US oil production at a post pandemic high; record drop in US oil exports, first Strategic Petroleum Reserve increase in 37 months; gasoline supplies at an eight month low; global oil supply was 1,260,000 barrels per day short in July as OPEC output was 781,000 barrels per day below their lowered targets
US oil prices finished higher for a seventh straight week after the EIA, OPEC, and the International Energy Agency (IEA) all forecast tighter supplies and growing demand for oil....after rising 2.8% to $82.82 a barrel last week after the EIA reported the largest drop in US oil supplies on record and Saudi Arabia extended their million barrel a day supply cut for another month, the contract price for the benchmark US light sweet crude for September delivery surged to a four-month high in early Asian trading on Monday amid supply constraints and the exacerbation of the military conflict in the Black Sea, but pulled back after being weighed down by a stronger dollar amid signs of tight supply then retraced some of its previous gains on profit-taking during the New York session and settled 88 cents lower at $81.94 a barrel as traders shrugged off the risk to oil supply in the Black Sea against inflation pressures in the United States and Eurozone, where central banks had pledged to continue restrictive monetary policy in their fight to reduce inflation. oil prices fell more than 1 percent in early trading Tuesday as traders reacted to weak Chinese trade figures and awaited the latest U.S. stockpile data. but reversed those early losses after Ukrainian President Zelenskiy said his country would retaliate if Russia continued to block Ukrainian ports, then rallied further in the New York session after the EIA forecast a better economic outlook than they had previously expected, and settled 98 cents higher at $82,92 a barrel as the EIA also forecast the world oil market would slide into a supply deficit for the remainder of 2023, citing steep production cuts from OPEC+'s largest producers and increased global oil consumption....oil prices eased in Asian morning trading on Wednesday, as concerns over slow demand fromr China grew after bearish trade and inflation data, outweighing fears over tighter supply arising from output cuts by Saudi Arabia and Russia. but rose notably as hopes for Chinese stimulus and signs of tight supply arising from output cuts by Saudi Arabia and Russia offset data showing a large weekly build in U.S. crude inventories, then climbed to the highest level in almost nine months on concern that a possible escalation of the conflict between Russia and Ukraine might choke off more supplies from an already tightening market. and settled $1.48 higher at a nine month high of $84.40 a barrel after the EIA reported large drawdowns from gasoline and distillate supplies, leaving fuel inventories well below the seasonal five-year average, while offsetting a larger-than-expected build in domestic crude oil stockpiles....however, oil prices dipped in Asian trading Thursday, on Chinese data showing crude oil imports dropped 18.8% from June to July, reaching their lowest daily rate since January, then tumbled in New York trading on US consumer price data that was seen to indicate that inflation was reaccelerating, and settled $1.58 lower at $82.82 a barrel on profit taklng after the release of the inflation data, as "super-core" prices -- a measure closely watched by the Fed, reaccelerated on the back of surging rents and transportation services...oil prices fell marginally in Asia on Friday as traders weighed optimistic demand forecasts from OPEC against mixed economic data from top importer China, but turned higher in New York trading after a report from the International Energy Agency (IEA) forecast strong demand for oil and tightening supplies, and settled 37 cents higher at $83.19 a barrel after all three major forecasting agencies were in rare agreement with forecasts that the oil market will slide into deeper deficit through the end of 2023, on steep production cuts from OPEC+ and stronger oil consumption, and thus managed to eke out a 0.4% gain on the week...
US natural gas prices also finished higher, increasing for the second time in seven weeks, as a strike among LNG workers in Australia led European gas prices to spike 40%, and the US followed....after falling 2.3% to $2.577 per mmBTU last week as gas production hovered near record levels while demand forecasts moderated, the contract price of US natural gas for September delivery opened 8 cents higher on Monday on greater confidence in forecasts for increased cooling demand later this month, and settled 14.8 cents higher at $2.725 per mmBTU, supported by a hot late-August forecast and the potential for a material decline in the storage surplus...natural gas prices opened higher again on Tuesday on production concerns and short-term cooling demand, and finished the session 5.2 cents higher at $2.777 per mmBTU, fueled by a steep – though temporary – decline in production and continued heat in key demand regions...natural gas prices opened more than 5% higher on Wednesday on production declines due to maintenance and steady cooling demand and rocketed 18.2 cents to a six-week high at $2.959 per mmBTU in a technical buying spree amid ongoing heat in Texas, and continued soft production in the wake of pipeline maintenance events. with a 40% spike in European gas prices amid Australia LNG supply fears undoubtedly contributing...but the price surge was over as quick as it began on Thursday as gas prices opened 7 cents lower and, forgoing cooling demand and production concerns, plummeted further after the EIA report hit the wire, and settled 19.6 cents lower at $2.763.per mmBTU as Wednesday's near 7% rally was unwound within a day by a bearish storage report....natural gas futures treaded water on Friday as traders continued to digest the latest inventory data, and closed out the week at $2.770 per mmBTU, up only seven-tenths of a cent on the day, but still 7.5% higher for the week..
The EIA's natural gas storage report for the week ending August 4th indicated that the amount of working natural gas held in underground storage in the US increased by 29 billion cubic feet to 3,030 billion cubic feet by the end of the week, which left our natural gas supplies 535 billion cubic feet, or 21.4% above the 2,495 billion cubic feet that were in storage on August 4th of last year, and 305 billion cubic feet, or 11.2% more than the five-year average of 2,725 billion cubic feet of natural gas that were in working storage as of the 4th of August over the most recent five years… however, natural gas supplies were still 11.7% below normal for this date in the EIA region defining the Pacific states, while 15.1% above normal in the South Central region of the country at the same time....the 29 billion cubic foot injection into US natural gas working storage for the cited week was more than the 25 billion cubic feet addition to supplies that was expected by industry analysts surveyed by Reuters, but was less than the 44 billion cubic feet that were added to natural gas storage during the corresponding week of 2022, and also less than the average 46 billion cubic feet addition to natural gas storage that has been typical for the same summer 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 August 4th showed that after a record drop in our oil exports, we had oil left to add to our stored commercial crude supplies for the 7th time in nineteen weeks, but for the 19th time in the past 33 weeks, as our production of oil also jumped to a post pandemic high....Our imports of crude oil rose by an average of 14,000 barrels per day to 6,682,000 barrels per day, after rising by an average of 301,000 barrels per day the prior week, while our exports of crude oil fell by a record 2,923,000 barrels per day to average 2,360,000 barrels per day, which combined meant that the net of our trade in oil worked out to a net import average of 4,322,000 barrels of oil per day during the week ending August 4th, 2,937,000 more barrels per day than the net of our imports minus our exports during the prior week. Over the same period, production of crude from US wells was reportedly 400,000 barrels per day higher at 12,600,000 barrels per day, and hence our daily supply of oil from the net of our international trade in oil and from domestic well production appears to have averaged a total of 16,922,000 barrels per day during the August 4th reporting week…
Meanwhile, US oil refineries reported they were processing an average of 16,579,000 barrels of crude per day during the week ending August 4th, an average of 62,000 more 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 978,000 barrels of oil per day were being added to 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 August 4th appear to indicate that our total working supply of oil from net imports and from oilfield production was 635,000 barrels per day less than what was added to storage plus 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 [ +635,000 ] 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......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 978,000 barrel per day increase in our overall crude oil inventories came as an average of 836,000 barrels per day were being added to our commercially available stocks of crude oil, while an average of 140,000 barrels per day were being added to the oil in our Strategic Petroleum Reserve, the first increase in the SPR since July 10th, 2020....however, except for the past four weeks, the 347,754,000 barrels of oil that still remain in our Strategic Petroleum Reserve would still be the lowest since August 19th, 1983, 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 withdrawals of last year. However, those Biden administration withdrawals 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 18 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 6,723,000 barrels per day last week, which was 2.7% more than the 6,549,000 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 400,000 barrels per day higher at a forty month high of 12,600,000 barrels per day because the EIA's rounded estimate of the output from wells in the lower 48 states was 400,000 barrels per day higher at 12,600,000 barrels per day, while Alaska’s oil production was 16,000 barrels per day lower at 377,000 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 3.8% below that of our pre-pandemic production peak, but was 29.9% 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 93.8% of their capacity while using those 16,579,000 barrels of crude per day during the week ending August 4th, up from their 92.7% utilization rate during the prior week, and a utilization rate that's back in the the normal range for early August... The 16,579,000 barrels per day of oil that were refined this week were little changed from the 16,581,000 barrels of crude that were being processed daily during week ending August 5th of 2022, but 6.7% less than the 17,777,000 barrels that were being refined during the prepandemic week ending August 2nd, 2019, when our refinery utilization rate was at 96.4%, on the high end of the normal range for this time of year...
With the increase in the amount of oil being refined this week, the gasoline output from our refineries was also higher, increasing by 92,000 barrels per day to 9,921,000 barrels per day during the week ending August 4th, after our refineries' gasoline output had increased by 341,000 barrels per day during the prior week. This week’s gasoline production was 2.3% less than the 10,150,000 barrels of gasoline that were being produced daily over the same week of last year, and 4.8% less than the gasoline production of 10,421,000 barrels per day during the prepandemic week ending August 2nd, 2019. At the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 50,000 barrels per day to 4,911,000 barrels per day, after our distillates output had increased by 80,000 barrels per day during the prior week. Even with those increases, our distillates output was 4.1% less than the 5,122,000 barrels of distillates that were being produced daily during the week ending August 5th of 2022, and 7.1% less than the 5,286,000 barrels of distillates that were being produced daily during the week ending August 2nd, 2019...
Even with this week's increase in our gasoline production, our supplies of gasoline in storage at the end of the week fell for the eighteenth time in twenty-five weeks, decreasing by 2,661,000 barrels to 216,420,000 barrels during the week ending August 4th, after our gasoline inventories had increased by 1,481,000 barrels during the prior week. Our gasoline supplies fell this week because the amount of gasoline supplied to US users rose by 454,000 barrels per day to 9,302,000 barrels per day, and because our imports of gasoline fell by 261,000 barrels per day to 684,000 barrels per day and because our exports of gasoline rose by 123,000 barrels per day to 941,000 barrels per day..And after eighteen gasoline inventory decreases over the past twenty-five weeks, our gasoline supplies were at an eight month low, 1.8% below last August 5th’s gasoline inventories of 220,316,000 barrels, and about 7% below the five year average of our gasoline supplies for this time of the year…
Meanwhile, even with this week's increase in our distillates production, our supplies of distillate fuels decreased for the thirteenth time in twenty-two weeks, falling by 1,706,000 barrels to 115,447 ,000 barrels during the week ending August 4th, after our distillates supplies had decreased by 796,000 barrels during the prior week. Our distillates supplies fell by more this week even though the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 64,000 barrels per day to 3,762,000 barrels per day, because our imports of distillates fell by 48,000 barrels per day to 65,000 barrels per day, and because our exports of distillates rose by 197,000 barrels per day to 1,458,000 barrels per day....With 34 inventory increases over the past sixty-four weeks, our distillates supplies at the end of the week were 3.5% above the 111,490,000 barrels of distillates that we had in storage on August 5th of 2022, but are now about 17% below the five year average of our distillates inventories for this time of the year...
Finally, with the record decrease in our oil exports, our commercial supplies of crude oil in storage rose for the 18th time in 32 weeks and for the 27th time in the past year, increasing by 5,851,000 barrels over the week, from 439,771,000 barrels on July 28th to 445,622,000 barrels on August 4th, after our commercial crude supplies had decreased by a record 17,049,000 barrels over the prior week. So, even with this week's increase, our commercial crude oil inventories were still slightly below the most recent five-year average of commercial oil supplies for this time of year, but were about 31% above the average of our available crude oil stocks as of the last weekend of July over the 5 years at the beginning of the past decade, with the difference 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 August 4th were 3.2% more than the 432,010,000 barrels of oil we had in commercial storage on August 5th of 2022, and were 1.6% more than the 438,777 ,000 barrels of oil that we still had in storage on August 6th of 2021, but were 13.3% less than the 514,084,000 barrels of oil we had in commercial storage on August 7th of 2020, after early pandemic precautions had left a lot of oil unused…
OPEC's Report on Global Oil for July
Thursday of this past week saw the release of OPEC's August Oil Market Report, which includes the details on OPEC's & global oil data for July, and hence it gives us a picture of the global oil supply & demand situation as Chinese demand tanked after levelling off in June, while oil supplies were impacted by an additional million barrel per day unilateral production cut by the Saudis and an ongoing 500,000 million barrel per day supply cut by Russia...July was also the eighth month that OPEC and aligned oil producers were operating under a 2 million barrel per day production cut, meant to take roughly 2% of global oil supplies off the market, in response to a perceived global surplus and related lower prices, and the third month of a Saudi led cut of an additional 1.16 million barrels per day, which, when combined with the unilateral Russian cut, was intended to take an additional 1.66 million barrels per day off the market for the rest of this year...all told, then, the members of the cartel have committed to holding 4.66 million barrels per day off the market, or roughly 4.6% of global supplies...
The first table from this month's report that we'll review is from the page numbered 47 of the report (pdf page 57), and it shows oil production in thousands of barrels per day for each of the current OPEC members over the recent years, quarters and months, as the column headings below indicate...for all their official production measurements, OPEC has used an average of production estimates by as many as eight "secondary sources", namely the International Energy Agency (IEA), the oil-pricing agencies Platts and Argus, the U.S. Energy Information Administration (EIA), the oil consultancy Cambridge Energy Research Associates (CERA), the industry newsletter Petroleum Intelligence Weekly, the energy consultancy Wood Mackenzie and the research and intelligence firm Rystad Energy, as a means of impartially adjudicating whether their output quotas and production cuts are being met, to thereby avert any potential disputes that could arise if each member reported their own figures….
As we can see in the bottom right hand corner of the above table, OPEC's oil output decreased by 836,000 barrels per day to 27,310,000 barrels per day during July, down from their revised June production total that averaged 28,146,000 barrels per day....however, that June OPEC output figure was originally reported as 28,189,000 barrels per day, which therefore means that OPEC's June production was revised 43,000 barrels per day lower with this report, and hence OPEC's July production was, in effect, 879,000 barrels per day less than the previously reported OPEC production figure (for your reference, here is a copy of the table of the official June OPEC output figures as reported a month ago, before this month's revision)...
OPEC's output fell sharply in July essentially because the Saudis implemented an additional million barrel per day output cut they first announced in early June, intended to boost sagging oil prices and head off any potential oil glut....that was just the latest in a series of oil supply cuts imposed by the OPEC+ cartel over the past year, beginning with a 2 million barrel per day production cut that the joint agreement imposed on all producers in October...following that, six OPEC oil producers, led by the Saudis, and two other oil producers aligned with OPEC+, came to an agreement at the beginning of April to further reduce their combined production by an additional 1.16 million barrels per day beginning in May, over and above the formal OPEC cuts...in addition, Russia agreed to extend their ongoing 500,000 barrels per day cut for the rest of the year for a total cut of 1.66 million barrels per day from those nine producers...production cuts for OPEC members under that agreement included 500,000 barrels per day (bpd) from the Saudis, 211,000 bpd from Iraq, 140,000 bpd from the Emirates, 128,000 bpd from Kuwait, 48,000 barrels per day from Algeria, and 8,000 barrels per day from Gabon...two months ago, our assessment was that only the Saudis managed to hit the additional production cut target in May, and only Algeria joined them in June, indeed, most of the others increased their production in June, rather than cutting it, and it appears that's also been the case in July....hence, the net production reduction remains less than half of what had been committed to by the parties to that April 2nd agreement..
furthermore, OPEC and other aligned oil producers had previously agreed to reduce production by 2,000,000 barrels per day beginning in November, so the net 1,207,000 barrels per day OPEC ex-Saudi Arabia has cut since then is also short of that...however, OPEC's production was already running 1,585,000 barrels per day below what they were expected to produce when that policy was initiated in October, so the 27,310,000 barrels per day OPEC produced in July still leaves them far short of what they were expected to produce during the month, as we'll see in the next table...
The above table was originally included as a downloadable attachment to the press release following the 33rd OPEC and non-OPEC Ministerial Meeting on October 5th, 2022, which set OPEC's and other aligned oil producers' production quotas for November and the following months through the end of 2023, and the quotas shown above were reaffirmed by the cartel for the first 6 months of 2023 in during the 34th OPEC and non-OPEC Ministerial Meeting on December 4th, 2022....the first column above, labeled "August 2022 required production", actually matches the October 2018 baseline production level on which OPEC and aligned producers have based all of their quotas since the onset of the pandemic, and the "Voluntary adjustment" is the production cut each country is expected to make from that benchmark level to achieve a 2 million barrel per day cut for the cartel as a whole, leaving each country with a Voluntary Production level they're expected to hit each month during 2023, whether they've produced that much recently or not....since war torn Libya and US sanctioned producers Iran and Venezuela have been exempt from the production cuts imposed by the joint agreement that has governed the output of the other OPEC producers since May 2020, they are not shown on the above list, and OPEC's quota excluding them is aggregated under the total listed for the 'OPEC 10', which you can see was expected to be at 25,416,000 barrels per day from November 2022 through December 2023...
with the April 2nd agreement, six members of OPEC agreed to further reduce their production by 1,035.000 starting in May and through the end of the year....thus the voluntary production level for the OPEC 10 would have been 24,381,000 through December....subtracting the newly initiated million barrel per day cut from the Saudi's production leaves OPEC's voluntary production level at with 23,381,000 barrels...therefore, the 22,600,000 barrels those 10 OPEC members actually produced in July were 781,000 barrels per day short of what they were expected to produce during the month, with Nigeria and Angola still accounting for the majority of this month's production shortfall...
The next graphic from this month's report that we'll look at shows us both OPEC's and worldwide oil production monthly on the same graph, over the period from August 2021 thru July 2023, and it comes from page 48 (pdf page 58) of OPEC's August Oil Market Report....on this graph, the ssky blue bars represent OPEC's monthly oil production in millions of barrels per day as shown on the left scale, while the purple graph represents global oil production in millions of barrels per day, with the metrics for global output shown on the right scale....
After this month's 836,000 barrel per day increase in OPEC's production from their revised production of a month earlier, OPEC's preliminary estimate is that total global liquids production decreased by a rounded 200,000 barrels per day to average 100.7 million barrels per day in July, a reported decrease which came after June's total global output figure was apparently revised down by 300,000 barrels per day from the 101.2 million barrels per day of global oil output that was reported for June a month ago, as non-OPEC oil production rose by a rounded 700,000 barrels per day in July after that downward revision, with most of July's non-OPEC production increase due to greater oil output from Canada, from "other Asian" producers, and from "other Eurasian" countries, which more than offset lower production from Russia and China...
After that 200,000 barrel per day decrease in global output, the 100.70 million barrels of oil per day that were produced globally during July were 700 million barrels per day, or 0.7% more than the revised 100.00 million barrels per day that were being produced globally in July a year ago, which was the twelfth month of the series of 400 million barrel per day production increases that OPEC and their allied producers implemented as their fourth output policy reset in response to the global demand recovery, following the early pandemic lockdowns (see the August 2022 OPEC report for the originally reported July 2022 details, as well as details on the history of OPEC policy changes)…with this month's decrease in OPEC's output in contrast to the global increase, their July oil production of 27,310,000 barrels per day was 27.1% of what was produced globally during the month, down from their 27.9% share of global output last month….OPEC's July 2022 production was ultimately revised to 28,482,000 barrels per day with the September 2022 OPEC report, which means that the same 13 OPEC members who were part of OPEC last year produced 1,172,000 barrels per day, or 4.1% fewer barrels per day of oil this July than what they produced last June, when they accounted for 29.1% of a smaller global output total…
With the decrease in global oil output that we've seen in this report, the amount of oil being produced globally during the month falls short of the expected global demand, as this next table from the OPEC report will show us...
The above table came from page 26 of the August Oil Market Report (pdf page 36), and it shows regional and total oil demand estimates in millions of barrels per day for 2022 in the first column, and then OPEC's estimate of oil demand by region and globally, quarterly over 2023 over the rest of the table…on the "Total world" line in the fourth column, we've circled in blue the figure that's relevant for July, which is their estimate of global oil demand during the third quarter of 2023….OPEC is estimating that during the 3rd quarter of this year, all oil consuming regions of the globe will be using an average of 101.96 million barrels of oil per day, which was revised 10,000 barrels of oil per day higher than the 101.95 million barrels per day estimated for the third quarter a month ago (we've circled this month's revisions in green)....but as OPEC showed us in the oil supply section of this report and the summary supply graph above, OPEC and the rest of the world's oil producers were only producing 100.70 million barrels per day during July which would imply that there was a shortage of around 1,260,000 barrels per day of global oil production in July, when compared to the demand estimated for the month...
Note that in green we have circled an downward revision of 40,000 barrels per day to OPEC's previous estimate for second quarter demand...so, in addition to figuring July's global oil supply shortfall that's evident in this report, that downward revision of 40,000 barrels per day to second quarter demand, combined with the 300,000 barrel per day downward revision to June's total global supply figure that's implied in this report, means that the 20,000 barrels per day global oil shortage we had previously figured for June would now be revised to a shortage of 280,000 barrels per day...in addition, the 620,000 barrels per day global oil output shortage we had previously figured for May, in light of the 40,000 barrels per day downward revision to second quarter demand, would now be revised to a shortage of 580,000 barrels per day...meanwhile, after the oil surplus we had previously figured for April was eliminated by June's revisions, the downward revision of 40,000 barrels per day to second quarter demand means April figure would return to a surplus of 40,000 barrels per day.....
Note that in green we have also circled an upward revision of 50,000 barrels per day to OPEC's previous estimates of first quarter demand...for March, that means that the 180,000 barrels per day global oil output surplus we had previously figured for March would be revised to a surplus of 130,000 barrels per day.. similarly, the upward revision to first quarter demand means that the global oil surplus of 480,000 barrels per day we had previously figured for February would now be revised to a surplus of 430,000 barrels per day, but that the 280,000 barrels per day global oil output shortage we had previously figured for January would be revised to a shortage of 330,000 barrels per day, in light of the 50,000 barrel per day upward revision to first quarter demand....
This Week's Rig Count
The number of drilling rigs active in the US decreased for the fourteenth time over the past fifteen weeks during the week ending August 11th, and is now 17.5% 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 5 rigs to 654 rigs over the past week, which was 105 fewer rigs than the 764 rigs that were in use as of the August 12th report of 2022, and was also 1,270 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 unchanged at 525 oil rigs during the past week, after the number of rigs targeting oil had decreased by four rigs during the prior week, leaving 77 fewer oil rigs active now than were running a year ago, as they now amount to just 32.6% of the shale era high of 1,609 rigs that were drilling for oil on October 10th, 2014, while they are now down 23.1% from the prepandemic oil rig count of 683….at the same time, the number of drilling rigs targeting natural gas bearing formations fell by 5 to 123 natural gas rigs, which left natural gas rigs down by 37 from the 160 natural gas rigs that were drilling during the same week of 2022, as they now amount to less than 7.7% 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 reports that six rigs they've labeled as "miscellaneous" continued drilling this week..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 vertical rig drilling to between 5,000 and 10,000 feet in Beaver county Utah, a directional rig drilling to between 5,000 and 10,000 feet on the big island of Hawaii, a horizontal rig drilling to more than 15,000 feet into the Williston basin in Dunn county, North Dakota, 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 vertical rig drilling to more than 15,000 feet into a formation in Lincoln county Wyoming, also into a formation unnamed by Baker Hughes. ...in the past we've identified various "miscellaneous" rig activity as being for exploration rather than production, for geothermal energy, and for carbon dioxide storage...
The offshore rig count in the Gulf of Mexico was down by one to 17 rigs this week, and included 15 rigs drilling for oil in Louisiana's offshore waters, and two drilling for oil in Texas waters....the Gulf rig count is still up by 1 from the 16 Gulf rigs running a year ago, when all 16 Gulf rigs were drilling for oil offshore from Louisiana…in addition to Gulf rigs, there is also a directional rig drilling for oil at a depth of between 10,000 and 15,000 feet, offshore from the Kenai Peninsula of Alaska, while there were two rigs drilling offshore from Alaska in that same area during the same week a year ago, hence, the national total of 18 rigs drilling offshore this week is thus equal to the national offshore count of 18 a year ago..
In addition to rigs drilling offshore, there are now four inland water based deployed this week, all in Louisiana, and down from five last week...they include a directional rig drilling for oil at a depth of between 10,000 and 15,000 feet in Lafourche Parish, 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 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....a year ago, there were just two such rigs drilling on inland waters...
The count of active horizontal drilling rigs was down by 6 to 579 horizontal rigs this week, which was also 114 fewer rigs than the 693 horizontal rigs that were in use in the US on August 12th of last year, and is now down 57.8% from the high of 1,374 horizontal rigs that were drilling on November 21st of 2014… meanwhile, the directional rig count was unchanged at 53 directional rigs this week, while those were still up by 14 from the 39 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 22 vertical rigs this week, but those were down by 9 from the 31 vertical rigs that were in use on August 12th 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 August 11th, the second column shows the change in the number of working rigs between last week’s count (August 4th) and this week’s (August 11th) count, the third column shows last week’s August 4th 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 12th of August, 2022...
Checking the Rigs by State file at Baker Hughes for the changes in Texas Permian, where oil rigs were up by two to 322, while natural gas rigs were down by four to five, we find that there were three rigs pulled out of Texas Oil District 8, which overlies the core Permian Delaware, and that another rig was pulled out of Texas Oil District 8A, which includes the counties over the northern Permian Midland, while at the same time two rigs were added in Texas Oil District 7C, which overlies the southern Permian Midland...combined, the changes in those districts indicate a decrease of two rigs in the Texas Permian, thus accounting for the change in the national Permian count....however, since all the active Permian gas rigs has been in New Mexico as recently as two weeks earlier, New Mexico would have had to see a swap out of those for oil rigs sometime since then for four Permian gas rigs to have been shut down this week...
elsewhere in Texas, there was a rig added in Texas Oil District 2, which would account for a natural gas rig added in the Eagle Ford shale, while there was a rig pulled out of Texas Oil District 4, which accounts for the loss of one oil rig in the Eagle Ford shale; which was down two oil rigs to 51...since there are no other count changes apparent in the Eagle Ford districts 1, 2, 3 and 4, that means that an oil rig removal was offset by the addition of a rig not tracked by Baker Hughes in the same district at the same time...
in other states, the removal of an offshore oil rig from the Gulf of Mexico and an inland waters directional rig that had been drilling for oil at in Vermilion Parish accounts for the 2 rig drop in Louisiana's count, while two natural gas rigs were pulled out of Pennsylvania's Marcellus, thus accounting for the rest of the national natural gas rig change this week...finally, in Oklahoma there was an oil rig start up in the Ardmore Woodford, thus balancing the national oil rig account...
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Ascent Res. 2Q – Drilled 21 & Fracked 22 Wells, Added 20 to Sales - Marcellus Drilling News - Ascent Resources, founded as American Energy Partners by gas legend Aubrey McClendon, is a privately held company focusing 100% on the Ohio Utica Shale. Ascent, headquartered in Oklahoma City, OK, is Ohio’s largest natural gas producer (356,700 leased acres) and the 8th largest natural gas producer in the U.S. The company issued its second quarter 2023 update on Wednesday. Ascent’s net production averaged 2.1 Bcfe/d (billion cubic feet equivalent per day) during 2Q23, up 6% over 2Q22 but down from 2.2 Bcfe/d in 1Q23. The company made $250 million in profit during 2Q23, down just a bit from the $285 million it made in 2Q22.
Ascent Resources Utica Holdings reports on 2Q – Ascent Resources Utica Holdings reported its second-quarter 2023 operating and financial results.The company said it had averaged net production of 2.1 billion cubic feet of gas equivalent per day, a 6% increase year-over-year, while increasing NGL and oil production by 20% and 28%, respectively, over the same period. It reported net income and adjusted net income of $250 million and $60 million, respectively. It reported generated net cash from operating activities of $285 million and adjusted earnings before interest, taxes, depreciation and amortization of $285 million.“The second quarter was one of strong execution and excellent operational performance, as the team continues to deliver on our plan while navigating a challenging price environment,” Ascent’s Chairman and CEO Jeff Fisher said. “We successfully turned in line 20 new wells across the play, with a handful of liquids-rich wells contributing to substantial quarter-over-quarter and year-over-year gains in NGL and oil production. We remain steadfast in our commitment to maintaining production and balancing our development across all three windows of the Utica shale.”
EOG Essentially Confirms DT Midstream Building Its Utica Pipeline | Marcellus Drilling News - In 2020, EOG Resources, one of the largest oil and gas drillers in the U.S. (with international operations in Trinidad and China), sold *all* of its Marcellus assets, which were located in Bradford County, PA, to Tilden Resources for $130 million (see EOG Resources Sells Marcellus Assets for $130M, Exits Basin). EOG left the M-U building, so to speak. But the company couldn’t stay away. Last November, we told you that EOG admitted to stealthily amassing 395,000 net acres in the Ohio Utica for very little money (see EOG Resources Accumulates 395K Acres in Ohio Utica for Under $500M/). EOG calls its new position the “Ohio Utica combo play,” and it concentrates on oil drilling in the Utica. What did EOG say about its Utica program in the company’s second quarter 2023 update?
EOG Touts Dorado, Ohio Utica Natural Gas Projects as LNG Demand Poised for Takeoff --EOG Resources Inc. is advancing multiple upstream natural gas projects ahead of an expected surge in LNG export demand, management said Friday.CEO Ezra Yacob discussed an improving outlook for natural gas prices, which have plunged this year, during the Houston-based independent’s second quarter earnings call. EOG operates in all the major Lower 48 onshore basins, as well as Trinidad and Tobago, and Australia. The company was the ninth leading producer of natural gas among U.S. publicly traded firms as of the first quarter, according to NGI calculations. “Regarding North American natural gas, while inventory levels remain above the five-year average, prices have firmed up recently, reflecting a reduction in natural gas drilling and an increase in demand from both power...
Lib Dems Use Form Letters to Reduce PA’s Chances of Winning H2 Hub - Marcellus Drilling News - The League of [Liberal Democrat] Women Voters of Pennsylvania is “teaming up” with the leftist fanatics at Food & Water Watch to launch a zombie (i.e., form) letter-writing campaign, hoping to convince the U.S. Department of Energy (DOE) NOT to award a $1 billion hydrogen hub contract for any application that includes the Keystone State (there are three such applications). Cause, you know, it would involve building more fossil fuel infrastructure in the state, and *everybody* knows that fossil fuels are Satanic. The Lib Dem groups are hoping if they can’t dazzle the DOE with brilliance, they can baffle them with mountains of Barbara Streisand form letters.
Coterra Tentatively Plans to Drop $200M/Yr from Marcellus Budget - Marcellus Drilling News - Coterra Energy, formed in 2021 by the merger of Permian oil driller Cimarex Energy and Marcellus gas driller Cabot Oil & Gas, issued its second quarter 2023 update yesterday. The company made far less profit in 2Q23 than it did one year ago, in line with other big Marcellus/Utica drillers. Coterra made $209 million in profit for 2Q23, versus $1.2 billion in 2Q22. Why the drop in profit? The crashing price of natural gas over the past eight months or so. Coterra received an average of $5.54/Mcf (before hedges) for its Marcellus gas in 2Q22, and $1.78/Mcf in 2Q23, a drop of 68%. Ouch. During a conference call with analysts, company management floated a potential plan to free up around $200 million from Marcellus operations in 2024 and reallocate it to other plays (the Permian or the Anadarko) by continuing to run just two rigs and one frac crew in the Marcellus.
Expansion News from DT Midstream and Equitrans - EnergyPortal.eu - DT Midstream and Equitrans have announced plans for expansion projects in the natural gas industry. DT Midstream has greenlighted the development of a new trunkline and gathering system in the Ohio Utica Shale. This is in response to the acquisition of dedicated acreage by a large-cap producer with plans to develop the area. The Ohio Utica System will have a capacity of 200 MMcf/d and is expected to be in service by the first half of 2024.DT Midstream also intends to integrate the gathering system with downstream assets, including the NEXUS Pipeline, in which it holds a 50% ownership. The company plans to maximize capacity and utilization on NEXUS by optimizing hydraulics and is considering a potential permanent expansion of the system. Currently, NEXUS has been experiencing strong takeaway flows, with an average utilization of 85% and reaching capacity on many days.Equitrans has also begun construction activities for its Ohio Valley Connector Expansion (OVCX) project. The expansion will increase the capacity of the existing Ohio Valley Connector (OVC) by 350 MMcf/d, bringing its total capacity to 1.2 Bcf/d. The OVC transports gas from northern West Virginia and southwestern Pennsylvania to Clarington, OH, and has interconnects with Equitrans’ Mainline and Sunrise Transmission System, as well as with REX and Rover pipelines.These expansion projects reflect the growing demand for natural gas in the region and the need for infrastructure to transport and deliver the resource. These developments will contribute to the overall growth and efficiency of the natural gas industry in the Ohio Utica Shale and surrounding areas.
Appalachia Natural Gas Midstream Expansions Heat Up | RBN Energy In a note a couple weeks ago, we discussed Williams' plans to ramp up brownfield expansions on Transco Pipeline, citing an influx of supply from Mountain Valley Pipeline (MVP) and increasing demand from downstream markets. This week, there was more expansion news from DT Midstream and Equitrans:DT Midstream said in its second-quarter earnings call that it has greenlighted and moved up the development of a new trunkline and gathering system to move associated gas from new wells drilled in the liquids-rich window of the Ohio Utica Shale. DTM accelerated its timeline for the project after the dedicated acreage held by a small private producer was acquired by a large-cap, investment-grade producer with plans to develop the area. The initial buildout of the Ohio Utica System will include a new trunkline and backbone of the gathering network with a capacity of 200 MMcf/d, and DTM is targeting in-service in H1 2024.DTM is looking to integrate the gathering system with downstream assets, including the NEXUS Pipeline, of which it has 50% ownership. DTM leadership also said on the call that it is looking to maximize capacity and utilization on NEXUS by optimizing hydraulics and hinted that it is assessing the possibility of a permanent expansion of the system. Appalachia takeaway flows on NEXUS have averaged 1.1 Bcf/d this summer to date, or 85% utilization. Average utilization was 87% in winter 2022-23 and reached or slightly exceeded the 1.3 Bcf/d capacity on many days. Equitrans informed FERC this week that it began construction activities for its Ohio Valley Connector Expansion (OVCX) project on August 3, after receiving a notice to proceed from FERC on July 31.) The expansion will increase capacity on the existing Ohio Valley Connector (OVC) by 350 MMcf/d, bringing its total capacity to 1.2 Bcf/d. OVC moves gas from northern West Virginia and southwestern Pennsylvania and delivers gas to Clarington, OH, and has interconnects with Equitrans’ Mainline and Sunrise Transmission System, as well as with REX and Rover pipelines.
18 New Shale Well Permits Issued for PA-OH-WV Jul 31 – Aug 6 | Marcellus Drilling News - New shale permits issued for Jul 31 – Aug 6 in the Marcellus/Utica were down a lot from the previous week. There were 14 new permits issued last week, down more than half from the 29 issued the previous week. Last week’s permit tally included just 4 new permits in Pennsylvania (very low), 14 new permits in Ohio, and no new permits in West Virginia (for the second week in a row). The top permittee for the week was Encino Energy, receiving 8 permits spread evenly between Harrison and Tuscarawas counties in Ohio. ASCENT RESOURCES | COLUMBIANA COUNTY | COTERRA ENERGY (CABOT O&G) | ENCINO ENERGY | GUERNSEY COUNTY | HARRISON COUNTY |HILCORP ENERGY | REPSOL | SUSQUEHANNA COUNTY | TUSCARAWAS COUNTY
Mysterious Oil Spill Reported in Machias - On Wednesday, Aug. 9 at approximately 1 p.m., Machias police were called to investigate a mysterious oil spill in front of the Machias Valley New Observer (MVNO) office on 41 Broadway. The police were alerted by a neighbor living next door to the newspaper office. Upon arriving at the scene, Chief Keith Mercer and another officer noticed a strong smell of oil or a similar substance in the air. They discovered a wide area of Broadway that was soaked in the oily substance. Chief Mercer immediately requested the assistance of the Machias Fire Department to spread absorbent material on the road in order to contain and clean up the spill. Initially, Chief Mercer suspected that an oil truck might have been responsible for dumping the oil. However, he now believes that the spill could have been caused by a 55-gallon drum falling off a truck and splitting open. Witnesses informed the police that a black truck had been seen stopped in the area just before the spill was reported. Despite efforts to determine the exact cause of the spill, Chief Mercer admits that without further information or witnesses coming forward, it is unlikely that they will be able to establish the cause definitively. Although Broadway was briefly reduced to a single lane while the fire crew spread absorbent material on the road, it was never completely closed to traffic. The fire crew was able to clear the scene by 1:45 p.m.
US natgas gains as hot weather forecasts offset higher output (Reuters) - U.S. natural gas futures firmed on Tuesday as hotter than normal weather kept air conditioning demand high, especially in Texas, offsetting pressure from rising output. Front-month gas futures for September delivery on the New York Mercantile Exchange settled 5.2 cents, or 1.9%, higher at $2.777 per million British thermal units (mmBtu). Warmer than normal weather in the densely populated states, continued heat in Texas, and indications that LNG export facilities are ramping up in anticipation of higher winter demand are all providing a more stable and supportive market for prices, said Gary Cunningham, director of market research at Tradition Energy. "Especially when you layer on the fact that we're seeing drilling CapEx cutbacks by several natural gas major players, we expect natural gas production to sort of plateau at just over 100 billion cubic feet a day through the end of the year and probably into early 2024." Power demand in Texas hit an all-time high on Monday and will likely break that record again this week as homes and businesses keep their air conditioners cranked up during the lingering heat wave, according to forecasts by the Electric Reliability Council of Texas (ERCOT), the state's power grid operator. Extreme heat boosts the amount of gas burned 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 from wind (22%), coal (16%), nuclear (8%) and solar (4%), federal energy data showed. Meteorologists forecast the weather in the Lower 48 states will remain hotter than normal through at least Aug. 23. Data provider Refinitiv forecast U.S. gas demand, including exports, would rise from 101.8 billion cubic feet per day (bcfd) this week to 105.2 bcfd next week as power generators burn more of the fuel and exports rise. Refinitiv said average gas output in the U.S. Lower 48 states was 102.1 bcfd so far in August, up from 101.8 bcfd in July. That compares with a monthly record of 102.2 bcfd in May. Gas flows to the seven big U.S. LNG export plants have fallen from an average of 12.7 bcfd in July to 12.2 bcfd so far in August due mostly to a reduction at Cheniere Energy's Sabine Pass in Louisiana. That compares with a monthly record of 14.0 bcfd in April. The U.S. is on track to become the world's biggest LNG supplier in 2023 - ahead of recent leaders Australia and Qatar - as much higher global prices continue to feed demand for U.S. exports due to supply disruptions and sanctions linked to the war in Ukraine. 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.
Natural gas' $3 razzle-dazzle over in just a day - -- Now you see it, now you don’t: That’s how natural gas’ latest run to $3 pricing was, with speculation of production tightness resulting in a near 7% rally unwound within a day by a bearish storage report. The front-month September gas contract on the New York Mercantile Exchange’s Henry Hub settled at $2.763 per mmBtu, or million metric British thermal units — down 19.6 cents, or 6.6% on the day. In Wednesday’s session, September gas settled up 6.6% as well, after reaching a near seven-month high of $3.018. Prior to that, the last time gas prices on the hub crossed $3 was during the week to Jan. 20, when they peaked at $3.595. That rally was triggered by speculation that America’s favorite fuel for indoor cooling and heating might be facing a supply squeeze from pipeline issues. Prior to Wednesday, the market had been stuck at mid-$2 for months as production often came in higher than thought, with weather conditions less intense than projected, resulting in less power burns than forecast for heating and cooling. Analysts at Gelber&Associates, a Houston-based energy markets advisory, had warned earlier this week about maintenance issues on the NEXUS and REX pipelines that could slow gas production, which had often breached the daily threshold of 1 billion cubic feet, or bcf. Nexus is an approximately 256-mile, 36-inch interstate natural gas transmission pipeline designed to transport up to 1.5 bcf of daily gas delivery from feed points in eastern Ohio to southeastern Michigan. REX, an acronym for the Rockies Express Pipeline, is a 1,679-mile (2,702 km) long gas delivery gas system from the Rocky Mountains of Colorado to eastern Ohio. But any concerns of supply tightness were offset by the U.S. Energy Information Administration’s weekly report Thursday on natural gas inventories, which showed gas stockpiles rising 29 billion cubic feet, or bcf, during the week ended Aug. 4 — versus a forecast injection of 25 bcf and a prior weekly build of 14 bcf. Total gas held in underground caverns across America was at 3.03 trillion cubic feet last week — up 21.4% from a year ago and 11.2% higher versus the five-year average. “Large buying from short-covering is therefore likely finished for now and will no longer provide bullish support,” Gelber’s analysts added.
Here's where Louisiana's LNG facilities will be located - Liquefied natural gas is a booming industry in Louisiana, and it’s only set to grow in the coming years. Three of the nation’s seven LNG export terminals are already in operation here, and 10 more new facilities are scheduled to be open by the end of the decade, if all goes to plan. Another one is in the works but doesn't have an announced timeline yet. The new projects are in various stages. Some are under construction, while others are still awaiting federal or state permits. Others have received their permits but have yet to move forward as their parent companies wait to make a final investment decision. The projects are underway amid high demand for LNG worldwide. Industry supporters say it's the best way to transition from dirtier fuel sources like coal and to wean Europe off Russian natural gas following the country's war in Ukraine. However, environmental advocates say natural gas is still a fossil fuel that spews out far too many emissions to be considered a clean energy source. Here is a map of Louisiana’s existing and proposed LNG facilities and where they will be located should they come to fruition as expected.
Gas Prices Inch Higher As TotalEnergies Shuts Down Port Arthur Refinery -was forced to shut down a unit at its 225,000-barrels-per-day refinery at Port Arthur in Texas due to a leaky pump, adding to other refinery outages that have pushed U.S. gasoline prices higher in recent days alongside the rise in crude oil prices. Total's U.S. unit of the French energy major, said in a statement, carried by Dow Jones, that “A pump located in unit 825 developed a leak that reached the reportable quantity of un-speciated volatile organic compounds.” “The unit is being shut down in order to isolate the pump and stop the leak,” the refinery operator added. The emissions from the incident ended on Thursday night after 11 hours. The refinery, 95 miles east of Houston, is one of TotalEnergies' six refining and petrochemicals platforms worldwide, and the company’s largest facility in the United States. Last week, the same refinery reported an operational disruption and gas emissions after the cogeneration unit at Port Arthur experienced a unit upset due to a loss nitrogen oxides steam injection. The latest incidents at TotalEnergies’ Port Arthur refinery add to other disruptions and outages at refineries on the U.S. Gulf Coast in recent days. Last week, an unexpected shutdown at the gasoline-making unit of ExxonMobil’s refinery at Baton Rouge, Louisiana, sent U.S. gasoline futures rallying to the highest since October 2022. Repairs at the Exxon refinery could take weeks and last for the rest of the driving season, thus reducing gasoline supply to the market. Gasoline prices are also responding to the recent rise in crude oil prices. This summer, gasoline prices are rising amid heatwave-related outages at some domestic refineries and WTI Crude jumping back to above $80 per barrel.
Some Permian E&Ps Reporting Softer OFS, Materials Costs Some Permian Basin-focused exploration and production (E&P) executive teams – Callon Petroleum Co., HighPeak Energy Inc. and Permian Resources Corp. to name a few – are reporting that oilfield services (OFS) and material prices softened during the second quarter. Houston-based Callon Petroleum Co. CEO Joe Gatto said OFS equipment prices dropped slightly. Gatto hosted a conference call to discuss earnings. Callon has exited the Eagle Ford Shale and expanded in the Permian’s Delaware sub-basin. Gatto said elevated prices for OFS equipment are softening. Callon “recently recontracted two drilling rigs at rates that were below our previous rates. Spot market items like steel casing and sand are being priced down between 15-20%, and we are also starting to realize price...
Our Oil Predicament Explained: Heavy Oil And The Diesel Fuel It Provides Are Key - by Gail Tverberg via OurFiniteWorld.com -- It has recently become clear to me that heavy oil, which is needed to produce diesel and jet fuel, plays a far more significant role in the world economy than most people understand. We need heavy oil that can be extracted, processed, and transported inexpensively to be able to provide the category of fuels sometimes referred to as Middle Distillates if our modern economy is to continue. A transition to electricity doesn’t work for most heavy equipment that is powered by diesel or jet fuel. A major concern is that the physics of our self-organizing economy plays an important role in determining what actually happens. Leaders may think that they are in charge, but their power to change the way the overall system works, in the chosen direction, is quite limited. The physics of the system tends to keep oil prices lower than heavy oil producers would prefer. It tends to cause debt bubbles to collapse. It tends to squeeze out “inefficient” uses of oil from the system in ways we wouldn’t expect. In the future, the physics of the system may keep parts of the world economy operating while other inefficient pieces get squeezed out. In this post, I will try to explain some of the issues with oil limits as they seem to be playing out, particularly as they apply to diesel and jet fuel, the major components of Middle Distillates. [1] The most serious issue with oil supply is that there seems to be plenty of oil in the ground, but the world economy cannot hold prices up sufficiently high, for long enough, to get this oil out.As I frequently point out, the world economy is a physics-based system. World oil prices are set by supply and demand. Demand is quite closely tied to what people around the world can afford to pay for food and for transportation services because the use of oil is integral to today’s food production and transportation services.Heavy oil is especially involved in this affordability issue. As oil becomes “heavier,” it becomes more viscous, and thus more difficult to ship by pipeline. If oil is very heavy, as is the oil from the Oil Sands of Canada, it needs to be mixed with an appropriate diluent to be shipped by pipeline.Heavy oil often has sulfur and other pollutants mixed in, adding costs to the refining process. Furthermore, heavy oil, especially very heavy oil, often needs to be “cracked” in a refinery to provide a desirable mix of end products, including diesel, jet fuel, and gasoline. This, too, adds costs. Otherwise, there would be too much of the product mix that would be like asphalt. Also, as noted previously, even if the costs of production are high, the selling price of diesel cannot rise very high without raising food prices. This tends to keep the prices of heavy crude oils below those for lighter crude oils.Many people believe that the high level of “Proved Oil Reserves” worldwide makes it certain that businesses can extract as much oil as they would like in the future. A major issue is whether these reserves mean as much as people assume they do. Oil reserves of OECD countries (an association of the US and other rich countries) are likely to be audited, but reserves of other countries may not be. Asking a relatively poor oil-exporting country the amount of its oil reserves is like asking the country how wealthy it is. We should not be surprised by fibbing on the high side. The problem is that the vast majority of reported oil reserves (85%) are held by non-OECD countries. These reserves may be significantly overstated.Also, even if the reserves are fairly reported, will the country have the resources to extract these reserves? Venezuela reports the highest oil reserves in the world thanks to its heavy oil in the Orinoco Belt, but it extracts a relatively small amount per year. An October 2022 article says that the country is waiting for foreign investment to expand production.Going forward, oil companies everywhere need to worry about broken supply lines for necessary items, such as steel drilling pipe. They need to worry about finding enough trained workers. They need to worry about the availability of debt and the interest rate that will be charged for this debt. If private oil companies look at the true prospects and find them too bleak, they will likely use their profits to buy back the shares of their own oil companies instead (as is happening now).
Private equity gets into oil and gas — Where private equity investors make acquisitions,bankruptcies tend to follow. Brands from Radio Shack to Toys R Us went under after being bought by these firms, as did the company that made the Instant Pot, and hundreds of local newspapers endured layoffs and reduced coverage. Now, private equity investors appear to have found a new target: oil and gas companies operating on public land in the Western U.S. A new report from Public Citizen, a nonprofit progressive think tank, reveals the industry’s interest in oil and gas extracted from public land in the West (the Private Equity Stakeholder Project co-authored the report). Companies backed by private equity have taken in 78% of all federal drilling permits approved in Colorado since 2017, and 50% of those in Utah. In total, according to the report, private-equity-backed companies hold approximately $380 million in unplugged oil and gas wells in four Western oil states: Colorado, New Mexico, Utah and Wyoming.In general, private equity refers to investors, such as hedge funds or venture capital outfits, that borrow large amounts of money to acquire struggling companies. The newly acquired company is then saddled with that accumulated debt. Meanwhile, the private equity firm tends to repay itself and its investors using fees, shareholder payments and debt restructuring. These tactics often mean big returns the private equity fund’s investors.But since private equity tends to focus on declining industries, this profit-squeezing model can result in the acquired companies going bankrupt. The Public Citizen study noted that private equity firms chew through companies quickly, holding them for an average of five years. And when oil companies go bankrupt, orphaned wells can be left behind to leak methane into the atmosphere, while the costs of plugging them ultimately falls on the public.“The overall point that we’re trying to make is that private equity’s involvement in Western oil drilling adds a layer of uncertainty because these companies turn over,” said Alan Zibel, a research director at Public Citizen. “They get in and they get out very quickly. So it really starts this chain of selling these companies to more and more potentially irresponsible actors.”
Pipeline operators to pay $12.5M after crude oil spills in Montana, North Dakota (AP) — Two pipeline operators have agreed to pay a $12.5 million civil penalty related to crude oil spills in Montana and North Dakota. The U.S. Environmental Protection Agency on Monday announced the settlement in a2022 federal court lawsuit. Belle Fourche Pipeline Company and Bridger Pipeline LLC will pay the $12.5 million to resolve the claims made under the Clean Water Act and Pipeline Safety Laws, the EPA said. The affiliated companies own and operate oil pipelines in Montana, North Dakota and Wyoming. In 2015, Bridger’s Poplar Pipeline broke and spilled more than 50,000 gallons (about 190,000 liters) of crude into the Yellowstone River near Glendive, Montana. Bridger has completed cleanup of the site, and in 2021 settled a lawsuit with federal and Montana authorities for $2 million. Montana’s Department of Environmental Quality previously fined Bridger $1 million in the case.In 2016, Belle Fourche’s Bicentennial Pipeline in Billings County, North Dakota, broke due to a landslide and spilled over 600,000 gallons (about 2.3 million liters) of oil, impacting an unnamed tributary, Ash Coulee Creek and the Little Missouri River. Belle Fourche’s cleanup is ongoing with oversight from North Dakota’s Department of Environmental Quality, according to the EPA.The agreement announced Monday does not resolve all issues with the Ash Coulee spill and reserves the government’s right to bring future legal claims.The $12.5 million civil penalty includes a nearly $4.6 million portion for North Dakota’s Department of Environmental Quality. Belle Fourche also will pay the state’s past response costs, totaling over $98,000, according to court documents filed Monday.“Oil pipeline spills can cause enormous and long-lasting damage to the environment,” Principal Deputy Assistant Administrator Larry Starfield of the EPA’s Office of Enforcement and Compliance Assurance said in a statement. “This settlement holds Belle Fourche and Bridger Pipeline accountable for their significant oil spills and requires them to take meaningful measures to prevent future spills from their oil pipelines.”The operators also are required to implement specified compliance measures, in addition to the civil penalty.
Ukrainians move to North Dakota for oil field jobs to help families facing war back home - (AP) — Maksym Bunchukov remembers hearing rockets explode in Zaporizhzhia as the war in Ukraine began. Now, about 18 months after the war broke out, Bunchukov is in North Dakota, like thousands of Ukrainians who came over a century ago. He is one of 16 new arrivals who are part of a trade group’s pilot effort through theUniting for Ukraine humanitarian program to recruit refugees and migrants during a workforce shortage. Twelve more Ukrainians are scheduled to arrive by Aug. 15 as part of the North Dakota Petroleum Council’s Bakken Global Recruitment of Oilfield Workers program. Some workers want to bring their families to North Dakota while others hope to return to Ukraine. The Bakken program has humanitarian and workforce missions, said Project Manager Brent Sanford, a former lieutenant governor who watched the Bakken oil rush unfold during his time as mayor of boomtown Watford City from 2010 to 2016. The oil boom initially was met by an “organic workforce” of western North Dakotans with experience in oil field jobs elsewhere, but as the economy reeled from the Great Recession, thousands of people flocked to the Bakken oil field from other states and even other countries to fill high-wage jobs, Sanford said. But the 2015 downturn, coronavirus pandemic and other recent shocks probably led workers back to their home states, especially if moving meant returning to warmer and bigger cities, Sanford said. Workforce issues have become “very acute” in the last 10 months, Ness said. Ness estimated there are roughly 2,500 jobs available in an oil field producing about 1.1 million barrels per day. Employers don’t advertise for every individual job opening, but post once or twice for many open positions, he said. An immigration law firm told Ness that Uniting for Ukraine would fit well for North Dakota given its Ukrainian heritage, similar climate and agrarian people, he said.
SoCalGas Agrees to $71M Settlement Tied to Aliso Canyon Natural Gas Leak in 2015 -- Regulators and Southern California Gas Co. (SoCalGas) have reached a $71 million settlement over the 2015 Aliso Canyon natural gas leak, the largest in U.S. history. The California Public Utilities Commission (CPUC) said late Thursday the agreement requires Sempra Energy’s SoCalGas to pay the penalty into the Aliso Canyon Recovery Account. The California Legislature created the account to address public health fallout from the leak, which started in October 2015 and lasted until February 2016. Nearly 100,000 tons of methane were released into the atmosphere during that span. The agreement further prevents SoCalGas from recovering the settlement’s costs from ratepayers. The utility also cannot bill customers for various other costs related to the leak, including $1.8 billion...
‘Dangerous pivot’ on overseas oil and gas deals splits Biden administration - The Biden administration is retreating from its promises to stop funding oil and gas projects overseas, triggering a split among senior officials over whether to prioritize climate change or the diplomatic alliances the White House has deemed critical to counter Russia and China. Federal agencies have approved funding for proposals like renovations to an Indonesian oil refinery and shipments of natural gas to Poland — sometimes over the objections of President Joe Biden’s special climate envoy, John Kerry, and Democratic lawmakers. The policy shift shows how the fraught global political situation caused by the war in Ukraine and Washington’s tense rivalry with Beijing is threatening environmental goals. Democratic lawmakers and environmentalists fear the change could erode U.S. climate leadership as greenhouse gas emissions rise steadily and temperatures soar. “The Biden administration continues to approve one fossil project after another, which completely undermines our international dialogue for a faster transition to renewables and undermines our credibility,” said Sen. Jeff Merkley (D-Ore.), who along with Sen. Ed Markey (D-Mass.) has pressed the White House for information on its policy for funding the oil and gas projects. But defenders of the shift say it is a pragmatic change that acknowledges European allies are dependent on Russian energy exports and developing nations are wary of China’s growing influence. “No one’s overlooking the climate consequences of these policies, but they are being weighed against the broader foreign policy, economic policy and security policies in United States,” said Landon Derentz, who worked on international energy policy at State, the Energy Department and the White House during the Obama, Trump and Biden administrations before leaving last year. The White House did not provide a comment for this story.
Canadian E&Ps, Pipelines and Utilities Recovering After Fires Scorched 2Q Natural Gas, Oil Output - Canada’s natural gas and oil sector faced daunting challenges during the second quarter because of the still-unfolding wildfire season, but activity overall has recovered, according to some of the top operators. Exploration and production (E&P) companies, midstream operators, oilfield services (OFS) providers and utilities reported big and small impacts to their operations between April and June because of the massive number of forest fires. Canada’s traditional wildfire season continues through September. Calgary-based E&Ps at one point in the quarter had shuttered at least 319,000 boe/d, or 3.7% of Canada’s total production, according to one government tally. Most production has since recovered, and some E&Ps even expect to exceed their initial...
Keyera Overcomes Canadian Wildfire Outages as KAPS Starts Up, Moving Supply from Grand Prairie -- The full ramp-up of a dual pipeline to transport natural gas liquids from Canada’s Grand Prairie production area helped improve the bottom line for Calgary-based Keyera Corp. during 2Q2023, even with outages related to the Canadian wildfires. The Calgary-based midstream operator began service in June through the second leg of the Key Access Pipeline System (KAPS). Keyera partners in KAPS with Stonepeak Partners LP. Condensate from a separate system began operations earlier this year. “Our basin continues to grow and set new records for both natural gas and crude oil production,” executives said. “As an essential infrastructure service provider, Keyera will continue to play an integral role in enabling basin growth.”
LUSCO aware of oil particles discovered on the shoreline following Buckeye oil spill --- OIL particles were reportedly discovered this week along the coastline in several upscale residential communities in the Lucaya area. #In a statement on Tuesday, Lucaya Service Company Limited (LUSCO), said it is aware of the recent discovery of trace amounts of oil particles along the shoreline and embankments near Fortune, Churchill, and Spanish Main beaches. #“The matter is under investigation and being contained and remediated with the utmost level of urgency,” said LUSCO. #LUSCO is responsible for the maintenance of properties in subdivisions developed by the Grand Bahama Development Company Limited (DEVCO). #The company indicated that it is in communication with the Department of Environmental Planning and Protection (DEPP), the Government Port Department, the Grand Bahama Port Authority’s Environmental Department, and the relevant agencies and stakeholders for ongoing monitoring. #On August 2, Buckeye Bahamas Hub reported that a spill occurred at approximately 5.54am on August during a flushing operation to facilitate the transfer of products between two tanks at its marine terminal off Pinder’s Point. #The company said approximately five to ten barrels of product fuel was released, and that was estimated that between two and three barrels of the product went into the water. #Environment and Natural Resources Minister Vaughn Miller, Senator Michael Halkitis, State Minister for Finance, and acting Minister for Grand Bahama, and a team from various government agencies travelled to Freeport to assess the situation and met with Buckeye officials. #The government agencies leading the investigation are the Port Department, the Department of Environmental Planning and Protection, and the Department of Environmental Health Services.
European Gas Prices Surge 30% On Australian Supply Fears -European natural gas prices have rocketed more than 30% on Wednesday, as traders panicked over the possibility of reduced LNG supply from Australia, a world leading supplier of the commodity. The European benchmark,TFF, jumped to as high as €42 per megawatt hour in Wednesday intraday trading, 35% higher than the previous day, and its highest point since mid-June.Commodity analysts have said that the sudden jump was likely due to some traders rushing to close their short positions on the news of tightening supplies. Europe has failed to secure enough long-term LNG contracts to offset cut-off Russian gas imports, with Reuters earlier predicting this may prove costly next winter and could sharply tighten the market. The European Union views natural gas as a bridge fuel in the transition to renewable energy, and buyers generally struggle to commit to long-term contracts. This means that Europe might be forced to buy more from the spot markets like it did in 2022, which in turn is likely to push prices up:"Since the green lobby in Europe has managed to persuade politicians wrongly that hydrogen to a large extent can replace natural gas as an energy carrier by 2030, Europe has become far too reliant on spot and short term purchases of LNG," consultant Morten Frisch earlier told Reuters.Last year, Australia emerged as the world’s leading exporter of LNG, shipping 82.0 million tonnes (Mt) of LNG2 valued at $63 billion, a new world record. That figure eclipsed 81.2 Mt exported by Qatar and 79.1 Mt exported by the United States. But some gas experts have claimed that Australia could soon lose its lead in the gas business due to a host of challenges including reserves not being fully replaced despite important legacy gas fields reaching the end of their lives, growing domestic demand and more regulatory scrutiny.Australia has 10 operating LNG projects located in Western Australia, Queensland and the Northern Territory with a total capacity of 88.6 million tonnes per annum (Mtpa). The Pluto Train 2 project currently under construction will bring total capacity to 93.6 Mtpa (126 Bcm) when it starts operations in 2026. Australian LNG projects have a good reliability track-record (achieved 93% of nameplate capacity in 2022).
European gas prices expected to rise amid Australia LNG supply fears - Energy analysts believe the bullish momentum for European natural gas prices will persist over the coming months after futures jumped almost 40% on Wednesday. Fears over possible supply disruption in Australia saw the front-month gas price at the Dutch Title Transfer Facility (TTF) hub, a European benchmark for natural gas trading, hit its highest level since mid-June on Wednesday. It rose to an intraday high of more than 43 euros ($47.4) per megawatt hour before paring gains and extended losses on Thursday. The contract was last seen trading at around 36.6 euros. In the U.S., meanwhile, gas futures for September delivery on the New York Mercantile Exchange rose 6.6% on Wednesday to settle at $2.96, reflecting their best daily performance since mid-June and the highest closing price since early March. The surge in gas prices came on news of a potential liquefied natural gas (LNG) facility strike at major plants in Australia as workers campaign for higher pay and improved job security. Zongqiang Luo, gas analyst at energy consultancy Rystad Energy, said the price spike reflected the likelihood of the strike materializing, which would in turn impact LNG supplies during ongoing heatwaves despite ample gas inventories in Europe. "The potential strike would be led by Australian workers at Chevron and Woodside Energy Group, which may interrupt four LNG facilities," Luo said in a research note. They added that the prospect of a strike could disrupt approximately half of Australia's LNG export capacity and prompt many Asian buyers to try to source their LNG cargoes elsewhere. China and Japan, for instance, purchased 26 million metric tons of Australian LNG combined in the first half of the year, Luo said, noting this accounted for over 60% of the country's exports over the period. "Looking ahead, we expect the bullish outlook for gas prices to continue with fewer LNG imports to Europe, planned maintenance for Norwegian pipelines and continued heatwaves in multiple regions globally," Luo said. For Europe, the spike in gas prices comes as the euro zone continues to wean itself off Russian fossil fuel exports following the Kremlin's full-scale invasion of Ukraine. John Evans, an analyst at brokerage PVM, said that despite countries such as Germany securing large gas deals with other countries, "there still remains a possibility of a shortfall and a reversion to having to buy at spot as seen in 2022." "Australia is now the highest exporter of LNG, beating Qatar and the US, but with production issues and compromised gas fields, European buyers are fearful of security in supply and have resorted to tank filling from the cash market before the onset of winter," Evans said in a research note. The extension of a force majeure declared in Nigeria in October last year was adding to tightness in the LNG market, Evans continued, with fields struggling to regain production after heavy flooding. "At present it does not appear that there is anything untoward in the energy sector to upset this rally," he said.
Bunker Operations Resume in Gibraltar After Oil Spill - Bunker operations resumed in Gibraltar over the weekend after last week's marine fuel spill. Bunker operations were allowed to go ahead in Gibraltar as of midday on Saturday, the Gibraltar Port Authority said in a statement on its website. Gibraltar is the largest bunkering location in the Mediterranean, with about 4 million mt/year of fuel deliveries. "Yellow flags have been raised at both Little Bay and Camp Bay," the authority said. "This will be constantly monitored and beachgoers are asked to report any sightings of oil or sheen to the lifeguards. "Red flags may be raised again if necessary. "Booms are being replaced in Rosia Bay, whilst the coastal clean-up continues. "Vessels continue to skim in the area for freefloating sheen with sorbent booms. "The Captain of the Port takes this opportunity to thank the port operators and the public for their understanding and cooperation throughout the oil spill response." An estimated 1,000-2,000 litres of VLSFO was spilled while the Gas Venus was being bunkered at Gibraltar on August 1 as a result of the vessel's tanks overflowing. Gibraltar is the largest bunkering location in the Mediterranean, with about 4 million mt/year of fuel deliveries. Ship & Bunker News Team
Oil spill gas tanker released from detention after operator pays £1.5m bond - The gas tanker that leaked fuel oil into the Bay of Gibraltar last week during a bunkering operation was released from detention on Thursday and allowed to sail from the Rock after its operator deposited a £1.5m bond to cover clean-up costs. The vessel Gas Venus departed Gibraltar late Thursday evening. The ship was detained on the day of the spill while an investigation was conducted into the cause of the incident. Officials estimate that between 1000 and 2000 litres of heavy fuel oil entered the sea when something went wrong during a refuelling operation at anchorage just off the South Mole. The spill reached areas of the rocky shoreline, particularly in the area of Rosia Bay where a clean-up operation has been going non-stop to remove as much of the oil as possible from what is classed as a sensitive conservation site. While the spill was relatively minor and most of the oil has been mopped up thanks to the efforts of official clean-up teams and volunteers, the incident has again focused attention on the impact of commercial maritime activity on the environment in British territorial waters around the Rock. The detention order on the Gas Venus was lifted under the authority of the Captain of the Port, John Ghio, upon the receipt by the Gibraltar Port Authority of a cash bond in the sum of £1.5 million. “This ensures that the costs of all oil spill response and clean-up operations are covered,” No.6 Convent Place said in a statement. “The vessel’s departure from Gibraltar will have no effect on the ongoing investigation as all evidence from the Gas Venus has already been collected.” “Clean-up operations remain focused on the area of Rosia Bay and continue to progress well.” In the wake of the incident, the ship’s captain, 56, was interviewed and arrested by the Royal Gibraltar Police on suspicion of a pollution offence under port rules. The captain remains on police bail and is in Gibraltar. He is due to surrender to bail within the next two weeks.
Section Of Russia-Europe Oil Pipeline Halted After Leak - Poland’s pipeline operator PERN said on Sunday it had halted a section of the Druzhba pipeline carrying oil from Russia to Europe after detecting a small leak that is being fixed, with oil flows set to be restored by Tuesday.The damaged section, where there is no indication of the leak being caused by a third party, is under repairs now, the company said in a statement carried by Reuters.“The expected time for pumping to resume is Tuesday morning,” PERN said.Security of supply to Germany is “fully guaranteed,” a spokesperson for the German federal Economy Ministry told Reuters.Apart from the section under repair, other parts of the infrastructure operated by PERN are operating as usual, including the Pomeranian section, which is used to pump crude oil arriving in tankers to Poland and then further to Germany, the company said.Parts of the Druzhba pipeline have come under attack since the Russian invasion of Ukraine.Earlier this year, a pumping station on the Druzhba oil pipeline was shelled in a western Russian region bordering Ukraine and Belarus, but the oil flows continued.The Druzhba pipeline is a key artery of oil supply from Russia to Europe, with two branches – a northern one via Belarus to Belarus, Poland, Germany, Latvia, and Lithuania, and a southern one passing through Ukraine and sending oil to the Czech Republic, Slovakia, Hungary, and Croatia.Flows through the Druzhba pipeline are exempted from the EU embargo on imports of Russian crude oil by sea that came into effect on December 5. The EU has exempted pipeline oil flows to landlocked EU member states from the ban.Nevertheless, Germany and Poland have said they would halt imports of Russian crude via the Druzhba pipeline as of January 1. Germany did it on the first day of this year, following through on a previous pledge to stop buying Russian pipeline crude despite the fact that the EU embargo exempts pipeline flows from Russia to Europe.
Poland hopes to fix leak in Russia's Druzhba oil pipeline by Tuesday (Reuters) - Polish pipeline operator PERN said it had halted pumping through a section of the Druzhba pipeline, which connects Russia to Europe, after detecting a leak in central Poland on Saturday, but it expects flows to resume on Tuesday. PERN said there was no indication a third party had caused the leak, which follows a series of attacks on pipelines carrying Russian oil and gas since Moscow launched its invasion of Ukraine in 2022. "PERN services have reached the damaged section of one of the lines of the western section of the Druzhba pipeline in the commune of Chodecz," PERN said earlier on Sunday. "It is the main line that transports crude oil from sea deliveries to the west. Repair work on the oil pipeline is currently underway. The expected time for pumping to resume is Tuesday morning." PERN did not say what the impact would be on supply to Germany, but a spokesperson for the federal Economy Ministry in Berlin said: "We are in contact with the operators of the east German refineries. The security of supply is still fully guaranteed." Firefighters and PERN emergency services were at the scene but there were no reports of a fire. "The part of the pipeline that was affected by the leak was cut off from the rest, so the scale of the leak is not huge, we're talking about a rectangular area measuring 30 by 210 metres (yards)," Grzegorz Jankowski from the State Fire Services in Wloclawek told private broadcaster TVN24. PERN said the second line was operating normally and there was no health threat to local residents. It said supply to Polish refineries was not impacted and that it was in contact with German partners receiving oil through the pipeline. Germany stopped buying Russian oil in January, but German media have reported that Kazakh oil was being imported through the line. Germany's industry association for fuels and energy did not immediately respond to requests for comment. "Other elements of PERN's infrastructure, including (Druzhba's) Pomeranian section, which is used to pump crude oil arriving in tankers to Poland and then further to Germany, are operating in standard mode," PERN said in its statement. The Druzhba oil pipeline is one of the world's largest and can carry 2 million barrels per day. The total capacity of the western section of both lines that carry oil from central Poland to Germany is 27 million tonnes of crude oil per year. Flows through the Druzhba pipeline have dropped sharply since Russia's invasion of Ukraine and pipeline infrastructure has been hit several times since in attacks that Moscow has blamed on Ukraine. Ukraine has not acknowledged the attacks. Europe has been on high alert over the security of its energy infrastructure since major leaks were found in the Nord Stream 1 and 2 gas pipelines running from Russia to Europe under the Baltic Sea in September. The leaks were found to have been caused by unexplained explosions that ruptured both pipelines. Moscow has blamed Ukraine and the West for the blasts, which occurred as Europe was reducing its reliance on Russian energy in response to the Russian invasion of Ukraine. Ukraine and Western leaders have denied any responsibility for the attacks, calling them an act of sabotage that they are investigating.
Polish operator starts repairs on pipeline carrying oil from Russia to Europe after detecting a leak (AP) — Poland’s oil pipeline operator said Sunday repairs are underway to a pipeline carrying oil from Russia to Germany that was temporarily shut down after a leak was discovered.The operator, PERN, said the pipeline is expected to resume normal operations on Tuesday.PERN said it detected the leak near Chodecz, a town in central Poland about 145 kilometers (90 miles) west of Warsaw. The leak was on one of the two lines that comprise the western section of the Druzhba (Friendship) pipeline.The company said it immediately halted pumping through the faulty pipeline, but the second line was operating normally.Firefighters and emergency services secured the area. An investigation into the cause of the the leak was underway, PERN said.The company said in a statement Sunday that crews have reached the damaged section of the pipeline and that repairs were underway.The Druzhba pipeline stretch carries oil from Russia to refineries in Poland, Germany, Hungary, Slovakia and the Czech Republic, according to the Polish state news agency PAP.
Poland says it fixes leak in Druzhba oil pipeline -(Reuters) - Polish pipeline operator PERN said on Tuesday that it had restored the Druzhba oil pipeline to full functionality as expected, after a leak had been discovered. PERN halted pumping through a section of the pipeline, which connects Russia to Europe, after detecting a leak in central Poland on Saturday. The operator said on Sunday there was no indication that a third party had caused the leak, which follows a series of attacks on pipelines carrying Russian oil and gas since Moscow launched its invasion of Ukraine in 2022. "PERN's technical services restored full functionality of the damaged pipeline on Monday evening," the operator said in a statement. "Now the company's focus will focus on clearing the area and restoring it to its proper condition." Germany, which receives supplies through the pipeline, stopped buying Russian oil in January, but German media have reported that Kazakh oil was being imported through the line. The Druzhba oil pipeline is one of the world's largest and can carry 2 million barrels per day. The total capacity of the western section of both lines that carry oil from central Poland to Germany is 27 million tonnes of crude oil per year. Flows through the Druzhba pipeline have dropped sharply since Russia's invasion of Ukraine and pipeline infrastructure has been hit several times since then in attacks that Moscow has blamed on Ukraine. Ukraine has not acknowledged the attacks.
Shell Pipeline Spill Damages Nigeria’s Farmland And Waning Oil Goodwill – Nigerian authorities and Shell Oil’s local subsidiary have been investigating the cause of an oil spill on the Trans Niger pipeline that lasted a week before it was contained. The spill was detected on June 11th at Eleme in south Nigeria’s Rivers State and confirmed by Shell Petroleum Development Company of Nigeria Limited (S.P.D.C.) four days later, after the oil had contaminated farmland and the Okulu River. The Trans Niger pipeline boasts 180,000 barrels per day, and is one of two channels used to export Bonny Light crude oil. Determining the volume of oil spilled will be crucial in determining not only the extent of the damage, but also who may be to blame for this particular incident.Shell has faced numerous legal battles over oil spills in the Niger Delta, a region plagued by the pollution, conflict, and corruption associated with the industry. The company has reported issues with pipeline vandalism and illicit tapping of their crude oil, and consistently attributes spills to these isolated local incidents. Thandile Chinyavanhu, a campaigner for Greenpeace Africa, said the latest spill only adds to Shell’s dubious environmental record in Nigeria. Fyneface Dumnamene, owner of the non-profit Youths and Environmental Advocacy Centre, estimated that the company has displaced over 300 fishermen in the region.“Shell must be held accountable and financially responsible for this spill and for its neocolonial role in causing climate loss and damage,” Chinyavanhu said.Even though the scale of the incident is still being investigated, it has already been deemed one of the worst in the last sixteen years in Ogoniland, a kingdom in the Niger Delta that predominantly houses farmers and fishermen. The Niger Delta region houses several minority ethnic groups, including Ijaw, Andoni, Dioubu, Nembe, and Ogoni. Shell terminated production in Ogoniland over two decades ago as a result of violent protests against severe environmental destruction, but the pipeline is still operational in transporting crude oil through the area. Additionally, although the leak itself has been contained, the process of cleaning up the affected farms and the river is still delayed, due to past grievances and deep mistrust among the community. Nigeria produced the most crude oil of any African nation in 2022, but a large portion of its domestic oil revenue is lost to corruption. Because the 1999 Constitution gives the federal government ownership over natural resources, minimal profits are distributed to the Nigerian people. Rather, the state’s profits increase as oil prices increase, and little of this revenue is poured into the Niger Delta, Nigeria’s main oil-producing region. Poverty in the Delta is widespread, and provisions such as transport infrastructure, water, and electricity are unreliable. Furthermore, oil exploitation has left large swaths of the region contaminated by gas flares and leakages, thereby rendering it unusable for farming. A 2011 report by the U.N. Environment Program criticized Shell and the Nigerian government for a half century of pollution, recommending a comprehensive billion-dollar cleanup. Local environmental activists, however, argue that the promised cleanup is a cover-up with no tangible impact, since it was promised to eventually begin in 2016. The lack of effective response from oil companies, as well as federal government officials, has created an environment of complicity in Nigeria.
Yemeni gov't confirms oil tanker rescue operation nearing completion - (Xinhua) -- The Yemeni government announced Tuesday that the United Nations' delicate operation to unload oil from the FSO Safer, a deteriorating tanker stranded off the coast of Yemen, is in its final stages. According to a statement from the state-run Saba news agency, the Yemeni Minister of Transport Abdul-Salam Humaid revealed that the international effort to address the Safer tanker situation has made remarkable progress. He clarified that "with meticulous coordination and rigorous execution," 1,083,285 barrels of crude oil have been successfully transferred from the Safer onto a replacement vessel. This accounts for 94 percent of the total amount stored onboard the deteriorating tanker. The Yemeni minister expressed gratitude for the collaborative efforts of various international partners and local authorities, highlighting the importance of proactive measures in safeguarding the environment and preventing such disasters from unfolding. The 45-year-old FSO Safer, marooned off the port of Hodeidah since 2015, had been a ticking time bomb containing approximately 1.1 million barrels of oil. As the vessel's condition continued to deteriorate, concerns escalated regarding the potential for a devastating oil spill. The situation grew dire enough that the United Nations issued a warning about the possibility of an oil spill that could surpass the 1989 Exxon Valdez disaster in scale. The ship-to-ship transfer of more than 1.1 million barrels of oil from the decaying floating storage and offloading unit FSO Safer to a replacement tanker, the Yemen, began on July 25, 2023, as announced by the United Nations. Yemen has been embroiled in a devastating civil war since 2014, with the Houthi rebels fighting against the internationally-recognized government and its allies. The war disrupted Yemen's food supply chain and caused widespread famine, bringing the Arab world's poorest country to the brink of collapse.
Conventional Discovered Oil and Gas Volumes Falling to New Lows -Despite rising investments in conventional oil and gas exploration, discovered volumes are falling to new lows. That’s what Rystad Energy research shows, the company highlighted in a new release sent to Rigzone, adding that its estimates show that in the first half of 2023, explorers found 2.6 billion barrels of oil equivalent (boe), which the company said was 42 percent lower than the first half of 2022 total of 4.5 billion boe. Rystad revealed in the release that 55 discoveries have been made from January to June this year, “compared to 80 in the first six months of last year”. The company noted in the release that this means discoveries in 2023 have averaged 47 million boe, which it said is lower than the 56 million boe per discovery for the same period in 2022. In the release, Rystad stated that, “in the hunt for new resources”, exploration companies are prioritizing the offshore sector. The offshore industry accounted for about 95 percent of exploration spending this year to date, but only about two-thirds of discovered volumes, the company highlighted in the release. In a chart included in the publication, Rystad revealed that annual global conventional exploration spending is expected to top $50 billion in 2023. This figure came in below $50 billion in 2022 and just above $40 billion in 2021, according to the chart. “Upstream companies are facing a period of uncertainty,” Aatisha Mahajan, the Vice President of Upstream Research at Rystad Energy, said in a company statement. “They are eager to capitalize on the increased demand for fossil fuels and find additional resources, but recent results have been lackluster,” Mahajan added. “If exploration efforts continue to yield unimpressive results for the remainder of the year, 2023 could be a record-breaker for the wrong reasons,” the VP continued.
India Scoops Up Cheapest Russian Oil Since Start Of Ukraine War India’s crude oil imports from Russia in June were the cheapest since the Russian invasion of Ukraine, during which time the world’s third-largest oil importer became a key Russian oil customer alongside China.The average cost of a barrel of Russian crude that landed at India’s ports in June was at $68.17, per data from India’s Ministry of Commerce and Industry cited byBloomberg. The price exceeds the $60 price cap set by the G7, but the cap does not include shipping. Most of India’s purchases of Russian crude oil are being done on a delivered basis inclusive of freight, insurance, and other costs.To compare, India paid $70.17 on average per barrel of Russian crude in May and $100.48 a barrel in June 2022, according to the data. International crude oil prices were lower in June compared to July and early August amid concerns about the global economy and the uneven Chinese recovery after the end of the Covid restrictions. But prices have rallied in recent weeks as hopes have grown of a soft landing of the U.S. economy. Analysts and traders expect the supply cuts by OPEC+ and the unilateral output and export reductions from Saudi Arabia and Russia, respectively, to tighten the market for the rest of the year. India’s crude oil imports from Russia dropped in July and could be headed to a more significant decline in August, to the lowest since January this year, according to Kpler. In July, crude imports from Russia into India, the world’s third-largest oil importer, dropped to 2.09 million barrels per day (bpd), down from 2.11 million bpd in the previous month, Viktor Katona, head of crude analysis at Kpler, told Bloomberg last week.
India nears finalising 20-year LNG deal with Qatar - The Indian Government-backed gas supplier, GAIL, is in the final stages of closing a liquefied natural gas (LNG) supply deal with Qatar, according to industry insiders cited by Reuters. This agreement will involve India purchasing at least 1 million metric tonnes of LNG per year from the world’s leading exporter, Qatar, and could extend for more than 20 years, said three industry and trade sources. This comes after the announcement of Abu Dhabi’s ADNOC striking a 14-year deal valued between $7 billion to $9 billion with Indian Oil Corp to supply 1.2 million metric tonnes of LNG per year. That deal was finalised during Prime Minister Narendra Modi’s recent visit to the United Arab Emirates (UAE). India’s pursuit of energy agreements is part of a broader strategy to ensure energy security as the nation strives for a high growth rate, eyeing its ambitious goal of becoming a developed economy in the coming decades. The deal with Qatar would align with GAIL’s plans to diversify its gas imports and hedge against potential supply disruptions, as witnessed after Russia’s invasion of Ukraine last year when LNG prices reached an all-time high. Last year, GAIL had to curtail gas sales to local industries following disruptions in its long-term agreement with the German unit of Russia’s Gazprom, as Berlin diverted volumes to its domestic market. Qatar, meanwhile, is seeking to sign record volumes of long-term sales contracts this year to expand its market share globally, particularly at Russia’s expense. The deal with GAIL would be significant as it will make the company the second local firm to enter into an agreement with Qatar. Petronet LNG, part-owned by GAIL, is already negotiating an extension beyond 2028 for its long-term LNG deal, under which Qatar supplies 8.5 million metric tonnes per year. One of the sources noted that a deal with GAIL would enhance prospects for renewing Petronet’s deal at improved pricing. India aims to conclude both deals by the end of September. Indian companies are investing billions in building gas infrastructure and are actively seeking long-term contracts to increase the share of natural gas in the country’s energy mix to 15% by 2030, up from about 6.5% currently. GAIL’s head of finance, Rakesh Jain, expressed the company’s intention to purchase an additional 7 million to 8 million metric tonnes of LNG by 2030, but aims to avoid depending on a single country for more than 1 million to 2 million metric tonnes annually, mitigating the risk of sudden disruption, reported Reuters.
TTF Prices Surge as Strikes Loom at Australian LNG Export Terminals – Labor unions in Australia have escalated negotiations with Woodside Energy Group Ltd. and Chevron Corp. by voting overwhelmingly to go on strike if necessary. Strikes haven’t started, but the Australia Workers’ Union and Maritime Union authorized protected industrial action. The move sets the stage for potential work stoppages that could put nearly 10% of global LNG capacity at risk of shutting down. The vote could impact operations at the Wheatstone, Gorgon and North West Shelf LNG export terminals. European natural gas prices surged Wednesday, when the prompt Title Transfer Facility (TTF) contract jumped by nearly 30% to finish close to $13/MMBtu. It was the largest gain since March 2022.
More Talks Scheduled to Avoid Strikes at Australia LNG Terminals – Negotiations to avert labor strikes at Woodside Energy Ltd.’s North West Shelf LNG export facility and Chevron Corp.’s Wheatstone and Gorgon facilities continued Friday. Another round of negotiations between the Offshore Alliance and the companies is scheduled for Tuesday (August 15). Talks over wages and working conditions have continued for months. The facilities can produce a combined 40 million metric tons/year of LNG, representing about 10% of global capacity. After skyrocketing earlier in the week due to supply concerns over potential work stoppages at the plants, European benchmark Title Transfer Facility (TTF) contracts declined for a second day Friday, falling through November.
Uptick in Chinese Natural Gas Imports Places Further Pressure on Global LNG Supply -- Despite a slower than expected economic recovery from the Covid-19 pandemic, China gradually regained its position as the world’s largest LNG importer in July, raising the potential for a winter supply squeeze. China’s liquefied natural gas imports from the beginning of the year through July totaled 42.2 million tons (Mt), placing it around 2 Mt higher than Japan during the same period, according to data from Kpler. Cargoes landing in China especially increased during the second quarter as the country’s spot buying activity increased. Kpler LNG analyst Laura Page told NGI that Chinese LNG demand is expected to continue to recover throughout the year compared to its drop in imports last year. China’s global LNG imports last year fell to the lowest point since 2019 as it...
China's July crude imports drop to lowest since January (Reuters) - China's crude oil imports in July fell 18.8% from the previous month to the lowest daily rate since January, customs data showed on Tuesday, as major exporters cut back overseas shipments and domestic stocks continued to build. Crude shipments into the world's biggest oil importer in July totalled 43.69 million metric tons, or 10.29 million barrels per day (bpd), the data from the General Administration of Customs showed. June's 12.67 million bpd of imports were the second-highest on record. Still, oil imports were 17% higher than the 8.79 million bpd brought in a year earlier, a period when China's economy was hammered by widespread COVID outbreaks and extensive lockdowns. Crude imports for the first seven months of the year totalled 325.8 million metric tons, up 12.4% on the same period in 2022. "The (month-on-month) decline was led by lower imports from the big-3 crude exporters, namely the U.S., Saudi Arabia and Russia, which have cut exports amid reduced production targets and/or higher domestic demand," said Emma Li, a China crude oil analyst at Vortexa in Singapore. Li noted that China's onshore crude oil inventories were over 1.02 billion barrels at the end of July and the consistent rise in those stockpiles could allow Chinese refiners to slow their purchases in the coming months. Despite the lower overall imports, state-owned refineries raised their processing rates in July to an average of 78%-82%, up 2-3 percentage points from June, data from consultancy Zhuochuang showed.
Platts Survey: OPEC+ Oil Output Slumps To Two-Year Low -The members of the OPEC+ group saw their collective oil production slump to the lowest level in nearly two years in July after Saudi Arabia began its unilateral output cut of 1 million barrels per day (bpd), the Platts survey by S&P Global Commodity Insights showed on Wednesday.OPEC’s oil production from all 13 members stood at 27.34 million bpd in July, down by 890,000 bpd compared to June. The non-OPEC allies saw their output at 13.06 million bpd, basically flat month on month, as Russian output remained almost unchanged, according to the survey. The July production of OPEC+, at 40.40 million bpd, was down by 940,000 bpd compared to June. Last month’s output of the alliance was the lowest since August 2021, the Platts survey found.Due to the voluntary unilateral cut, Saudi Arabia’s crude oil production fell to 9.05 million bpd, the lowest level since June 2021, and falling below Russia’s production, according to the survey.Higher production in Iran and Venezuela, both under sanctions, slightly offset the cuts from Saudi Arabia. Iran and Venezuela, however, are not part of the OPEC+ deal for production cuts due to the sanctions constraining their output and exports. OPEC’s crude oil production alone fell in July by the largest amount in years, according to the monthly Bloomberg survey from last week. OPEC’s crude production fell by 900,000 bpd last month, to an average of 27.79 million bpd. It is the sharpest drop since 2020 when the group rushed to cut its output in the wake of Covid lockdowns and crashing demand.Crude oil production at OPEC and OPEC+ are expected to remain low for at least this month and next, as Saudi Arabia last week extended its 1-million-bpd cut into September, adding that the reduction could be extended or extended and deepened. Russia, for its part, will cut oil exports by 300,000 bpd in September, after a 500,000-bpd export reduction pledged for August.
Kazakhstan Prolongs Oil Output Cuts Until 2024 - – Kazakhstan has reaffirmed its commitment to the agreement on oil output cuts by 78,000 barrels per day till the end of 2024 following the latest agreement reached by the Organization of Petroleum Exporting Countries (OPEC). This was announced at the 49th meeting of the Joint Ministerial Monitoring Committee (JMMC) on Aug. 4, reported the Energy Ministry’s press service.OPEC member countries recognized the importance of complying with the obligations fulfilled under the agreement in May-June, noting the current situation in the oil market.JMMC members agreed to continue monitoring market conditions to respond to market changes and be ready to take the necessary measures, relying on the solidarity of the participating countries. The JMMC expressed support and gratitude for Saudi Arabia’s efforts to maintain the stability of the oil market, for an additional voluntary reduction by one million barrels per day, and for extending it until September.The committee also thanked Russia for an additional voluntary reduction in oil exports by 300,000 barrels per day in September.
Iran Plans To Boost Oil Output To 3.5 Million Bpd Before October - Iran expects to increase its oil production by 250,000 barrels per day (bpd) to reach 3.5 million bpd output by the end of next month, the head of the National Iranian Oil Company (NIOC) said on Wednesday. At the time when the current Iranian administration took office in 2021, the country was producing 2.2 million bpd of oil, NIOC’s chief executive Mohsen Khojastehmehr was quoted as saying by the semi-official Tasnim news agency.Iranian oil output is set to hit 3.5 million bpd by the end of the Iranian month of Shahrivar, or September 22, 2023, the executive added.Last month, Iran was already producing 3.1 million bpd of oil, the highest level in nearly five years, a member of the energy committee at the Iranian Parliament said in July. Iran has boosted output by nearly 1 million bpd since President Ebrahim Raisi took office in August 2021. Iranian oil production increased from 2.2 million bpd back then to 3.1 million now, Hossein Hosseinzadeh, a member of the energy committee at the Iranian Parliament, the Majlis, told Iranian news agency IRNA.According to estimates by Argus, the last time Iran produced that much oil was in October 2018.That was the year in which then-U.S. President Donald Trump re-imposed sanctions on Iran’s oil exports after withdrawing the United States from the nuclear deal.Per OPEC’s secondary sources in its latest Monthly Oil Market Report, Iranian crude oil production stood at 2.754 million bpd in June, up by 56,000 bpd compared to May, and higher than the 2022 average of 2.554 million bpd. Iran itself has not reported production figures to OPEC since the U.S. sanctions on its oil industry returned in 2018.
Oil giant Saudi Aramco posts 38% drop in second-quarter profit as lower prices bite -Saudi state oil giant Aramco reported 112.81 billion riyal ($30.0 billion) in net profit for the second quarter, a fall of nearly 40% from the same period last year amid a decline in hydrocarbon prices. Second-quarter profit nevertheless came slightly above analyst expectations near $29.8 billion in an Aramco-supplied poll. In a filing to the Saudi stock exchange — known as Tadawul — the company said the substantive decline was due to lower crude oil prices and weakening refining and chemicals margins. “Despite the economic headwinds, we see signals that global demand remains resilient, supported by an ongoing recovery in the aviation sector,” Aramco CEO Amin Nasser told the media during a company earnings call Monday. The company is following its industry peers by boosting dividend payouts despite the sharp fall in profitability. The oil giant reaffirmed its first-quarter base dividend of $19.5 billion, paid in the second quarter, and declared a second-quarter dividend of $19.5 billion, to be delivered in the third quarter. Aramco also said it intends to distribute performance-linked dividends over six quarters, starting with a $9.9 billion distribution in the third quarter. “Our plan to maintain a sustainable and progressive dividend for our shareholders remains intact,” Nasser said. ‘Still a strong financial position’ This quarter’s result “is still a strong financial position. Yes, it’s not as astonishing as the results that we saw last year – but this is aligned with the overall industry trend,” Carole Nakhle, CEO of Crystol Energy, told CNBC’s “Capital Connection” on Monday. The net income figure was a 38% decline from the previous year’s second-quarter earnings, which had hit a jaw-dropping net income of $48.4 billion. At the time, the second-quarter 2022 result was up 90% on the year, on the back of the energy price surge triggered by Russia’s war in Ukraine.
OPECs oil production slumps as Saudi Arabia cuts output -- OPEC’s crude oil production from all its member states fell by 836,000 barrels per day (bpd) to 27.31 million bpd in July, due to a 968,000 bpd decline in Saudi output as the Kingdom nearly delivered its promised 1-million-bpd cut last month.Production in Saudi Arabia, Libya, and Nigeria dropped last month compared to June, while rising production from Iran, Angola, and Iraq offset some of the Saudi reduction, according to secondary sources in OPEC’s Monthly Oil Market Report (MOMR) published on Thursday.Libya and Iran, however, together with Venezuela, are exempted from the OPEC+ deal binding the other 10 OPEC members in production cuts.Saudi Arabia, leader of the cartel and the OPEC+ agreement, saw its crude oil production slump by 968,000 bpd from June to average 9.021 million bpd in July, per OPEC’s secondary sources in the report. Due to Saudi Arabia’s voluntary unilateral cut, the Kingdom’s crude oil production has now fallen below the production of Russia, the key partner of OPEC in the OPEC+ alliance. Libyan production dropped by 52,000 bpd and Nigerian output fell by 40,000 bpd, marking the other big drops in OPEC’s crude oil production last month. Iraq, Iran, Angola, and Venezuela boosted their respective output, according to OPEC’s secondary sources.Saudi Arabia will continue to drag OPEC’s production lower in August and September, too, after the Kingdom said last week it would extend its unilateral voluntary cut into September. Russia, for its part, also announced an extension in its export cuts into September, although the pledged cut will be lower than in August. Russia will cut oil exports by 300,000 bpd in September, Deputy Prime Minister Alexander Novak said last week, shortly after the Saudi announcement of its production extension. Russia has said it would reduce its August oil exports by 500,000 bpd. Analysts and market participants expect the OPEC+ cuts to tighten the market for the rest of the year.
OPEC+ Oil Supply Plunges By 1.2 Million Bpd As Saudi Arabia Cuts Output --Oil supply from the OPEC+ group dipped in July by 1.2 million barrels per day (bpd) to 50.7 million bpd, the lowest level in nearly two years as Saudi Arabia began its unilateral production cut of 1 million bpd, the International Energy Agency (IEA) said on Friday. The alliance’s oil production was down by more than 2 million bpd from the start of the year. Over the same period, oil producers outside the OPEC+ group increased their combined production by 1.6 million bpd to 50.2 million bpd. For the rest of the year, the non-OPEC+ production gains are expected to be limited, the IEA said.OPEC alone saw its crude oil production from all its member states fall by 836,000 bpd to 27.31 million bpd in July, due to a 968,000 bpd decline in Saudi output as the Kingdom nearly delivered its promised 1-million-bpd cut last month. Saudi Arabia, leader of the cartel and the OPEC+ agreement, saw its crude oil production slump by 968,000 bpd from June to average 9.021 million bpd in July, per OPEC’s secondary sources in its latest monthly report. Due to Saudi Arabia’s cut, the Kingdom’s crude oil production has now fallen below the production of Russia, the key partner of OPEC in the OPEC+ alliance. Global oil supply plunged by 910,000 bpd to 100.9 million bpd in July, as the Saudi cut more than offset a 310,000 bpd increase in non-OPEC+ supply to 50.2 million bpd last month, the IEA’s estimates showed.This year, global oil output is set to rise by 1.5 million bpd to a record 101.5 million bpd, with the U.S. driving gains of 1.9 million bpd from non-OPEC+ producers. Next year, non-OPEC+ supply is also set to dominate world supply growth, and is expected to increase by 1.3 million bpd while OPEC+ could add just 160,000 bpd, the agency said.
Oil Prices Surge to Highest Since Mid-April After Attack on Russian Oil Hub and OPEC Production Cuts Oil prices reached their highest levels since mid-April after a series of significant events:
- Attack on Russian oil export hub: Ukraine conducted a naval drone attack on Russia’s port of Novorossiysk, a crucial hub for Russian oil exports. This attack heightened concerns about potential disruptions in oil supply.
- Extended production cuts by Saudi Arabia: The world’s top oil exporter, Saudi Arabia, announced an extension of its voluntary crude oil output cut of one million barrels per day until the end of September. This measure aimed to limit oil supply and support prices.
- Production cuts by Russia: Russia, the second-largest oil exporter globally, also pledged to reduce oil exports by 300,000 million barrels per day in September.
Brent futures, the global benchmark, traded slightly below the flatline at $86.17 per barrel, marking the highest price since April 14. U.S. West Texas Intermediate (WTI) futures dipped 0.1% to $82.74 per barrel but remained close to mid-April highs.Josh Young, chief investment officer at Bison Interests, believes that the decline in supplies will lead to much higher prices in the future. Volatility expected: Young anticipates significant price fluctuations in the coming years due to the imbalance between supply and demand. Ed Morse, the global head of commodity research at Citi, projects that Saudi Arabia and Russia will gradually increase their output after September. He estimates that oil prices will peak at $90 per barrel at most this quarter, citing moderate demand growth.
Oil Shrugs off Black Sea Risk Ahead of US Inflation Report -- West Texas Intermediate futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange declined on Monday as market participants assessed risk to oil supply in the Black Sea against inflation pressures in the United States and Eurozone, where central banks pledged to continue restrictive monetary policy in their fight to reduce inflation. The Russian oil tanker "Sig" was attacked by a Ukrainian drone near the strategic Novorossiysk port on Saturday (7/5), 24 hours after the port was forced to briefly halt all traffic due to a drone attack on a Russian warship. Novorossiysk port processes nearly 1.9 million bpd or 2% of global oil supply. There was no public claim of responsibility by the Ukrainian government, which usually refrains from taking credit for attacks on Russian territory, but a source in Ukraine's Security Service, the SBU, told NBC News that it "blew up a large oil tanker of the Russian Federation" in a joint operation with the navy. Oil traders have so far brushed aside the latest geopolitical risk in the Black Sea. Lower crude oil contracts on Monday follow last week's 4% rally fueled by extended production and export cuts into September announced by Saudi Arabia and Russia. Saudi Arabia announced an extension of unilateral 1 million bpd production cut into September, while hinting that those cuts could be "deepened to support the market balances." Saudi Arabia's unilateral cut is atop of production reductions previously agreed to by the kingdom in the OPEC+ framework. Saudi oil production for September will be about 9 million bpd, the lowest output rate since 2012 outside of the pandemic. Russia last week said it would limit oil exports by 300,000 bpd in September from 500,000 bpd this month. On Thursday, U.S. Census Bureau will release its inflation report for July which could give investors greater insight into the likelihood of additional rate increases by the Federal Reserve. The consumer price index for July is expected to accelerate to 3.3% annually from 3% in June, while core inflation, which strips out volatile items like food and energy, is projected to have slowed to a year-on-year increase of 4.7%. The upcoming inflation data follows July's nonfarm employment report from the Labor Department released on Friday (8/4) showing job growth of 178,000, the slowest pace since early 2021. Investors are wagering the July employment report showed the U.S. labor market is cooling enough for the Federal Open Market Committee to maintain the federal funds rate in a 5.25% by 5.5% target range when they meet on Sept. 20. At settlement, the U.S. dollar index advanced 0.02% against a basket of foreign currencies to 101.861, with the dollar having an inverse relationship with West Texas Intermediate. WTI September futures on NYMEX declined $0.88 to settle at $81.94 bbl, and ICE October Brent settled down $0.90 to $85.34 bbl. NYMEX September RBOB futures advanced $0.0213 to $2.8044 gallon, while September ULSD contract fell $0.0467 gallon to $3.0155 gallon.
Oil reverses losses amid escalations in Russia-Ukraine war - Prices of Basra Heavy and Medium crude oil witnessed a robust surge on Tuesday, climbing more than 2% as the market reacted to changing dynamics. Basra Heavy crude recorded a notable increase of $1.79, equivalent to 2.16%, reaching $84.68 per barrel. Similarly, Basra Medium crude experienced a gain of $1.89, or 2.20%, settling at $87.83 per barrel. In contrast, Tuesday's global oil market demonstrated a slightly different trajectory. Oil prices edged lower in response to disappointing trade data from China, the world's largest oil importer. Imports and exports from the Asian economic powerhouse fell significantly more than anticipated, signaling sluggish growth. Despite these concerns, the decline in oil prices remained contained due to anticipated supply constraints. Brent crude futures registered at $85.05 per barrel, representing a marginal dip of 29 cents, or 0.34%, as of 0641 GMT. Meanwhile, U.S. West Texas Intermediate (WTI) crude exhibited a similar trend, at $81.69 per barrel, experiencing a modest decrease of 25 cents, or 0.31%.
Basra Oil Prices Surge Over 2% on Tuesday - Shafaq News - Oil reversed losses after Ukrainian President Volodymyr Zelenskiy said his country would retaliate if Russia continues to block Ukrainian ports. Zelenskiy’s warning triggered fresh buying in the futures market as traders weighed the possibility of supply disruptions. Oil had advanced to the highest since April early in Monday’s trading, with the U.S. crude benchmark erasing year-to-date losses after the Organization of Petroleum Exporting Countries and its allies cut production. On Tuesday, cartel leader Saudi Arabia reaffirmed its commitment to voluntarily curb supplies next month. Still, a weakening demand outlook is weighing on the market. The U.S. Energy Information Administration on Tuesday lowered its forecast for U.S. consumption. Reports from OPEC and the International Agency coming later this week will offer further updates on the health of the market. Adding to bearish pressures, China’s trade plunged in July as slowing global demand clouded the outlook for exports, while the nation’s oil imports slipped to a six-month low. The dollar climbed and stocks fell as a ratings downgrade for 10 small- and midsized-U.S. lenders exacerbated worries of renewed banking tumult. Away from headline prices, Brent crude has weakened markedly versus other oil benchmarks in recent days. It’s now trading at a rare discount to Middle Eastern Dubai crude as OPEC+ output cuts lift the cost of heavier supplies, while its premium to WTI also has contracted to around the smallest since May. WTI for September delivery fell 0.8 per cent to US$82.59 a barrel at 1:55 p.m. in New York. Brent for October settlement dipped 0.7 per cent to $85.92 a barrel.
The Oil Market Rebounded from its Earlier Losses as the EIA Forecast a Better Economic Outlook Than Previously Expected - The oil market rebounded from its earlier losses as the EIA forecast a better economic outlook than previously expected. In overnight trading, the crude market sold off sharply and extended its losses to over $2 as it posted a low of $79.90. The market was pressured and traded below the lower boundary of its upward trending channel on economic data showing China's imports and exports fell more than expected in July. However, the market, which bounced off its low and retraced its losses, was well supported by the release of the EIA’s Short Tern Energy Outlook. The EIA projected GDP growth of 1.9% in 2023, up from a previous forecast of 1.5%. The EIA also forecast Brent crude oil prices will average $86/barrel in the second half of this year, up about $7/barrel from a previous forecast. The oil market rallied to a high of $83.08 ahead of the close as the market refocused on hopes for a recovery in U.S. oil demand. The September WTI contract settled up 98 cents at $82.92 and the October Brent contract settled up 83 cents at $86.17. The product markets ended higher, with the heating oil market settling up 7.01 cents at $3.0856 and the RB market settling up 4.07 cents at $2.8451. growth unchanged at 1.76 million bpd year on year. However, it cut its forecast for 2024 world oil demand growth by 30,000 bpd and now sees a 1.61 million bpd year on year increase. It forecast world oil demand in 2023 at 101.19 million bpd and demand in 2024 at 102.8 million bpd. The EIA reported that world oil output in 2023 is forecast to increase by 1.42 million bpd to 101.3 million bpd and by 1.7 million bpd to 103 million bpd in 2024. OPEC’s oil output is estimated to fall by 700,000 bpd to 33.47 million bpd in 2023 and increase by 490,000 bpd to 33.96 million bpd in 2024. The EIA reported that U.S. oil output is forecast to increase by 850,000 bpd to 12.76 million bpd in 2023 and by 330,000 bpd to 13.09 million bpd in 2024. U.S. petroleum demand is forecast to increase by 190,000 bpd to 20.47 million bpd in 2023 and by 280,000 bpd to 20.75 million bpd in 2024. U.S. gasoline demand is forecast to increase by 130,000 bpd to 8.91 million bpd in 2023 and remain unchanged in 2024 at 8.91 million bpd. U.S. distillate demand is expected to fall by 70,000 bpd to 3.89 million bpd in 2023 and increase by 90,000 bpd to 3.98 million bpd in 2024. The EIA said Brent crude prices are forecast to average $86/barrel in the second half of 2023, up about $7/barrel from its previous forecast last month.Saudi Arabia’s cabinet said it reaffirms its support for precautionary measures by OPEC+ to stabilize the oil market.Polish pipeline operator PERN said that it had restored the Druzhba oil pipeline to full functionality as expected, after a leak had been discovered. PERN halted pumping through a section of the pipeline, which connects Russia to Europe, after detecting a leak in central Poland on Saturday. On Sunday, the pipeline operator said there was no indication that a third party had caused the leak.Colonial Pipeline Co is allocating space for Cycle 47 shipments on Line 2, its main distillate line from Houston, Texas to Greensboro, North Carolina. This allocation is for the pipeline segment north of Collins, Mississippi.
Oil Gains After EIA Sees Tighter Market, Higher Oil Prices - Reversing morning losses triggered by weak trade data from China, oil futures settled Tuesday's session with solid gains after U.S. Energy Information Administration forecast the world oil market would slide into a supply deficit during the remainder of 2023, citing steep production cuts from OPEC+'s largest producers, Saudi Arabia and Russia, and increased global oil consumption. In its Short-term Energy Outlook released this afternoon, EIA said it expects OPEC+ production cuts combined with higher demand to put downward pressure on global oil inventories through the end of the year. Washington-based energy watchdog estimates crude inventories across industrialized countries will decrease by an average of 400,000 bpd in the second half of the year before reversing back to builds in the second quarter of 2024. "The Brent crude oil spot price in our forecast increases in the coming months, reflecting our expectations of tightening balances in global oil markets. Crude oil prices begin to ease in 2Q24 as supply growth leads to some rebuilding of global oil inventories later in 2024," said EIA. United States, Canada, Brazil, Norway, and Guyana are expected to drive growth in global oil supply with combined production gains of 2.1 million bpd this year and 1.2 million bpd in 2024. The United States is expected to lead non-OPEC growth, contributing 1.3 million bpd of supply growth in 2023 and 500,000 bpd in 2024. Oil traders now await the release of weekly inventory data from the American Petroleum Institute scheduled for 4:30 PM ET, followed by the official report from EIA Wednesday morning. Early in the session, oil futures came under selling pressure after China reported its outbound shipments plunged by more than 14% last month, posting its worst decline since the early days of the pandemic in February 2020. Shipments to the United States and European Union have been hit particularly hard, registering a 20% decline from a year earlier. The data clearly shows global demand for Chinese manufactured goods is lagging far behind pre-COVID trends amid ongoing trade tensions with Western economies and the "de-risking" of global supply chains. Russia was the only country that saw a major spike in Chinese exports, up 52% from a year earlier, led by shipments of automobiles and other high-value goods. Domestically, bank shares slumped and the U.S. dollar rallied in afternoon trade Tuesday after Moody Investors Services downgraded the credit rating of several U.S. regional banks, including M&T Bank, Pinnacle Financial, and Webster Financial among others. Moody has further warned that it is now reviewing six larger lenders for a potential credit downgrade. "Rising funding costs and declining income metrics will erode profitability, the first buffer against losses," said Moody's in explaining the downgrades. "Asset risk is rising, in particular for small and mid-size banks with large [commercial real estate] exposures." On the session, the U.S. dollar rallied 0.47% against a basket of foreign currencies to settle at 102.340, limiting gains for the West Texas Intermediate September contract, which gained $0.98 bbl to $82.92 bbl. ICE October Brent advanced $0.83 to $86.17 bbl. NYMEX September RBOB futures moved $0.0407 higher to $2.8451 gallon, while September ULSD contract advanced $0.0701 gallon to $3.0856.
Oil Hits Year to Date High as Supply Risks Climb -- Oil climbed to the highest in almost nine months on concern that a possible escalation of the conflict between Russia and Ukraine may choke off more supplies in an already tightening market. West Texas Intermediate futures ended the session above $84 a barrel, breaking through an earlier high for the year set in April. Prices held onto gains even after US government data showed crude inventories rose by about 5 million barrels last week as investors focused on fuel stockpiles that declined by the most in three months. “The demand-concern narrative is not a topic today as product inventories are low,” said Giovanni Staunovo, an analyst at UBS Group AG. “It is more a market-tightness narrative that is driving oil.” Technical factors also are supporting prices after crude breached its April high, he added. The latest threat to supplies is the risk to Russian flows from the Black Sea after Ukrainian President Volodymyr Zelenskiy said his country would retaliate to prevent the OPEC+ producer from “blocking our waters.” The remarks followed a Ukrainian drone attack on an oil tanker over the weekend. Key market gauges have been pointing to tighter markets in recent days. The nearest timespread for WTI crude surged on Wednesday, along with its Brent equivalent. Stockpiles at the key storage hub of Cushing, Oklahoma, have declined for five of the past six weeks. Oil has rallied since late June following pledges by OPEC+ heavyweights Saudi Arabia and Russia to cut supply, but headwinds still linger. China’s economic rebound remains sluggish, and the Energy Information Administration on Tuesday lowered its forecast for US consumption of products this year. “The fact that WTI has broken the post-OPEC high of $83.50 made in April means that people who had been bearish or skeptical of the group’s efforts working have been proven wrong,” said Fawad Razaqzada, a market analyst at City Index and Forex.com. “Oil prices should continue trending higher for as long as there is no major demand worries, so a move up to $85 looks increasingly likely from here.” The International Energy Agency and OPEC will release reports later this week that will provide snapshots of the oil market, which is expected to tighten through the second half of the year. WTI for September delivery rose $1.48 to settle at $84.40 a barrel in New York. Brent for October settlement increased $1.38 to settle at $87.55 a barrel.
Draws in U.S. Fuel Stocks Helped Offset Some Concerns of Weaker Demand from China --The oil market rallied higher on Wednesday as draws in U.S. fuel stocks helped offset some concerns of weaker demand from China as the country’s crude oil imports in July fell by 18.8% on the month to the lowest level since January. The market traded mostly sideways in overnight trading before it began its upward trend once again. The crude market was supported by fears that Ukraine could target ships heading to Russian Black Sea ports. Also, production cuts from Saudi Arabia and Russia continued to lend support to the market. The WTI contract traded higher and extended its gains to $1.73 and posted a high of $84.65, the highest level since November 2022, following the release of the EIA’s weekly petroleum stock reports. The oil complex was well supported by the larger than expected draws in product stocks, with a draw of 2.66 million barrels in gasoline stocks and a draw of 1.7 million barrels in distillate stocks. The market mostly shrugged off a large build of 5.85 million barrels in crude stocks following the record draw the week before. The oil market later erased most of its gains, retracing more than 62% of its rally before settling in a sideways trading range. The September WTI contract settled up $1.48 at $84.40, the highest level since November 16, 2022 and the October Brent contract settled up $1.38 at $87.55, the highest level since January 23rd. The product markets settled sharply higher, with the heating oil market settling up 12.14 cents at $3.2070 and the RB market settling up 8.33 cents at $2.9284. The EIA reported that crude oil stocks in the U.S. Strategic Petroleum Reserve increased by 995,000 barrels in the week ending August 4th to 347.75 million barrels, the biggest weekly increase since June 2020. U.S. Energy Department has bought back some 6.3 million barrels of oil to refill the SPR in recent months, after the Biden administration released a record 180 million barrels from the reserve last year to control prices after Russia's invasion of Ukraine. U.S. net imports of crude oil increased by 14,000 bpd to 6.682 million bpd, the highest level since January 2022. Meanwhile, crude exports fell by 2.923 million bpd on the week to 2.360 million bpd. Exports fell by the most on record. The EIA also reported that crude oil production increased by 400,000 bpd on the week to 12.6 million bpd.IIR Energy reported that U.S. oil refiners are expected to shut in about 212,000 bpd of capacity in the week ending August 11th, increasing available refining capacity by 131,000 bpd. Offline capacity is expected to fall to 180,000 bpd in the week ending August 18th.According to executives and analysts, top U.S. oil refiners will run their plants this quarter at up to 95% of their combined 17.9 million bpd capacity. The refining industry has been running at above 90% of capacity for more than a year on strong gasoline and diesel demand and high profit margins. Analysts said the new forecasts will be challenged by extreme heat that has blanketed the main U.S. refining hub on the Gulf Coast this summer, contributing to scattered outages. Marathon Petroleum, the largest refiner with 13 processing plants that provide 16% of U.S. refining throughput, aims to operate at 94% of its combined 2.9 million bpd capacity in the third quarter. The second-largest U.S. refiner, Valero Energy aims to process at up to 95% of its 3 million bpd capacity. Among smaller refiners, Par Pacific aims to operate at 92% of its capacity and HF Sinclair is targeting 94% of crude oil throughput.Colonial Pipeline Co is allocating space for Cycle 47 on Line 1, its main gasoline line from Houston, Texas to Greensboro, North Carolina. The current allocation is for the pipeline segment north of Collins, Mississippi.
Oil Prices Dip In Asian Trade Amid Chinese Economic Concerns - Despite sharp reductions in fuel stockpiles in the US and reductions in Saudi and Russian output, oil prices fell in early Asian trade on Thursday after reaching new highs in the previous session due to worries about the Chinese economy. After closing the previous session at its highest level since January 27, Brent crude decreased 20 cents, or 0.2%, to $87.35 per barrel by 0006 GMT. West Texas Intermediate (WTI) crude dropped 23 cents, or 0.3%, to $84.17 after reaching a high point not seen since November 2022. Since WTI is produced in the United States, primarily in the Permian Basin, it serves as the primary benchmark for oil in North America. Texas is the primary source of the oil. After that, it travels through pipelines to the Midwest and the Gulf of Mexico, where it is refined. Cushing, Oklahoma, serves as the primary delivery location for WTI’s physical exchange and price settlement. The Cushing hub delivery system consists of 16 storage terminals and 35 pipelines (20 inbound and 15 outbound). The hub stores 13% of the oil stored in the United States and has a storage capacity of 90 million barrels. The daily capacity for inbound and outbound shipping is 6.5 million barrels. “The Pipeline Crossroads of the World” refers to Cushing. According to data released by China on Tuesday, crude oil imports dropped 18.8% from June to July, reaching their lowest daily rate since January. As the world’s second-largest economy struggled to revive demand, China’s consumer sector also experienced deflation in July, and factory-gate prices continued to decline. Although distillate inventories, which include diesel and heating oil, fell by 1.7 million barrels last week, versus analysts’ expectations in a Reuters poll for both to hold mostly steady, prices were supported by government data released on Wednesday that showed U.S. petrol stocks fell by 2.7 million barrels. The top exporter Saudi Arabia’s intention to extend its voluntary production cut of 1 million barrels per day for an additional month, to include September, also helped to support prices. Russia also announced a 300,000 bpd reduction in oil exports for September. Additionally, investors were anticipating Thursday’s release of the U.S. Consumer Price Index (CPI), which is expected to show a slight year-over-year acceleration.
Oil settles lower as US rate hike fears subside, China demand weighs (Reuters) - Oil prices settled lower on Thursday, with Brent crude holding close to January highs, as speculation about another U.S. interest rate hike faded following inflation data and OPEC remained positive on the oil demand outlook. Both benchmarks have been on a sustained rally since June, with West Texas Intermediate crude (WTI) trading on Thursday at its highest this year and Brent hitting its highest price since January. Brent crude fell $1.15, or 1.3%, to settle at $86.40 a barrel while WTI settled down $1.58, or 1.9%, at $82.82. Oil prices have been boosted in recent days by extensions to output cuts by Saudi Arabia and Russia, alongside supply fears driven by the potential for conflict between Russia and Ukraine in the Black Sea region to threaten Russian oil shipments. But recent data showed the consumer sector in China fell into deflation and factory gate prices extended declines in July, raising concerns about fuel demand in the world's second-largest economy. The U.S. is also prohibiting some investment in China in sensitive technologies like computer chips and requires government notification in other tech sectors. "China's data just gets worse and worse, and this is only going to make it more difficult for China to ramp up its economy," Lending support to prices, OPEC said in its monthly report on Thursday it expected a healthy oil market for the rest of the year, and stuck by its forecast for robust oil demand in 2024, as the outlook for world economic growth slightly improves. Thursday's U.S. consumer prices data for July fuelled speculation the Federal Reserve is nearing the end of its aggressive rate hike cycle. Markets largely shrugged off a higher-than-expected 5.85 million-barrel build in U.S. crude stocks reported on Wednesday, after a record drawdown the week before. Low inventory levels have pushed gasoline positions to their highest since the day Russia invaded Ukraine, and investors and analysts say they may continue to rise if record Atlantic Ocean heat draws a hurricane into the Gulf of Mexico and disrupts refineries. "With gasoline and distillate deficits expanding, both markets will likely prove sensitive to the first suggestion of a major storm event capable of working its way into the Gulf of Mexico with hurricane status," said John Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.
Oil prices dip as investors balance China data and OPEC optimism - Shafaq News -- Oil prices fell marginally on Friday as investors weighed optimistic demand forecasts from the OPEC producer group against mixed economic data in top importer China. Brent crude fell 15 cents to $86.25 a barrel at 0515 GMT, while U.S. West Texas Intermediate crude futures were down 13 cents at $82.69 a barrel. Both benchmarks have been on a sustained rally since June, with West Texas Intermediate crude (WTI) trading on Thursday at its highest this year and Brent hitting its best price since January. "Oil markets may have been overbought from a multi-week rally, though OPEC+ output cuts and improved demand outlooks remained bullish factors," said Tina Teng, a market analyst at CMC Markets in Auckland. The Organization of Petroleum Exporting Countries (OPEC)said on Thursday it expects world oil demand to rise by 2.25 million barrels per day (bpd) in 2024, compared with growth of 2.44 million bpd in 2023. Both forecasts were unchanged from last month. In 2024, "solid" economic growth amid continued improvements in China is expected to boost oil consumption, it added. Market sentiment was also lifted by Thursday's U.S. consumer prices data for July, which fuelled speculation the Federal Reserve is nearing the end of its aggressive rate hike cycle. However, Teng also noted that "China’s sluggish economic data and the retreat on Wall Street weighs on risk sentiment, and a strengthened USD also pressured commodity prices".
Oil Futures Settle Higher As IEA Report Forecasts Demand Growth, Tighter Supplies - Crude oil futures settled higher on Friday after a report from the International Energy Agency (IEA) forecast strong demand for oil and tightening supplies in the market. In a report released today, the IEA said global oil demand hit a record 103 million barrels per day in June and added that demand could scale another peak this month. The IEA also said output cuts from Russia and Saudi Arabia could result in a sharp decline in inventories over the rest of this year and lift oil prices even higher. The agency expects oil demand to grow by about 1 million barrels per day. However, that is down from its previous forecast by 150,000 barrels. West Texas Intermediate Crude oil futures for September ended higher by $0.37 at $83.19 a barrel. Brent crude futures were up $0.30 or about 0.35% at $86.70 a barrel a little while ago. WTI and Brent crude futures, both recorded their seventh straight weekly uptick. The market also noted the OPEC's report released on Thursday which said global oil demand will likely rise by 2.25 million barrels per day next year, compared with growth of 2.44 million barrels per day in 2023. A report from Baker Hughes showed the total number of active drilling rigs in the U.S. fell by 5 this week to 654 this week. While the number of oil rigs stayed the same this week at 525, the number of gas rigs dropped by 5 to 123, the data said. Edward Moya, Senior Market Analyst at OANDA, says, "Crude prices are resuming their bullish ascent as energy traders remain overly confident the oil market will remain tight. The oil rally is poise for a seventh straight week of gains and it doesn't seem like exhaustion is settling in yet. When the market gets complacent, sometimes that is when you get a decent pullback, but for now it seems any oil dips will be bought."
Oil Gains for 7th Week as IEA, OPEC See Tighter Oil Market - New York Mercantile Exchange West Texas Intermediate and Brent crude on the Intercontinental Exchange settled modestly higher on Friday, and advanced for the seventh consecutive week. The gains came after the three major forecasting agencies said this week global oil market fundamentals strengthened considerably over the summer months, which is reflected in widening backwardated market structures for the crude benchmarks. The International Energy Agency, Organization of the Petroleum Exporting Countries, and U.S. Energy Informational Administration were in rare agreement this week with forecasts that the oil market will slide into deeper deficit through the end of 2023 on steep production cuts from OPEC+ and stronger oil consumption. On the demand side, IEA Friday morning said worldwide oil demand climbed to a fresh record-high 103 million barrels per day (bpd) over the June-July period, and is likely to soar higher in August, bringing annualized growth in oil consumption to 2.2 million bpd. Next year, the Paris-based energy watchdog expects demand growth to moderate to 1 million bpd amid macroeconomic headwinds in China and an environment of high interest rates in countries in the Organization for Economic Cooperation and Development bloc. "World oil demand is scaling record highs, boosted by strong summer air travel, increased oil use in power generation and surging Chinese petrochemical activity," said IEA in its August Oil Market Report. Meanwhile, the largest oil producers with OPEC+, Saudi Arabia and Russia, continue to restrain supplies to the global oil market in their efforts to boost prices and revenue. In its Monthly Oil Market Report released on Thursday, OPEC said Saudi oil production plunged by 968,000 bpd last month to 9.021 million bpd -- the lowest output rate since the global disruption caused by the pandemic in 2020. Saudi Arabia on Aug. 3 extended a 1-million-bpd production cut for a third month into September and said it could further extend the cut or even deepen the reduction into the fourth quarter. Russia also saw a steep decline to its crude output and exports, according to OPEC, with oil production falling to 9.93 million bpd in the third quarter, down from 11.2 million bpd reported at the start of the year. On a combination of OPEC+ cuts and higher demand expectations, EIA projected global oil inventories to decline consistently through the end of the year, putting upward pressure on oil prices. The Washington-based energy watchdog estimates crude inventories across industrialized countries will decrease by an average of 400,000 bpd in the second half of the year before reversing back to builds in the second quarter 2024. United States, Canada, Brazil, Norway, and Guyana are expected to drive growth in global oil supply with combined production gains of 2.1 million bpd this year and 1.2 million bpd in 2024. The United States is expected to lead non-OPEC growth, contributing 1.3 million bpd of supply growth in 2023 and 500,000 bpd in 2024. At settlement, NYMEX WTI September futures gained $0.37 to $83.19 per barrel (bbl), and ICE Brent October futures finished the session at $86.81 per bbl, up $0.41. NYMEX September RBOB futures advanced $0.0602 to $2.9649 per gallon, and the September ULSD contract settled the session at $3.1215 per gallon, retreating for the second straight session from a six-month high $3.2070 per gallon settlement.
Venezuela's BRICS Application: Expert Offers Insight on Potential Entry - Venezuela's bid to join BRICS comes amid its ongoing economic and political crisis, which has been exacerbated by US sanctions and the COVID-19 pandemic. As the South American country has struggled with hyperinflation, President Nicolas Maduro has accused the US of waging an "economic war" against his government.Venezuela, the South American country with the world’s largest proven oil reserves, has officially applied to join the BRICS group of major emerging economies. The announcement was made by President Nicolas Maduro last week, who expressed his hope that the application will be approved soon.BRICS, comprising Brazil, Russia, India, China, and South Africa, accounts for about 31.5% of the global gross domestic product (GDP) and 40% of the world's population. The group also operates a development bank and a contingency reserve arrangement to support its members and other developing countries.According to Fan Hesheng, director of the Institute of Latin American Studies at Anhui University in China, Venezuela wants to join BRICSfor several reasons."First, Venezuela has a good understanding of the identity of BRICS countries, because all BRICS countries are developing countries, especially big countries like China and Russia," the political scientist told Sputnik. "Second, the BRICS countries are strong in terms of economic strength and industrialization capacity, which Venezuela also appreciates."Furthermore, Hesheng emphasized that the BRICS countries have performed well in recent years in terms of industrial capacity and financial sustainability. According to the Chinese expert, the third reason is that Caracas values the sense of self-identity and mutual support among the BRICS countries, which can provide an alternative platform for cooperation and multilateralism.
Over 3,000 US Marines and Sailors Arrive in Middle East in Deployment Aimed at Iran - Over 3,000 US Marines and Navy sailors arrived in the Middle East on Sunday as part of a previously announced deployment aimed at Iran as tensions are rising in the region.The troops are part of an Amphibious Readiness Group/Marine Expeditionary Unit (ARG/MEU) and arrived onboard the amphibious assault ship USS Bataan and dock landing ship USS Carter Hall. The vessels entered the Red Sea on Sunday after transiting through the Suez Canal.Responding to the deployment, Iranian Foreign Ministry spokesman Nasser Kanani accused the US military of fueling regional instability. “The US government’s military presence in the region has never created security. Their interests in this region have always compelled them to fuel instability and insecurity,” he said. “We are deeply convinced that the countries of the Persian Gulf are capable of ensuring their own security.”US Naval Central Forces Central Command said the deployment is a response to “harassment and seizures of merchant vessels.” Iran seized two tankers in the Persian Gulf earlier this year, but the incidents were provoked by the US seizing a tanker carrying Iranian oil.Under the pretext of sanctions enforcement, the US Justice Department seized the Greek tanker Suez Rajan in April and forced the ship to head for Texas instead of China as the US intended to steal the 800,000 barrels of Iranian oil it was carrying. According to recent media reports, US companies are hesitant to discharge the oil because they fear reprisal from Iran in the Persian Gulf, and the Suez Rajan is stuck off the coast of Texas.Tensions have soared in the Persian Gulf since April, and the US has announced a series of deployments meant to deter more Iranian seizures. Last month, the US claimed it stopped Iranian forces from seizing two commercial vessels near Oman. The US military is now considering placing armed troops on commercial vessels, an unprecedented move that would significantly heighten the risk of a direct clash with Iran.
Syria: Iran's Kanaani Blames Foreign Intervention for Islamic State Escalation - Per Syrian state media, Iranian Foreign Ministry spokesperson Nasser Kanaani condemned a Friday Islamic State attack on a Syrian military bus (other sources claim the target consisted of two trucks), which resulted in the deaths of at least 20 government soldiers. Kanaani claimed that recent escalations in IS violence are “the result of the continuation of intelligence, security and logistical support for the terrorists that are provided by some countries with the purpose of undermining stability, calm and security in Syria.”Claims vary as to the total casualty count. The Associated Press cites the (UK-based) Syrian Observatory for Human Rights as putting the death toll at 33, with the Islamic State claiming 40 killed and 10 wounded. The attack took place in Deir el-Zour province.The Islamic State’s claimed caliphate lost control of its last formally claimed territory to a US-backed Kurdish offensive in 2019, but its “sleeper cells” continue to conduct attacks on both civilian and Syrian military targets including, earlier this year, massacres of truffle hunters in the Palmyra area. The group also announced a change in leadership last week, and new “caliph” Abu Hafs al-Hashimi al-Quraishi may be attempting to make his mark with an increased tempo of operations.The fourth “caliph,” Abu al-Hussein al-Husseini al-Qurayshi, supposedly died in April when, according to Turkey’s president Recep Tayyip Erdogan, he blew himself up during a Turkish raid on his safe house). The Islamic state announced his death in early August, but said he died in combat with a Syrian al-Qaeda affiliate.
Ukraine declares war on Russia’s Black Sea shipping – Russian ports and ships on the Black Sea — including tankers carrying millions of barrels of oil to Europe — could justifiably be attacked by the Ukrainian military as part of efforts to weaken Moscow's war machine, a senior Kyiv official warned Monday in the wake of two recent attacks on Russian vessels. "Everything the Russians are moving back and forth on the Black Sea are our valid military targets," Oleg Ustenko, an economic adviser to Ukrainian President Volodymyr Zelenskyy, told POLITICO, saying the move was retaliation for Russia withdrawing from the U.N.-brokered Black Sea grain deal and unleashing a series of missile attacks on agricultural stores and ports. “This story started with Russia blocking the grain corridor, threatening to attack our vessels, destroying our ports,” Ustenko said. “Our maritime infrastructure is under constant attack." Over the weekend, Ukraine declared the waters around Russia’s Black Sea ports a “war risk area” from August 23 “until further notice.” The zone includes major Russian ports like Novorossiysk, Anapa, Gelendzhik, Tuapse, Sochi and Taman. That's causing insurance rates for ships to skyrocket and could imperil one of Russia's main export routes for oil and oil products — key in ensuring the Kremlin has enough cash to keep waging war against Ukraine. “After this weekend, the Black Sea feels like a more dangerous place for international shipping, and it was already very dangerous,” said Byron McKinney, director with S&P Global Market Intelligence. “Many vessels simply don’t go to the area. Insurance is pretty much nonexistent. Where there are insurance rates they’re very high and that’s only going to increase.”On Saturday, Russia’s federal maritime agency, Rosmorrechflot, reported that a Russian tanker, the Sig, had been hit in an apparent strike by Ukrainian forces while sailing close to Ukraine’s occupied Crimean peninsula.“The tanker received a hit on its engine room, close to the waterline on the starboard side, presumably as a result of an attack by a sea drone,” officials said.Ukraine’s defense ministry said that as long as Russians “terrorize peaceful Ukrainian cities and destroy grain condemning hundreds of millions to starvation,” there would be “no more safe waters or peaceful harbors for you in the Black and Azov Seas.”
Drone attack on tanker shows Kyiv’s intent to hit Russian energy shipments – An overnight naval drone attack against a Russian tanker in the Black Sea signals a potential new front in the Ukraine war, with Kyiv delivering its strongest message to date that it is willing to target Moscow's all-important shipments of oil and fuel. The battle for supremacy in the Black Sea is ramping up fast, with massive implications for global energy and food security. The attack on the tanker off Crimea came only a day after another Ukrainian marine drone — a flat, arrowhead-shaped vessel packed with explosives — targeted a Russian naval base near the port of Novorossiysk, badly damaging a warship.“The tanker was damaged in the Kerch Strait during an attack by the Ukrainian Armed Forces," Russia's state-run TASS news agencyreported on Saturday. "The crew is safe, the Maritime Rescue Center informed us. The engine room was damaged. Two tugboats arrived at the scene of an emergency with a tanker in the Kerch Strait, the question of the towing vessel is being resolved,” it said.Russia's Federal Marine and River Transport Agency reported it was a SIG oil and chemical tanker — a ship whose owner, St. Petersburg-based company Transpetrochart, was sanctioned by the U.S. in 2019 for supplying jet fuel for Russian forces in Syria.Tensions are rising in the Black Sea after Russia last month announced it was withdrawing from the U.N.-brokered Black Sea Grain Initiative and started attacking Ukrainian ports on the Black Sea coast and on the Danube River with missiles, destroying tens of thousands of tons of Ukrainian grain. After those attacks and the blockade, Ukrainian officials issued a statement in July that Russian vessels will be no longer safe in the Black Sea. Kyiv's defense ministry said in a statement that such vessels "may be considered by Ukraine as carrying military cargo with all the corresponding risks" from midnight Friday.On Saturday, Kyiv announced a "war risk area" around Russian ports on the Black Sea, specifically citing the ports of Novorossiysk, Anapa, Gelendzhik, Tuapse, Sochi and Taman. The declaration will be in effect from August 23 “until further notice,” it said. Marine Traffic, an online maritime tracking site, has the latest position of the SIG tanker fixed near the Kerch Strait “at anchor.” Russia's Marine and River Transport Agency reported all 11 crew members on board were safe and that the tanker was struck in the engine room near the waterline on the starboard side, presumably as a result of an attack by a marine drone. By morning, the water pouring to the engine room has been staunched, and the vessel was afloat, Russian official said.
Oil Reaction Surprisingly Muted As Kiev Expands Conflict With Attacks On Russian Oil Exports - As Bloomberg Markets live commentator Jake Lloyd-Smith writes this morning, oil’s had "a curiously muted reaction" to the latest twist in the war in Ukraine, with Brent getting only a small lift before trading flat and then dipping into the red. For those who missed the latest news, on Saturday a Russian oil tanker was hit by a Ukrainian sea drone in the Kerch Strait. In addition, on Friday, Ukraine attacked a Russian naval ship with a sea drone in the Black Sea port of Novorossiysk. Kiev recently said that it had designated six Black Sea ports - a vital conduit for its crude - as being in "war risk" areas, indicating that there could be further attacks on Russian territory. As Academy Securities reports, "Ukraine’s goal in attacking the tanker was to increase insurance costs for Russia’s partners that are buying oil and shipping it out of those ports, which raises the true cost of buying “discounted” Russian oil and hurts Russia financially." The number of attacks in the Black Sea by both Ukraine and Russia have increased since Moscow terminated the grain deal last month that had allowed Ukraine to continue to export grain to alleviate the global food crisis. With Ukraine’s land-based counteroffensive making no progress in the latest humiliation to NATO forces which are waging war against Russia by Ukraine proxy, Kiev is now looking to expand the conflict into the Black Sea and even into Moscow where Ukrainian drones attacked buildings last week; indeed, as Ukraine’s defense ministry said in a Saturday post that “Two can play that game” in response to Russian attacks on Ukraine grain infrastructure.
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