Oil, Gas, And Fracking News Reads 09June 2018 – Part 2

Written by rjs, MarketWatch 666

Here are some more selected news articles about the oil and gas industry from the week ended 09 June 2018. Go here for Part 1.

This is a feature at Global Economic Intersectionevery Monday evening.

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Chinese Gas Pipeline Explosion Injures 24 People — A natural gas pipeline operated by the state-owned China National Petroleum Corp. exploded in the southwestern Guizhou province on Sunday night. At least 24 people were “seriously injured,” Xinhua reported Monday, citing local government authorities. Eight people are reportedly in critical condition and 16 in serious condition. No deaths were reported.The explosion occurred around 11:20 p.m. local time in the Shazi district of Qianxinan County.The pipeline was shut down and the fire was put out by 2:30 a.m. on Monday. An investigation into the gas leak is underway and authorities are still searching for any more casualties.The pipeline transports natural gas from Myanmar’s Kyaukpyu port to southwest China, Reuters reported.A similar explosion happened on a nearby section of the pipeline in Shazi district in July 2017. That blast, which was caused by heavy rains and a landslide, took eight lives and injured 35, Xinhua reported then.The latest blast comes amid the Chinese government’s efforts to boost natural gas to combat the country’s notorious air pollution. Natural gas is considered “clean” because it emits 50 percent less carbon dioxide than burning coal. But the primary ingredient of natural gas is methane, a greenhouse gas about four times more powerful at trapping heat than CO2.

There’s a gas pipeline deal to be done with Kim Jong Un. Any takers? – The idea of building a conduit to carry natural gas from the Russian Far East to South Korea has been around since the 1990s. From 2008 to 2011, as Russia’s gas giant, Gazprom PJSC, was building a pipeline as far as Vladivostok, the company signed a memorandum of understanding with North Korea and a framework agreement with Seoul’s Korea Gas Corp. to extend it south.It went nowhere, primarily because of the politics surrounding Kim’s bid to build up his nuclear and missile programs. With North Korea’s relations with the U.S., Seoul, and China now on the mend, and South Korea trying to reduce its dependence on coal and nuclear power, the pipeline would seem an obvious piece of economic diplomacy.The government in Seoul, at least, seems interested in bringing the proposal back to life. “Should the security situation on the Korean Peninsula improve, we will be able to review the LNG project involving the two Koreas and Russia,” South Korean Foreign Minister Kang Kyung-wha told a regional energy conference at the end of March, according to the state-owned Yonhap News Agency. Getting the North involved in such a project could “serve as a catalyst that helps ease geopolitical tensions in the region,” she said. Perhaps, but many obstacles stand in the way. Impoverished, unpredictable, and with a history of flouting international law, the government in Pyongyang would make a high-risk partner for something as capital-intensive as an energy pipeline. Even at the height of optimism about the project in 2012, when Gazprom was announcing it was ready to start work, a report by a Russian energy academic warned that “Russia cannot provide its South Korean counterparts with reliable guarantees of safe delivery,” because it lacked “real influence” over Pyongyang.

Global LNG trade continues to grow, especially from Australia and the United States – Global trade in liquefied natural gas (LNG) reached 38.2 billion cubic feet per day (Bcf/d) in 2017, a 10% (3.5 Bcf/d) increase from 2016 and the largest annual volume increase on record, according to the Annual Report on LNG trade by the International Association of Liquefied Natural Gas Importers (GIIGNL). In 2017, there were 19 LNG exporting countries and 40 LNG importing countries. Australia and the United States were among the countries with the largest increases (2.7 Bcf/d combined) in 2017 LNG exports. Besides Australia and the United States, several other countries also increased LNG exports in 2017. The return to service of Angola LNG and increases from several countries including Nigeria, Malaysia, Algeria, Russia, and Brunei added another 1.4 Bcf/d of LNG exports, more than offsetting a combined decline of 0.6 Bcf/d in exports from Qatar, Indonesia, Norway, Peru, the United Arab Emirates, and Trinidad. Asian countries led the growth in global LNG imports, accounting for 74% (2.6 Bcf/d) of the increase in 2017. Japan remains the largest LNG importer, importing 11.0 Bcf/d in 2017. China had the largest growth in LNG imports globally (1.5 Bcf/d) and became the world’s second-largest LNG importer in 2017, surpassing South Korea. LNG imports also increased in South Korea, Pakistan, Taiwan, and Thailand, which collectively added 1.0 Bcf/d. Europe increased its LNG imports by 1.4 Bcf/d, primarily in Spain, Italy, Portugal, France, and Turkey. LNG imports in the United Kingdom declined by 0.34 Bcf/d (35%), one of only two countries in Europe to experience declines in LNG imports, as lower winter heating demand from the residential sector and increased electricity generation from wind reduced the demand for natural gas. Growth in LNG trade was driven in part by new liquefaction capacity commissioned in Australia, the United States, and Russia, collectively adding 3.4 Bcf/d of liquefaction capacity. The world’s first floating liquefaction plant, Malaysia’s PFLNG Satu (0.2 Bcf/d capacity), was also commissioned in 2017. Since 2013, the United States and Australia have added a combined 9.67 Bcf/d of new liquefaction capacity, with another 8.3 Bcf/d expected to be completed by 2020. Including additions in the United States and Australia, liquefaction projects currently under construction are projected to increase global liquefaction capacity by 13.5 Bcf/d by 2022.

Global LNG trade jumped 10.3% to 393 Bcm in 2017: BP — Global LNG trade grew 10.3% in 2017 to 393.4 Bcm of gas equivalent, the fastest growth since 2010, BP said in its latest annual statistical review published Wednesday. LNG supply growth leading to more price convergence Strong production growth — aided by startup of new LNG trains in Australia and the US — was met by equally strong demand growth from China, which accounted for almost half of the global expansion. Chinese LNG imports totaled 52.6 Bcm of gas equivalent last year, up 47% on the 35.9 Bcm it bought in 2016. Qatar remained the main global LNG supplier, with exports totaling 103.4 Bcm of gas equivalent, while the US saw its exports soar to 17.4 Bcm last year from just 4.3 Bcm in 2016 — which was the first year of LNG supplies from the lower 48. Australia also saw its exports rise strongly by 28% to 75.9 Bcm last year, making it the world’s second biggest LNG supplier by some distance. BP chief economist Spencer Dale said that while market observers had predicted an LNG supply “glut” given the wave of new supply projects that came online in the past few years, the result instead has been periods of unsustainably low prices rather than a build-up of idle capacity.

Natural Gas Flirts With Upside And Downside – Since its introduction in 1990, the NYMEX natural gas futures contract has traded in a range from $1.02 to $15.65 per MMBtu. Over recent years, the band has narrowed near the bottom end of the trading band. As the monthly chart illustrates, over the past three years, we have seen a narrowing trading range. In 2016, natural gas traded from $1.611 to $3.994, a $2.383 per MMBtu range. Last year, the range narrowed to under one dollar at 90.9 cents on the continuous futures contract. So far in 2018, the range has been from $2.53 to $3.661 or $1.131 per MMBtu. Even the range in 2016 is a far cry from past years. In the wild years of 2005 and 2008, the trading band for natural gas was $9.92 and $8.484 respectively. Interestingly, interest in the market is far greater these days than during the heyday of volatile conditions when speculators flocked to the natural gas futures arena. The natural gas market has matured and evolved in the United States over the past decade. The fact is that both the supply and demand side of the fundamental equation for the energy commodity has undergone dramatic changes. The discovery of massive reserves in the Marcellus and Utica shale regions of the United States and technological advances in hydraulic fracking has increased the supplies of natural gas at an exponential rate since the last time the price traded above the $10 per MMBtu level. At the same time, the cost of production has dropped because of both technology and, more recently, an energy-friendly administration in Washington DC that has cut regulations and decreased corporate tax rates. The lower price over recent years is the result of considerable increases in supplies at a lower cost.

Analysts call for 88 Bcf injection to US gas storage for seventh build of season – US gas in storage is expected to have increased by 88 Bcf last week as dipping production and rising temperatures foreshadow a string of slightly below-average builds in the weeks ahead, creating a bullish case for end-of-season levels. The US Energy Information Administration on Thursday is expected to report an 88 Bcf injection for the week ended June 8, according to a survey of analysts by S&P Global Platts. Responses to the survey were tight and ranged for a build of 81 Bcf to 95 Bcf. The EIA plans to release its weekly storage report at 10:30 am EST. An 88 Bcf injection would be more than the 82 Bcf build in the corresponding week last year but less than the five-year average build of 91 Bcf. This would only be the seventh injection of the year compared to the 10 net injections normally seen by this time. Over the past five years storage has added an average amount of 719 Bcf by now. This year, stocks have risen by 536 Bcf since the end of the heating season. In 2014, when in the injection season started at a low of 824 Bcf, storage fields had added 783 by early June. An injection within analysts’ expectations of 88 Bcf would increase stocks to 1.905 Tcf. The deficit versus the five-year average would expand to 515 Bcf and the deficit versus last year in the corresponding week would shrink to 793 Bcf. The EIA reported a 92 Bcf injection for the week ended June 1. It increased inventories to 1.817 Tcf, which was 30.5% less than the year-ago inventory of 2.616 Tcf, and 22% less than the five-year average of 2.329 Tcf.

EIA Shocks with 96 Bcf Storage Build; July Natural Gas Falls – The Energy Information Administration (EIA) reported a 96 Bcf build into storage inventories for the week ending June 8, considerably higher than even the most bearish of expectations. Nymex July natural gas futures initially appeared to take the surprise build in stride as the prompt month barely budged after the storage report’s 10:30 a.m. release.“Prices didn’t fall that much. We were at $2.97 when the number came out, then we dropped a penny,” INTL FC Stone’s Tom Saal said. By 11 a.m., the Nymex July contract had dropped to around $2.93, down 3.2 cents from Wednesday’s settle.The EIA’s reported 96 Bcf injection lifted storage inventories to 1,913 Bcf, 785 Bcf less than last year at this time and 507 Bcf below the five-year average of 2,420 Bcf.Before the EIA released the report, market consensus built around a build in the upper 80s Bcf range. EBW Analytics favored a slightly smaller build, while Bespoke Weather Services projected a 90 Bcf injection. Kyle Cooper of ION Energy Services expected a 93 Bcf build, and a Bloomberg survey had a range of 82-95 Bcf, with a median expectation of 90 Bcf. A Reuters poll also had a range of 82-95 Bcf, with a median expectation of 90 Bcf.Last year, the EIA reported an injection of 82 Bcf, while the five-year average build stands at 91 Bcf. The East region injected 26 Bcf into storage, while the Midwest injected 31 Bcf. Inventories in the South Central region rose by 27 Bcf.Saal said Thursday’s late-morning trading action was likely due to high-frequency traders that don’t necessarily care about such a large discrepancy in storage estimates versus the actual reported build. “The market is groping along now. There’s only so many things it can react to,” he said. Still, with weather forecasts showing cooler weather beginning next week, there could be some downside risk in play.

NYMEX July contract breaches $3/MMBtu on hot weather forecasts – The NYMEX July natural gas futures contract jumped 5.7 cents Friday to $3.022/MMBtu, the first time the prompt-month contract has reached above $3/MMBtu since late January, as hot weather in the coming days are likely to suppress storage-building efforts. Prices were last seen above the $3/MMBtu level in January. That came when a demand surge put storage levels at a 17.5% deficit to the five-year average for the week ended January 26, according to Energy Information Administration data.The price movement “is even more surprising after yesterday’s bearish storage report,” Myers said.The EIA reported a 96-Bcf injection to gas storage stocks Thursday for the week that ended June 8, a build well above market expectations. The current stock level of 1.913 Tcf is a 21% deficit from the five-year average of 2.42 Tcf, according to EIA. “The market believes that warm weather in the coming days is going to suppress the next storage injections,” Myers said.Prices are likely to get further support from the National Weather Service forecast of above-average temperatures for much of the country while the Southwest region is likely to experience cooler weather than usual. US dry gas production slid a mere 100 MMcf day on day to 77.6 Bcf/d Friday, down 1% since the start of the week. Production is likely to rise to 78.3 Bcf/d over the next seven days, S&P Global Platts Analytics data showed.

July Natural Gas Surpasses $3 as Weather Models Point to Increased Heat – July natural gas was uncharacteristically active Friday as traders eyed increasingly hotter trends in the latest weather forecasts and the potential hotter temperatures may have on already below-normal storage inventories. The Nymex July gas futures contract settled 5.7 cents higher at $3.022.Spot gas prices were mixed as warmer weather was expected to lift demand in key eastern regions, but maintenance events and mild conditions in other areas sent prices tumbling. The NGI National Spot Gas Average climbed 1 cent to $2.62.Nymex July futures were strong from the start of trading, rising above $3 just before the open and climbing as high as $3.032 before easing a bit into the settle. At the forefront of Friday’s trading action were weather forecasts calling for more a very warm to hot pattern through the end of the month, with most days having greater than normal cooling degree days (CDD). National demand was expected to increase over the weekend as hot high pressure shifted over the Great Lakes, Mid-Atlantic and East, where high temperatures of 90s were to be widespread, including in major cities from Chicago to New York City, NatGasWeather said.“This high pressure system is where hotter trends have held all week to add numerous CDDs/Bcf in demand,” the forecaster said. Demand is expected to soften late into the coming week week as weather conditions still looked quite comfortable across the central and northern United States with highs of 70s and 80s. Weather data also showed a weaker ridge over Texas and the South for less intense heat, NatGasWeather said. It will still be quite warm over the Southeast with upper 80s and 90s for regionally stronger demand, and likely hot over California into the Southwest as well with upper 80s to near 100. The hot upper ridge is expected to gain strength June 25-30 across the southern and central United States, including the Southeast and up the Mid-Atlantic Coast. “Where the data could be a little hotter is across the Great Lakes and Northeast. Although, it wouldn’t take much of a shift with the hot dome of high pressure further north or east for the pattern to look much more bullish,”

Hong Kong’s CK infrastructure bids over $9 billion for Australian pipeline company – Victor Li, the new chairman of Hong Kong’s CK Infrastructure Holdings Ltd., moved to expand the empire built by his billionaire father, Li Ka-shing, by offering more than $9 billion for Australian pipeline operator APA Group. The elder Mr. Li was known to be a fan of buying assets that offered stable returns and the APA bid shows the younger Mr. Li is continuing that strategy. It also demonstrates that Victor Li is committed to expanding an empire that includes ports and property businesses in China, electric utilities in Australia and mobile phone networks in the U.K. Li Ka-shing retired last month. APA operates more than 9,000 miles of gas pipelines in Australia. It also owns or has interests in gas-storage facilities, gas-fired power stations and wind farms. Its portfolio of assets is valued at more than $15 billion. On Wednesday, APA said it would open its books to a CKI-led consortium after receiving a conditional offer worth 11 Australian dollars (US$8.33) a share in cash. APA left the door open to other bidders. A formal offer would need approval from Australia’s antitrust regulator and the Foreign Investment Review Board. The CKI offer came at a 33% premium to APA’s Tuesday closing price. It values APA at more than $9.3 billion. The APA bid comes at a challenging time for the Li family’s CK Hutchison Holdings Ltd. conglomerate, which owns a majority stake in CKI. Chinese competitors are eating away at its port and property businesses in Hong Kong and mainland China, while regulators have blocked bids worth more than $10 billion for a mobile phone operator in the U.K. Political uncertainty in the U.K. also poses a risk to CK Hutchison as more than a third of its operating profit comes from there. CKI is one of the largest foreign investors in Australian infrastructure. It owns SA Power Networks, an electricity distributor in South Australia state, Melbourne electricity supplier CitiPower, gas distributor Australian Gas Networks Ltd. and an electricity distributor and a renewable-energy transmission business in Victoria state.

Unsold Nigerian July crude oil pegged at 20 million-34 million barrels – Nigerian oil has been slow to sell this month as bidders for the country’s July-loading heavy and light sweet crudes have been absent from the market. Market participants pegged the amount of unsold Nigerian barrels loading in July at 20 million-34 million barrels, amounting to roughly 40%-75% of what is produced in a month. “For the time being, it is extremely quiet. No one has tried to jump on these barrels,” one trader said, adding refiners were trying to reshuffle their needs. “Some refiners could be opportunistic about buying distressed cargoes,” another trader said. Equity holders, who will take June-loading cargoes they could not sell into their own systems, have struggled to deliver additional stems into their systems in July. Akpo and Agbami, Nigeria’s best grades in terms of sulfur and gravity, have fallen to a seventh-month low as large quantities of oil from the June and July program remained unsold as traditional buyers sought alternatives. Akpo and Agbami were both last assessed at a 65 cents/b discount to Dated Brent, their lowest since November 13 when they hit the same level, S&P Global Platts data showed. Marketing barrels has been more difficult due to wide Brent-WTI spreads giving oil coming from west of the Atlantic Ocean a price advantage over Brent-related ones.

BP Sees No Sign Of Oil Supply Shortfall Due To Underinvestment – UK supermajor BP doesn’t expect global oil supply shortages in the coming years because of reduced investment, Brian Gilvary, BP’s Group Chief Financial Officer, said on Thursday.“We’re not seeing under-investment coming through yet,” Gilvary said at the FT Energy Transition Strategies summit in London, as quoted by Reuters.“If we start seeing a drop off in production in the Lower 48 [U.S. shale] that might be a cause of concern,” Gilvary said at the summit. Earlier this year, Saudi Aramco’s president and chief executive Amin Nasser saidthat the industry would need to invest more in exploration, after record-low discoveries last year. Oil firms will have to meet not only growing energy demand but will have to offset with new discoveries a large natural decline in mature oil fields, Aramco’s top executive said in Houston in March.According to Nasser, the industry – which has already lost US$1 trillion in investments during the downturn – needs more than US$20 trillion over the next 25 years to meet rising demand for oil and gas. More recently, higher oil prices and lowered development and project costs have led to cautious optimism and measured risk-taking within the industry that is set to see an uptick in global oil investment this year, energy consultants Wood Mackenzie say. While much of the investment increase is happening in U.S. onshore – with shale companies lifting 2018 budgets by 15-20 percent in response to higher prices – conventional oil project investments around the world are also coming back, especially in top offshore areas where project economics are competitive with U.S. tight oil, says Simon Flowers, Wood Mackenzie’s Chairman and Chief Analyst.

Russia led the world for oil and gas discoveries in Q3 2017 – — A total of 30 oil and gas discoveries were made in the third quarter of 2017. Of these, 18 are conventional oil, one is heavy oil, one is unconventional gas, and the remaining 10 are conventional gas, according to GlobalData, a data and analytics company. Among countries, Russia leads with eight discoveries, followed by Norway and Australia with five and three discoveries respectively. Pakistan and Senegal had two discoveries in third-quarter 2017.In Russia, all eight discoveries yielded conventional oil, with two located in the West Siberian basin and the rest in the Volga-Ural basin. In Norway, among five discoveries, four finds yielded conventional gas from the Barents Sea basin and Norwegian Sea basin, while the remaining one yielded conventional oil from the Barents Sea basin.In Australia, among three discoveries, two discoveries yielded conventional oil, one from offshore terrain and the other from shallow water terrain, and the remaining one yielded conventional gas from onshore terrain.Among operators, Rosneft Oil Company leads among operators with seven discoveries, followed by Statoil ASA with five discoveries, and Oil and Natural Gas Corporation Limited (ONGC) and Cairn Energy Plc with two discoveries each. The remaining operators had one discovery each in third-quarter 2017.

Interview: Would Qatar like to see an OPEC exit strategy? – Ahead of OPEC’s most important meeting in years on June 22, Qatar’s energy minister Mohammed Al-Sada answers questions from the S&P Global Platts team on what to expect in Vienna and the state of the world LNG market.Al-Sada: “The ‘Declaration of Cooperation’ Agreement between OPEC and allied non-OPEC countries effective from January 1, 2017, has been very successful in balancing the market by reducing the overhang of a staggering 340 million barrels above the OECD five-year average commercial stock levels of 2.81 billion barrels. With a committed production adjustment over the 500 days till mid-May this year, the stock overhang has been brought down to almost zero. Currently both the ‘fundamentals’ and ‘geopolitics’ are very robust and are having a strong influence on the market. These factors have dramatically changed the market. Whether production cuts should be prolonged, or re-negotiated, in the context of market fundamental and changing geopolitics would be reviewed by OPEC and allied non-OPEC countries during the forthcoming meetings on 22-23 June in Vienna. They will surely arrive at an appropriate decision to the benefit of both suppliers and consumers.” : “The production adjustment has been a thoughtful and agreed step to rebalance the market. It has worked well and there is certainly a good opportunity to extend and enhance the cooperation with the countries who have contributed to the stabilization of the market in the best interest of all and the world economy at large. Global spending peaked at $900 billion in 2014 but the crash in oil prices thereafter reduced the investment by half in 2017. It is estimated that the industry would only be spending $510 billion in 2018. It would be safe to say that except for shale plays in the US, there is still a general hesitation in committing resources for oil exploration and development.There is a need to stimulate investments to ensure adequate oil supplies are available to meet the growing demand and offset declines in some parts of the world.”

Geopolitical Tensions Reach Boiling Point Ahead Of OPEC Meeting — The upcoming OPEC meeting on June 22 is shaping up to be a contentious one, after news broke that the U.S. government asked Saudi Arabia to increase oil production before Washington pulled out of the Iran nuclear deal. Earlier last week, news surfaced that the U.S. government asked Saudi Arabia to boost output to relieve pressure on prices. But Reuters followed up with a report on June 7, adding more context to that story. According to Reuters, a high level Trump administration official called Saudi Arabia a day before Trump was set to announce the U.S. withdrawal from the Iran nuclear deal, asking for more oil supply to cover for disruptions from Iran. The last time the U.S. government pressured OPEC into adding supply, it was also over Iran. The Obama administration wanted the cartel to offset disrupted Iranian production, after an international coalition put stringent sanctions on Iran in 2012. Roughly 1 million barrels per day were knocked offline. While the Trump administration’s request might irk OPEC members, with Iran obviously the most aggrieved, the apparent willingness of Saudi Arabia to comply with Washington’s request has ignited furor from within the group.“It’s crazy and astonishing to see instruction coming from Washington to Saudi to act and replace a shortfall of Iran’s export due to their Illegal sanction on Iran and Venezuela,” Iran’s OPEC governor, Hossein Kazempour Ardebili, said in comments to Reuters. He said that OPEC would not simply comply with Washington’s requests.“No one in OPEC will act against two of its founder members,” he said, referring to Iran and Venezuela. “The U.S. tried it last time against Iran, but oil prices got to $140 a barrel.”“OPEC will not accept such a humiliation. How arrogant and ignorant one could be (to) underestimate the history of 60 years’ cooperation among competitors,” he said. Venezuela wrote to OPEC members, asking them to denounce U.S. sanctions, a request similar to the one Iran made recently. “I kindly request solidarity and support from our fellow members,” Venezuelan oil minister Manuel Quevedo wrote. The group should discuss “the constraining effects of unilateral sanctions imposed by the United States of America, which represent an extraordinary aggression, financially and economically, for our national oil industry’s operations and the stability of the market.”The comments suggest that a good portion of the cartel is lining up against any move to increase production. It could set the stage for a heated meeting in Vienna in two weeks’ time. “It might be one of the worst OPEC meetings since 2011,” Eugen Weinberg of Commerzbank told CNBC.

Is Russia Bailing On The OPEC Deal? For the first week of June, Russia, the world’s largest oil producer, exceeded the amount it agreed to produce as part of the January 2017, OPEC/non-OPEC supply cut deal. Russia produced some 11.1 million barrels per day (bpd), far exceeding production limits outlined in the deal, Interfax news agency said on Saturday, citing a source familiar with the matter. As part of the oil production cut, Russia agreed to trim its production by 300,000 bpd from 11.247 million bpd. The output cut deal called for its members to remove some 1.8 million bpd of oil from global markets.That deal was orchestrated to stop the bloodletting in global oil markets at the time due to a ramp up in U.S. shale production and Saudi Arabia’s late 2014 strategy of trying to drive U.S. shale producers out of business by opening the production flood gates and sending prices to multi-year lows.However, the Saudi’s plan backfired. Global oil prices tumbled from more than $100 per barrel in mid-2014 to under $30 per barrel by the start of January 2016, throwing global markets into a historic supply overhang, and causing financial chaos for the Saudis who had to start issuing international bonds to offset record budget deficits – a development that is still ongoing as the Kingdom shores up its finances from that low oil price period. Now that OECD oil inventory levels have reached the OPEC/non-OPEC members’ goal of five-year averages, there is talk and speculation among not only media but oil producing countries asking if it’s time to ramp up production. Also, geopolitical factors are coming into play as renewed U.S. sanctions against Iran will remove as many as 500,000 bpd from global markets, perhaps more according to other forecasts. In addition, OPEC member Venezuela’s oil production is coming apart at the seams, also removing more barrels from the market.

Feature: North Korea peace deal could reshape Russian gas export priorities – With US President Donald Trump and North Korean leader Kim Jong-un set to meet at a historic summit in Singapore Tuesday, global power brokers such as Russia are eyeing the prospect of an end to the nuclear stand-off on the Korean peninsula and a “new era” in relations with North Korea. Russia believes a potential North Korea peace deal could help to strengthen multilateral energy cooperation in North Asia, with the possible revival of a project to build a gas pipeline through the Korean peninsula underpinning new partnerships in the region. Russian President Vladimir Putin last week said that he continues to support peace talks and the development of new economic projects with North Korea. Putin said the focus lies on infrastructure projects, primarily a gas pipeline, adding that other energy infrastructure are possible with regional players. “There are many opportunities for joint, trilateral and quadrilateral cooperation, we just need to move in this direction,” Putin said in an interview with China Media Group. In a sign that Russia is preparing for greater cooperation, Putin has for the first time invited Kim Jong-Un to the Eastern Economic Forum in September. Russia’s flagship economic showcase for Asian investors, it has become something of a launch pad for new cooperation between Russia and Asian investors. Analysts see significant potential in integrating North Korea into the regional energy network for Russia, though it could lead to changes in Russia’s energy project prioritizes.

Global crude oil demand growth is now hostage to China, India: Russell (Reuters) – Discussion in the crude oil market is degenerating into a single “will they or won’t they” focus on whether the Organization of the Petroleum Exporting Countries (OPEC) will ease their output restrictions next week. While the meeting in Vienna on June 22 will undoubtedly heavily influence the direction of short-term crude prices, the market’s focus solely on supply could be viewed as somewhat myopic. Demand is probably the more important driver of the oil price over the longer term, and the simple truth is that the global market is effectively now hostage to just two countries. China and India have so far this year accounted for about 69 percent of the expected growth in crude oil demand, meaning that what happens in those two behemoths is likely of far more importance to the crude market than what may or may not happen in Vienna. The International Energy Agency forecast last month that global crude oil demand would rise by 1.4 million barrels per day (bpd) in 2018, down from an earlier estimate of 1.5 million bpd. For the first five months of the year China’s crude oil imports were 9.21 million bpd, according to customs data, a rise of 690,000 bpd on the same period in 2017. India’s crude imports were 4.57 million bpd in the January-May period, up 272,000 bpd from the same period last year, according to vessel and port data and industry sources. Together these two countries, the world’s biggest and third-largest crude importers, have brought in 962,000 bpd more in the first five months of 2018 than in same period last year. If this pace of growth was maintained for the whole year, it would mean that China and India would account for the lion’s share of the IEA’s forecast for the increase in global demand.

Oil prices stall as hedge funds take profits: Kemp (Reuters) – Investors continue to reduce their bullish position in crude oil futures and options, after a blistering rally over the last year, but now the profit-taking has spread to refined fuels such as gasoline and heating oil. Hedge funds and other money managers cut their net long position in the six most important futures and options contracts linked to petroleum prices by 72 million barrels in the week to June 5, according to data from regulators and exchanges. Funds cut their net long positions in Brent (-14 million barrels), NYMEX and ICE WTI (-19 million barrels), U.S. gasoline (-17 million), U.S. heating oil (-12 million) and European gasoil (-10 million). Portfolio managers have trimmed their combined net long in petroleum to 1.113 billion barrels, down from a recent high of 1.411 billion on April 17 and a record 1.484 billion on Jan. 23. Heavy liquidation has seen the combined position cut by 298 million barrels over the last seven weeks, with most of the reduction coming from crude, where net length has been reduced by 302 million barrels. But in the two most recent weeks the liquidation has spread to gasoline, heating oil and gasoil, reflecting broader doubts about the sustainability of the rally (https://tmsnrt.rs/2JD9EEe ). Oil consumption growth has been strong and the combination of OPEC output restraint and involuntary production losses from Venezuela and other countries has pushed the market into deficit this year. However, with benchmark crude prices up by almost 70 percent over the last 12 months, and now apparently stalling, many fund managers appear to have decided now is a good time to realise some profits. Most of the reduction in net length has come from the liquidation of long positions (-232 million barrels) rather than the creation of fresh short positions (+66 million barrels) confirming profit-taking is the main motive.

Crude Oil Prices Settle Higher as Iraq Warns Against Lifting Output Curbs – WTI crude oil prices settled higher Monday as Iraq’s oil minister warned producers against easing limits on production curbs offsetting reports of an uptick in Russian and Saudi output. On the New York Mercantile Exchange crude futures for July delivery rose 36 cents to settle at $66.10 a barrel, while on London’s Intercontinental Exchange, Brent added 2 cents to trade at $76.48 barrel. Iraq’s oil minister, Jabar al-Luaibi, warned producers Monday against pumping more oil, claiming oil prices still needed support. That helped oil prices bounce from weakness earlier in the session following reports Russia and Saudi Arabia had increased output. Russian oil production reportedly rose by 150,000 barrels per day in the first week of June to 11.1 million barrels by day. That was above the country’s quota agreed in OPEC-led production agreement. The 1.8 million barrel a day production-cut agreement, first agreed in November 2016, between OPEC and non-OPEC members has rid the market of excess crude supplies, underpinning a move higher in oil prices. At OPEC’s next meeting due June 22, the OPEC-led deal is expected to come under review. Saudi Arabia, meanwhile, increased production by more than 100,000 barrels a day in recent weeks, the WSJ reported Friday. That saw Saudi output inched higher to about 10 million barrels a day. Reports of rising Russian and Saudi output emerges amid signs of an ongoing ramp up in U.S. output, raising fears of a slowdown in the rebalancing of oil markets. The number of oil rigs operating in the US increased by 1 to 862, its highest level since March 13, 2015, according to data from energy services firm Baker Hughes. The positive start to week for crude prices comes just days after data showed traders continued to slash their bets on further upside in oil prices.

Oil Markets Unmoved By North Korea Summit | OilPrice.com – The markets shrugged at the historic meeting between President Trump and North Korean dictator Kim Jong Un. Both sides hailed the summit as a breakthrough, with a pledge towards denuclearization, but as expected, there was a lack of even the most basic details on how they might get there. Oil was flat at the start of Tuesday. Opposition to an increase in the OPEC/non-OPEC production limits continues to grow, with Iraq coming out against such a move. OPEC’s second largest producer said that the production cuts have not yet achieved the intended objective of balancing the oil market. “Producers from within and outside OPEC have not yet reached the goals set,” Iraq’s oil minister Jabbar al-Luaibi said in a statement. Iraq “rejects unilateral decisions made by some producers which do not consult with the rest.” He went on to add: “We shouldn’t exaggerate the need of the oil market for more oil at the present time, and which could cause great damage to global markets.” The statement of opposition comes after Iran and Venezuela also called upon the group to keep the limits in place. The open resistance from a growing number of OPEC members to what seems to be a likely outcome (a softening of the production curbs) is setting the stage for a contentious meeting. Despite opposition from some OPEC members, the two most important producers, Saudi Arabia and Russia, are already signaling their intent to raise output. Saudi Arabia also added production last month, which, marking a significant change in strategy. OPEC’s secondary sources said Saudi Arabia increased production by 85,000 bpd in May while the Saudis themselves said production rose by 161,000 bpd. Russia also increased output at the beginning of June from 10.95 million barrels per day to 11.09 mb/d. The data suggests the two producers are laying the groundwork for higher output. Venezuela told OPEC that it increased production in May by 28,000 bpd, but those communications tend to lack credibility. OPEC’s secondary sources say that Venezuelan output actually fell by 42,000 bpd, putting overall output at a new low of 1.392 mb/d, or roughly 750,000 bpd below 2016 levels.

WTI/RBOB Slide On Russia Oil-Cut Rollbacks, Surprise Inventory Builds — After last week’s biggest inventory build since 2008, headlines confirming Russia is seeking a roll-back of oil-cuts saw selling pressure ahead of the API data which confirmed last week’s surprise builds in crude, gasoline, and distillates.Bloomberg reports that Russia plans to propose that OPEC and its allies be allowed to return production to October 2016 levels, rolling back most but not all of their output cuts within three months, according to a person familiar with Russian thinking. The nations would proportionally share out a 1.8 million barrel-a-day increase to their output limit starting as soon as July, the person said, asking not to be identified because the information isn’t public. The actual boost in supply to the market would be less than that because some states, notably Venezuela, Angola and Mexico, aren’t able to increase, the person said.Additionally, next year, the U.S. government doesn’t see worldwide or U.S. crude production as high as it once did. The Energy Information Administration decreased its 2019 forecast for global production to 102.21 million barrels a day, with most of the downward revision from OPEC.“Overall, where we’re at, is continuing to call into question just what the ultimate outcome will be of the OPEC meeting,” said John Kilduff, a partner at Again Capita LLC.“The opposition that you’re seeing from several OPEC members has given the market some pause about continuing to sell off here.”API

• Crude +833k (-1.25mm exp)
• Cushing -730k (-900k exp)
• Gasoline +2.33mm
• Distillates +2.1mm

EIA-reported builds in Crude, gasoline, and distillates last week shocked markets, and this week confirmed that surprise in API data…OPEC decisions remain on everyone’s mind but inventory data is spoiling the short-term fun and games.“Our best guess is currently that there will be no formal decision to change the production target, but a rather a type of agreement or understanding that compliance will be relaxed,” said Johannes Benigni, chairman of JBC Energy Group in Singapore.The surprise build combined with Russia sent prices modestly lower…

Oil mixed as OPEC cites uncertain market outlook for 2018 (Reuters) – Oil prices were mixed on Tuesday, with U.S. crude settling higher before falling in post-settlement trading, and Brent slipping as investors prepared for a key meeting of the OPEC producer group next week. Brent crude futures LCOc1 fell 58 cents to settle at $75.88 a barrel, while U.S. West Texas Intermediate crude futures CLc1 climbed 26 cents to $66.36. In post-settlement trading, however, WTI turned negative while Brent extended losses after data from the American Petroleum Institute showed a surprise build of 833,000 barrels in U.S. crude stockpiles. Analysts had expected a decline of 2.7 million barrels. [API/S] A stronger dollar .DXY and euro weakness EUR= was putting some pressure on Brent prices, said Phillip Streible, senior market strategist at RJO Futures. A strong dollar makes greenback-denominated oil more expensive for holders of other currencies. “I was looking for an up day (for WTI) – in just a few weeks it had fallen from around $73 (a barrel) to $65, … and even for the window of seasonal decline, that’s a big move to go uncorrected,” said Walter Zimmerman, chief technical analyst at ICAP-TA. The Organization of the Petroleum Exporting Countries released its monthly report on Tuesday, saying a high degree of uncertainty was hanging over the global oil market. [nL8N1TE33E] OPEC and other producing countries including Russia have cut oil output by 1.8 million barrels per day (bpd) since January 2017 in an effort to boost the market. OPEC holds its next meeting on June 22-23, and is expected to decide on future supply policy. With U.S. sanctions threatening to cut Iranian exports and the potential for more declines in Venezuelan production, Saudi Arabia and Russia have indicated they would be willing to make up for any supply shortfall. U.S. production, meanwhile, is expected to rise by less than previously expected, to 11.76 million barrels per day next year, the U.S. Energy Information Administration said.

Saudi Oil Production Jumps In June Despite Drop In Oil Demand: OPEC – It will probably not come as a surprise that at a time when both Trump, and Saudi Arabia, are pressing OPEC to reverse the 1.5 year long OPEC agreement and pump more oil so US gasoline prices dont soar in the summer months, that according to the just released monthly report from the cartel, total OPEC production rose by 35.4kb/d to 31.869mmb/d mostly thanks to Saudi output rising by 85.5kb/d (according to secondary) sources to 9.987mmb/d and up a whopping 161.4kb/d as per direct communication, and back over 10 million barrels. Joining Saudi Arabia in producing more oil in June were Algeria & Iraq, while production again declined in Venezuela, with Libya and Nigeria also seeing a decline in output.Commenting on the state of the market, OPEC noted that 2018 global oil demand growth forecast unchanged; and is forecast to increase by around 1.65mln bpd to average 98.85mln bpd, with total oil consumption projected to surpass 100mln bpd during Q4 2018.However, OPEC did warn that its outlook for H2 2018 warrants close monitoring of the factors impacting both world oil demand and non-OPEC supply that will shape the outlook of the oil market going forward; the tacit warning here is that oil prices may be so high to pressure oil demand.”Looking at various sources, considerable uncertainty as to world oil demand and non-OPEC supply prevails,” said report read. “This outlook for the second half of 2018 warrants close monitoring.”Indeed, according to the report, Saudi April oil demand saw its biggest drop on record, falling across all product categories, with most of the weakness in the heavy part of the barrel, OPEC reported. Demand was down more than 5% y/y in 1st 4 months of 2018, with April falling y/y by 420k b/d, or 17%. “April was extremely sluggish, with the highest drop ever recorded” the monthly report cautioned:

Trump Slams OPEC Again, Demands Lower Prices: “Oil Prices Are Too High, OPEC Is At It Again” – Nearly two months after Trump drew a line in the sand on oil prices, when on April 20 he lashed out at OPEC, tweeting that “Oil prices are artificially Very High! No good and will not be accepted!”which promptly set a ceiling on crude and prompted Saudi Arabia to scramble to boost production…Looks like OPEC is at it again. With record amounts of Oil all over the place, including the fully loaded ships at sea, Oil prices are artificially Very High! No good and will not be accepted! – Donald J. Trump (@realDonaldTrump) April 20, 2018… moments ago Trump doubled down on his oil- price targeting, and in a lengthy tweetstorm that touched on everything from Marc Sanford’s loss, to the strength of the economy, to the just concluded North Korean summit, his relationship with Kim Jong Un and the cancellation of war games with South Korea, even the announcement of the world cup host nation (US, Mexico and Canada), Trump once again lashed out at OPEC, tweeting that “Oil prices are too high, OPEC is at it again. Not good!”Oil prices are too high, OPEC is at it again. Not good! – Donald J. Trump (@realDonaldTrump) June 13, 2018Translation: Trump realizes that the middle-class is spending increasingly more on gasoline, taking away from disposable income, and hopes that Saudi Arabia will pump more to offset the loss of Venezuela and Iran oil (which would not be impaired if Trump hadn’t killed the Iran deal), in line with what we described in “Rising Gas Prices Threaten To Wipe Out Trump’s Tax Cut Benefits“. This time, the market reaction to Trump’s angry tweet was far muted, with oil barely moving – so far – after it slumped following yesterday’s API report, even if it recovered most of the losses.

WTI/RBOB Soar After Huge Surprise Crude Draw (Despite Production Surge) — Despite Russia production-cut roll-back headlines, WTI/RBOB prices are unchanged from the huge, bearish surprise API-reported inventory surge. However, for the 2nd week in a row, DOE data was entirely opposite and showed a big crude and gasoline draw. Markets ignored the 100k b/d surge in production…Bloomberg Intelligence Senior Energy Analyst Vince Piazza notes that a potential agreement by OPEC to increase oil output when it meets later in June is curtailing the crude rally from earlier this year, while prices in earshot of $80 a barrel weigh on demand and threaten economic growth.Bloomberg reports that OPEC and its partners will meet next week and debate whether to restore output halted last year. Saudi Arabia and Russia have said it’s time to reverse the cuts and appear to have begun reviving supplies, but face opposition from Iran, Iraq and Venezuela.“There is no need for a change in the level of production,” said Iran’s OPEC governor, Hossein Kazempour Ardebili, who serves as one of the country’s representatives to the group. “Any increase should be limited to the production allocation in the agreement, which is valid to the end of 2018.”Oil’s recent rally to a three-year peak above $80 a barrel in London has prompted warnings that prices could hurt economic growth. Yet Kazempour insisted that OPEC will resist pressure to raise production. “The Trump administration is trying to intervene in the affairs of a sovereign organization,” he said. Such attempts have failed in the past and “they will also fail” this time. DOE:

• Crude -4.143mm (-1.25mm exp) – biggest draw since March
• Cushing -687k (-900k exp)
• Gasoline -2.271mm (+1mm exp)
• Distillates -2.101mm

After a very bearish API report, and an extremely bearish DOE report last week, DOE data surprised across the board with the biggest crude draw in 3 months and a surprise gasoline draw. This is the 4th weekly decline in Cushing stocks in a row…

EIA says US weekly gasoline demand finds new all-time high — US gasoline demand — measured as product supplied — hit a new all-time weekly high in the week ended June 8, Energy Information Administration data showed Wednesday. Product supplied of gasoline was reported at 9.879 million b/d in the first full week of June, the highest that figure has ever been in data going as far back as 1991. The previous all-time high occurred earlier this year, when product supplied was reported at 9.857 million b/d for the week ended April 13. Amid robust demand, US gasoline stocks for the week were reported 2.27 million barrels down on the week at 236.763 million barrels, which is about 2.3% below their level in the year-ago week. Those stocks fell despite uptick in US gasoline imports, which the EIA says rose from 777,000 b/d in the week ended June 1 to 824,000 b/d in the week ended June 8. Aside from strong demand, higher US gasoline imports likely did not lead to an increase in fuel stocks because gasoline exports rose 69,000 b/d to reach 607,000 b/d. The EIA data show this is the highest volume of exports seen in the first full week of June going as far back as 2010. Interestingly, US demand reached an all-time high despite prices being above historic norms. On Tuesday, S&P Global Platts assessed CBOB in Houston, which is perhaps the most liquid gasoline cash market in the US, at July NYMEX RBOB futures minus 14.60 cents/gal, or $1.9439/gal. This is more than 40% above the assessment value from the year-ago date. This data lines up with a blog post from AAA, an auto-club, posted on Wednesday which said that motorists are now spending more on fuel at the pump relative to last summer.

Crude Oil Prices Settle Higher on Massive Draw in U.S. Crude Supplies – WTI crude oil prices settled higher on Wednesday as data showed a massive draw in U.S. crude supplies despite an ongoing expansion in output. On the New York Mercantile Exchange crude futures for July delivery rose 28 cents to settle at $66.64 a barrel, while on London’s Intercontinental Exchange, Brent gained 75 cents to trade at $76.62 a barrel. Inventories of U.S. crude fell by 4.143 million barrels for the week ended June 8, well above expectations for a draw of 1.440 million barrels, according to data from the Energy Information Administration (EIA). The unexpected rise in crude supplies emerged as imports fell, while the widening spread between Brent and WTI crude prices encouraged U.S. exporters to ramp up exports. Crude imports fell 247,000 barrels per day (bpd) last week to 8.1 million barrels per day (bpd), while exports rose 300,000 bpd. A 3% uptick in refinery activity, saw product inventories such as gasoline and distillate fall sharply, underpinning the size of the draw in crude supplies. Gasoline inventories – one of the products that crude is refined into – fell by 2.271 million barrels, confounding expectations for an increase of 0.443 million barrels, while supplies of distillate – the class of fuels that includes diesel and heating oil – unexpectedly fell by 2.101 million barrels, topping expectations for a build of 0.200 million barrels. The unexpected draw in gasoline inventories was supported by rise in U.S. gasoline demand to an estimated 9.88 million bpd – a record high. U.S. oil output, meanwhile, continued its expansion rising 0.1m bpd to a record 10.9 million bpd, according to preliminary EIA data, strengthening the United States’ position as the second largest oil producer behind Russia. The uptick in US output arrives at a time when the world’s other two largest producers – Russia and Saudi Arabia – raised output, stoking investor fears major oil producers would continue to expand output to plug falling supplies from Venezuela and Iran.

Higher oil prices set to moderate consumption growth: Kemp (Reuters) – Growth in global oil consumption has accelerated significantly since prices slumped in 2014 – highlighting the critical role demand plays in balancing the market. Lower oil prices stimulated OECD consumption between 2015 and 2017 and played a big role in eliminating the global oil market surplus during the rebalancing phase of the cycle. With oil prices up 70 percent over the last 12 months, however, higher prices are set to moderate OECD consumption and thereby global demand growth in 2018/19. Economists often observe that the price-elasticity of oil demand is low, meaning a small change in prices does not have much impact on the amount consumed in the short term. But low impact does not mean no impact. In the case of a large and sustained change, such as occurred in 2014/15, consumption has proved significantly flexible and plays a key role in rebalancing the market. According to the latest estimates from BP, global consumption increased by almost 1.7 million barrels per day (bpd) in 2017 (“Statistical Review of World Energy“, BP, 2018). Consumption has risen by an average of 1.7 million bpd in the last three years since oil prices slumped (2015-2017) compared with an average of just 1.1 million bpd in the three previous years (2012-2014). Real crude oil prices averaged $51 per barrel between 2015 and 2017, down from $112 between 2012 and 2014, according to BP.

Oil shortage or surplus? Floating storage swamps Europe (Reuters) – OPEC is considering whether or not to raise its oil production to prevent the global market from becoming too squeezed, but there is one part of the world that is telling a very different story about the balance between supply and demand. The boom in U.S. shale shipments has outstripped OPEC’s production cuts and pushed millions of barrels into European waters, where more crude is being stored on ships than at any time in the last 18 months. And it’s not just the volume of oil aboard ships. At a monthly average in May of 12.9 million barrels, or 26 percent of total global floating storage, Europe had more oil in floating storage than the Asia-Pacific region at 9.7 million, according to data from oil analytics firm Vortexa. In March-April, Europe’s share was 10 percent versus 40 percent in Asia-Pacific. Vortexa estimates the monthly average share of oil in floating storage located in European – including the Mediterranean – in May outstripped volumes floating in Asia-Pacific for the first time since at least the beginning of 2015. Buyers in China, India and Indonesia have taken growing amounts of U.S. crude rather than their usual cargoes of Nigerian, Angolan or Middle East fare, some of which have unusually ended up in Europe. Consultants Kpler estimate there are some 17 million barrels of oil on ships in northwest Europe, the most since at least early 2016 and Nigerian in particular is extremely unusual. “It’s quite rare to have Nigerian crude floating in the North Sea. It’s only happened in a total of two weeks in 2018 and 4 weeks in 2017,” Kpler economic analyst Reid I’Anson said. U.S. exports are running at around 2.5 million barrels a day, having more than doubled since January, despite a lack of pipeline and port capacity to get crude to the international markets that has forced down differentials for domestic grades. This has inflated the premium that Brent-linked crudes command over their U.S. rivals, which has yawned out to nearly $11 a barrel this month, from closer to $5 a month ago, as well as boosting the cost versus Middle East grades. The North Sea tends to see builds in floating storage between April and June most years, as refineries gradually exit maintenance mode.

Russia And Saudi Arabia Will Save The Day If OPEC Deal Falls Apart – Even if the current OPEC/NOPEC oil production cut deal goes to pieces, Saudi Arabia and Russia will be willing to go it alone, the two largest oil producers in the agreement said on Thursday ahead of the much-talked-about OPEC meeting later this month, suggesting that some kind of market-managing efforts may remain in place, even if Iran and Iraq begin to sour on the collaboration. The comments came after Khalid al-Falih and Alexander Novak met in Moscow, and were rubber stamped by Saudi Crown Prince Mohammed bin Salman and Russian President Vladimir Putin, who also met on Thursday. The agreement between the two countries was lacking in specifics, saying that they would develop a “comprehensive bilateral agreement” on energy cooperation, according to S&P Global Platts. Both countries increased their May oil production in a show of force that served to calm the oil market somewhat as fears grow over potential supply gaps stemming from looming US sanctions on Iran and realized supply gaps from Venezuela. In a similar market-calming statement made earlier on Thursday, Khalid al-Falih said that it was “inevitable” that OPEC and its partners would agree next week to gradually roll back the oil production cuts that were forged in November 2016 and implemented – at least partially – in January 2017.

OPEC will squeeze oil buffer to historic lows with an output hike (Reuters) – The oil industry will face the biggest squeeze on its spare production capacity in more than three decades if OPEC and its allies agree next week to hike crude output, leaving the world more at risk of a price spike from any supply disruption. Spare capacity is the extra production oil producing states can bring onstream and sustain at short notice, providing global markets with a cushion in the event of natural disaster, conflict or any other cause of an unplanned supply outage. That buffer could shrink from more than 3 percent of global demand now to about 2 percent, its lowest since at least 1984, if the Organization of the Petroleum Exporting Countries, Russia and other producers decide to increase output when they meet on June 22-23, U.S. bank Jefferies said. “You would essentially be taking 3.2 million barrels per day (bpd) of spare capacity down to approximately 2 million bpd,” Jefferies analyst Jason Gammel said, adding global demand was 100 million bpd. Some analysts say spare capacity could even fall below 2 percent, after years of low oil prices drove down investment in new production across the industry. Saudi Arabia, OPEC’s de facto leader which has indicated its support for hiking output at next week’s meeting in Vienna, has said it is alert to the potential squeeze on the market. “We are concerned about tight spare capacity nowadays,” Saudi Energy Minister Khalid al-Falih told Reuters last month, although he also said the industry was in “better shape” than in 2016 when oil prices plunged below $30 a barrel. OPEC and its allies have been curbing supply since January 2017 to boost oil prices and cut bloated global inventories. The price of crude has since surged, climbing above $80 a barrel last month, while inventories have also fallen. But falling inventories, which have now dropped back to around their five-year average in industrialized nations, adds to the conundrum facing OPEC. “Today we no longer have an inventory cushion or a large spare capacity,” Claudio Descalzi, chief executive of Italy’s Eni (ENI.MI), said in January. “In this context, any geopolitical event can create a price spike.”

Oil market’s shock absorbers becoming dangerously depleted (Reuters) – Sanctions on Iran and the continued decline in output from Venezuela will leave the oil market very vulnerable to any further production or consumption surprises next year.Output and demand in the global market are each currently running at almost 100 million barrels per day (bpd).To ensure a steady flow of oil from the wellhead to consumers, the industry relies on a series of shock absorbers to handle any interruption in supplies or unexpected strength in demand.Both commercial inventories and OPEC spare capacity have become dangerously eroded over the last 12 months, leaving the oil market much more vulnerable in 2019.If all the other shock absorbers become exhausted, oil prices will have to rise to the point where consumption growth begins to slow.The oil market’s first line of defence comes from changes in the volume of commercial inventories held by producers, traders and refiners.OECD commercial stocks currently stand at 2.8 billion barrels, composed of crude (1.1 billion barrels), other liquids (300 million barrels) and refined products (1.4 billion barrels).Additional stocks are held in non-OECD countries, as well as on tankers and in pipelines, either in transit from oilfields to refineries and on to final customers, or as floating storage.The vast majority of stocks are held for operational reasons to ensure the uninterrupted flow of oil from wellhead to final customers.Only a small percentage, generally less than 15 percent, can be considered discretionary and available to act as a shock absorber.OECD crude and product stocks are already 27 million barrels below the five-year average, according to the International Energy Agency (“Oil Market Report“, IEA, June 2018).The five-year average was inflated by the glut of oil between 2015 and 2017, so it m ay not be representative of the normal level of inventories.

Global Oil Supplies Down To 58 Days, Four Hours, And Forty-Eight Minutes — IEA — June 14, 2018 –If folks are confused by all the statements coming out of Saudi Arabia, this may be the reason. Reuters wondersif OPEC is moving the goalpost for its oil market scoreline.I have never really believed whatever OPEC says but lately the flip-flops have seemed even more outrageous. First, there’s too much oil; then, there’s not enough oil; then, there’s enough oil now but there won’t be enough oil next year; and now, not only is there not enough oil now, there won’t be enough oil next year, and US shale oil won’t be able to make up the difference.Four months ago, there was this article from Reuters: surge in global oil supply may overtake demand in 2018 (IEA).Today, crude oil demand in 2019 will grow another 1.4 million bopd after growing a similar 1.4 million bopd this year (2018). So, we go back to the data. First, it’s nearly impossible to find OECD crude oil inventories. I think it’s around 2 billion bbls. This was fromoilprice.com, March, 2018: At 2.865 billion barrels, OECD stocks were 206 million barrels lower than in January 2017, but 50 million barrels above the latest five-year average, OPEC said. But ycharts says the number is 4.4 billion bbls. Regardless, what it is, no one knows how much is really needed. In the US, we have better data, but folks interpret it differently. At 435 million bbls in reserves, analysts suggest that’s below the average median/mean/average for the past five years. And yet, it certainly appears that historically, the US has done just fine with 350 million bbls in reserves. [My benchmark remains: 350 million bbls in reserves.] So, let’s look at what I think is the best metric: the number of days of crude oil supply. For the US, my benchmark is 21 days. Anything more than 21 days is a “glut.” We haven’t seen 21 days or less since 2014.

Crude futures mixed on split among OPEC members, US stocks draw; ICE Brent down to $76.43/b, NYMEX WTI up at $66.80/b – Crude oil prices were mixed in European trading Thursday morning as the market searched for signals on how OPEC will resolve rising divisions over the future of the production cut agreement, and digested a surprise drop in US crude stocks. At 1030 GMT, the August ICE Brent crude futures contract was down 31 cents/b from Wednesday’s settle, at $76.43/b, while the NYMEX July sweet light crude contract was up 16 cents at $66.80/b. The US dollar index was down 0.27%. On Thursday morning, mixed comments from OPEC members cast further uncertainty over whether OPEC would maintain current production cuts or increase output over the course of the year, ahead of the June 22 OPEC meeting in Vienna. On Thursday, Saudi energy minister Khalid al-Falih told reporters in Moscow that an agreement between OPEC and non-OPEC partners to increase output and loosen quotas was “inevitable.” “I think it will be a reasonable, moderate agreement. It’s not going to be anything outlandish. We will be easing our ceilings back,” the minister said. That sentiment is backed by Russia, which has also communicated that it hopes to increase output following next week’s meeting. But Iranian minister Hossein Kazempour Ardebili said Thursday that Iran, Iraq and Venezuela are aligned in maintaining the current OPEC deal, and said that current prices are acceptable to consumers and producers.

Crude Oil Prices Settle Higher as Saudi Says Output Hike Will Be Reasonable – WTI crude oil prices settled higher as traders mulled comments from Saudi’s oil minister ahead of the Organization of the Petroleum Exporting Countries meeting next week. On the New York Mercantile Exchange crude futures for July delivery gained 25 cents to settle at $66.89 a barrel, while on London’s Intercontinental Exchange, Brent fell 1.08% to trade at $75.92 a barrel. Ahead of the Organization of the Petroleum Exporting Countries (OPEC) meeting next week, Saudi Arabian Oil Minister Al Falih reportedly said “it’s inevitable” that OPEC and its allies will agree to boost oil production next week, according to a report from Bloomberg. Al Falih insisted, however, that the uptick in output would be reasonable and won’t be anything “outlandish.” Traders remained concerned rising output would slow the rebalancing in oil markets as the production-cut agreement has helped rid the market of excess crude supplies. In November 2016, OPEC and other producers, including Russia agreed to cut output by 1.8 million barrels per day (bpd) to slash global inventories to the five year-average. The OPEC-led deal was renewed last year through 2018 and is expected to come under review at the oil-cartel’s next meeting on June 22. The uptick in oil prices comes a day after the Energy Information Administration revealed U.S. supplies fell more than expected but output rose to a record. Inventories of U.S. crude fell by 4.143 million barrels for the week ended June 8, well above expectations for a draw of 1.440 million barrels, according to data from the Energy Information Administration. U.S. oil output, meanwhile, continued its expansion rising 0.1m bpd to a record 10.9 million bpd, according to preliminary EIA data, strengthening the United States’ positions as the second largest oil producer behind Russia.

OPEC May crude oil output slides to 13-month low of 31.90 mil b/d: Platts survey – As OPEC prepares to meet in Vienna to decide whether to loosen the taps, its crude production in May slid for the fourth straight month to 31.90 million b/d, the lowest in over a year, according to the latest S&P Global Platts survey of industry officials, analysts and shipping data. The 14-country bloc produced 32.00 million b/d in April, a 140,000 b/d drop from March, according to the survey. The April figure is about 730,000 b/d below OPEC’s notional ceiling of about 32.73 million b/d, when every country’s quota under its production cut agreement is added up. Outages due to the troubles in Nigeria and Venezuela’s oil industries more than offset higher output from Saudi Arabia, Iraq and Algeria, the survey found, as May production fell 100,000 b/d from the previous month. OPEC output was last lower in April 2017 at 31.85 million b/d, the last month before West African producer Equatorial Guinea became its newest member. The 14-country bloc’s next meeting is June 22, when ministers will gather in the Austrian capital amid speculation that Saudi Arabia may push for more flexibility on production quotas in anticipation of sustained declines in Venezuela and the impact of US sanctions on Iran. Recent price rises have also drawn the ire of the US, a key Saudi ally. OPEC is committed, along with 10 non-OPEC producers including Russia, to a 1.8 million b/d cut agreement that is scheduled to run through the end of 2018. The May figure is about 830,000 b/d below OPEC’s notional ceiling of about 32.73 million b/d, when every member’s quota under the deal is added up.

Oil Prices Crash On Supply Fears – Oil prices bounced around over the past few days as the markets await OPEC’s decision in a week’s time. While the meeting is shaping up to be a contentious one, the hype also demonstrates OPEC’s clout years after the group’s obituary was written. “With unplanned outages escalating, geopolitical risks rising, and U.S. shale production facing infrastructure bottlenecks, Saudi Arabia is once again back in the driver’s seat exerting significant influence over the oil market in 2018,” Helima Croft, the global head of commodity strategy at RBC Capital Markets, said Thursday. “All eyes are on what course of action it will call for at the June 22 OPEC meeting in Vienna.” The IEA said in its latest Oil Market Report that robust U.S. shale growth will underpin 2.0 million barrels per day (mb/d) of non-OPEC supply growth this year, plus 1.7 mb/d of non-OPEC output gains in 2019. That should more than meet demand growth…in theory, at least. The agency warned that significant losses in Venezuela and Iran could leave a supply gap. “Even if the Iran-Venezuela supply gap is plugged, the market will be finely balanced next year, and vulnerable to prices rising higher in the event of further disruption,” the IEA said. “It is possible that the very small number of countries with spare capacity beyond what can be activated quickly will have to go the extra mile.” Libya’s two largest oil export terminals suffered disruptions this week due to clashes between rival groups. The outages at the Es Sider and Ras Lanuf terminals disrupted some 240,000 bpd of supply, Libya’s National Oil Corp. said on Thursday. The two facilities account for 40 percent of Libya’s oil exports. If the losses are sustained for any lengthy period of time, it will put more pressure on the OPEC+ group to increase output at its meeting on June 22. Any increase in the volume of output from OPEC and Russia will necessarily cut into spare capacity levels, which analysts say could drop to the lowest level in decades. “You would essentially be taking 3.2 million barrels per day (bpd) of spare capacity down to approximately 2 million bpd,” Jefferies analyst Jason Gammel told Reuters, assuming around 1 mb/d increase in output. Periods of low spare capacity have historically been associated with times of high and volatile prices.

Rig Count Falters Amid Oil Price Correction – Baker Hughes reported a dip in the number of active oil and gas rigs in the United States today. Oil and gas rigs decreased by 3 rigs, according to the report, with the number of oil rigs increasing by 1, and the number of gas rigs decreasing by 4.The oil and gas rig count now stands at 1,059 – up 126 from this time last year. Canada, for its part, gained 27 oil rigs for the week – after last week’s gain of 13 oil and gas rigs. Despite weeks of significant gains, Canada’s oil and gas rig count is still down by 20 year over year. Oil benchmarks experienced a huge slide on Friday as Russia and Saudi Arabia proclaimed their willingness to increase output ahead of the June 22 OPEC/NOPEC meeting in Vienna, even if the oil production cut deal were to fall apart. The loose commitment by two of the largest signees to the production cut deal was enough to drag down prices that were earlier being pulled upwards by Venezuela’s freefalling oil production that some think will fall below 1 million barrels per day, and continuing reports that Iran may face multiple obstacles on the road to exporting its oil in the wake of renewed sanctions levied by the United States. At 12:07pm EDT, the WTI benchmark was trading down a massive 3.36% (-$2.25) to $64.64, with Brent down 3.48% (-$2.64) to $73.30. Both benchmarks are down week on week as well as on the day. US oil production continues putting downward pressure on oil prices, and for the week ending June 08, production reached 10.900 millionbpd – just a hair shy of the 11 million bpd production that many had forecast for the year.

Crude Oil Prices Settle 2.7% Lower on Growing Fears of OPEC Output Hike – WTI crude oil prices settled lower as data pointing to an ongoing expansion in U.S. output and fears that Saudi Arabia and Russia were set to hike production weighed on sentiment. On the New York Mercantile Exchange crude futures for July delivery fell 2.74% to settle at $65.06 a barrel, while on London’s Intercontinental Exchange, Brent fell 3.41% to trade at $73.35 a barrel. The number of oil rigs operating in the US increased for a fourth-straight week, rising by 1 to 863, according to data from energy services firm Baker Hughes, pointing to signs of an expansion in U.S. output. The continued uptick in drilling activity comes as the Energy Information Administration said Wednesday U.S. oil output rose to a record 10.9 million barrels. Crude oil prices had started the session on the back foot after Russia Energy Minister Alexander Novak said Thursday after talks with Saudi Energy Minister Khalid al-Falih that both nations agreed to gradually increase production. Saudi Arabian Oil Minister Al Falih had previously attempted to temper investor fears of a sharp rise in production, insisting earlier this week the uptick in output would be reasonable and won’t be anything “outlandish.” Traders fear that an uptick in global output would slow the rebalancing in oil markets as the production-cut agreement has proved effective in slashing the glut in global crude supplies. In November 2016, OPEC and other producers, including Russia agreed to cut output by 1.8 million barrels per day (bpd) to slash global inventories to the five year-average. The OPEC-led deal was renewed last year through 2018 and is expected to come under review at the oil-cartel’s next meeting on June 22.

Global oil benchmark ends at 6-week low on expectations for OPEC output hike – Oil futures dropped sharply Friday, ending the week lower, with global benchmark Brent crude settling at a more-than-six-week low on expectations OPEC and its allies will agree next week to boost output. August Brent crude, the global benchmark, declined by $2.50, or 3.3%, to $73.44 a barrel on ICE Futures Europe. That’s the lowest settlement since May 2, and they suffered a loss of roughly 4% for the week, according to FactSet data. July West Texas Intermediate crude, the U.S. benchmark, traded on the New York Mercantile Exchange, lost $1.83, or 2.7%, to settle at $65.06 a barrel, pulling back after a four-session climb. It saw its lowest finish since June 6 and lost about 1% for the week. Saudi Arabia, the de facto leader of the Organization of the Petroleum Exporting Countries, is considering an output boost of 500,000 to 1 million barrels a day, while Russia is weighing a rise of as much as 1.5 million barrels a day, said commodity analysts led by Eugen Weinberg at Commerzbank, in a note. Major oil producers meet June 22 in Vienna. The problem, however, is that several OPEC members, including Iran and Venezuela, are resisting output boosts that are intended to offset their own production falls, he said. News reports said the U.S. requested a 1-million-barrel-a-day output increase and tweets by President Donald Trump slamming OPEC for high oil prices could prove to be “additional stumbling blocks” and could lead to a production increase on the smaller side, he added. Indeed, the “vast majority” of OPEC producers are arguing against relaxing the production curbs agreed by OPEC and major non-OPEC producers, said Helima Croft, head of commodity strategy at RBC Capital Markets, in a note. Most OPEC producers “are effectively tapped out,” she said, noting that while Saudi Arabia is in a much better position than most other sovereign producers, its own ambitious Vision 2030 economic plan could be put in danger by a sharp drop in prices.

United States, Saudi Arabia and Russia Find Agreement on Oil Policy – – It is unusual for the United States, Saudi Arabia and Russia to see eye-to-eye, much less try to achieve common energy policy goals, even indirectly.But that is what seems to be happening, and it is taking the edge off the yearlong rise in oil and gasoline prices. Even if those countries have their own reasons for welcoming the surge in production, it is also reducing the influence of the Organization of the Petroleum Exporting Countries, which will meet in Vienna next week to discuss production cuts put in place in early 2017.The cheerleader, if not the ringmaster, in this effort is President Trump, who took to Twitter on Wednesday to criticize OPEC for high crude prices. “Oil prices are too high, OPEC is at it again,” he wrote in his second such statement since April. “Not good.” Whatever happens at the OPEC meeting, two of the biggest players in the global oil market – Saudi Arabia and Russia – appear to have already calculated that it is in their immediate interest to crank up production, effectively sidelining the Saudis’ fellow cartel members.Between them, the two countries have already each added more than 100,000 barrels a day to global oil supplies. Mr. Trump wants even more crude sloshing around the market to tamp down energy prices ahead of the congressional elections in November, and it looks like he may well get it. It is perfectly normal for Republican and Democratic administrations to try to nudge oil prices down, but rarely – if ever – has the effort been so blunt and public. For decades, whenever presidents faced rising gasoline prices, American officials privately called Saudi Arabia seeking help in getting OPEC to boost production – something that the Trump administration has done, as well. But Mr. Trump appears unsatisfied with limiting his overtures to private diplomacy. He is publicly targeting OPEC even though oil prices have stabilized since his criticism in April, and regular gasoline prices have slid by roughly a nickel a gallon since Memorial Day. A barrel of oil in the United States now costs about $67 a barrel, down nearly $4 over the past month, although that is still about 45 percent higher than at this time last year.

Gloves back on, OPEC and U.S. shale producers to deepen ties in Vienna (Reuters) – Only a few years ago, shale CEOs and the Organization of the Petroleum Exporting Countries were in open conflict. Now, they realize they’re in the same boat and need to row in tandem to keep global crude supply and demand in balance, according to interviews with analysts, executives and investors. The recent rise in crude prices – up more than 40 percent in the past year – has lifted profits for producers across the globe, but also threatens to erode demand for fossil fuels at a time when electrification is becoming commonplace. “We’re getting to a point where a continued rise in the oil price is going to cause major problems for the global economy,” said Amy Meyers Jaffe, director of the program on energy security and climate change at the Council on Foreign Relations. “There are bigger issues at hand besides output that OPEC and shale producers care about.” OPEC and U.S. representatives have met at least twice this year, with a third high-profile meeting set for Vienna next week. Finding the optimal balance of crude supply and demand will be the hot topic. Harold Hamm, the billionaire founder of U.S. shale pioneer Continental Resources, is due to address OPEC ministers, along with fellow shale executives Hess Corp CEO John Hess and Pioneer Natural Resource Co Executive Chairman Scott Sheffield. Hamm and Hess did not respond to requests for comment ahead of the meeting. Sheffield declined to comment. “I wouldn’t take dialogue and discussion as any kind of collaboration. We’re all talking about what does world demand look like for oil,” said U.S. Senator Heidi Heitkamp, a North Dakota Democrat who successfully pushed to lift the U.S. oil export ban in 2015. Lifting that ban ushered in a sea change in global energy, sending nearly 2 million barrels of U.S. crude to India, China and other markets historically dominated by OPEC and forcing the group and its American rivals to be more conciliatory. Hamm, who called OPEC a “toothless tiger” in 2014, has begun encouraging fellow shale companies to focus more on profitability and less on profligate production. Last month, Hamm addressed a Saudi Aramco board meeting in Houston.

OPEC producers, Russia can quickly boost crude output by 1.5 million b/d: IEA – Middle East OPEC producers and Russia can quickly boost crude production by around 1.5 million b/d to make up for Venezuela’s increasing output loss as well as the potential decline in Iranian oil output when US sanctions are implemented, a senior International Energy Agency official said Thursday. Keisuke Sadamori, IEA director for energy markets and security, said at an event in Tokyo: “A quick output boost could be expected mainly from OPEC member countries in the Middle East.” “These countries, which have intentionally cut production, have a capacity to boost around 1.2 million b/d in a relatively short time,” he said, adding Russia could boost output by around 300,000 b/d. OPEC will meet June 22 in Vienna to decide on the future of its production agreement with 10 non-OPEC countries, led by Russia. Asked about his outlook for the OPEC meeting, Sadamori said: “Under the current market conditions, a certain action is objectively needed to be taken to stabilize the [oil] market.” The IEA now expects Venezuela’s oil output could fall to 800,000 b/d or even lower next year, from 1.36 million b/d in May and following a 1 million b/d fall over the past two years. Sadamori said the agency also expected to see a “negative impact” on Iranian oil production from the US decision in May to reinstate sanctions. “[The US sanctions] will basically be based on the same clauses in the National Defense Authorization Act for the 2012-15 sanctions,” Sadamori said, adding it remained unclear about how exactly the US sanctions will be implemented. International buyers of Iranian oil have until November 4 to wind down contracts before the US re-imposes sanctions on the oil, energy, shipping and insurance sectors. The US has said it will also consider allowing countries to continue importing Iranian crude oil, as long as they demonstrate they are significantly reducing those volumes every 180 days.

Ritz-Carlton Crackdown Still Haunts the New Saudi Arabia — The Ritz-Carlton Hotel in Riyadh, where hundreds of rich and once-powerful Saudis were detained in what the government called an anti-corruption campaign, has been a hotel again for four months. Its legacy as a jail, though, runs deep in the new Saudi Arabia. Billionaires, royals and bureaucrats remain locked up, including Prince Turki bin Abdullah and former Economy Minister Adel Fakeih, a key architect of the kingdom’s transformation plan, according to associates. Some are now in the Al-Ha’er prison, a maximum-security facility south of the capital where many Islamic militants are incarcerated. Those released had to promise to pay huge settlements, while some were banned from travel or required to wear ankle bracelets to monitor their whereabouts, according to their associates. The fate of those still being held is unknown, including the former head of the Saudi Arabian General Investment Authority, Amr Al-Dabbagh, and Ethiopian-born Saudi billionaire Mohammed Al Amoudi. The arrests have created a climate of fear, obscuring the daily reports of change that Crown Prince Mohammed bin Salman is ushering in as a young reformer for a new era. Cinemas are open, genders mix more freely and women will be allowed to drive starting this month, but there’s an increasingly authoritarian side to his leadership. The enthusiasm that existed when he unveiled his sweeping changes to Saudi society two years ago in “Vision 2030″ has been slowly replaced with wariness about staying on-message, according to conversations with more than a dozen businessmen, government officials, activists and diplomats, all of whom asked not to be named for fear of retribution.Some Saudis put phones in separate rooms or in plastic containers, worried their microphones are being remotely accessed. Most are reluctant to talk politics in public. A Saudi businessman recently asked a guest in his own sitting room to lower his voice as he discussed the kingdom’s anti-corruption campaign with friends.

Three killed in Saudi Arabia following Houthi missile attack – Three people have been killed in southern Saudi Arabia, after a suspected Houthi missile fired from Yemenhit the town of Jizan late Saturday, Riyadh has said. Saudi-led anti-Houthi coalition Spokesperson Colonel Turki al-Maliki said a “projectile” was “launched deliberately to target civilians” on Saturday, according to Saudi Press Agency, which initially reported two casualties. He warned that the Saudi-led coalition – which is waging an air war in Yemen – will retaliate in time. “The Joint Forces Command of the coalition will strike with an iron fist all those who threaten the safety and security of Saudi nationals, residents and critical capabilities” he said. Houthi rebels in Yemen have ramped up missile attacks on Saudi Arabia in recent weeks and months. On Tuesday, Riyadh’s air defence systems intercepted a Houthi missile fired from Yemen at the Saudi city of Yanbu, north of Mecca and Jeddah. Other missiles have been intercepted by air defences this month. The Houthis launched their most audacious ballistic attack yet when the Yemeni rebels fired a series of missiles at the Saudi capital in March. Other attacks on Riyadh have taken place since, the most recent being in May. Saudi and UAE-backed Yemeni government forces have surrounded the key port of Hodiedain recent weeks, putting pressure on the Houthi defenders.The UN and aid agencies have pleaded with the Saudi-led force against an attack on Hodeida, warning that it could lead to mass civilian casualties and starvation. Saudi Arabia, the UAE and other Arab joined the Yemen war in March 2015, to help support the Yemeni government which had fled the capital Sanaa in 2014. At least 10,000 people have been killed, the vast majority civilians from Saudi-led coalition air raids.

Anglo-American Media’s Complicity in Yemen’s Genocide — We’re living through a massive artificial famine, right now. In NW Yemen, home of the Yemeni Shia who’ve fought off a Saudi-financed invasion, the “coalition” of invaders has settled on a slower, more effective strategy: artificial famine and blockade. This is how you kill off a troublesome population, not with bombs and guns alone. Hunger and disease are much better mass killers than firearms and bombs.NW Yemen has been blockaded for years now. And the Saudi strategy is working well. Yemen has had up to a million cases of cholera, an illness unheard of in countries with modern antibiotics. Untreated cholera is fatal in about half of all cases (versus 1% when normal treatment is available). Since medical supplies are being blockaded (with the help of the US Navy), and few journalists have made much effort to find out what has been going on in the blockaded areas, we may be dealing with an unreported death toll of half a million people, most of them children.Yemen is a perfect target for artificial famine and blockade, because it never had enough farmland to feed its people. Before the Saudi invasion, Yemen imported almost 90% of its food supplies. When the Saudis imposed their blockade, cutting off all food imports to Hodeidah, the one Red-Sea port serving NW Yemen, those imports stopped. There has never been any alternative route for food supplies to Yemen. Even before the war, road traffic between Saudi and Yemenwas all but shut down. (Which is why, in a year spent a few miles from the Yemen border, I went up to the border many times, looked over it, but never gave a thought to crossing it. It would never have been allowed.)So NW Yemen is closed off very nicely, from the Saudi view. Which is also the view of the US, UK, UAE, Israel, Kuwait, and the oil companies – basically, anyone who matters in this world. Shia Yemenis are dying at a very satisfactory rate, children first (because children are always the first to die in long sieges like this). The next step for the Saudi-led “coalition” will be taking Hodeidah, the Shia provinces’ one source of food and medical aid. That operation is well underway as I write.

UN, Red Cross Evacuate Staff From Yemen Port City Ahead Of “Imminent” US-Saudi Coalition Assault – The New York Times reports that the United Nations is pulling its staff from the besieged Yemeni port city of Al Hudaydah as a massive assault on the country’s only major humanitarian lifeline appears imminent. UN staff have played a key role in delivering foreign aid through what is now one of the besieged country’s only humanitarian access points to the outside world, through which 80% of all humanitarian aid flows. The NYT details that the UN evacuation comes after “member countries were told that an attack by forces led by the United Arab Emirates was imminent, according to two diplomats briefed on the matter.” Houthi and other allied Yemeni tribal forces have held the port city of 600,000 for the last two years after ousting the Saudi backed government in Sanaa three years ago. The Saudi-US military coalition currently besieging the country through airstrikes and sea blockade claims Al Hudaydah is a key arms smuggling point through which Iran supplies the Shia Houthis, including sophisticated ballistic missiles which have hit locations inside Saudi Arabia within the past year. Iran has denied that it is a party to the war which has claimed many tens of thousands of casualties – both through direct fighting and through starvation and disease. While acknowledging the US to be a major part of the coalition preparing for the attack on Al Hudaydah, the NYT has still managed to paint the US-Saudi-Emirati forces as benevolent-minded saviors bent on rescuing Yemeni civilians. While first noting that “Yemen is already classified as the world’s worst humanitarian disaster” with “more than 75 percent of the population… dependent on food aid” and as “millions are on the brink of starvation” the NYT report absurdly emphasizes that only the Americans can stave off disaster: “Diplomats in the region say they believe that only more pressure from Washington will stop the planned assault.” Thus while the Pentagon has long been at the forefront of the war on Yemen which has caused the deaths of thousands of children, according to one leaked UN report from last summer, the NYT presents the US role as, in our words,‘reluctant humanitarian aggressors’ of some sort.

Arab states launch biggest assault of Yemen war with attack on main port (Reuters) – A Saudi-led alliance of Arab states launched an attack on Yemen’s main port city on Wednesday, the largest battle of the war, aiming to bring the ruling Houthi movement to its knees at the risk of worsening the world’s biggest humanitarian crisis. Arab warplanes and warships pounded Houthi fortifications to support ground operations by foreign and Yemeni troops massed south of the port of Hodeidah in operation “Golden Victory”. Ground battles raged near Hodeidah airport and al-Durayhmi, a rural area 10 km (6 miles) south of the city, media controlled by the Arab states and their Yemeni allies reported. The assault marks the first time the Arab states have tried to capture such a heavily-defended major city since joining the war three years ago against the Iran-aligned Houthis, who control the capital Sanaa and most of the populated areas. The port is the main route for food to reach most Yemenis, 8.4 million of whom are already on the verge of famine. The Houthis deployed military vehicles and troops in the city center and near the port, as warplanes struck the coast to the south, a resident speaking on condition of anonymity told Reuters. People fled by routes to the north and west. CARE International, one of the few aid agencies still there, said 30 air strikes hit the city within half an hour. “Some civilians are entrapped, others forced from their homes. We thought it could not get any worse, but unfortunately we were wrong,” said CARE’s acting country director, Jolien Veldwijk. Saudi-owned Al Arabiya TV quoted witnesses describing “concentrated and intense” bombing near the port itself. “Under international humanitarian law, parties to the conflict have to do everything possible to protect civilians and ensure they have access to the assistance they need to survive,” said Lise Grande, U.N. humanitarian coordinator for Yemen.

Saudi-led ground troops launch assault on Yemen port city of Hodeida, a key moment in three-year war | South China Morning Post: A Saudi-led coalition backing Yemen’s exiled government began an assault Wednesday morning on Yemen’s port city of Hodeida, a crucial battle in the three-year-old conflict that aid agencies warned could push the Arab world’s poorest country into further chaos. Iranian-aligned Shiite rebels known as Houthis and their allies for years have held the Red Sea port, crucial to food supplies in a nation on the brink of famine after years of war. The battle for Hodeida, if the Houthis don’t withdraw, also may mark the first major street-to-street urban fighting for the Saudi-led coalition, which can be deadly for both combatants and civilians alike. Before dawn Wednesday, convoys of vehicles appeared to be heading toward the rebel-held city, according to videos posted on social media. The sound of heavy, sustained gunfire clearly could be heard in the background. Saudi-owned satellite news channels and later state media announced the battle had begun, citing military sources. Houthi media did not immediately report the attack. Yemen’s exiled government “has exhausted all peaceful and political means to remove the Houthi militia from the port of Hodeida,” it said in a statement. “Liberation of the port of Hodeida is a milestone in our struggle to regain Yemen from the militias.” Forces loyal to Yemen’s exiled government and irregular fighters led by Emirati troops had neared Hodeida in recent days. The port is some 150km southwest of Sanaa, Yemen’s capital held by the Houthis since they swept into the city in September 2014. The Saudi-led coalition entered the war in March 2015 and has received logistical support from the US.

Yemen – The Starvation Siege Has Begun -Last night the Saudi coalition launched its attack on the city of Hodeidah in Yemen. Hodeidah is the only Yemeni harbor on the Red Sea coast that can take large vessels. It is ruled by the Houthi who in 2014 took over the capital Sanaa and disposed of the Saudi installed Hadi government. 90% of the food for the 18 million people living in Houthi controlled areas comes through Hodeidah. Saudi-owned satellite news channels and later state media announced the battle had begun, citing military sources. They also reported coalition airstrikes and shelling by naval ships. The initial battle plan appeared to involve a pincer movement. Some 2,000 troops who crossed the Red Sea from an Emirati naval base in the African nation of Eritrea landed west of the city with plans to seize Hodeida’s port, Yemeni security officials said.Emirati forces with Yemeni troops moved in from the south near Hodeida’s airport, while others sought to cut off Houthi supply lines to the east, the officials said. The port is now classified as a zone of active military conflict. Prolonged fighting may well destroy the port infrastructure. Even if the Saudi coalition forces take and reopen it they will continue to block food supplies for the central highlands of Yemen. They want to starve the Houthis into submission.

“Civilians Trapped”: Major Assault On Yemen Port Begins; Saudi Ship Attacked — The biggest and potentially most catastrophic battle in terms of civilian casualties has begun in the three-year war between the Saudi coalition and Iranian-aligned Houthi rebels. The assault began early Wednesday after days of the United Nations warning against the operation which also involves the UAE and United States as leading the campaign on the Houthi held port city of Al Hudaydah. Reuters reports the following breaking updates:

• “concentrated and intense” bombing near the port itself.
• 30 air strikes hit the city within half an hour.
• Houthis say they hit a coalition barge
• Port is main route to feed 8.4 million on verge of famine
• “Some civilians are entrapped, others forced from their homes.”
• Arab warplanes and warships pounded Houthi fortifications to support ground operations by foreign and Yemeni troops massed south of the port of Hodeidah in operation “Golden Victory”.
• Ground battles raged near Hodeidah airport and al-Durayhmi, a rural area 10 km (6 miles) south of the city

Though Saudi and coalition authorities have long imposed a media blackout on Yemen which has resulted in little on the ground footage of the war, some early footage of the ground assault has emerged on pro-Saudi social media:عاجل | Ùيديو مباشر: بإسناد القوات المسلحة الإماراتية القوات المشتركة تقترب من مطار الحديدة #الحديدة_تتحررpic.twitter.com/pPBWBkM2dP – الحديدة مباشر (@HdeidahMubasher) June 13, 2018 Early footage of Saudi-UAE coalition troops mustering outside of the contested port city:

Yemen war: Fighting rages over vital port of Hudaydah – BBC — Fierce fighting has been reported after pro-government forces in Yemen, backed by a Saudi-led coalition, launched an offensive on the rebel-held city of Hudaydah, a key port for aid supplies.Thirty Houthi rebels and nine members of pro-government forces are said to have been killed.Coalition forces are now within two kilometres of the city’s airport, the Emirati envoy to the UN says.The UN Security Council restated its fears about the fate of civilians.The emergency meeting on Thursday, called by the UK, saw members agree the port must be kept open to prevent a further worsening of Yemen’s humanitarian crisis. About eight million people are at risk of starvation in the war-torn country and the coastal city is where most aid arrives for people in rebel-held areas. However, there was not enough support on the council for Sweden’s motion to demand an immediate halt to the offensive on Hudaydah. Vassily Nebenzia, Russia’s UN ambassador and president of the council in June, said the body urged “all sides to uphold their obligations under international humanitarian law”.

The siege of Hodeidah, Washington’s war crime in Yemen — The siege of Yemen’s Red Sea port of Hodeidah launched by Saudi and United Arab Emirates-led forces at dawn on Wednesday could cost the lives of some quarter of a million people in the crowded city itself, according to a UN estimate, while threatening to kill millions more across the country through hunger and disease. Inflicting mass suffering upon civilians is the main purpose of the attack on Hodeidah, which is the principal lifeline for food, fuel and medicine for at least 70 percent of the population in a country that depends on imports for up to 90 percent of its food. The aim is to starve the impoverished Yemeni people into submission. Last year alone, some 50,000 Yemeni children starved to death – roughly 1,000 every week – according to the aid group, Save the Children. One million Yemenis are infected with cholera, an epidemic that has claimed the lives of nearly 2,500 people. As part of its preparations for the Hodeidah offensive, Saudi warplanes bombed a cholera clinic run by Doctors without Borders.This total war against an entire population, of the likes carried out by Hitler’s Third Reich three-quarters of a century ago, would be impossible without the uninterrupted support – military and political – of US imperialism since its outset.The US, together with its main NATO allies the UK and France, has supplied the planes, warships, bombs, missiles and shells used to devastate Yemen and slaughter its people. In his eight years in office, President Barack Obama presided over some $115 billion in arms sales to the monarchical dictatorship in Riyadh. The Trump administration, which has sought to forge an anti-Iran axis with Saudi Arabia, the other reactionary Gulf oil sheikhdoms and Israel, has touted arms deals with Riyadh that potentially would amount to $110 billion. The Pentagon has given direct and indispensable aid to the Saudi-led onslaught, providing midair refueling for the planes that bomb Yemeni civilians, staffing a joint command center in Riyadh with US intelligence and logistics officers and reinforcing the Saudi-UAE blockade of the country with American warships. Recently, US Green Berets have been deployed with Saudi ground forces to assist in their anti-Yemen operations. Under the banner of the “war on terror”, the Pentagon is waging its own air war in Yemen, conducting at least 130 air and drone strikes in 2017, quadruple the number in 2016. The Trump administration gave the go-ahead for the current siege of Hodeidah in the form of a statement from US Secretary of State Mike Pompeo announcing that he had spoken with the rulers of the UAE and “made clear our desire to address their security concerns.” Pentagon officials have reported that US officers are helping to select targets in the port city.

Libya “Before And After” Photos Go Viral -A Libyan man who took photos of himself posing at various spots across Beghazi in 2000 has revisited the same locations 18 years later to photograph life under the new “NATO liberated” Libya. The “before and after” pics showing the utter devastation of post-Gaddafi Libya have gone viral, garnering 50,000 retweets after they were posted to an account that features historical images of Libya under Gaddafi’s rule between 1969 and 2011. It appears people do still care about Libya even if the political elites in Paris, London, and Washington who destroyed the country have moved on. Though we should recall that British foreign secretary Boris Johnson was caught on tape in a private meeting last year saying Libya was ripe for UK investment, but only after Libyans “clear the dead bodies away.” We previously detailed in Libya’s Slave Auctions And African Genocide: What Hillary Knew how Libya went from being a stable, modernizing secular state to a hellhole of roving jihadist militias, warring rival governments, and open-air slave auctions of captured migrants. Yet what the viral photos confirm is that Libya was once a place of sprawling hotels, wide and clean city streets, functioning infrastructure, and lively neighborhoods. But these very places are now bullet-ridden ruins rotting amidst the political backdrop of the ‘Mad Max’ style chaos unleashed immediately after US-NATO’s bombing the country into regime change.

Iraqi ballot box storage site catches fire, drawing calls for an election re-run — A fire ripped through Iraq’s biggest ballot warehouse on Sunday ahead of a vote recount prompted by allegations of fraud during legislative elections that saw a surprise victory for a populist cleric. A senior security official, speaking to AFP on condition of anonymity, said the fire broke out in a warehouse located in Al-Russafa, one of the largest voting districts in eastern Baghdad. Firefighters brought the blaze under control several hours after it started, and the extent of the damage caused to ballot boxes was still unclear. Around 60 percent of Baghdad’s two million eligible voters had cast their ballots in the May election in Al-Russafa district. A column of black smoke billowed from the warehouse, normally used to store foodstuff, and could be seen across the capital. Warehouse staff ran out of the building carrying blue and white plastic ballot boxes to safety as firefighters backed by around a dozen trucks struggled to put out the fire, an AFP reporter said. Late on Sunday, Iraqi Prime Minister Haider al-Abadi said that the burning of a storage was part of a plot to harm Iraq’s democratic process, the first government indication the incident was deliberate. “Burning election warehouses … is a plot to harm the nation and its democracy. We will take all necessary measures and strike with an iron fist all who undermine the security of the nation and its citizens,” Abadi said in a statement.

US-Backed Kurds Agree To “Unconditional Talks” With Syrian Government After Pentagon-Turkey Deal – We’ve long predicted that the US-backed Syrian Kurdish forces currently holding a vast chunk of land in Syria’s northeast with the help of American coalition air power will naturally drift toward striking a deal with Assad, as the two sides have throughout the war exercised some degree of quiet cooperation against ISIS, foreign jihadists, and Turkish expansionism. In a huge weekend development which has gone largely unnoticed by mainstream media, the political wing of the US-trained and supported Syrian Democratic Forces (SDF) announced it is open to entering into unprecedented direct negotiations with the Assad government over the future of the country. The Syrian Democratic Council, or SDC, is the political arm of the powerful alliance of mostly Kurdish and Arab fighters that make up the SDF, and on Sunday declared willingness to enter into “unconditional talks” with the Syrian government. The London based international Arabic newspaper Asharq Al-Awsat reports the following: In a statement on Sunday, the SDC said it was committed to resolving Syria’s deadly conflict through dialogue, and would not “hesitate to agree to unconditional talks”. “It is positive to see comments about a summit for Syrians, to pave the way to start a new page,” it said.Leading SDC member Hekmat Habib told AFP that both the council and the SDF “are serious about opening the door to dialogue” with the regime.“With the SDF’s control of 30 percent of Syria, and the regime’s control of swathes of the country, these are the only two forces who can sit at the negotiating table and formulate a solution to the Syrian crisis,” he said.

Israel is about to destroy this Palestinian village. Will Britain step in? – Israel is intent on destroying the homes of the 173 Palestinians who live in the small shepherding community of Khan al-Ahmar, along with the school that serves 150 children from the area. Last month, Israel’s high court of justice removed the last obstacle to this barbaric act of demolishing an entire community in order to forcibly transfer its residents and take over their land. Israel has announced that the land from which these Palestinians will be evicted will serve to expand the nearby settlement of Kfar Adumim. The story of Khan al-Ahmar exemplifies Israel’s policy of expelling dozens of Palestinian communities from areas it plans to formally annex. To keep international criticism to a minimum, Israel usually tries to evict residents slowly by creating unbearable living conditions that force them to leave their homes, allegedly of their own free will. To that end, the authorities refuse to connect these communities to running water and power grids, do not authorise construction of homes or other structures and restrict their pastureland. Now, emboldened by Donald Trump’s overt disdain for human rights – or basic human decency for that matter – and bolstered by the Israeli idea that the European Union is too weak to act decisively, the authorities have stepped up their efforts and issued demolition orders for all the structures in Khan al-Ahmar. Justice Noam Sohlberg, who wrote the ruling that rejected the petition against the execution of these orders, noted the “undisputed” premise that “construction in the Khan al-Ahmar compound, both the school and the dwellings, is unlawful”. He went on to argue that the court should not interfere in the state’s “law enforcement” actions.

Iran, spurned by US, angrily watches Trump-North Korea talks – For Iran, the so-called “Axis of Evil” has boiled down to a party of one, as President Donald Trump prepares for direct talks with North Korea. For those in Tehran, whether hard-liners, reformists or people simply trying to get by in Iran’s worsening economy, it’s head-spinning, especially after seeing Trump pull America out of the nuclear deal with world powers. It wasn’t supposed to be like this. Excited crowds flooded the streets after the 2015 nuclear deal that Iran struck with world powers, including the U.S. under President Barack Obama. The deal saw Iran agree to limit uranium enrichment in its nuclear program, which the West feared could be used to build a nuclear weapon. For Iran, which long has maintained its atomic program was for peaceful purposes, the deal took the shackles of sanctions off its economy and opened up its oil sales abroad. Then came Trump, who campaigned pledging to tear up the nuclear deal. Once elected, he included Iran in his travel bans, blocking Iranians from traveling to the U.S., home to a large Iranian community. Then on May 8, Trump followed through on his threat and pulled America out of the nuclear agreement, dooming billions of dollars of business deals, including Boeing sales. But at the same time, Trump had traded his criticism of Kim Jong Un, a leader he once derided as “Little Rocket Man” on Twitter, for hopes of a one-on-one meeting.

Iranians Rage At Nike After World Cup Team Forced To Switch Shoes — It’s not merely that the Iranian national team for the 2018 World Cup will no longer have access to Nike shoes or equipment, it’s that their current shoes are actually being taken away from them. The announcement set Iranian social media ablaze with anger over the weekend, with many Iranians declaring they would never again buy Nike products: “The sanctions mean that, as a U.S. company, we cannot provide shoes to players in the Iran national team at this time,” Nike told NBC News in a statement. Soon after initial breaking reports of the decision last week, Iranian-American Middle East analyst Holly Dagres noted, “In the wake of Nike’s decision to not provide cleats to Iran’s national football team, Iranians are pushing a boycott of the US brand using #BoycottNike.”Nike will provide 60% of World Cup players with their shoes as official sponsors when they take the field on June 14 in St. Petersburg, Russia, but says it will confirm to US law citing new U.S. Treasury-enforced sanctions on Iran, and impending White House plans for more. Violators can face punishment of up to $1 million and 20 years in prison, and American banks assisting in business transactions can also be “subject to civil penalties of up to the greater of $250,000 or twice the transaction value,” according to the US Department of the Treasury Iran sanctions page.Now, no Iranian players are allowed to wear Nike shoes or gear after the last minute decision – items which the company had previously provided; however, less than a week away from Iran’s first game with Morocco on Friday players are being forced to switch.

Is Putin really ready to “ditch” Iran? – The topic of Russian actions in Syria still continues to fascinate and create a great deal of polemics. This makes senses – the issue is exceedingly important on many levels, including pragmatic and moral ones, and today I want to stick strictly to the pragmatic level and set aside, just for a while, moral/ethical/spiritual considerations. Furthermore, I will also pretend, for argument’s sake, that the Kremlin is acting in unison, that there are no Atlantic Integrationists in the Russian government, no 5th column in the Kremlin and that there is no Zionist lobby exerting a great deal of influence in Russia. I will deal with these issues in the future as there is no doubt in my mind that time and events will prove how unfounded and politically-motivated these denials are in reality. But for the purpose of this analysis, we can pretend that all is well in the Kremlin and assume that Russia is fully sovereign and freely protecting her national interests. So what do we know about what is going on in Syria? I submit that it is obvious that Russia and Israel have made some kind of deal. That there is an understanding of some kind is admitted by both sides, but there is also clearly more happening here which is not spelled out in full. The Israelis, as always, are bragging about their total victory and posting articles like this one: “In Syria, Putin and Netanyahu Were on the Same Side All Along” with the subheading reading “Putin is ready to ditch Iran to keep Israel happy and save Assad’s victory“. Really?

China, Iran agree to strengthen strategic cooperation despite US pressure – China and Iran have agreed to strengthen strategic cooperation during Iranian President Hassan Rouhani’s visit to China, possibly paving the way for steady crude flows between the two countries. The meeting with China’s president Xi Jinping took place on Sunday on the sidelines of the Shanghai Cooperation Organization summit in the eastern coastal city of Qingdao, and comes at a time when Iran faces reimposition of sanctions by the US, which could impact its crude oil exports. China is the largest buyer of Iranian crude and did not reduce crude imports from Iran even at the height of the previous sanctions against Tehran in 2012. In the first quarter of 2018, China’s imports of Iranian crude rose 17.3% year on year to 658,000 b/d, making Iran its sixth-biggest supplier. Xi and Rouhani agreed on Sunday to enhance bilateral pragmatic cooperation and pursue comprehensive strategic partnership, according to China’s state-owned Xinhua news agency. Xi also called on the two countries to deepen political relations to enhance strategic mutual trust, increase exchanges at all levels, and continue to support each other on issues of major concern involving their respective core interests, according to Xinhua news agency. The latest agreement is expected to further advance bilateral comprehensive strategic partnership established during Xi’s state visit to Iran in 2016. Xinhua quoted Xi as saying that the Iran nuclear deal should continue to be implemented earnestly as it acts to stabilize the peace and stability in the Middle East as well as for the international non-proliferation regime. ‘