and compares with an increase of 35 bcf in the same week last year and a five-year (2018-2022) average increase of 45 bcf. Power demand in Texas hit a record high for a second day in a row on Tuesday and will likely break that record again on Thursday, and next week, as homes and businesses keep air conditioners cranked up to escape a lingering heat wave, according to the Electric Reliability Council of Texas (ERCOT), the state's power grid operator. Analysts at Gelber & Associates, an energy consultancy, said one other factor that likely boosted U.S. gas prices was Russian threats to Ukrainian ships and attacks on its Black Sea ports. One concession Russia has demanded to allow Ukraine to ship grain across the Black Sea again was the lifting of international sanctions that make it harder for Russia to export fertilizer. The U.S. has not sanctioned Russian fertilizer. Natural gas is the preferred feedstock to make fertilizer, so if rules are changed to make it easier for Russia to export more fertilizer, then demand for gas to make that fertilizer in Russia could increase, Gelber analysts said. In addition to the U.S. price gain, gas in Europe was up about 9% on Thursday. Front-month gas futures for August delivery on the New York Mercantile Exchange rose 15.4 cents, or 5.9%, to settle at $2.757 per million British thermal units, their highest close since June 30. That was the biggest one-day percentage gain since mid-June. Data provider Refinitiv said average gas output in the U.S. Lower 48 states has risen to 101.6 billion cubic feet per day (bcfd) so far in July, up from 101.0 bcfd in June. That compares with a monthly record of 101.8 bcfd in May. On a daily basis, however, output was on track to drop by 1.3 bcfd over the past two days to a preliminary one-week low of 100.4 bcfd on Thursday due mostly to declines in Oklahoma and North Dakota. Meteorologists forecast the weather in the Lower 48 states would remain hotter than normal through at least Aug. 4. With warmer weather coming and LNG export plants expected to consume more gas, Refinitiv forecast U.S. gas demand, including exports, would rise from 105.7 bcfd this week to 106.8 bcfd next week. The forecast for next week was higher than Refinitiv's outlook on Wednesday. Gas flows to the seven big U.S. LNG export plants have risen to an average of 12.8 bcfd so far in July from 11.6 bcfd in June. That was still well below the monthly record of 14.0 bcfd in April due to ongoing maintenance at several facilities in Louisiana, including Cameron LNG, Cheniere Energy's Sabine Pass and Venture Global LNG's Calcasieu.
U.S. natural gas up 6%, apparently on bet over Russia fertilizer demand - Storage fills for natural gas in the United States came in as expected for last week, and there was not much of a change either in weather forecasts. Yet, U.S. gas prices rallied some 6% Thursday in a development market watchers said could have more to do with the Russia-Ukraine situation.Most-active contract August gas on the New York Mercantile Exchange’s Henry Hub settled up 15.4 cents, or 5.9%, at $2.757 per mmBtu, or million metric British thermal units. The U.S. Energy Information Administration, or EIA, reported earlier in the day that storage levels for natural gas rose by 41 billion cubic feet, or bcf, during the week ended July 14 — virtually in line with the 40-bcf injection forecast by industry analysts tracked by Investing.com.With all else, including the weather, being equal, the fallout from the collapse of the Black Sea Grain Initiative after Russia’s pullout from the deal was cited as a possible catalyst for the rally in U.S. gas.Since withdrawing from the U.N.-brokered deal that allowed Ukrainian grain exports to flow to other countries, Russian leader Vladimir Putin had laid out his demands for the deal to be reinstated. At the top of the list was the lifting of international sanctions on Russian fertilizer deliveries.“If the demands are met, Russian gas supply will be drawn from as the country’s fertilizer,” said analysts at Houston-based energy markets advisory Gelber&Associates. If Putin gets his way, “a huge chunk of the fertilizer industry resumes manufacturing in full force”, and will be tapping Russian gas stockpiles too — a bullish development, said Gelber’s analysts who noted the rally on the Henry Hub coincided with the breaking of this news on Russian demands over the Black Sea front.
Investigation: Texas failed to crack down on gas after grid crisis - Since a deadly February 2021 freeze interrupted the flow of natural gas to power plants across Texas, state regulators have inspected gas facilities to see if they’re prepared for winter. But an E&E News analysis of state weatherization records found that few operators have been written up for violations beyond paperwork, raising questions about how thorough and effective Texas’ efforts have been. Data provided by the state Railroad Commission, which oversees Texas’ vast oil and gas network, shows that only 222 of more than 7,000 natural gas facilities designated as critical infrastructure last winter were cited for problems. Advertisement All but 10 of the citations went to operators that didn’t fill out weatherization forms by a December 2022 deadline. The others were for sites that failed to implement any weatherization practices. None of the violations obtained through an open records request included specific equipment issues, such as failing to insulate pipes or replace old valves, although details about most of the sites were included in inspectors’ comments. Weatherizing critical natural gas infrastructure has become a focal point of conversations about how to prevent power outages in severe weather events across the country. It gained urgency after more than 240 people died in Texas in 2021 because of Winter Storm Uri, which caused widespread energy problems and outages. Critics say if Texas is not being thorough with inspections, it could set the state up for another crisis. “It does make you wonder, was there anything actually implemented on these sites, or was it just really paperwork problems?” said Virginia Palacios, executive director at Commission Shift, a nonprofit advocacy group that aims to reform the Railroad Commission of Texas. In a response to E&E News questions about the inspection data, Railroad Commission spokesperson RJ DeSilva said many factors come into weatherizing natural gas facilities — and that the agency’s mission includes protecting Texans. “Rest assured — rule requirements and our inspections across Texas work to help ensure that gas flows for electricity and heating … as was the case during last winter’s storms,” DeSilva wrote in a statement. Two of the three commissioners who serve on the state’s Railroad Commission — Wayne Christian and Jim Wright — did not respond to requests for comment. The third, Chair Christi Craddick, declined to comment through a spokesperson. All three are Republicans. After Uri stuck, Texas lawmakers approved laws that required the Railroad Commission and the state Public Utility Commission, which oversees the state’s electric system, to make changes. Chief among them was S.B. 3, which passed in 2021. That measure mandated that the Railroad Commission help identify natural gas infrastructure that’s critical to natural gas-fueled power plants. It also required the Railroad Commission to adopt rules that include “measures a gas pipeline facility operator must implement” in order to be prepared for extreme weather conditions, if those facilities serve power generation needs. But parts of the Texas Administrative Code that dictate how critical natural gas infrastructure needs to be weatherized for winter storms are much less specific and prescriptive than other sections of the code.
Biden unveils aggressive rules for public land oil drilling - In a win for conservation groups, the Biden administration plans to increase the amount of money oil companies have to provide before they can drill on public lands twentyfold, the Interior Department indicated Thursday.The draft overhaul of Interior’s onshore oil and gas rules also weighs tightening the amount of time an oil and gas drilling permit can be used, while killing the long-standing practice in the federal oil patch of renewing unused permits.Bureau of Land Management Director Tracy Stone-Manning characterized the proposed reforms — due out officially next week — as “common sense and needed.”“This proposal to update BLM’s oil and gas program aims to ensure fairness to the taxpayer and balanced, responsible development as we continue to transition to a clean energy economy,” she said in a statement.Jacking up bonding requirements would represent one of the most ambitious steps taken by this administration to revamp drilling practices on federal lands and rein in fossil fuel development.Some environmentalists, as well as Biden administration officials, have stressed that new bonding requirements that ensure money is set aside when companies go bust are needed to ensure future oil wells are not abandoned on the taxpayers’ dime. The Biden administration, working with Democrats and Republicans on Capitol Hill in 2021, passed a $4.7 billion fund to clean up the up to 800,000 orphaned oil wells some estimate exist across the country.BLM’s proposed regulation overhaul, however, is sure to kick off a fight with the oil and gas interests that have said setting bonds too high will depress federal oil production. The oil industry that operates on federal lands has often been at odds with the Biden White House’s energy policies and its attempts to create a stricter environment for mineral extraction on federal lands.“It’s a false notion that the onshore oil and gas program is beset with so many deficiencies and problems that these overarching rules are needed,” said Kathleen Sgamma, president of the Western Energy Alliance.Sgamma said developers by and large clean up their own wells, and the Biden administration regulations are targeted to push oil drillers off federal lands.Under the draft rules, bonds for new oil and gas leases would go from today’s $10,000 to a minimum of $150,000. For so-called blanket bonds, which cover all drilling in a single state, the draft rule proposes an increase from the current $25,000 amount set in 1951 to $500,000. BLM is also proposing to eliminate blanket bonds that a driller can obtain nationally — a longtime ask from environmental groups critical of the federal oil program.
Oil and gas companies would pay more to drill on public lands under new Biden rule (AP) — Oil and gas companies would have to pay more to drill on public lands and satisfy stronger requirements to clean up old or abandoned wells under a new rule announced Thursday by the Biden administration.A rule proposed by the Interior Department raises royalty rates for oil drilling by more than one-third, to 16.67%, in accordance with the sweeping climate law approved by Congress last year. The previous rate of 12.5% paid by oil and gas companies for federal drilling rights had remained unchanged for a century. The federal rate was significantly lower than what many states and private landowners charge for drilling leases on state or private lands.The new rule does not go so far as to prohibit new oil and gas leasing on public lands, as many environmental groups have urged and as President Joe Biden promised during the 2020 campaign. But officials said the proposal would lead to a more responsible leasing process that provides a better return to U.S. taxpayers.The plan codifies provisions in the climate law, known as the Inflation Reduction Act, as well as the 2021 infrastructure law and recommendations from an Interior report on oil and gas leasing issued in November 2021.The new rule “provides a fair return to taxpayers, adequately accounts for environmental harms and discourages speculation by oil and gas companies,’' said Laura Daniel-Davis, principal deputy assistant Interior secretary for land and minerals management.Interior “is committed to creating a more transparent, inclusive and just approach to leasing and permitting that serves the public interest while protecting natural and cultural resources on our public lands,″ she added.The new royalty rate set by the climate law is expected to remain in place until August 2032, after which it can be increased. The higher rate would increase costs for oil and gas companies by an estimated $1.8 billion in that period, according to the Interior Department.The rule also would increase the minimum leasing bond paid by energy companies to $150,000, up from the previous $10,000 established in 1960. The higher bonding requirement is intended to ensure that companies meet their obligations to clean up drilling sites after they are done or cap wells that are abandoned.The previous level was far too low to force companies to act and did not cover potential costs to reclaim a well, officials said. As a result, taxpayers frequently end up covering cleanup costs for abandoned or depleted wells if an operator refuses to do so or declares bankruptcy. Hundreds of thousands of “orphaned” oil and gas wells and abandoned coal and hardrock mines pose serious safety hazards, while causing ongoing environmental damage.
North American RNG Production Forecast to Steadily Increase to 2050, Says Wood Mackenzie - North America could see an increase in renewable natural gas (RNG) production by 2050, as government incentives and new production capacities are added, according to a recent analysis by Wood Mackenize researchers “RNG has become more popular as it can have five times lower carbon intensity than natural gas projects and helps reduce emissions considerably when used for transportation fuel,” said Wood Mackenzie senior research analyst Natalia Patterson. In 2022, 60 MMcf/d of new RNG production was added, with the number of projects doubling in the last five years, the researchers noted.
Drought Impacting Panama Canal LNG Transit as Mexico Liquefaction Projects Advance - More U.S. LNG cargoes are taking longer and costlier routes to reach consumers in Asia as a drought impacting levels at the Panama Canal has increased wait times to transit the waterway. “The Panama Canal remains a primary route for U.S. LNG to access Asian markets, though an increased volume of trade is utilizing other routes, especially from the Cheniere-operated terminals,” said Kpler analyst Adam Bennett. Cheniere Energy Inc. is the leading U.S. LNG exporter. Bennett told NGI that there’s been a “pronounced drop” in the usage of the canal among vessels leaving the company’s Sabine Pass and Corpus Christi terminals. Cheniere’s management has said it is shunning the waterway for now because it’s uneconomical to use it.
Enterprise Adds More Natural Gas Capacity in Permian with Ramp Up at 300 MMcf/d Plant - Enterprise Product Partners LP has begun service at its Poseidon cryogenic natural gas processing plant in Glasscock County in West Texas. The company’s sixth plant in the Midland sub-basin has a nameplate capacity of 300 MMcf/d and can extract more than 40,000 b/d of natural gas liquids (NGL). Enterprise now is able to process 1.3 Bcf/d of natural gas and extract 185,000 b/d of NGLs in the Midland, the Houston-based midstream company said. The plant is supported by long-term acreage dedication agreements.
Ring Energy Snaps Up More Permian CBP Acreage in West Texas - Ring Energy Inc. is expanding its Central Basin Platform (CBP) leasehold in the Permian Basin of West Texas through a $75 million deal with privately held Founders Oil & Gas IV LLC. The independent exploration and production (E&P) company, headquartered in The Woodlands north of Houston, is snatching up 3,600 net acres in Ector County, including about 50 drilling locations in the San Andres play. CEO Paul McKinney said the assets “strategically expand our existing operations in the southern portion of the CBP, allowing us to capture operating cost” and “synergies associated with a larger core operating area.”
U.S. OFS Job Gains Slow, as Energy Sector Competes for Employees -- U.S. oilfield services (OFS) employment in June continued to hit post-pandemic highs, but jobs edged up by only 45 last month, according to an analysis of Bureau of Labor Statistics (BLS) data by the Energy Workforce & Technology Council. Total OFS jobs inched up to 665,258 jobs in June, closer to the 706,528 jobs in February 2020 prior to the Covid-19 outbreak in the United States. Energy Workforce President Molly Determan told NGI that the small job gains were tied to the “tight labor market.” The OFS sector is “competing with many organizations to hire more employees.”
Rigs and Spreads July 21: Ugly — Princeton Policy Advisors
Rig counts
Total oil rig counts declined, -3 to 534
Horizontal oil rig counts fell, -4 to 483
The Permian horizontal oil rig count was down, -3. The Permian has been losing rigs and a fair pace for the last two months.
The horizontal oil rig count fell at a pace of -3.25 / week on a 4 wma basis.
This number has been negative for 32 of the last 33 weeks
Frac spreads rose, +11 to 274. This is not sustainable.
DUC inventory has fallen below 15 weeks for the first time, 14.7 weeks today
In order to hold DUC counts constant, horizontal rigs would have to rise by 68 or frac spreads would have to fall 34.
The EIA issued the July DPR this week. Highlights:
Crude and condensate production from key shale plays rose in June to 9.23 mbpd, up 36 kbpd from May
Permian production was up 11 kbpd in June. Permian production growth has averaged 12 kbpd / month over the last three months
The Permian is really slowing down; growth is being sustained by the Bakken, with support from the other secondary plays
Compared to last year, total shale oil production is up 0.7 mbpd; the Permian is up 0.5 mbpd
Production is being sustained in part by the cannibalization of the DUC inventory
USCG tries to contain diesel spill from sunken tug in Alabama - Coast Guard Sector Ohio Valley received notification at approximately 2 p.m. Sunday from RMB Marine Services reporting a sunken tugboat in the Port of Florence. Pollution responders from Coast Guard Marine Safety Detachment Nashville were deployed to assess the situation on scene. RMB Marine Services is working with E3 Solutions, an Oil Spill Removal Organization (OSRO) to clean up the discharged product. An estimated 200 feet of hard boom was deployed Sunday to contain the product in the water. Over 350 additional feet of boom was deployed Monday to act as a secondary barrier. The deployed hard boom is currently containing most of the fuel, which is being recovered via a vacuum truck and drum skimmer. There have been no reports of injuries or wildlife impact. The maximum potential for spill is 2,500 gallons of diesel fuel. The Coast Guard is investigating the cause of the incident.
California will cap hundreds of orphaned oil wells - California state regulators announced Tuesday their plans to cap orphaned oil wells across the state, including wells in a South Central Los Angeles residential neighborhood near USC that caused health complaints from residents for years. The effort is part of a new push to close problem sites that have posed health risks to communities across the state, oftentimes disadvantaged neighborhoods in close proximity to oil drill sites. Gov. Gavin Newsom earmarked $100 million in the state budget to address the issue. California has identified 5,300 wells that are orphaned, or likely orphaned, meaning they are deserted or do not have an operator who is financially viable or compliant, according to the California Geologic Energy Management Division. Improperly abandoned wells can leak methane and harmful chemicals into groundwater. State regulators will target more than 370 wells in their first phase of the new push, which will cost about $80 million, according to CalGEM. “This list includes leaking wells with serious compliance issues that have concerned communities for years,” David Shabazian, director of the state Department of Conservation, said in a news release. “It represents months of work to collaborate with local governments, identify environmentally sensitive wells and those that impact disadvantaged communities across California’s oil-producing regions.” Those sites include 37 wells with Citadel Exploration in Bakersfield; 22 wells with Sunray Petroleum near Arvin and Lamont in Kern County; and 21 wells in Los Angeles with AllenCo Energy. For years, neighbors living near the AllenCo drill site in South L.A. complained about noxious fumes that gave them nosebleeds, headaches and respiratory problems including asthma. When federal inspectors from the U.S. Environmental Protection Agency became ill during a site visit in November 2013, AllenCo voluntarily shut down the facility.
North Dakota Poised for Production Bump with More Natural Gas Takeaway Needed, Officials Say - Well completion activity is on the rise in North Dakota, likely heralding a surge in oil and gas production and underscoring the need for more natural gas egress capacity, state regulators said Friday (July 14). Department of Mineral Resources (DMR) Director Lynn Helms and North Dakota Pipeline Authority Director Justin Kringstad held a press conference to discuss May production figures and the outlook for upstream activity in the state. The number of active hydraulic fracturing crews in the state stood at 26 as of Friday, a level not seen since before the pandemic, Helms said.
USA Bill Could Bar Sale of Emergency Oil to China - China would be blocked from purchasing oil from the US’s emergency stockpiles under legislation slated for a Senate vote Thursday. The amendment to the must-pass National Defense Authorization Act comes amid a renewed focus on the country’s Strategic Petroleum Reserve, which stands at a 40-year-low following the Biden administration’s 180 million barrel drawdown last year to help tame oil prices in the aftermath of Russia’s invasion of Ukraine. The measure, sponsored by West Virginia Democratic Senator Joe Manchin and Senator Ted Cruz, a Texas Republican, needs 60-affirmative votes for adoption. The SPR amendment had been slated for a vote Wednesday afternoon, but was moved to Thursday. The legislation is similar to a bill that passed the House in January that would prohibit the sale of US oil from the reserve to any company under the control of the Chinese Communist Party and ban the export of any crude oil from the SPR to China. The Senate version also bars the sale of oil to Russia, North Korea and Iran, according to a Manchin spokeswoman. The Strategic Petroleum Reserve, created in the aftermath of the Arab oil embargo in the 1970s, currently stands at 346.8 million barrels. The Biden administration has vowed to refill the reserve, though so far the pace has been a trickle. Republicans, who have criticized the release as a ploy to lower gas prices before the midterm election’s last November, have also raised flags about the administration’s use of the emergency stockpiles, alleging the Energy Department transferred 900,000 barrels of oil to Unipec America Inc., a subsidiary of Communist Party owned Sinopec Corp. and the recipient of billions of dollars of investment by BHR Partners, a private equity firm where Hunter Biden, the president’s son, was a founding board member. The White House has said the Energy Department is required by law to sell the SPR oil in a competitive auction to the highest bidder, regardless of whether the bidder is a foreign company. It has also said that the release of oil from the reserve last year was needed to address price spikes caused by the conflict in Ukraine and ensuing supply disruptions. The annual US defense policy bill is considered as must-pass because it authorizes pay increases as well as compensation for troops in harm’s way and is widely-supported by Republicans.
Alberta, BC Pursuing GHG Reduction Credits for Canadian LNG Exports --The Alberta and British Columbia (BC) governments have set out to gain formal, international greenhouse gas (GHG) reduction credits for exporting LNG as a replacement for coal and oil in other countries. Alberta Premier Danielle Smith last week told attendees of the International Gas Union’s LNG2023 conference in Vancouver that she has begun talks with her BC counterpart, David Eby, on the plan. Canada does not yet export liquefied natural gas in significant quantities. However, the Shell plc-led LNG Canada export terminal in Kitimat, BC, is on track to begin operations in 2025. In addition, more than a dozen similar projects have been proposed or are under development.
Another Milestone Reached at LNG Canada Project After Final Module Arrives by Ship - The 215th and final prefabricated piece has voyaged across the Pacific to the first Canadian liquefied natural gas export terminal, LNG Canada, under construction on the northern coast of British Columbia at Kitimat. Fluor Corp., the engineering firm contracted to assemble the C$18 billion ($13.5 billion) operation, reported that the arrival from a Zhuhai manufacturing site in China finished a “critical phase” at the site more than 800 miles north of Vancouver.Ship deliveries of the terminal pieces known as modules have been underway since March 2022, when the first arrival was a tower that stands 145-feet tall and weighs more than 500 tons.
Drought triggers new restrictions on B.C.'s oil and gas sector -- Northeastern B.C.’s elevation to Level-5 drought conditions tripped a new round of water restrictions on industry in the region by the B.C. Energy Regulator as residents struggle through their third straight year of severe dry conditions.B.C.’s natural gas sector has managed to hold its operations stable due to decade-long efforts to recycle water they use in hydraulic-fracturing operations, but the restrictions have hit at a moment when more drilling has been approved following a major agreement with First Nations, according to Fort St. John Chamber of Commerce CEO Kathleen Connolly. With an agreement with the Blueberry River First Nations on land management ironed out, “and permits are being approved, there’s more drilling that they’re looking to get completed,” Connolly said. “But the water is just a real barrier to them being able to get that work done.” On July 12, the B.C. Energy Regulator (BCER) suspended previously approved water withdrawals held by oil and gas firms on the Pine, Beaton and Kiskatinaw rivers within the Peace River watershed and the Fontas, Sikani Chief, Prophet and Kiwigana rivers within the Liard River watershed.
NGOs report oil spill in Gulf of Mexico -- Mexican NGOs on Tuesday reported an oil spill in an area of the Gulf of Mexico where an explosion this month killed two workers at a gas production platform of state company Pemex. Satellite images show that the spill began on July 4, three days before the blast, and by last week had spread over some 400 square kilometers (154 square miles). This was “more than twice the surface area of the city of Guadalajara,” the NGOs said in a statement. “The complete opacity with which this spill has been handled is worrying,” said the NGOs, which included including Greenpeace. Pemex, in a statement, acknowledged there was a leak but said “the volume of hydrocarbons that escaped was minimal.” It said the spill was reported to the government and Navy for repairs. “Most of the spilled volume was recovered immediately,” said the company, rejecting the scale of the spill as claimed by the NGOs. Debt-laden Pemex has suffered a string of accidents in recent years. In February, a dozen workers suffered burns in two fires that occurred at facilities in the southeastern state of Veracruz. In August 2021, a fire on a platform during maintenance work left several people dead. The previous month, a spectacular blaze and gas leak from an underwater pipeline in the Gulf of Mexico caused what was dubbed an “eye of fire” in the sea, though there were no victims. Other incidents included fires in 2015 and 2016 on offshore installations that each left several people dead.
Ecuador confirms oil spill of 1,200 barrels on northwest coast - Authorities in the South American nation of Ecuador have confirmed that an oil spill released about 1,200 barrels into the Pacific, contaminating kilometres of oceanfront. Rafael Armendariz, transportation manager for the state-owned oil firm Petroecuador, confirmed on Thursday that the incident took place a day earlier when a tank in the marine terminal in the port of Esmeraldas surpassed its capacity. “It is estimated that around 1,200 barrels were spilled,” Armendariz said at a press conference. “Not all of them fell onto the beach. A part was contained by the pool inside of Petroecuador’s facilities.” A view of an oil refinery, with a barrel branded with the Petroecuador logo. The spill occurred at state-run Petroecuador’s refinery in Esmeraldas, affecting nearby beaches [File: Daniel Tapia/Reuters] About half of the crude spilled out of Petroecuador’s facilities, spreading across about 4km (2.5 miles) of Las Palmas Beach, a popular destination for recreation and tourists. An investigation into the cause of the spill is taking place. General Manager Ramon Correa said problems like negligence, mechanical damage or sabotage could not yet be ruled out. Esmeraldas is about 150km (93 miles) south of Ecuador’s northern border with Colombia. The company says it has controlled 90 percent of the spill’s impact on land and 60 percent at sea through initial cleanup efforts. Environmental Minister Jose Davalos told the TV station Ecuavisa the spill could affect wildlife such as birds and crustaceans. He expected the cleanup to take about a week. Davalos noted that he is awaiting an assessment from Petroecuador before deciding on appropriate penalties.
EU Gas Matchmaking Hits Nearly 424Bcf in Potential Deals -- A European Union platform for collective gas purchases by member countries has matched up about 423.78 billion cubic feet (12 billion cubic meters) in potential deals with international suppliers. Under the EU Energy Platform, which is part of the REPowerEU strategy, the 27-member bloc can pool demand, negotiate with international partners and coordinate collective purchases. The platform is part of strategies to diversify supply away from Russia. Following Russia’s invasion of Ukraine February 2022, the EU declared March 11 that year the phaseout of fossil fuels from its traditional energy source by 2027 and on May 18, 2022 launched the REPowerEU outlining measures toward that goal. On May 16, 2023 the EU announced the first international tender under the joint gas buying platform had matched suppliers with customers for close to 385 Bcf (10.9 Bcm) in potential buys. The second round exceeded that by about 35 Bcf (1.0 Bcm), the European Commission said in a press release last week. The EU posted around 562.21 Bcf (15.92 Bcm) in demand in the latest round and 25 “reliable international suppliers” offered to supply approximately 536.43 Bcf (15.19 Bcm). The joint purchasing service, operated by Prisma European Capacity Platform GmbH, “has matched the most attractive offers with customer demands”, the commission said. “All participants have been informed about the matching results and will now be able to start contractual negotiations, in full confidentiality and outside of the AggregateEU mechanism”, it added, referring to the demand aggregation and purchasing service. AggregateEU welcomes producers from any country except Russia. On the other hand, besides EU companies, buyers may also be from Albania, Bosnia and Herzegovina, Georgia, Kosovo, Moldova, Montenegro, North Macedonia, Serbia and Ukraine. Prospective buyers under the second tender have scheduled deliveries between August 2023 and March 2025, according to European Commission Vice-President Maros Sefcovic. “This was meant to cover the entire gas year and accommodate the purchasing patterns of some energy-intensive industries which buy gas over longer periods of time”, he said announcing the results in Brussels.
Traces of explosives found in yacht in Nord Stream sabotage investigation, diplomats say— Investigators found traces of undersea explosives in samples taken from a yacht that was searched as part of a probe into last year’s attacks on the Nord Stream gas pipelines in the Baltic Sea, European diplomats told the United Nations Security Council. The diplomats said the investigation has not yet established who sabotaged the pipelines, which were built to carry Russian natural gas to Germany, or whether a state was involved. The attack, which happened as Europe attempted to wean itself off Russian energy sources following the Kremlin’s full-scale invasion of Ukraine, contributed to tensions that followed the start of the war. The source of the sabotage has been a major international mystery. Denmark, Sweden and Germany have been investigating the Sept. 26 attack, and the Danish Foreign Ministry tweeted a letter Tuesday from the three countries’ U.N. ambassadors to the president of the Security Council with information on their activities so far. Officials voiced caution in March over media reports that a pro-Ukraine group was involved in the sabotage. German media reported then that five men and a woman used a yacht hired by a Ukrainian-owned company in Poland to carry out the attack, and that the vessel set off from the German port of Rostock. German federal prosecutors declined to comment directly on that and other reports, but they confirmed that a boat was searched in January, and said there was suspicion that it could have been used to transport explosives to blow up the pipelines. A section of this week’s letter detailing Germany’s findings said that the yacht’s precise course had not been definitively established. The letter said “traces of subsea explosives were found in the samples taken from the boat during the investigation,” but it did not elaborate. “At this point it is not possible to reliably establish the identity of the perpetrators and their motives, particularly regarding the question of whether the incident was steered by a state or state actor,” it said. “All information to clarify the matter will be pursued during the continuing investigations.”
Japan’s LNG Buyers Increasingly Frustrated with Australia’s Energy Policy -- Australia could lose long-term LNG supply contracts with Japan under recent government policy changes over the past several months that appear to undermine the country’s natural gas industry. Under the Australian Domestic Gas SafeGuard Mechanism (ADSGM) passed earlier this year, the government is allowed to divert liquified natural gas feedstock to meet domestic demand, and effective July 1, requires new LNG facilities to be carbon-neutral. “Australia and Japan have worked together at the highest level to develop and support LNG, but now changing policies, new constraints and burdens are put in place,” Japan’s Institute of Energy Economics chief executive Tatsuya Terazawa told media this month in Tokyo.
UN hands over vessel to Houthis as oil transfer of decaying tanker set to start-Xinhua (Xinhua) -- The United Nations delivered a replacement vessel to Yemen's Houthi group on Monday as part of an urgent mission to avert a potential oil spill from the decaying Safer tanker off Yemen's western coast. The handover ceremony took place aboard the Nautica, the replacement tanker chartered by the UN in March that has arrived at the location of the Safer on Sunday. During the ceremony, which was attended by UN officials and representatives from the Houthi authorities, the tanker was officially renamed the Yemen, a Xinhua correspondent witnessed. A team employed by the UN will start the transfer of approximately 1.14 million barrels of crude oil from the Safer to the Yemen in the coming days. The Safer, originally constructed as a supertanker in 1976 and later converted to a floating storage and offloading facility (FSO) for oil, is currently moored approximately 4.8 nautical miles off the coast of Hodeidah Province in Yemen. Currently, the Safer is under the control of the Houthis. However, the internationally recognized government of Yemen also asserts ownership of the tanker and its crude oil. The disputes between the two sides have disrupted the regular maintenance of the tanker, resulting in its decay over the years. The UN has warned that a spill from the FSO Safer could have a devastating impact on the Red Sea and the coastline of Yemen. The spill could release four times as much oil as the 1989 Exxon Valdez disaster, which killed thousands of seabirds and marine mammals and caused widespread environmental damage. ■
‘Risk is high’: UN ship arrives in Yemen to prevent catastrophic oil spill from decaying tanker | South China Morning Post The Nautica entered Yemeni waters at midday and was expected to moor soon alongside the FSO Safer, a rusting supertanker in the Red Sea The operation to transfer 1.14 million barrels of Marib light crude to the Nautica, bought by the UN for the operation, is expected to begin at the end of the week.
United Nations poised to begin transfer of 1 million barrels of oil from decaying tanker in Red Sea - Yemen The UN-led project to prevent a massive oil spill from the decaying FSO Safer supertanker off Yemen’s Red Sea coast took a major step forward today when the replacement vessel Nautica sailed from Djibouti en route to the Safer site. All technical preparations and agreements have been finalized. The Safer, which holds an estimated 1 million barrels of oil, has been at risk of breaking up or exploding for years. A major spill from the vessel would result in an environmental and humanitarian catastrophe. Once the replacement vessel arrives, the oil aboard the Safer will be pumped out in a ship-to-ship transfer that is expected to take about two weeks to complete. The leading marine salvage company SMIT, a subsidiary of Boskalis, stabilized the Safer since arriving at the site on 30 May. The UN Development Programme (UNDP), which contracted SMIT, is implementing the operation to remove the oil. UNDP Administrator Achim Steiner said: “With the Nautica now en route, we expect the removal of oil from the Safer to begin in the next week. Removing the threat the Safer poses will be a huge achievement for the many people who have worked tirelessly on this complex and difficult project over months and years to bring us to this point. We will not rest until that threat is gone, and today we are close to beginning the operation.” Speaking from aboard the Nautica, the UN Resident and Humanitarian Coordinator for Yemen, David Gressly, said: “The ship-to-ship transfer of the oil is an important milestone, but not the end of the operation. The next critical step is the installation of a CALM buoy to which the replacement vessel will be safely moored. I thank donors, private companies and the general public for providing the funds that have brought us so far.”
Global Oil Demand to Reach Record High in 2023: IEA | Rigzone -- Global oil demand will increase by 2.2 million barrels per day (MMbpd) to reach a record high of 102.1 MMbpd in 2023, the International Energy Agency (IEA) said in its latest oil market report (OMR). China will account for 70 percent of global gains on the back of increasing petrochemical use, the IEA said. However, “China’s widely anticipated reopening has so far failed to extend beyond travel and services, with its economic recovery losing steam after the bounce earlier in the year”, the agency said. The IEA projects growth to slow to 1.1 MMbpd in 2024. “World oil demand is coming under pressure from the challenging economic environment, not least because of the dramatic tightening of monetary policy in many advanced and developing countries over the past twelve months”, the IEA said. The IEA forecast global oil production to rise by 1.6 MMbpd to 101.5 MMbpd, as output from non-OPEC+ nations is expected to increase by 1.9 MMbpd. In 2024, the agency sees global oil supply rising by 1.2 MMbpd to a new record of 102.8 MMbpd, with non-OPEC+ nations accounting for all of the increase. Lower output from Saudi Arabia and core OPEC+ members, since production cuts were first implemented last November, has been offset by higher output from other producers, according to the report. Supply from the USA rose by 610,000 bpd with natural gas liquids jumping to all-time highs while biofuels increased seasonally. However, the IEA predicts that global supply could fall by more than 1.0 MMbpd this month as Saudi Arabia implements steeper cuts. Observed global oil inventories rose by 19.4 million barrels in May to the highest level since September 2021, as a surge in China led to a 44.2 million barrel build in nations not part of the Organization for Economic Cooperation and Development (OECD). OECD industry stocks rose by 170,000 bpd in May, while China posted its largest monthly increase in crude stocks in a year at 1.1 MMbpd. China’s recent buying spree included heavily discounted Russian and Iranian barrels, the report said. In its April OMR, the IEA projected that world oil demand will climb by two million barrels per day in 2023 to “a record 101.9 million barrels per day”. Non-OECD countries, buoyed by a resurgent China, will account for 90 percent of growth, the April OMR noted. In May, the IEA had boosted forecasts for global oil demand as China reopened its economy following years of anti-Covid lockdowns. The agency raised global demand estimates by a hefty 500,000 barrels a day for the first quarter, and by just under half as much for the year as a whole. As a result, world consumption would climb by 2.0 million barrels a day this year to average 101.9 million a day, it had predicted. Meanwhile, according to a separate report by the IEA, fossil fuel supply investments are set to rise by more than six percent to around $950 billion for 2023, based on an analysis of the announced spending plans of large- and medium-sized oil, gas, and coal companies.
Oil Prices Dip As China’s Economic Growth Disappoints - Oil prices fell by around 1% in early Asian trade on Monday after major Libyan oilfields resumed production over the weekend following a brief shutdown and after China reported second-quarter economic growth below expectations. In the morning in Europe, the U.S. benchmark WTI Crude was trading down by 0.98% at $74.68 per barrel, while the international benchmark, Brent Crude, traded below the $80 per barrel mark it had reached last week for the first time since May. Brent was down by 0.96%, at $79.10. Underwhelming Chinese GDP data weighed on the oil market, again, after the world’s second-largest economy and top crude oil importer reported early on Monday6.3% GDP growth for the second quarter, missing expectations of 7.3% growth and slowing quarter-on-quarter. GDP in the second quarter rose by just 0.8% compared to the first quarter, after 2.2% quarterly growth in the first quarter.The economic growth miss from China added to the return to production of large Libyan oilfields to weigh on oil prices on Monday. Last Friday, Libya’s largest oilfield, Sharara, was fully halted amid protests on Friday as tensions in the restive African OPEC producer returned. The El Feel oilfield close to Sharara was also affected and was also stopped. Combined, the Sharara and El Feel oilfields in southwestern Libya pumped around 350,000 bpd of crude oil before the stoppage. The halting of production at the fields was the result of protests by the Al-Zawi tribe over the kidnapping of Faraj Bumatari, a former finance minister.Bumatari has been released, tribal leader Al-Senussi Al-ahlaiq told Reuters, which led to the resumption of production at Sharara and El Feel.Libya lost 340,000 barrels in production due to the closures, Oil Minister Mohamed Aoun told Dubai-based Asharq TV this weekend.The oil ministry warned that Libya would lose market share due to the on-and-off supply.“The loss of confidence in the continuity of Libyan oil supply to the global market will result in a loss of market share for Libyan oil and decreased demand for it,” the ministry said in a statement carried by Reuters.
Media Error Triggers Significant Oil Price Spike - If you've ever wondered if media headlines and jawboning really influence oil prices, you can now put the question to rest. A mistake in publishing sent oil prices up sharply on Monday morning—but prices have since bounced back to normal levels now that the offending media piece has been removed and a retraction printed.The Reuters headline wasn't exactly incorrect. "Saudi Arabia's Energy Department will voluntarily extend production cuts until the end of 2024." But we knew that. This is old news that dates back to June 4, when Saudi Arabia agreed to extend its additional voluntary oil cut until next year.But even just rehashing the old news today like it was some new event sent Brent and WTI up by 2%, with Brent reaching above the important $80 threshold. But that was then. Within the span of less than an hour, crude oil prices returned to earth, and are now trading at a loss for the day.At 9:48 a.m. ET, WTI was trading down 1.22% on the day, at $74.50. Brent crude had sagged 1.25% back to $78.87 after the market realized that Saudi Arabia wasn't doing anything extra today to prop up prices.Saudi Arabia has taken action to balance oil supplies with demand, to hear its energy ministry tell it—the result often ending with price hikes. But those moves have recently been quite temporary in nature, failing to keep prices higher.Not even two weeks ago, Saudi Aramco—the country's state-run oil giant—raised its crude oil prices to its prized market, Asia, for a second month in a row, while cutting production voluntarily by a million barrels per day. Saudi Arabia's Light for August loading is now $3.20 per barrel above Oman/Dubai quotes.
Crude Slides on Profit Taking as China's Macros Disappoint --- Oil futures accelerated losses in the afternoon session Monday, sending the international benchmark below $79 bbl as market participants digested weaker-than-expected macroeconomic data out of China where an uneven post-pandemic recovery undermines the outlook for fuel consumption. Further pressuring the oil complex, Libya's energy ministry on Sunday said the shut-in production at the country's two largest oil fields -- Al Sharara and El Feel -- have been brought online following last week's disruption. Protests against the U.N.-backed government in Tripoli shut down at least two out of the nation's largest oilfields, taking offline around 500,000 bpd or 0.5% of global oil production. It remains unclear whether the brokered deal between protests and government forces will survive the tests of time. Libya has Africa's largest oil reserves, but its oil production has been frequently interrupted since the breakout of civil war over a decade ago. The oil market is sensitive to the news of unplanned supply disruption as global oil balances are seen falling into a deeper shortfall in the second half of the year. Both Russia and Saudi Arabia are rapidly reducing oil production as part of the OPEC+ deal to remove 3.6 million bpd from the global oil market. Russian Energy Minister Alexander Novak said on Monday that Moscow will cut oil exports by 2.1 million metric tons for the third quarter, roughly in line with cuts of 500,000 bpd. "Russia will cut both pipeline and seaborne oil exports in August," added Novak. On the macroeconomic data front, China reported on Sunday its gross domestic product expanded 6.3% during the second quarter on an annualized basis, outstripping growth in the first quarter but missing market expectations. Meanwhile, youth unemployment across urban areas spiked to a new record high 21.3% as business and consumer confidence takes a hit amid the faltering recovery. Youth employment is being closely watched by economists and the government as a record 12 million university graduates are expected to enter the Chinese job market this year. National Bureau of Statistics spokesperson Fu Linghui noted on Monday that youth unemployment is likely to get worse before it gets better as China's economy faces multiple headwinds from geopolitical and macroeconomic fronts. Furthermore, China's retail sales for June rose by 3.1%, below the 3.5% expected. Meanwhile, industrial production for June rose by 4.4% from a year ago, better than the 2.7% forecast. The fresh data indicated continued uneven post-pandemic recovery, with faltering private confidence, record-high youth unemployment and overhanging risk in the property market. At settlement, front-month West Texas Intermediate on NYMEX fell $1.27 to $74.15 bbl, and ICE September Brent contract declined $1.37 to $78.50 bbl. NYMEX August RBOB futures dropped back $0.0120 to $2.6317 gallon, and August ULSD futures fell to $2.5642 gallon, down $0.0337 on the session.
Oil steadies as investors eye US crude supplies - Oil prices were little changed on Tuesday as investors weighed a possible tightening of U.S. crude supplies against weaker-than-expected Chinese economic growth. Both benchmark contracts fell more than 1.5% on Monday following lacklustre economic data from China, the world’s largest oil importer, as well as the partial restart of some Libyan oilfields. Brent crude was up 7 cents at $78.57 a barrel by 1330 GMT, while U.S. West Texas Intermediate (WTI) crude rose 10 cents to $74.25 a barrel in relatively muted trading, with the contract set to expire on Thursday. The September WTI contract was also up 10 cents to $74.18. Market participants were awaiting industry data later on Tuesday that is expected to show U.S. crude oil stockpiles and product inventories fell last week. Meanwhile, U.S. shale oil production is projected in August to see its first monthly decline since December 2022, data from the Energy Information Administration showed on Monday. Sluggish gross domestic product (GDP) data from China released on Monday “kept a cautious lid on prices with some reservations in its demand recovery,” said Jun Rong Yeap, a market strategist at IG in Singapore. China’s GDP grew 6.3% year-on-year in the second quarter, compared with average analyst forecasts of 7.3%. Still, global supplies are expected to see a boost from the resumption of output at two of three Libyan fields that were shuttered last week. Output was affected by a protest against the abduction of a former finance minister.
Oil Prices up on Expected Economic Support in China, Weaker US Output - (Reuters) -Oil prices climbed more than 1% on Tuesday after China said it will act to support economic growth in the world's biggest oil importer and on expectations the U.S. Federal Reserve will stop raising interest rates soon and a forecast decline in U.S. output. Brent futures rose $1.13, or 1.4%, to settle at $79.63 a barrel, while U.S. West Texas Intermediate (WTI) crude rose $1.60, or 2.2%, to settle at $75.75. That cut Brent's premium over WTI to its lowest since late May. The smaller premium makes it less likely energy firms will spend money to send ships to the U.S. to pick up crude cargoes for export. In the U.S., several pieces of economic news over the past week or so, including a report Tuesday showing retail sales rose by less than expected in June, have boosted expectations the Fed will stop hiking rates after a widely expected 25 basis-point increase at its July 25-26 meeting. Higher interest rates increase borrowing costs and can slow economic growth and reduce oil demand. After posting sluggish gross domestic product data earlier in the week, China's top economic planner pledged it would roll out policies to "restore and expand" consumption without delay. Energy traders expect "the oil market will remain tight as Russian shipments drop and as China prepares to provide more support to households," said Edward Moya, senior market analyst at data and analytics firm OANDA. The International Monetary Fund's (IMF) chief Kristalina Georgieva, however, told financial leaders of the Group of 20 nations that medium-term growth prospects remain weak. On the supply side, U.S. shale oil production will likely decline in August for the first time since December, projections from the U.S. Energy Information Administration (EIA) showed. Looking ahead, the oil market is waiting for U.S. oil inventory data from the American Petroleum Institute (API), an industry group, on Tuesday and the EIA on Wednesday. Analysts in a Reuters poll forecast a 2.4-million barrel draw from U.S. crude stocks during the week ended July 14. [EIA/S] [API/S] If correct, that would be the fourth crude stock decline in five weeks, and compares with a decrease of 0.4 million barrels in the same week last year and a five-year (2018-2022) average increase of 1.9 million barrels.
Oil rises to US$80 as Russian supply drop offsets economy risks - Oil rose to trade around US$80 a barrel in London as traders weighed signs of tightening in the global crude market against a shaky economic backdrop. Brent futures added 0.6 per cent in thin trading volumes on Wednesday. It rose the previous session as data showed that Russia's crude shipments fell to a six-month low in the four weeks to July 16. The curbs suggest that Moscow is fulfilling a pledge with its partners in the OPEC+ coalition to rein in supplies. Embedded Image Oil has been buffeted over the past couple of months as investors weigh China's stuttering recovery against supply cuts by OPEC+ heavyweights Saudi Arabia and Russia, and indications that the Federal Reserve may be close to concluding a cycle of interest-rate hikes. Prices have made a decisive break higher since late June on signs that the market may finally be tightening, but are still lower for the year. “It looks like the price weakness is behind us, and traders seem to recognize that the market will tighten significantly from this month due to supply cuts and improving demand,” said Carsten Fritsch, commodity analyst at Commerzbank AG in Frankfurt. “But the prospect for recessions in the US and the eurozone combined with slower demand in China will provide headwinds.” Russia said it aims to reduce its third-quarter crude export plans by 2.1 million tons, in line with its previously stated pledge to cut overseas shipments by 500,000 barrels a day in August. There are also signs of tightening in the U.S., the world's biggest fuel consumer. The American Petroleum Institute said that U.S. oil inventories fell by 797,000 barrels last week, according to a person familiar with the data. The API is funded by the oil industry. Stockpiles at the storage hub in Cushing, Oklahoma, dropped by three million barrels last week. That would be the biggest decline since October 2021, if confirmed by the official Energy Information Administration due Wednesday. Prices: WTI for August delivery added 0.5 per cent to US$76.10 a barrel at 10:30 a.m. in London. Brent for September settlement rose 0.6 per cent to US$80.13 a barrel. Brent's prompt timespread was at 15 cents a barrel in backwardation, near the narrowest this month, in a sign that traders remain cautious.
WTI Tops $76 After API Data Showed US Inventories Fell -- New York Mercantile Exchange oil futures and Brent crude traded on the Intercontinental Exchange powered higher early Wednesday after the American Petroleum Institute reported a smaller-than-expected drawdown in U.S. commercial crude stockpiles but a sizable drop in refined fuel supplies during the week ended July 14. Further details of the API report released Tuesday revealed commercial oil stocks declined 797,000 barrels (bbl) last week, falling short of an expected 1.8-million-bbl drop. Currently, commercial inventories stand at 458.1 million bbl -- about 1% above the five-year average. The expectations for a larger drawdown were in part due to data released from the U.S. Energy Department showing no transfer occurred last week from the Strategic Petroleum Reserves to the commercial side. Stocks at the Cushing, Oklahoma, tank farm -- delivery point for West Texas Intermediate futures -- dropped by a sizable 3 million bbl. Gasoline stocks, meanwhile, fell by 2.8 million bbl through July 14, far above calls for a 1.1-million-bbl draw, while distillate inventory decreased 100,000 bbl compared with an expected 200,000 bbl increase. Next, oil traders are awaiting the official government report from the U.S. Energy Information Administration, scheduled for 10:30 a.m. EDT release. Tuesday afternoon, West Texas Intermediate futures broke above the key resistance level of $75 bbl after Saudi Arabia reported its seaborne crude exports fell below 7 million barrels per day (bpd) for the first time this year in May, showed the data published on Joint Organizations Data Initiative (JODI) platform. Saudi oil production was also shown to have dropped by 502,000 bpd to 9.96 million bpd -- two months prior to the introduction of a voluntary 1-million-bpd production cut. There was an unconfirmed report that hit media airwaves on Tuesday, suggesting Riyadh plans to extend the unilateral production cut through the end of the year, potentially rallying WTI above $75 bbl. While the report was quickly withdrawn, oil extended gains ahead of the inventory report. Capping the upside for the oil complex is a strengthening U.S. dollar that extended gains into the third consecutive session on Wednesday, trading 0.31% higher against the basket of foreign currencies. The greenback's strength comes as investors have fully priced in a 25-basis-point increase to the federal funds rate at FOMC's next week meeting. Investors see a 99% chance that the central bank will raise the federal funds target range to between 5.25% and 5.5%, a nearly 22-year high, according to CME FedWatch Tool. Despite inflation easing and the labor market remaining largely intact, Fed officials repeatedly warned they are prepared to do more to ensure the economy will not reignite inflationary pressures. Near 7:30 a.m. EDT, front-month West Texas Intermediate on NYMEX gained $0.26 to $76.01 bbl, and ICE September Brent contract advanced $0.49 to trade above $80 bbl. NYMEX August RBOB futures traded little changed near $2.6934 gallon, and August ULSD futures moved up to $2.6321 gallon, up by $0.0327 in overnight trading.
Oil loses early gains as U.S. data point to underwhelming summer demand - Oil prices settled lower on Wednesday after government data showed U.S. crude inventories fell by just a third of expected levels last week, even after the Biden administration halted weekly additions of oil from the national reserve to the market. Gasoline consumption underwhelmed as well for a mid-July week. New York-based West Texas Intermediate, or WTI, crude reversed gains seen before the data to settle down 40 cents, or 0.5%, at $75.35 per barrel. The U.S. crude benchmark hit an intraday high of $76.87 earlier. Just a day ago, WTI rallied more than 2% on upbeat expectations over last week’s U.S. oil and fuel consumption. London-based Brent also swung from a session high of $80.92 to settle down 17 cents, or 0.2%, at $79.46. Like WTI, Brent jumped 2% in the prior session as longs in the market bet heavily on strong demand numbers for U.S. oil and fuel last week. The U.S. crude inventory balance fell by just 708,000 barrels for the week ended July 14 — versus expectations for a 2.44 million barrel draw, the Energy Information Administration, or EIA, reported. In the prior week to July 7, crude stockpiles surged by almost 6.0M barrels, the most in a month. The crude draw reported by the EIA did not come with its usual caveat — the release of crude from the U.S. Strategic Petroleum Reserve. For months now, weekly drawdowns from the reserve had been a point of contention for oil bulls, who said the additional oil had often suppressed crude prices from rallying. The Biden administration’s use of the SPR has, however, been a highly-charged matter for oil bulls and the president’s political opponents. Both sides accuse him of indiscriminately releasing hundreds of millions of barrels from the stockpile to subdue crude prices and shore up his political standing with American voters — when the reserve is meant for emergency use, in times of critically short oil supply. Biden, in his defense, has said he was only acting to reduce record high pump prices of fuel, which stood at above $5 per gallon last June and have fallen since to around $3.50. The administration also blames last year’s high crude oil prices for U.S. inflation getting to four-decade highs of above 9% in June 2020. In the past couple of months, the administration canceled SPR sales mandated through 2024 and moved to refill the reserve, which has fallen to 40-year lows. Earlier this month, the Department of Energy announced buying plans for about 6M barrels, on top of a previously-stated 12M, and invited U.S. energy companies to offer their selling prices. On the gasoline inventory front, the EIA reported a draw of 1.066M barrels for last week. Analysts had expected the agency to cite a decline of 1.577M barrels instead, after a near unchanged level for gasoline in the prior week. Automotive fuel gasoline is the No. 1 U.S. fuel product. Finished motor gasoline products delivered to the marketplace — an indication of demand at the pump — fell to 8.855M barrels from the prior week’s 8.756M. Typically, during summertime like this, some 9M barrels of gasoline or more are supplied to the market weekly. “To be fair, the overall volume of products supplied to the market was still relatively high at 20.8M barrels last week, versus the prior weekly tally of 18.7M and distillates seem to be the reason for that,” said John Kilduff, partner at New York energy hedge fund Again Capital. “But gasoline is really what the market watches most and summertime demand for that is weak, to say the least.” In the case of distillate stockpiles, the EIA reported a build of 14,000 barrels. Analysts had forecast a build of 460,000 barrels last week, against a previous surge of 4.815M. Distillates are refined into heating oil, diesel for trucks, buses, trains and ships, and fuel for jets.
Oil Edges Up as Liquidity Thins to Six Month Low | Rigzone - Oil edged higher in a session marked by choppy trading and dwindling liquidity as a mixed fundamental picture dueled with negative sentiment from broader markets. The number of oil futures contracts trading hands dropped to the lowest since late January, in part due to the expiration of West Texas Intermediate’s August contract. On the fundamental front, the outlook remains varied as global supply has tightened while China attempts to revitalize its sagging economic growth. “Open interest has dropped precipitously this week, reflecting the low-conviction trading action and reinforcing the view that systematic traders continue to be in control of price action,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth. China’s efforts to revive growth — including lower interest rates, easier access to credit and a series of measures to kick-start the moribund housing market — have done little to bolster the economy of the biggest crude importer. Another signal that Beijing was seeking to boost corporate confidence came this week in a joint pledge by the Communist Party and the government to improve conditions for private businesses. The recent revival in the US dollar, following a slump last week, added to the bearishness for oil, with commodities priced in the currency more expensive for most buyers. WTI for August delivery, which expires Thursday, rose 28 cents to settle at $75.63 a barrel in New York. The more active September contract settled at $75.65. Brent for September settlement gained 18 cents to settle at $79.64 a barrel.
The oil market on Thursday traded in and out of positive territory --The oil market on Thursday traded in and out of positive territory, ahead of its expiration at the close. The market traded mostly sideways and posted a high of $76.15 after Ukraine said it would consider any ship heading for Russian Black Sea ports as a potential target. On Wednesday, Russia issued a similar threat, saying it would consider any vessel heading to Ukraine’s Black Sea ports to potentially be carrying military supplies. Warnings from both sides threatened to escalate a dispute over grain shipments and broaden the war to the strategic waterway. However, the crude market sold off over $1.40 from its highs to a low of $74.72 by mid-day. The market later retraced some of its losses and settled in a sideways trading range ahead of the August WTI contract’s expiration at the close. The August WTI contract went off the board up 28 cents at $75.63, while the September WTI settled up 36 cents at $75.65 and the September Brent contract settled up 18 cents at $79.64. The product markets ended the session over 2 cents higher, with the heating oil market settling up 2.26 cents at $2.6444 and the RB market settling up 2.27 cents at $2.7432. Two OPEC+ sources said the OPEC+ group’s Joint Ministerial Monitoring Committee panel will hold an online meeting on August 4th, a day later than previously scheduled. The U.S. Senate backed an amendment to an annual defense bill on Thursday that would prohibit exports to China of oil from the SPR. As voting continued, the tally was 68 to 13 in favor of the measure, beyond the 60 votes needed in the 100-member Senate to add the amendment to the National Defense Authorization Act. Wood Mackenzie said the current global annual investment of around $500 billion into upstream oil and gas would be sufficient to meet peak oil demand in the 2030s, contrary to widespread belief of under-investment in the sector. It stated that current expenditure could deliver the supply needed to meet demand peaks due to "the development of giant low-cost oil resources, relentless capital discipline and a transformational improvement in investment efficiency". It said it expected oil demand to peak at 108 million bpd in the early 2030s before beginning its long-term decline, with fuel efficiency, electric vehicles, and natural gas substitution taking over eventually. Kpler ship tracking data is currently showing the U.S. is importing 330,000 b/d of gasoline from Europe so far in July, down from the 450,000 b/d recorded in June. It appears European gasoline exports are being diverted to West Africa, as West Africa appears to be importing some 512,000 b/d from Europe in July versus the 377,000 b/d imported in June. The EPA reported that the U.S. generated 674 million biodiesel blending credits in June, down from 750 million credits in May. It also reported that the U.S. generated 1.28 billion ethanol blending credits in June, unchanged on the month.
Oil Prices Climb On China Stimulus Optimism -- Oil prices rose about 1 percent in European trade amidst fears of lower supplies from Russia and signs of declining inventories. Investors also assessed chances of further stimulus from China after rating agencies sent stark warnings about Wanda Commercial, China's biggest commercial real estate firm. Benchmark Brent crude futures were up a little over 1 percent at $80.45 a barrel, while WTI crude futures were up 1.1 percent at $76.50. Fresh data showing a decline in U.S. crude inventories and signs of declining supplies from Russia helped oil extend its recent rally. Russia may consider introducing quotas on the export of oil products in a bid to stabilize global gasoline prices, Reuters quoted Russian Deputy Prime Minister Alexander Novak as saying today. Moscow aims to reduce its third-quarter crude export plans by 2.1 million tons, in line with its previously stated pledge to cut overseas shipments by 500,000 barrels a day. Meanwhile, amid concerns over rising interest rates and a worsening economic outlook, the Chinese government has pledged to make the private economy "bigger, better and stronger" with a series of policy measures. China's top economic planner, the National Development and Reform Commission, has unveiled new measures aimed at supporting spending on automobiles and consumer electronics.
Oil Chases Equities Higher With OPEC+ Supplies in Focus -- Oil futures followed equity markets higher on Friday as investors re-assessed their outlook for tighter supplies available on the global market, shrugging off pressure from a rallying U.S. dollar. The U.S. dollar extended gains into the fourth consecutive session on Friday, gaining 0.22% against global peers as investors looked to the Federal Reserve's meeting next week that is widely expected to deliver another 0.25% rate hike. The move would lift the federal funds rate to a 5.25%-5.5% range, the highest since 2001. With inflationary pressures easing, most investors expect no change to rates at the September meeting and just 27% forecast another hike by the November meeting. This week's economic data showed the U.S. labor market remains resilient, with initial unemployment claims falling to the lowest level in three months at 228,000 applications. Economists widely expected the labor market to show some signs of rising layoffs this summer amid a manufacturing recession and slowing consumer spending. For context, U.S. retail sales slowed more than expected in June, data from the Census Bureau showed this week, rising at just 0.2% pace and below the expected 0.5%. This might suggest that typical transmission lines between the labor market and strength of underlying demand might have been compromised during the pandemic months as employers are now more inclined to hoard labor. Near 8.30 AM ET, West Texas Intermediate September contract on NYMEX advanced $1 to $76.68 bbl, while international crude benchmark Brent for September delivery added $1.05 to $80.69 bbl. NYMEX August RBOB futures advanced $0.0454 to $2.7886 gallon, and August ULSD futures strengthened to $2.7317 gallon, up $0.0673 so far on a session. The U.S. dollar index jumped 0.21% against the basket of foreign currencies to trade near 100.800 against the basket of foreign currencies. Friday's move higher in the oil complex follows EIA's inventory report, showing oil stored in Cushing, Oklahoma farm tanks -- delivery point for West Texas Intermediate contract -- plunged 2.9 million bbl during the week-ended July 14. This marked the steepest drawdown in Cushing stockpiles in nearly two years, adding to the evidence global inventories are gradually drawing as a result of OPEC+ extended production cuts announced on June 4. EIA said in its latest Short-Term Energy Outlook global oil inventories will gradually transition from builds seen over the first half of the year to consistent draws until the fourth quarter 2024. "This transition puts upward pressure on global oil prices over the forecast period. Global oil inventories increased by an average of 0.6 million bpd in 1H23, and we forecast they will decrease by an average of 0.7 million b/d in 2H23. Inventories continue to fall by an average of 0.4 million b/d in the first three quarters of 2024 before increasing by 0.1 million b/d in 4Q24," said EIA in its July STEO.
Oil rallies higher for fourth straight week on tightening supply - Oil prices rose more than a dollar per barrel on Friday, buoyed by growing evidence of supply shortages in the coming months and rising tensions between Russia and Ukraine that could further hit supplies. Brent crude futures rose $1.43, or 1.8%, to settle at $81.07 a barrel. U.S. West Texas Intermediate (WTI) crude futures rose $1.42, or 1.9%, to settle at $77.07 a barrel, the highest since April 25. "The oil market is starting to slowly price in a looming supply crunch as it is on track for its fourth week of price gains," "Global supplies are starting to tighten and that could accelerate dramatically in the coming weeks. Increased war risk could also impact prices," Russia hit Ukrainian food export facilities for a fourth day in a row on Friday and practiced seizing ships in the Black Sea, in an escalation of tensions in the region since Moscow's withdrawal this week from a U.N.-brokered safe sea corridor agreement. In the U.S., crude inventories have fallen, amid a jump in crude exports and higher refinery utilization, the Energy Information Administration (EIA) said on Wednesday. Earlier on Monday, the EIA had forecast that U.S. oil and gas production was likely to decline in August for the first time this year, adding to concerns of supply tightness. Separately on Friday, UAE Energy Minister Suhail al-Mazrouei told Reuters that current actions by OPEC+ to support the oil market were sufficient for now and the group was "only a phone call away" if any further steps were needed. Meanwhile, investors welcomed stimulus measures designed to reinvigorate China's sluggish economy. Data from the world's second-biggest oil consumer suggests the government's 5% annual growth target will be missed. On Friday, Chinese authorities unveiled plans to help boost sales of automobiles and electronics. "We estimate the supply and demand balance for oil in the $75-$95 range for 2024, as limited OPEC+ supply and good demand in the U.S. is offset somewhat by weaker-than-expected demand in China as its economic recovery continues to lag,"
Iranian Oil Stolen by the US Stuck on a Tanker Off the Coast of Texas - US federal prosecutors are struggling to sell off a shipment of stolen Iranian oil being carried by a Greek tanker off the coast of Texas, The Wall Street Journal reported Tuesday.The US Justice Department seized the Greek tanker Suez Rajan in Aprilunder the pretext of sanctions enforcement and forced the ship to head for Texas instead of China. The Suez Rajan is carrying 800,000 barrels of stolen oil and is currently off the coast of Galveston.According to the Journal, the US can’t sell the oil because the companies that would unload the oil are worried about Iranian retaliation in the Persian Gulf. “Companies with any exposure whatsoever in the Persian Gulf are literally afraid to do it,” a Houston-based energy executive involved in the matter told the paper.The executive said that several companies contacted about the oil declined to unload the cargo. After the US stole the Iranian oil shipment, Iran seized two tankers in the Persian Gulf, which was likely retaliation.Since then, the US has announced several measures to increase its military presence in the region to prevent more Iranian seizures in the Persian Gulf that it provoked in the first place.The US has a history of seizing tankers and stealing Iranian cargo. In 2021, the Biden administration sold off two million barrels of Iranian oil taken from a tanker that was seized off the coast of the UAE. During the Trump administration, the US seized ships carrying Iranian gas bound for Venezuela and discharged some of the cargo in New York.
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