Oil, Gas, And Fracking News Reads 30June 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 30 June 2018. Go here for Part 1.

This is a feature at Global Economic Intersection every Monday evening.

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Derailed Train Spills 230,000 Gallons of Crude Into Flooded Iowa River – A train derailment spilled 230,000 gallons of crude oil into an already-flooded Iowa river Friday, endangering downstream drinking water, the Des Moines Register reported Sunday.Thirty-two cars of a Burlington Northern Santa Fe (BNSF) train derailed, 14 of which leaked crude oil into the Rock River in Doon, Iowa. The cause of the derailment is unknown, but officials including Iowa Governor Kim Reynolds attributed it to heavy rain Wednesday and Thursday which led to flooding.To aid recovery from extreme weather and its consequences, including the derailment, Reynolds issued aproclamation of disaster emergency Saturday for Lyon County, where the train derailed, as well as Plymouth, Sioux and Woodbury counties.Workers so far have contained nearly half the spill – around 100,000 gallons – using booms, BNSF told Reuters.The oil spill hit the town of Rock Valley, Iowa, which was coping with its second flood in four years, especially hard.”Our city administrator said to me, ‘The only thing we need now is a plane crash,'” Rock Valley mayor Van Otterloo told the Des Moines Register. “Everything came at once.”Rock Valley acted quickly to shut off water wells following the spill and plans to drain the wells and use rural water until the well water tests safe.There are also concerns that oil could contaminate drinking water in Omaha, Nebraska, 150 miles downstream, since the Rock River merges with the Big Sioux River, which then feeds into the Missouri. Omaha’s Metropolitan Utilities District said they were monitoring water pulled from the Missouri, the Des Moines Register reported. The Metropolitan Utilities District said they could source water from unconnected rivers if needed, according to Reuters. Reynolds told the Des Moines Register it was still unknown how many communities were affected by the oil spill and how it would impact the surrounding environment.

Derailed tank cars in Iowa were shipping Canadian crude to US Midwest – The 32 tank cars that derailed Friday in Iowa were shipping Canadian crude to the US Midwest, with the total spilled volumes estimated to be 230,000 gallons, or roughly 5,475 barrels, officials said over the weekend. A total of 14 tanks cars were “compromised” and a BNSF investigation is now underway, railroad spokeswoman Amy Casas said Sunday. Early Friday, 32 rail cars went off the track near Doon in Lyon County, Iowa, spilling crude into the nearby swollen Little Rock River, BNSF said then without giving any reason for the derailment. The train was carrying Canadian crude produced by ConocoPhillips and the cargo was destined for Stroud, Oklahoma, company spokesman Daren Beaudo said in an email Saturday. There were no reported injuries to the train crew and nearby residents, he said. BNSF has responsibility for clean-up and mitigation of the incident and ConocoPhillips is working with the railroad, local emergency officials and regulators, Beaudo said. Hazardous materials and environmental experts are containing spilled oil with booms and recovering it with skimmers and vacuum trucks and at this point, an estimated 100,000 gallons (2,380 barrels) or 44% of the total volume was contained, BNSF said in its latest update Saturday at 4:30 pm CT (0930 GMT). Additional booms have been placed five miles downstream the river and nearby water bodies and crude oil will be removed from the immediate derailment area with oil-water separators, the railroad said Saturday.

Cleanup Underway After Train Derailment Causes Oil Spill — Floodwater has receded in northwest Iowa, where a train carrying crude oil derailed on Friday.The oil has now been contained, but removing all the oil from the water could take months. At least 200 people are now helping with cleanup efforts. BNSF Railroad is asking anyone with damage as a result of that derailment to contact them to get everything cleaned up and repaired.”We have representatives from the EPA, state, local, regional, regulators are on site overseeing what we’re doing and working with them to make sure that we clean up in the appropriate way as it relates to federal law and state law,” said BSNF spokesperson Andy Williams. “Every plan that we come up with we’re having approved by them before we move forward. The long-term cleanup will take a while, a matter of months, probably, and we will be working hand in hand with the EPA and other agencies.”The sheriff’s office is asking everyone to stay away from the area because of the heavy machinery being used.

Nearly half of Iowa crude oil spill contained, BNSF says – (Reuters) – Workers have contained nearly half of the crude oil spilled near Rock River in northwest Iowa over the weekend following a freight train derailment on Friday, BNSF Railway Co said. About 100,000 gallons had been hemmed off using booms out of the estimated 230,000 gallons spilled, BNSF said in a statement on Saturday. The spill has raised concerns about drinking water downstream. The company did not respond to questions on Sunday about the progress of the cleanup. No one was hurt in the derailment, in which 32 cars came off the rails, 14 of which leaked at least some of their contents, BNSF said. The derailment happened south of Doon, a city of a few hundred people. The cause has not been confirmed, although Iowa Governor Kim Reynolds attributed it to an intense storm and flash flooding in an emergency proclamation issued by her office on Saturday. The spill threatened to contaminate drinking water for residents about 150 miles (240 km) downstream in Omaha, Nebraska. Metropolitan Utilities District, which provides the Omaha metro area’s drinking water, said it was monitoring the spill. If needed, it would shift water pumping to two other water treatment plants, which are supplied by another river not connected to the spill, the utility said in a statement on Friday. The utility did not respond to a request on Sunday for an update on its monitoring. BNSF, a unit of Berkshire Hathaway Inc, said it was using skimmers and vacuum trucks to clean up the spill and minimize damage to the environment. The spill posed no risk to workers or nearby residents, BNSF said.

Work continues in U.S. Iowa to contain oil spill after train derailment (Xinhua) — A U.S. railway company and Iowa State are continuing their joint efforts on Monday to contain the oil spill following a tanker train derailment. Fourteen cars of the derailed train have leaked some 230,000 gallons (about 870,000 liters) of crude oil into the flooded fields in Lyon County, northwestern Iowa since Friday, according to Burlington Northern Sante Fe (BNSF) officials. The train company has built a temporary road to the site along a flooded stretch of tracks, reported Iowa Radio, adding clean-up operations have been underway around the clock. BNSF spokesman Andy Williams said that at least ten of the 32 derailed cars have already been drained of oil, with another seven being moved to nearby field to be disassembled. Skimmers and booms have been placed near the derailment site to capture the spilled oil. Williams said the whole clean-up process will possibly take several weeks, if not months. The cause of the derailment is unknown but both the train company and local officials believe that flooding was a major factor leading to the accident early Friday.

Minnesota regulators to decide this week on Enbridge Line 3 (AP) – State regulators reconvene this week to decide whether to approve or reject Enbridge Energy’s proposal for replacing its Line 3 oil pipeline across northern Minnesota.The Public Utilities Commission meets Tuesday so its members can resume questioning Enbridge officials as well other supporters and opponents of the project. The panel could then deliberate as long as until Friday before making its decision.Line 3 was built in the 1960s. It runs from Alberta across North Dakota and Minnesota to Superior, Wisconsin. Enbridge says it needs replacing to ensure safety and restore capacity because the existing pipeline is increasingly subject to corrosion and cracking. But climate change and tribal activists object because it would carry Canadian tar sands crude and risks spills in pristine waters where Native Americans harvest wild rice.

Possibility of civil unrest hangs over regulatory hearings on controversial Enbridge pipeline proposal (Minneapolis The specter of civil unrest – like the protests that erupted over building the Dakota Access pipeline in 2016 – hung over the fourth day of regulatory hearings on a $2.6 billion proposal by Enbridge to build a new pipeline across northern Minnesota. Utility regulators spent the day talking about what the least-objectionable route for a replacement for Enbridge’s 1960s-vintage Line 3 would be – or whether it should be built at all. The Minnesota Public Utilities Commission (PUC) is expected to decide Thursday or Friday at the latest whether to grant Enbridge a permit for the project and which route to endorse. It is one of the mostly highly charged issues before the PUC in many years. PUC Chairwoman Nancy Lange noted the possibility of unrest if Enbridge’s proposal is approved. “One of the things that concern me is permitting something that could cause civic disruption,” she said. Lange acknowledged the weaknesses in the route alternatives. But she also asked Enbridge about construction delays if the PUC chose an alternative route of some sort – one with less opposition. Christy Brusven, an attorney for Enbridge, said the delay would be more than two years. She also noted that alternative routes also would likely meet opposition. “There are a number of groups that are a ‘hard no’ on the project, whatever it is,” she said.

Minnesota regulator approves rebuild of Enbridge pipeline – (Reuters) – A Minnesota regulator on Thursday approved a certificate of need for Enbridge Inc to rebuild its Line 3 oil pipeline, angering environmentalists but offering hope to Western Canadian oil producers that have struggled to move crude oil to refiners. The Minnesota Public Utilities Commission’s decision clears the final major hurdle, pending possible appeals, in Enbridge’s three-year effort to rebuild its aging, corroded 1,031-mile (1,660-km) pipeline that runs from Alberta in western Canada to Wisconsin. Shares of Calgary, Alberta-based Enbridge closed up 3.7 percent in Toronto. The commission also approved a route that closely follows Enbridge’s preference and will take Line 3 over a new corridor for part of its path. The certificate of need has conditions, including that Enbridge make a financial guarantee to clean up any environmental damage and that it remove at landowners’ request pipeline that is no longer in use. Pipeline bottlenecks have steepened a price discount for Western Canadian heavy crude this year. Refiners in Minnesota and surrounding states say Line 3 is necessary to increase crude supplies. Shouts from Native Americans and environmental activists interrupted the meeting. “Shame on you, you cowards!” one woman shouted before breaking into tears. Environmental groups and some indigenous communities oppose the project over concerns about spills and impact on tribal wild rice harvesting areas. “What they have done to us today is egregious,” said Winona LaDuke, executive director of Honor the Earth activist group. “They have gotten their Standing Rock. We will do everything that is needed to stop this pipeline.”

Minnesota approves Enbridge Line 3 with route modifications — Canada’s Enbridge won approval Thursday to build its Line 3 replacement through the state of Minnesota, clearing a major hurdle for the 1,031-mile crude transportation project to run from Canadian province Alberta to Wisconsin. The Minnesota Public Utilities Commission voted 5-0 to issue a “certificate of need” for the project, according to a webcast of the hearing. The commission then voted 3-2 to approve a route for the pipeline mostly along a path Enbridge preferred, with some modifications, according to the webcast and local media reports. Indigenous and environmental groups had objected in the hearing to the route Enbridge preferred. An Enbridge spokesman said Thursday the company would issue a statement after the PUC finished its proceedings. The current pipeline ships some 380,000 b/d of light, medium and heavy crude barrels from Western Canada to refineries in the Midwest. The replacement, with new line pipes of larger diameter, would increase throughout on the line to 760,000 b/d. “It’s a big deal,” one Canadian market participant said ahead of the decision. It will add “400,000 b/d of new capacity across the border.” While crude is not expected to move on the Line 3 replacement until 2020, the project will be the first of the three new pipelines that could give Western Canadian producers greater ability to export crude. The two other projects are Kinder Morgan’s expansion of its Trans Mountain pipeline, which would provide 590,000 b/d of new capacity and the 830,000 b/d Keystone XL pipeline of TransCanada.

Minnesota Approves Enbridge Pipeline Rebuild, ‘An Accident Waiting to Happen’ – The Minnesota Public Utilities Commission (PUC) approved a controversial rebuild of Line 3 of the Enbridge Energy oil pipelineThursday, as environmental activists and Native American groups vowed to keep fighting, The Associated Press reported.Opponents are concerned about the need for new fossil fuel infrastructure and the danger of an oil spill near vulnerable ecosystems in Minnesota, including areas where Native Americans harvest wild rice, which is sacred to the Ojibwe.”You have just declared war on the Ojibwe!” Tania Aubid of the Mille Lacs Band of Ojibwe stood and said when the PUC’s decision became apparent. “What they have done to us today is egregious,” Honor the Earth executive director Winona LaDuke told Reuters. “They have gotten their Standing Rock. We will do everything that is needed to stop this pipeline.” Enbridge Energy argued they needed to replace the existing Line 3, which was built in the 1960s and is subject to corrosion and cracking. They currently operate it at half-capacity due to safety reasons. The company said they would continue running the existing unsafe pipeline if a replacement was not approved, The Associated Press reported. Opponents, including the Minnesota Department of Commerce, said the Midwest didn’t need the additional oil from a pipeline replacement since demand will likely fall with the rise of electric vehicles and renewable energy.The commissioners seemed to have a hard time making the decision―chairwoman Nancy Langue wiped away tears as she explained her reasoning―and emphasized concerns about the safety of the existing, older pipeline “It’s irrefutable that that pipeline is an accident waiting to happen,” Commissioner Dan Lipschultz said before the vote. “It feels like a gun to our head … All I can say is the gun is real and it’s loaded.”

Analysis: US natural gas production hits record high, propelled by Texas – US natural gas production edged up to a fresh record high this week, largely due to gains in Texas, the Southeast, and the Appalachia region. Modeled US production surpassed 79.8 Bcf/d on Sunday, setting the new record high, S&P Global Platts Analytics data shows. Over the past week, US production has been exceptionally strong, averaging 79.4 Bcf/d, with six of the highest output days on record. Texas has led that growth. Month-to-date, production in the state has averaged nearly 18.8 Bcf/d, outpacing May’s average by roughly 340 MMcf/d on increases in the Permian Basin and East Texas Haynesville. Gains in the Southeast are playing a role, too. In June, production across the region has averaged 11.5 Bcf/d and is up about 150 MMcf/d compared to the prior-month average, with gains in the Haynesville and the Louisiana/Mississippi offshore being partially offset by declines from the Alabama offshore. In the dry basins of Appalachia, gas production has averaged 27.5 Bcf/d in June, a month-on-month increase of 300 MMcf/d and the highest monthly average there on record. After briefly touching modeled levels close to 28 Bcf/d earlier this month, Northeast production has since pulled back modestly, averaging just over 27.6 Bcf/d. Looking ahead, it’s possible that Northeast production growth could flounder this summer, thanks to continued in-service /delays on Rover Pipeline’s upstream supply laterals. While the Majorsville, Burgettstown and Sherwood laterals await an authorization from the US Federal Energy Regulatory Commission, flows on Rover’s mainline have averaged just over 2.2 Bcf/d in June, or about 68% of the pipeline’s designed 3.25 Bcf/d nameplate capacity.

Kinder Morgan Plans $2B Permian Gas Pipeline — Kinder Morgan‘s Texas subsidiary has announced a $2 billion pipeline to transport natural gas from the oil-rich Permian Basin. As the Houston Chronicle noted, this is Kinder Morgan’s first major project announcement since the Canadian government’s controversial $4.5 billion (U.S. $3.5 billion) buyout of the company’s existing Trans Mountain pipeline and its expansion project. The Trans Mountain expansion is expected to triple the amount of tar sands transported from Alberta to the coast of British Columbia and has been at the center of widespread protests by environmentalists and some Indigenous groups.The proposed “Permian Highway Pipeline” is designed to transport up to 2 billion cubic feet of natural gas per day through approximately 430 miles of 42-inch pipeline from the Waha, Texas, area to the U.S. Gulf Coast and Mexico markets, a press release states. Partners include Blackstone Group-backed EagleClaw Midstream Ventures and the Apache Corporation. The pipeline is expected to be in service in late 2020 and is “subject to the execution of definitive agreements and the receipt of construction permits,” the release says.

Report on Oil and Gas Fracking Impact on Local Aquifers – With a technical report in hand on anticipated impacts of oil and gas fracking, Sandoval County commissioners will hold a work-study session open to the public. County Commissioner Jay Block said June 13 that no date had been set. “I have the final report,” Block said in an e-mail. “The plan is to have a work session that is public to go over the report.”A draft ordinance based on the study by geologists at New Mexico Tech and other factors will be produced by the County Planning and Zoning Commission, which will submit its recommendation to the County Commission.“We are not being rushed. We’ve been working this for well over two years, and have had numerous citizens provide their input, the commission voted on a citizens’ working group [draft] as well, and we have also worked with the Oil Conservation Division of the N.M. Natural Resources Department and New Mexico Tech for scientific data,” Block said.“So, as you can see, we have been extremely transparent, and we will not be rushed. I will make my decision based on a balanced approach based on data, needs of our county, safety, sciences and pater protection.” He noted that “our schools receive over $47 million a year from the [oil and gas] industry alone, not including the other programs and sectors that receive tax dollars from that industry which is almost 40 percent of our state budget. That plays a part in this as well,” he added.

Zinke’s Halliburton mess deepens – – Interior Secretary Ryan Zinke met at department headquarters in August with Halliburton Chairman David Lesar and other developers involved in a Montana real estate deal that relied on help from a foundation Zinke established, according to a participant in the meeting and records cited by House Democrats late Thursday.Zinke, Lesar and the others later discussed the development project over dinner that night, the participant in the meeting confirmed to POLITICO. The new details raise further questions about Zinke’s involvement in the project, and whether his conversations with the developers – especially in Interior’s office – violated federal conflict of interest laws given Halliburton’s extensive business before this department. POLITICO reported Tuesday that a foundation Zinke established a decade ago agreed to let the Lesar-backed development build a parking lot on foundation land. Zinke has told POLITICO that he was no longer involved in the foundation’s operations since becoming secretary in March 2017, and that has he “resigned as president and board member” of the foundation when he joined President Donald Trump’s Cabinet. But he has not said whether he continued holding discussions with the developers, who are pursuing a multi-use project in his hometown of Whitefish. Zinke was scheduled to meet at the Interior Department with Lesar and his son and lead project developer Casey Malmquist on Aug. 3, according to an email from his scheduler cited by the House Democrats. About six weeks later, he received an email from Malmquist with plans for the development, which is expected to include shops and a microbrewery – a project initially proposed by Zinke more than five years ago. A week after Zinke received Malmquist’s email, Zinke’s wife, Lola, signed a letter of intent in her role as president of the foundation agreeing to let the developers use its land. “Ryan – our development plan and your park project are an absolute grand slam,” Malmquist wrote in one email to Zinke released via the Freedom of Information Act. “I have never been more excited about a development as I am about this one.”

An Update On Natural Gas Flaring Challenges In North Dakota – Crude oil and natural gas production in the Bakken are at record highs, and with the surge in production has come infrastructure constraints and higher rates of flared gas, renewing concerns about possible production shut-ins. As gas production volumes exceeded gas processing capacity, the flaring rate in April 2018 rose to 15% of total monthly volumes – – precisely the current limit set by North Dakota’s gas capture plan and three percentage points above the 12% cap due to kick in this November. Rig counts, producers’ drilling plans and $70/bbl crude oil prices all point to further production growth, which means that without additional processing capacity – or a change in the gas-capture policy – it will be increasingly difficult for producers and processors to comply. Today, we look at the latest developments in Bakken gas production, gas-related infrastructure and the gas capture policy. As we discussed last fall in There’s a Fire in the Night, the Bakken oil and gas industry has been struggling with gas capture and flaring issues for the better part of the last decade. There was a time, going back to 2011, when as much as 37% of produced gas was being flared as oil and associated gas production was on a tear and gas gathering and processing were struggling to keep up. That prompted the North Dakota Industrial Commission (NDIC) to require exploration and production companies (E&Ps) to file a “gas capture plan” (GCP) with their drilling permits and put in place flaring limits.The new rules limit flaring to one year after first production from a well, after which time producers have to do one of the following: connect the well to a gas gathering pipeline, cap it, or link it to an electrical generator or a compression or liquefaction system that consumes at least 75% of the gas onsite.

Fracking, Proppant, And Water – This is my 30-second “elevator talk” regarding completion strategies in the Bakken right now.

• Length of laterals: the standard is a “long lateral”; some call it an “extended reach”; two sections “long”, about 9,000 feet horizontally
• Number of stages: 50; less than 40 catches my attention; suggests something out of the ordinary; I check the sundry forms to see if there might be an explanation; below 20, “definitely” a failed frack . over 60, catches my attention
• Water (gallons, data from FracFocus): 8 million to 12 million gallons; generally 10 million gallons; up to 12 million gallons doesn’t necessarily surprise me; up to 20 million gallons definitely gets my attention
• Sand/ceramic (by percent, weight, data from FracFocus): 14%; for all practical purposes, the difference between 100% and water volume by weight
  • a very small percent of overall mix is the proprietary “cocktail” to help “lubricate” the movement of oil to the well bore
  • above 16% gets my attention
  • below 10% really gets may attention
• Sand/ceramic per stage: 10 million lbs / 50 stages = 200,000 lbs/stage
• Sand/ceramic per foot (which most folks like to use): 10 million lbs / 9,000 feet = 1,100 lbs / foot (about half what they are using in the Permian, based on what Mike Filloon posts)
• To determine amount of sand, until the official report comes out, using data from FracFocus: a gallon of water = 8.35 pounds calculate amount of water in pounds (e.g., 10 million gallons x 8.35 pounds = 83.5 million lbs) if weight of water in percentage is 86%, then 14% (by weight) is sand/ceramic
• Checking my work:
  • in my example, total frack mix (water + sand/ceramic) = 97 million lbs
  • 86% of that was water, or 83 million lbs
  • 83 million lbs of water / 8.35 pounds (per gallon of water) = 10 million gallons, and that’s where we started

State one step closer to gas pipeline, but not the one the Walker administration wants – Alaska is one step closer to getting an in-state natural gas pipeline; though it’s not clear if the project will ever be built. The U.S. Army Corps of Engineers announced Friday that it had released the final supplement for its environmental review of the Alaska Stand Alone Pipeline project. The final permit in that process should be released sometime in the next three months. The in-state pipeline project has taken a backseat to the massive Alaska LNG export project. Both projects would pipe gas several hundred miles from the North Slope to market, but the standalone pipeline is designed for in-state use, while the Alaska LNG project is designed to sell that gas to Asian markets. Staff at the Alaska Gasline Development Corporation have repeatedly said that they are focused on building the larger project. Frank Richards is the senior vice president for both projects at the state’s gasline corporation. He said the in-state pipeline project is basically on hold, now that it has the permits it needs. “It’s truly the backup plan,” Richards said. “It means we will have the permits and authorization to construct, should the need arise.” Even though the in-state pipeline project is on hold, Richards said it can still help the state develop the Alaska LNG project. The pipeline projects are similar enough that federal regulators could use work done on one to guide permitting for the other. Also, Richards said there is about $11 million left over from developing the in-state project that can now be used to fund the export project.

Alaska Native corporations wildcatting in big unexplored interior basins – Alaska Native-owned oil service contractors are exploring the state’s large, mostly untested interior sedimentary basins, areas long thought to be natural gas-prone but now known to also have crude oil potential. The Trans Alaska Pipeline System runs through several of the basins being tested, which includes state-owned as well as lands owned by the Native corporations. Doyon, which has large landholdings in Interior Alaska, has now started drilling its fourth well in the Nenana Basin west of Fairbanks with another Native American company, Cook Inlet Region, of Anchorage, as a partner. The primary target is oil, says Jim Mery, Doyon’s senior vice president for lands and natural resources. But the basin has gas potential and could supply Fairbanks, the state’s second largest community about 50 miles east of the drilling location, he added. Further south, Ahtna, which owns lands in the Copper River Basin in eastern Interior, completed a third exploration well in late spring in that area and is planning a fourth prospect, according to Ahtna’s COO, Tom Maloney. Success has been elusive so far, but this is rank wildcat country where persistence and patient capital is needed, the Native corporations say. Both Doyon and Ahtna own oil support companies active on the North Slope. Doyon Drilling, a Doyon subsidiary, is one of the state’s major drilling contractors.

Sleepy U.S.-Canada Border Post Reveals Diverging Oil Fortunes – In a rural patch of prairie along the U.S.-Canadian border, the towns of Portal, North Dakota, and North Portal, Saskatchewan, couldn’t be closer. They share a fire department, and the first eight holes of the local golf course are in Canada, while the ninth and the club house are in the U.S. But here in the Bakken shale patch, one of North America’s most-prolific oil fields, the U.S.-Canada border represents a drillers’ divide. Spurred by a surge in crude prices, North Dakota’s production is rising more than three times faster than its counterpart in the Bakken region of Saskatchewan. The output difference between the two countries runs deeper than the shared field. While U.S. drillers deploy more rigs than any time since 2015 amid a fracking surge in the Permian Basin, companies including ConocoPhillips, Royal Dutch Shell Plc and Equinor ASA have sold operations or pulled out of Canada’s oil sands, the world’s third largest source of crude reserves. A shortage of pipelines and a regulatory environment that’s often slower and less certain than in the U.S. has helped spark the flight of capital southward, said Tom Whalen, chief executive officer of the Petroleum Services Association of Canada, a trade association representing oil servicing companies. “We [Canadians] are kind of dying by our own sword,” Whalen said in a phone interview. “We are making it very difficult to do business.” A new tax law in the U.S. has helped oil companies by reducing the corporate rate and allowing companies to write off some assets sooner than in the past. Routine licensing for a well in Alberta takes 79 to 119 days versus 30 to 60 days in Texas, according to a report last year by the Canadian Association of Petroleum Producers. Enerplus Corp. Chief Executive Officer Ian Dundas estimates that 10 years ago, his company allocated 90 percent of its capital spending to properties in Canada and 10 percent to its U.S. holdings. Those percentages have been reversed, he said in an interview.

Oil Investment In Canada To Drop Despite Rallying Prices – Canada has the world’s third-largest crude oil reserves, but the country seems determined to pretty literally keep these in the ground. This determination becomes strikingly obvious when Canada is compared with its southern neighbor, which is just what Bloomberg’s Robert Tuttle and Kevin Orland did in a recent story.In the United States, they write, the number of oil and gas rigs are increasing – currently at its highest level since 2015, the height of the oil price crisis. In Canada, on the other hand, there has been an exodus of oil majors including Shell, ConocoPhillips, and Equinor, among others.In the United States, capex in the oil industry is forecast by an Oil and Gas Journal poll to rise by 9.1 percent to US$132.5 billion this year alone. In Canada, total oil investment is seen falling by 2 percent to US$30.11 billion (C$40.1 billion).Of course, there is a clear difference between the energy policies that the two neighbors’ governments are pursuing. Washington is all about energy independence, even energy dominance. Trump’s administration has been working consistently towards ensuring the best possible investment climate for oil and gas producers, much to the chagrin of environmentalists and the renewable energy industry.Ottawa, conversely, has been clearly in favor of what might very loosely be called the green lobby. This has proven a challenge recently, as the federal government had to step in and buy the Trans Mountain pipeline expansion project from Kinder Morgan after the company refused to move forward with it in the face of strong provincial government opposition from British Columbia. Despite this move, caused as much by desperation as by any desire to have the pipeline built, Ottawa has on the whole been playing against oil. Industry insiders interviewed by Bloomberg’s Tuttle and Orland note the regulatory regime that is slowing down investments, dampening the willingness of companies to do business in Canada. The average well-licensing procedure in Canada takes between 79 and 119 days. This compares with just 30 to 60 days for a well in Texas.

Western Canadian Crude takeaway constraints to ease, but only temporarily. – The weeks-long shutdown at Syncrude Canada’s oil sands production facility in northeastern Alberta will alleviate pipeline takeaway constraints that have significantly widened the price spread between Western Canadian Select (WCS) and West Texas Intermediate (WTI) crude oil. But when Syncrude returns later this summer, there’s every reason to believe that the constraints will too, as will the need for significantly more crude-by-rail shipments. Railed volumes out of Western Canada have been increasing in recent months, but not by enough to avert WCS-WTI differential blowouts to $25 and even $30/bbl. The catch is that most of the rail-terminal capacity built a few years ago is mothballed, and that railroads are reluctant to dedicate more locomotives and personnel unless shippers make one-, two- or even three-year commitments to take-or-pay for that logistical support. Today, we consider the ongoing challenges Western Canadian producers face in moving their crude to market. The biggest news in the crude oil business the past few days was OPEC’s June 23 announcement that its members will be increasing their output by as much as 1 MMb/d. But the runner-up was likely the news that Syncrude’s 360-Mb/d operation may be offline through the end of July – a shutdown triggered by a power outage. Syncrude accounts for nearly 10% of Western Canadian production, and the suspension of flows from its production facility north of Fort McMurray, AB, opens up a lot of space on the region’s takeaway pipelines – pipelines that have been running at or very near capacity for months. Syncrude’s troubles and their effects on Western Canada’s takeaway constraints are very likely to be only temporary, though. The underlying problem – insufficient pipeline capacity and profit-sapping differentials – isn’t going away.

Oil company additions to proved reserves in 2017 were the highest since 2013 — In 2017, a group of the world’s largest publicly traded oil and natural gas producers added more hydrocarbons to their resource base than in any year since 2013, according to the annual reports of 83 exploration and production companies. Collectively, these companies added a net 8.2 billion barrels of oil equivalent (BOE) to their proved reserves during 2017, which totaled 277 billion BOE at the end of the year. Exploration and development (E&D) spending in 2017 increased 11% from 2016 levels but remained 47% lower than 2013 levels.Of the 83 companies, 18 held more than 80% of the 277 billion BOE in proved reserves at the end of 2017. Although many of these companies have global operations, some are national oil companies with reserves concentrated in their home countries, including Russia, China, and Brazil. Proved reserves change from year to year because of revisions to existing reserves, extensions and discoveries of new resources, purchases and sales of proved reserves, and production.Organic additions to proved reserves, or reserves added through improved recovery and extensions and discoveries, are linked directly with capital expenditures in E&D. Proved reserves acquired through purchases do not represent E&D capital investment but rather reflect transfers of assets between companies. Revisions to proved reserves are usually more significantly influenced by changes in crude oil and natural gas prices than by E&D investment. Of the 17.7 billion BOE in organic proved reserves added in 2017, slightly less than half (8.5 billion BOE) were in the United States, while Russia, Central Asia, and the Asia-Pacific region accounted for 24% (4.3 billion BOE). Canada (which includes oil sands and synthetic crude oil), Latin America, and the Middle East and Africa regions each added more than 1.1 billion BOE. Regionally, Europe accounted for the fewest organically added proved reserves for the sixth consecutive year, adding 0.3 billion BOE (2% of world total) of proved reserves in 2017.

Top GOP lawmaker not persuaded by green groups’ promises that they aren’t foreign agents | TheHill: A top House Republican says he isn’t convinced that two leading green groups aren’t in cahoots with China and Japan to influence United States environmental policy, despite their ardent denial. Rep. Rob Bishop (R-Utah) said Thursday he still suspects that two groups – Natural Resources Defense Council (NRDC) and the Center for Biological Diversity (CBD) – could be acting as foreign agents, based on lawsuits they’ve filed against U.S. military actions in Asia and the Pacific Ocean. “Based on the committee’s investigation to date, we are concerned that environmental groups that bring such lawsuits may be knowingly or vulnerable to unwittingly serving as proxies for our foreign adversaries,” Bishop said in a statement Thursday, referring to the House Committee on Natural Resources, which he chairs.“The Foreign Agents Registration Act is an important mechanism for ensuring that the American people and U.S. government know the source of information and the identity of foreign entities attempting to influence U.S. public opinion, policy, and laws.” Both the NRDC and CBD sent initial responses to the panel this month, following letters from Bishop and Rep. Bruce Westerman (R-Ark.) asking for documents related to potential foreign influence or control of the groups. In their responses, both groups denied that they are acting as foreign agents or that they must register with the federal government under the Foreign Agents Registration Act.

Court rules fracking is not banned, despite SNP rhetoric — FRACKING has not been banned in Scotland, despite numerous “mistaken” statements by SNP ministers to the contrary, the country’s highest court has ruled. Rejecting a bid to overturn the ‘ban’, the Court of Session ruled there was no prohibition against the controversial gas extraction technique, merely an evolving planning policy. Lord Pentland said statements by ministers, including Nicola Sturgeon, that there was a ban “did not accurately express the legal effect of the decisions” involved. Indeed, “the Lord Advocate, on behalf of the Scottish Ministers, made it clear to the court that such statements were mistaken and did not accurately reflect the legal position”. Lord Pentland concluded that “as a matter of law, there is no prohibition against fracking in Scotland”. The ruling followed the SNP government telling parliament in October that fracking had effectively been banned through the use of planning powers.

As North Sea oil wanes, removing abandoned rigs stirs controversy – One of the world’s largest areas of offshore oil and gas exploitation, in Europe’s North Sea, is closing down. Over the next few years, thousands of wells will be plugged and hundreds of giant production platforms removed from the storm-tossed sea, in one of the world’s largest and most expensive exercises in industrial decommissioning. Good riddance? Not so fast. Some ecologists are pleading for the rigs to be left behind, at least in part, to support the marine life that has grown up around them. And they fear the dismantling could disturb toxic drilling waste on the seabed that nobody plans to remove. How this plays out could yield important lessons for the decommissioning of other offshore oilfields from the coasts of California and Brazil to the South China Sea and, potentially, the Arctic. Two decades ago, the North Sea was one of the world’s largest sources of oil, pumping up 6 million barrels a day. That figure is now down to 1.5 million barrels, and the industry is turning to the task of decommissioning the estimated 600 production platforms in the North Sea. The British sector alone contains 470 of them, along with roughly as many other offshore installations, plus 10,000 kilometers of pipelines and 5,000 wells. The British industry expects to carry out more than 200 decommissions between now and 2025. Many steel rigs will be cut off just below the seabed, and either dragged ashore in one piece or dismantled offshore. A handful of early giant concrete structures, which can weigh as much as 400,000 tons, may have to stay put because there is no way of moving them. The British industry estimates the final bill at $51 billion, though some analysts say it will be double that. Whatever the price, since decommissioning is tax deductible, the cost will be largely born by taxpayers.

Major Oil Spill Contaminates 1,000 Birds in Rotterdam Harbor – Environmental groups and volunteers are working to save about 1,000 oil-covered birds after a freighter spilled heavy fuel oil into a Rotterdam harbor on Saturday, the Netherlands’ Sea Creatures Rescue Team estimated to Reuters.Odfjell, the owner of the freighter Bow Jubail, said the vessel crashed into a jetty while mooring and accidentally ruptured its hull, releasing 217 tons of heavy fuel oil into the water.Swans, gulls, geese and cormorants were contaminated by the oil, according to BBC News. Emergency workers trying to rescue the animals were said to be overwhelmed by the numbers.The slick has covered a six-mile radius in the harbor, BBC News reported, citing local media. Hundreds of birds are still thought to be in the water.”I haven’t yet seen a swan untouched by the oil. It’s a real catastrophe,” adviser Claude Velter told Dutch TV.About 250 oil-stained swans were taken to the animal shelter Vogelklas Karel Schot in Rotterdam on Sunday.”The birds are now stabilized,” the rescue center said in a Facebook post. “In addition to food and water, they need rest. It is e xpected that the first birds in the next few days will be stable enough to be washed.”

Dutch regulator estimates Groningen natural gas output at 19-20 Bcm in Gas Year 17 – The Dutch gas regulator has estimated that gas production from the giant Groningen field onshore the Netherlands will be in the range of 19-20 Bcm in the current Gas Year (October 2017-September 2018), below the official quota of 21.6 Bcm/year. In its latest report on Groningen safety published Wednesday, the regulator (Staatstoezicht op de Mijnen — SodM), also said it expected the quota for Gas Year 18 starting in October to be 19.4 Bcm. An official decision on the quota for the year has yet to be taken. A spokesman for Groningen operator NAM — a joint venture between Shell and ExxonMobil ?- said that it was “for the minister of economic affairs to comment on the regulator’s estimates.” The gas market failed to react to the news. “In my view the upward move is not really linked to Groningen, it is purely oil, and small movement in the FX,” one European gas trader said.

Italy Threatens to Throw Spanner in European Alternative to Russian Gas — No fewer than Turkish President Recep Tayyip Erdogan, Azerbaijani President Ilham Aliyev, Serbian President Aleksandar Vucic, Ukrainian President Petro Poroshenko and Turkish Cypriot President Mustafa Akinci attended a gathering in Central Turkey on 12 June. The amount and variety of attendees of this meeting reveal a common interest in one field of geopolitical developments: energy and more specifically natural gas. The opening ceremony of the 1.850 kilometers long Trans Anatolian Pipeline, TANAP, starting at the Shah Deniz gas field in Azerbaijan and ending in Turkey, is the last step before connecting to the European grid in Greece and Italy. TANAP is part of the Southern Gas Corridor, which was the dream of many European leaders and officials to create an alternative to Russian gas. The attendance of several high-level dignitaries shows the interest in the pipeline and the geopolitical developments of the region. More specifically, Russia’s dominant position in the natural gas market of southeast Europe has set leaders scrambling to find alternatives or at least competition of producers. The fraught relations between Russia and Ukraine brought these countries on a collision course. However, due to historical reasons the energy industries of Moscow and Kiev have been closely intertwined. Russia has set itself an ambitious goal of circumventing Ukraine as its main transit country for gas exports. The Turk Stream and Nord Stream 2 pipelines, which are either planned or under construction, will carry much of the needed gas to Europe starting in 2019 when a new transit contract has to be signed with Kiev. Ukraine intends to diversify away from and ultimately stop buying gas from Russia. The Southern Gas Corridor, therefore, is a highly anticipated alternative. The attending of Petro Poroshenko at the opening ceremony is a testament to this goal. Already Ukraine importing gas from neighbouring European countries with plans to increase domestic production of natural gas. The election of a new government in Italy has brought change to the strategic energy map, which for a decade seemed to be fixed. The €40 billion Southern Gas Corridor pipeline bringing Azeri gas to Europe was intended to be linked to Italy’s by a yet-to-be-built Trans Adriatic Pipeline, TAP. However, the coalition government of the Five Star Movement and the League has created much uncertainty. Environment Minister Sergio Costa has dubbed TAP as “pointless” and has ordered the launch of a formal review. The coalition partners have made fighting corruption one of their election promises. Furthermore, decreasing gas consumption is used as another argument not to construct an additional pipeline. Although demand has risen over the years, it is nowhere near the peak of a decade ago. Italy imports 90 percent of its needs from Russia, Libya, Algeria, and Holland while there is spare capacity.

Meanwhile, In The Arctic… In a development that could further advantage OPEC members as they step up production to compensate for falling exports out of Venezuela and (potentially) Iran, the Barents Observer is reporting that two of Russia’s largest Arctic out-shipment points for oil and LNG have become “packed with ice” leaving tankers and carriers stranded in the “paralyzed” area, which hasn’t been this packed with ice at midsummer in four years. Experts had expected that ice clogging up the Gulf of Ob would melt with the summer months, allowing Rosatomflots, the state-owned energy company responsible for the region, to avoid relying on their nuclear-powered icebreakers to clear the area. According to Rosatomflot, its icebreakers will be working at least through the first week of July to free stranded ships from the ice. Two icebreakers, the Taymyr and the Vaygach, are working overtime. There are also several smaller tugs and icebreakers working in the waters around the Sabetta port.One Rosatomflot representative pointed out that the climate change fears which had analysts worried about rapid melting of ice caps in the Arctic have apparently receded. The global warming, which there has been so much talk about for such a long time, seems to have receded a little and we are returning to the standards of the 1980s and 1990s, says company representative Andrey Smirnov. Companies shipping from the area have in recent years invested in building more powerful tankers capable of breaking up the ice on their own. The projects are expected to ratchet up exports from the region by the equivalent of millions of barrels of oil per year. The Yamal LNG plant is fully dependent on smooth shipping to and from the port of Sabetta. A fleet of 15 powerful top ice-class carriers are being built for the project. The ships are capable of independently breaking through more than two meter thick ice. Commercial shipments from Sabetta started in early December 2017.

Radioactive water reignites concerns over fracking for gas – High levels of a radioactive material and other contaminants have been found in water from a West Australian fracking site but operators say it could be diluted and fed to beef cattle. The findings were contained in a report by oil and gas company Buru Energy that has not been made public. It shows the company also plans to reinject wastewater underground – a practice that has brought on seismic events when used in the United States. Buru Energy has been exploring the potentially vast “tight gas” resources of the Kimberly region’s Canning Basin. The work was suspended when the WA government last year introduced a fracking moratorium, subject to the findings of a scientific inquiry.In a submission to the inquiry obtained by the Lock the Gate Alliance, Buru Energy said a “relatively high concentration” of Radium-228, a radioactive element, was found in two water samples from a well in 2015 and 2016. The so-called “flowback water” contains fracking fluids, and water released from rock in which naturally-occurring radioactive materials can be concentrated.The samples exceeded drinking water guidelines for radionuclides. However Buru Energy said samples collected from retention ponds were below guideline levels and the water posed “no risk to humans or animals”. Buru Energy said while the water was not suitable for human consumption, the “reuse of flowback water for beef cattle may also be considered”. The water did not meet stockwater guidelines but this could be addressed “through dilution with bore water”.

Gazprom resumes talks on natural gas pipeline to South Korea via North Korea – Gazprom has renewed talks with South Korea on a potential natural gas pipeline from Russia’s Far East via North Korea in light of the improved political situation in the region, while it also expects talks with China on gas supplies to be completed by the end of the year, company officials said Friday. Following the talks between US President Donald Trump and North Korean leader Kim Jong-un and improving relations between North and South Korea, the discussions about a potential pipeline through both Koreas are back on the table after years of being suspended. South Korea is the second-largest buyer after Japan of LNG from the Gazprom-led Sakhalin-2 LNG plant on the Pacific coast.

US wants allies to cease oil imports from Iran by Nov. 4 | TheHill: The U.S. is pressing its allies to cut all oil imports from Iran by Nov. 4, a senior State Department official said Tuesday. Teams of State and Treasury Department officials have been dispatched to Europe and Asia in recent weeks to garner support for the Trump administration’s Iran strategy, telling allies that they are expected to cease oil imports from the country, the official said.The diplomatic efforts will affect several key U.S. allies that import significant amounts of Iranian oil, including Japan, South Korea and Turkey. The Trump administration is not planning to issue waivers that would allow allies to continue importing oil from Iran, according to the State Department official. “I think the predisposition would be no, we’re not granting waivers,” the official said during a background briefing with reporters. U.S. crude prices shot up Tuesday to more than $70 per barrel – their highest point since May – after it was revealed that the Trump administration is urging allies to end oil imports from Iran. The State Department official said the U.S. plans to engage with other countries in the Middle Easter to “ensure that the global supply of oil is not adversely affected by these sanctions.”

US presses Iran’s oil customers to cut imports to zero by November 4: State Department – Iran’s oil buyers should not expect any waivers to US sanctions that snap back in November, after the State Department confirmed Tuesday it was taking a hard line on sanctions enforcement and working with Mideast allies to prevent an oil supply shock. “We will certainly be requesting that their [Iranian] oil imports go to zero, without question,” a senior State Department official told reporters during a background briefing. Oil prices climbed after the statement, and analysts raised their projections for how much Iranian crude would leave the market this fall. Iran exported an estimated 2.45 million b/d of crude in April, a surge from recent levels of about 2 million b/d as the country and its customers prepared for US President Donald Trump’s expected decision to exit the Iran nuclear deal, which he announced May 8. “If the US succeeds at zeroing out Iran’s exports, it will have a big price problem at the pump around election time that Saudi Arabia cannot fix,” said Bob McNally, president of Rapidan Energy Group and former energy adviser to President George W. Bush. McNally was referring to US midterm elections in November that will determine which party controls Congress. Joe McMonigle, an analyst for Hedgeye Risk Management, said he now expects the November resumption of Iran sanctions to disrupt 1 million b/d, up from a range of 500,000-800,000 b/d he predicted last month. “The administration’s message today is that the oil market should get ready for a larger amount of Iranian crude getting removed from the market,” said McMonigle, a former Department of Energy chief of staff.

U.S. Toughens Stance on Future Iran Oil Exports – WSJ – The U.S. threatened to slap sanctions on countries that don’t cut oil imports from Iran to “zero” by Nov. 4, part of the Trump administration’s push to further isolate Tehran both politically and economically, a senior U.S. State Department official said. Buyers of Iranian crude had expected the U.S. would allow them time to reduce their oil imports over a much longer period, by issuing sanctions waivers for nations that made significant efforts to cut their purchases. That expectation was partly based on previous comments from top Trump officials, as well as the Obama administration’s earlier effort to wean the world off Iranian oil over several years. But the senior State Department official said on Tuesday that President Donald Trump’s administration doesn’t plan to issue any waivers and would instead be asking other Middle Eastern crude exporters over the coming days to ensure oil supply to global markets. The tactic is likely to further escalate geopolitical tensions between the U.S. and other nations as the Trump administration pits itself against its allies and other major economies over its nearly unilateral policy toward Iran and a host of challenges on trade. Oil prices immediately jumped on the news, with West Texas Intermediate crude for August delivery ending 3.6% higher at $70.53 a barrel on the New York Mercantile Exchange. That marked the highest level since May, when the White House said it would pull out of the 2015 Iran nuclear accord – which the U.S. and other major countries reached with Tehran to curb its nuclear development – and would reimpose crushing sanctions on one of the world’s largest oil suppliers. “We will certainly be requesting that their oil imports go to zero without question by Nov. 4th,” the official said of other countries’ purchases of Iranian oil. While the administration won’t rule out issuing sanctions waivers in the future, the official said, its predisposition is: “No, we’re not going to do waivers.” “We view this as one of our top national-security priorities,” the official said. The move is likely designed to spur greater global compliance with U.S. sanctions. Most major importers of Iranian crude have balked at Washington’s new economic offensive against Tehran.

US Wants India To Stop Importing Oil From Iran By November – The US has asked all countries, including India, to stop all oil imports from Iran by November as it ruled out any exemption to India and Indian companies from its reimposed Iranian sanctions regime for them carrying out any transaction with Iran.”On China and India, yes, certainly,” a state department official told reporters when asked if the US has told all countries, including India and China, to stop all their imports of Iranian oil by November 4.He said Indian and Chinese companies would be subject to the same sanctions as those in other countries. Given the huge energy needs, India and China are major importers of Iranian oil.”Their (India and China) companies will be subject to the same sanctions that everybody else’s are if they engage in those sectors of the economy that are sanctionable, where there were sanctions imposed prior to 2015. And yes, we will certainly be requesting that their oil imports go to zero. Without question,” the state department official said on condition of anonymity.Responding to questions, the official said these countries should start reducing the import of oil from Iran now and bring it to zero by November 4. “Without question, they should be reduced. That’s what we’ve been telling them in our bilateral meetings. They should be preparing, now, to go to zero (by November 4),” the official said. The official said this is part of the Trump administration’s effort to isolate streams of Iranian funding and are looking to highlight the totality of Iran’s malign behaviour across the region.

Iran: India may ignore US demands to halt oil imports: India said Wednesday it did not recognize sanctions the United States has threatened to impose on countries that continue to buy Iranian oil after November 4. “India does not recognize unilateral sanctions, but only sanctions by the United Nations,” Sunjay Sudhir, joint secretary for international cooperation at India’s petroleum ministry, told CNNMoney when asked whether India would reduce oil imports from Iran. The US demand was made by a senior State Department official on Tuesday. It reflects the hard line President Donald Trump is holding after he decided to withdraw from an international nuclear agreement and reimpose sanctions on Iran. Iran is India’s third-largest oil supplier after Iraq and Saudi Arabia, according to Indian government data. And India buys more Iranian oil than any country except China. Analysts say the Indian government is unlikely to heed the US call. “More than China, India is unlikely to capitulate to the US demand,” analysts at the Eurasia Group wrote in a note on Tuesday. They estimate that India is currently buying about 700,000 barrels per day from Iran, a critical and strategic source of supply to meet India’s growing demand for energy. “India’s state-owned refiners will likely continue to import Iranian crude,” they said. India’s top state-owned oil companies – Hindustan Petroleum, Bharat Petroleum and Indian Oil – did not immediately respond to requests for comment.

Iranian President Reopens Nuclear Plant: “We Will Bring The US To Its Knees” – Iranian president Hassan Rouhani said on Wednesday: “We will bring the US to its knees in this battle of wills.” The Iranian government is continuing to warn of harsh retaliation against the United States after the Trump administration pulled out of the 2015 nuclear agreement. According to PressTV, the threat comes as Washington continues to attempt to bully its allies into halting imports of Iranian oil after Donald Trump unilaterally quit the cornerstone international nuclear agreement instituted by his predecessor, Barack Obama. Iran has previously said there would be consequences should the US decide to withdraw from the agreement. The United States, meanwhile, has continued to push Iran. After withdrawing from the 2015 Iran nuclear agreement, known as the Joint Comprehensive Plan of Action (JCPOA), in May the US vowed to reinforce economic pressure and sanctions against Tehran, reported RT. While the European capitals have so far refused to leave the cornerstone security accord, on Tuesday the State Department threatened private companies with sanctions unless they completely cut Iranian crude oil imports by November. Rouhani also seeks to unify all Iranians. “We will take problems. We will take pressure. But we will not sacrifice our independence,” Rouhani vowed. “Even in the worst case, I promise that the basic needs of Iranians will be provided,” the Jerusalem Post quoted Rouhani saying live on national television. Rouhani additionally noted that his administration will continue to defend Iran’s interests and focus on strengthening the economy. “We have enough foreign currency to inject into the market.”

Kazakhstan to maintain oil output at current level of 1.8 mil b/d throughout 2018: report – Kazakhstan is planning to maintain oil output at the current level of 1.8 million b/d until the end of the year, energy minister Kanat Bozumbayev said Tuesday, according to the Prime news agency. “Our daily production is 1.8 million barrels, we are not planning to reduce it, the average rate of production will remain around this level until the end of the year,” Bozumbayev said according to the report. Kazakhstan is participating in the OPEC/non-OPEC agreement to cut oil production that came into force at the beginning of 2017. It committed to cut its liquids production by 20,000 b/d from November 2016 volumes of 1.7 million b/d under this deal, but has met its target just once, in August 2017, due to planned maintenance at one of the country’s major projects, Tengiz. The latest statistics released in mid-June showed that Kazakhstan’s oil and gas condensate output was 7.825 million mt, or around 1.85 million b/d in May. Bozumbayev attended a meeting on Saturday during which changes to the deal to allow additional barrels to come to market were agreed. Bozumbayev also said Tuesday that Kazakhstan hopes that output at its major Kashagan project will increase by the end of this year. “Currently we have reached production of 300,000-320,000 b/d. By the end of the year I hope it will be a bit higher,” he said.

A Storm Is Brewing In The Southern Gas Corridor – No less than Turkish President Recep Tayyip Erdogan, Azerbaijani President Ilham Aliyev, Serbian President Aleksandar Vucic, Ukrainian President Petro Poroshenko and Turkish Cypriot President Mustafa Akinci attended a gathering in Central Turkey on 12 June. The amount and variety of attendees of this meeting reveal a common interest in one field of geopolitical developments: energy and more specifically natural gas. The opening ceremony of the 1.850 kilometers long Trans Anatolian Pipeline, TANAP, starting at the Shah Deniz gas field in Azerbaijan and ending in Turkey, is the last step before connecting to the European grid in Greece and Italy. TANAP is part of the Southern Gas Corridor, which was the dream of many European leaders and officials to create an alternative to Russian gas.The attendance of several high-level dignitaries shows the interest in the pipeline and the geopolitical developments of the region. More specifically, Russia’s dominant position in the natural gas market of southeast Europe has set leaders scrambling to find alternatives or at least competition of producers.The fraught relations between Russia and Ukraine brought these countries on a collision course. However, due to historical reasons the energy industries of Moscow and Kiev have been closely intertwined. Russia has set itself an ambitious goal of circumventing Ukraine as its main transit country for gas exports. The Turk Stream and Nord Stream 2 pipelines, which are either planned or under construction, will carry much of the needed gas to Europe starting in 2019 when a new transit contract has to be signed with Kiev.Ukraine intends to diversify away from and ultimately stop buying gas from Russia. The Southern Gas Corridor, therefore, is a highly anticipated alternative. The attending of Petro Poroshenko at the opening ceremony is a testament to this goal. Already Ukraine importing gas from neighbouring European countries with plans to increase domestic production of natural gas. The election of a new government in Italy has brought change to the strategic energy map, which for a decade seemed to be fixed. The €40 billion Southern Gas Corridor pipeline bringing Azeri gas to Europe was intended to be linked to Italy’s by a yet-to-be-built Trans Adriatic Pipeline, TAP. Environment Minister Sergio Costa has dubbed TAP as “pointless” and has ordered the launch of a formal review. The TAP consortium, which includes British oil group BP, Italy’s Snam and Spain’s Enagas, has said re-routing the pipeline away from Italy is not an option.

U.S., allies express concern over transfer of Libyan oil facilities (Reuters) – The United States, France, Britain and Italy said on Wednesday they were deeply concerned by an announcement that east Libyan oil fields and ports would be handed over to a parallel National Oil Corporation (NOC) based in Libya’s east. “These vital Libyan resources must remain under the exclusive control of the legitimate National Oil Corporation and the sole oversight of the Government of National Accord,” the countries said in a joint statement, referring to the NOC and U.N.-backed government in the capital, Tripoli. “We call for all armed actors to cease hostilities and withdraw immediately from oil installations without conditions before further damage occurs.” The statement responded to an announcement on Monday by forces loyal to Khalifa Haftar’s Libyan National Army (LNA) that they would hand eastern ports to a parallel NOC based in the eastern city of Benghazi. The announcement followed a week of fighting over the ports of Ras Lanuf and Es Sider, which have been controlled along with other ports in Libya’s oil crescent by the LNA since September 2016. The LNA had previously let the internationally recognized Tripoli NOC operate the ports, boosting Libya’s oil production. But after Ras Lanuf and Es Sider were attacked this month, it said oil revenues paid into the central bank in Tripoli were being used to fund its rivals. Past attempts by eastern-based factions to sell oil independently of Tripoli have been thwarted by U.N. Security Council resolutions. “Any attempts to circumvent the…Security Council’s Libya sanctions regime will cause deep harm to Libya’s economy, exacerbate its humanitarian crisis, and undermine its broader stability,” Wednesday’s joint statement said.

Shell Exits Majnoon Oil Field In Iraq | OilPrice.com – Shell has handed over the operations of the Majnoon oilfield in Iraq to Iraqi state-run Basra Oil Company, exiting the field as it said last year it would do, Reuters reported on Wednesday, citing two Iraqi oil officials close to the deal.Last year, Shell said that it would sell its interest in the Majnoon oilfield after the oil major and Iraq failed to agree on future production plans and investment budgets. After months of negotiations, Shell agreed at the end of 2017 to exit the venture and hand over its operation to Basra Oil Company (BOC) by the end of June 2018. Shell was the operator and holder of 45 percent at Majnoon, with Malaysia’s Petronas owning 30 percent, and Iraq’s Missan Oil Company holding the remaining 25 percent.At the end of December, Iraq said that it had formed a management team to take overoperations from Shell after the oil major exits the field by the end of June. Iraq wants to raise production at Majnoon from the current 235,000 bpd to around 400,000 bpd in the “coming years”.Today, officials from Shell and Basra Oil Company met to mark the handing over of the operations of the field.“The handing over process was smooth and without any issues,” one Iraqi oil official told Reuters after the meeting.In April, Anton Oilfield Services and Petrofac signed a two-year deal with Iraq’s oil ministry to operate the Majnoon field on behalf of Basra Oil Company. “Shell’s exit will not have any effect on production operations and we can increase output without any hurdles,” another Iraqi official told Reuters, commenting on the handover. Shell, for its part, is focusing on its gas operations and joint ventures in Iraq, and sold in March its 19.6-percent stake in the West Qurna 1 oil field to a subsidiary of Japan’s Itochu Corporation for US$406 million.

Kuwait says Neutral Zone oil production halted until deal reached with Saudi – Oil production at the Neutral Zone between Saudi Arabia and Kuwait will resume when the two sides reach a deal, Kuwait’s oil minister said on Tuesday.Bhakeet Al-Rashidi told parliament production was stalled “due to technical reasons”, according to Kuwait news agency KUNA.He said the two sides were “tackling the matter” and production would resume “as soon” as they reached an agreement.Kuwait said in late 2016 it was preparing to restart production at oilfields in the zone after production was previously halted. At the time the closure of the fields, mainly Khafji and Wafra, had become a political sticking point.Khafji was shut in October 2014 for environmental reasons and Wafra has been shut since May 2015 due to operating difficulties.Before its closure Khafji, operated by Kuwait Gulf Oil Company and a Saudi Aramco subsidiary, was producing between 280,000 and 300,000 barrels per day, according toReuters. The Wafra field has an output capacity of about 220,000bpd of Arabian Heavy crude. US oil major Chevron operates the field on behalf of the Saudi government.

OPEC’s Agreement Sends Oil Prices Soaring – OPEC issued a communique on Friday that called on a return to 100 percent compliance for the group, down from 152 percent in May. The announcement deferred country-specific allocations, likely because they could not agree on the details. The decision likely means that any country with spare capacity will be able to boost production. In practice, Saudi Arabia and Russia will carry the lion’s share. How individual countries make decisions about how much to produce, while still trying to stay below a collective cap, opens up a lot of uncertainty. Oil prices moved up on Friday morning, on expectations that the result from the OPEC+ meeting won’t lead to a supply glut. In recent days, there seemed to be a bit of convergence on a plan to boost production, perhaps by around 600,000 bpd. That amount would merely offset the declines from Venezuela over the past year, and would not plug the entire supply deficit facing the market. “The market caught up a little in terms of realizing that the rumored increase was less than what is necessary to balance the market,” Emily Ashford, director of energy research at Standard Chartered, told the WSJ. “Any increase in production will come at the expense of spare capacity so that leaves the market much more vulnerable to future supply shocks,” she added. OPEC’s technical committee recommended a supply increase of about 1 million barrels per day, although press reports widely noted that such an increase would likely only be nominal, and actual barrels put onto the market would reach only about 600,000 bpd because several countries have no ability to boost output. The recommendation came even as Iranian oil minister Bijan Zanganeh walked out of a meeting on Thursday night, although he met with his Saudi counterpart Friday morning. The discord likely led to the vague decision on 100 percent compliance, rather than on country-specific increases.

U.S. Shale Companies Motor Ahead Despite OPEC – WSJ – OPEC’s decision last week to increase production modestly is seen as an attempt to keep prices elevated without creating a spike. The move eased concerns among the member countries about tightening supply and the potential for a price spike, but it also lifted the stock prices of U.S. oil producers, which have learned to survive at whichever price OPEC pursues.“We’re not running our business based on what OPEC does regarding supply,” said Doug Lawler, chief executive of Chesapeake Energy Corp. , a pioneer of shale drilling. “We just have to respond accordingly and focus on the technology and the innovation that helps us be efficient regardless of the price.”U.S. production has grown at a record-setting pace this year, hitting 10.9 million barrels a day this month after oil prices exceeded $70 a barrel for the first time since 2014. That makes the U.S. the world’s No. 2 oil producer behind Russia, but ahead of Saudi Arabia. OPEC members, plus Russia, came to an agreement two years ago to cut production to shrink excess supply and prop up prices. At the meeting last week in Vienna, OPEC ministers cobbled together a deal to reverse course and boost oil output by an effective 600,000 barrels a day to head off a possible run to $100-a-barrel oil. Russia said over the weekend that it would support OPEC’s efforts. Now U.S. shale companies are again in position to benefit from OPEC’s market-balancing actions. Speaking at the meeting in Vienna, Scott Sheffield, chairman of Pioneer Natural Resources Co. , said the company has a shared interest with OPEC in preventing overheated prices. High prices generate a short burst of profits but can undermine economic growth and tamp down demand. Mr. Sheffield said: “$100 is not going to help OPEC. It’s not going to help us in the Permian.” His company is one of the top drillers in the Permian Basin of West Texas and New Mexico. OPEC’s new barrels also come at an opportune time for shale companies, which are facing production-threatening infrastructure constraints in the Permian, the country’s most active drilling region. Analysts say Permian producers might have to scale back drilling until new pipelines come online in 2019.

5 things investors need to know about OPEC’s decision to lift oil output The Organization of the Petroleum Exporting Countries agreed on Friday to rein in member production cuts, essentially lifting output to help make up for an expected shortfall in global supplies. The expected output increase, however, appears likely to be smaller than market participants had expected. In a statement, OPEC said it has “decided that countries will strive to adhere to the overall conformity level of OPEC-12, down to 100%, as of 1 July 2018 for the remaining duration of the above mentioned resolution and for the JMMC to monitor and report back to the President of the Conference.” OPEC also granted membership to Congo and set its next regular meeting for Dec. 3. Doing the math from the figures offered in the official OPEC statement from the conference, OPEC members agreed to add back 624,000 barrels a day into the global market, according to one analyst’s estimates.In a meeting on Friday, the Joint Ministerial Monitoring Committee pegged member compliance with production-cut agreement reached in late 2016 and implemented in 2017 at 152% in May of this year. The original deal called for output reductions of 1.2 million barrels a day from late 2016 levels from 12 of the 14 OPEC members at that time. With compliance at 52% above the agreed upon reductions, OPEC was essentially over complying – cutting roughly 1.8 million barrels a day. To get back to 100% compliance, OPEC members would have to add 624,000 barrels a day in output.As Khalid al-Falih, Saudi Arabia’s energy minister, left Friday’s meeting, he said the agreement was to increase oil production by 1 million barrels a day, according to various news reports.That 1 million-barrel figure was not mentioned in the official statement. That suggests a possible concession to Iran, according to the Financial Times, which faces renewed U.S. sanctions after President Donald Trump abandoned the 2015 nuclear deal with Tehran. The sanctions threaten oil supplies from Iran. Iran had opposed the calls for an output increase, but appeared to smooth over differences with Saudi Arabia just ahead of the Friday meeting. Nigerian oil minister Ibe Kachikwu said the 1 million-barrel agreement would see OPEC members raise output by at least 700,000 barrels a day, with non-OPEC countries, led by Russia, adding the rest, according to the Financial Times report.

OPEC “Deal” Ends With Output Confusion, Sets Stage For “Deal Unraveling” — Just 24 hours after OPEC appeared on the edge of splintering, Iran seemed to cave and in a deal that was described as a victory for everyone, OPEC member states and Russia provided a vague assurance they would boost output by striving to return to full compliance of the original production quotas as set in the 2016 Vienna production cut agreement. As Goldman summarized in its post-mortem, “no further details were provided, including no country level allocation, no guidance for non-OPEC participants or timeline for the increase.” Furthermore, during the press conference following Friday’s deal, the one question which never got an explicit answer is how much output would be boosted by, with little clarity shed beyond “targeting full compliance at the group level”. This suggests that there is room for countries with spare capacity to increase production above the individual quotas but also that such adjustments could not be resolved. As a result, Goldman’s energy analyst Damien Courvalin said that he views today’s agreement “as masking disagreements within the group and a potential start to the unraveling of the deal, with core-OPEC and Russia looking to increase production but Iran opposing such an increase.” Bloomberg’s Javier Blas confirmed as much, noting that Friday’s agreement was a “fudge in the time-honored tradition of OPEC, committing to boost output without saying which countries would increase or by how much” a fudge which gave every member – especially Iran which by endorsing a production boost would have been seen as effectively approving of Trump’s sanctions and allowing other states to take its market share – an “out” to save face, by sufficiently masking up the details so no explicit accusations of backtracking can be made. Importantly, “it gives Saudi Arabia the flexibility to respond to disruptions at a time when U.S. sanctions on Iran and Venezuela threaten to throw the oil market into turmoil.” So what is the actual production boost? This is where the confusion really sets in. First, here is Goldman’s take: Several ministers suggested that this would correspond to a 0.7 mb/d increase in production, which would represent OPEC returning to its aggregate production quota. Such an increase in production would likely only be gradual, leaving it on a path close to our base case 550 kb/d increase in 3Q18. While production could exceed our 550 kb/d expectation for 4Q18, we see risks that Iran production may be even lower than we assume. Bloomberg referenced a similar number, noting that the deal could add about 700,000 barrels of daily supply from OPEC and non-OPEC producers. On Saturday morning, however, the discrepancy grew, with various soundbites estimating the boost based more on political tensions than actual production dynamics, and ranging from under 500kb/d to over 1 million:

What Saudi Arabia does now is key for global crude oil markets (Reuters) – If it were possible to boil the crude oil market down to just one determining factor for the coming months, it would be this: What will Saudi Arabia actually do? The Saudis appear to have emerged as the winners from last week’s meeting of the Organization of the Petroleum Exporting Countries (OPEC), and the subsequent talks between OPEC and its allies in the deal to restrict output. The outcome of the meetings would seem to indicate that crude oil supply should rise by as much as 1 million barrels per day (bpd). That’s based on the assumption that OPEC and allies will return to 100 percent compliance with the November 2016 cut of 1.8 million bpd from a current situation of over-compliance. However, the reality on the ground is that many OPEC countries lack the ability to pump their full quotas. Saudi Arabia is the only producer that can ramp out output significantly within a short period of time. The market consensus after the OPEC meeting in Vienna on June 22, and the talks with non-OPEC allies the following day, was that the agreements reached wouldn’t actually result in an extra 1 million bpd reaching global markets. While there is some debate on the likely increase in supply, the upper end of the range is around 600,000 bpd. The question is whether this would be enough to prevent prices from rallying again. Given that the Saudi Arabia, the world’s largest crude exporter, is going to have to provide the lion’s share of any increase in output, watching its export numbers and price signals in the coming months will be key. In fact, the Saudis already are supplying more crude, according to vessel-tracking and port data compiled by Thomson Reuters Oil Research and Forecasts. Saudi seaborne crude exports were 7.06 million bpd in May, the most in a year, the data shows.

Saudi pledges ‘measurable’ oil supply boost as OPEC, Russia agree deal (Reuters) – OPEC agreed with Russia and other oil-producing allies on Saturday to raise output from July, with Saudi Arabia pledging a “measurable” supply boost but giving no specific numbers. The Organization of the Petroleum Exporting Countries had announced an OPEC-only production agreement on Friday, also without clear output targets. Benchmark Brent oil rose by $2.5 or 3.4 percent on the day to $75.55 a barrel. On Saturday, non-OPEC oil producers agreed to participate in the pact but a communique issued after their talks with the Vienna-based group provided no concrete numbers amid deep disagreements between OPEC arch-rivals Saudi Arabia and Iran. U.S. President Donald Trump was among those wondering how much more oil OPEC would deliver. “Hope OPEC will increase output substantially. Need to keep prices down!” Trump wrote on Twitter after OPEC announced its Friday decision. The United States, China and India had urged oil producers to release more supply to prevent an oil deficit that could undermine global economic growth. OPEC and non-OPEC said in their statement that they would raise supply by returning to 100 percent compliance with previously agreed output cuts, after months of underproduction. Saudi Energy Minister Khalid al-Falih said OPEC and non-OPEC combined would pump roughly an extra 1 million barrels per day (bpd) in coming months, equal to 1 percent of global supply. Top global exporter Saudi Arabia will increase output by hundreds of thousands of barrels, he said, with exact figures to be decided later. “We already mobilized the Aramco machinery, before coming to Vienna, pre-empting this meeting,” Falih said, referring to the Saudi state oil company. Russian Energy Minister Alexander Novak said his country would add 200,000 bpd in the second half of this year. Asked to what extent the decision to increase supply had been driven by pressure from Trump, Novak said: “It is obvious that we are not being driven by tweets but base our actions on deep market analysis.”

Oil prices settle lower, with Brent leading the drop, in the wake of OPEC’s gathering – Oil prices settled lower on Monday, with global benchmark Brent crude leading the decline, amid some uncertainty in the wake of an agreement by the Organization of the Petroleum Exporting Countries to ramp up production that was backed by nonmember Russia.August West Texas Intermediate crude on the New York Mercantile Exchangegave up an earlier climb to lose 50 cents, or 0.7%, to settle at $68.08 a barrel, returning a small portion of Friday’s 4.6% climb. August Brent crude fell 82 cents, or 1.1%, to $74.73 a barrel on the ICE Futures Europe exchange.The spread between the two benchmarks has narrowed in recent days, with analysts attributed at least part of the better performance in WTI prices on a crude production outage in Canada that is expected to tighten the U.S. market. The “OPEC meeting ended with the existing deal being left unchanged but the group aiming to reduce over-compliance and to get output back to the originally-intended levels,” said analysts at JBC Energy Research Centre, in a note dated Monday. “But members clearly differ in their interpretation of the deal as the actual wording of the communiqué is not exactly clear enough.” “Saudi Arabia has essentially argued that those who have spare capacity can now produce more to make up for producers who cannot meet their quota,” they said. “On the other hand, Iran sees such a quota reallocation as a breach of the deal and thus expects the real supply response to be rather small.”

WTI Extends Gains After Biggest Crude Draw Since Sept 2016 – WTI/RBOB prices soared today on the heels of Iran oil sanction threats from Washington. With expectations of further draws (after last week’s big surprise draw), API reported a massive 9.22mm barrel draw – the biggest since Sept 2016. API:

• Crude -9.22mm (-3mm exp) – biggest draw since Sept 2016
• Cushing -1.741mm (-1.3mm exp)
• Gasoline +1.152mm
• Distillates +1.75mm

Following last week’s surprising large crude draw (but product builds) API reported a 9.22mm crude draw – which if it holds for EIA, will be the biggest draw since Sept 2016… WTI topped $70 – highest in a month – after US sanction threats against Iran trumped Saudi output increase headlines. Heading into the API print, WTI was flatlined at around $70.50, before kneejerking higher on the API print

Oil Prices Rise After API Reports Major Crude Draw — As oil prices continues to fall, the American Petroleum Institute (API) reported a major draw of 9.228 million barrels of United States crude oil inventories for the week ending June 22 compared to analyst expectations that this week would see a much smaller draw in crude oil inventories of 2.572 million barrels. Last week, the American Petroleum Institute (API) reported a draw of 3.016 million barrels of crude oil. The API reported another buildup in gasoline inventories for week ending June 22, this week in the amount of 1.152 million barrels. This was close to analyst expectations of a build of 1.313 million barrels. Crude oil prices spiked today on the back of anticipated oil export disruptions in Libya after the Libyan National Army said it had passed control of the country’s oil ports to a non-officially recognized National Oil Corporation affiliated with the eastern government of the country based in Benghazi. Further support to oil prices come as the United States continues to pressure countries to cease buying oil from Iran. By 3:40pm EDT, WTI was trading at $70.43, up $2.35 (+3.45%). Brent crude was trading at $76.15, up $1.60 (+2.15%). US crude oil production stagnated for the first week in many months, reaching 10.9 million bpd in the week ending June 08, holding fast for the week ending June 15, according to the EIA. Distillate inventories saw a build this week of 1.785 million barrels, compared to an expected build of 774,000 barrels, while inventories at the Cushing, Oklahoma, site fell again this week, by 1.741 million barrels. The U.S. Energy Information Administration report on crude oil inventories is due to be released on Wednesday at 10:30am EDT. By 4:36pm EST, oil prices held steady, with the WTI benchmark trading up 3.61% on the day to $70.54 and Brent trading up 2.31% at $76.27.

WTI-Brent Spread Narrows On Canada Oil Crisis — The difference between WTI and Brent narrowed significantly over the past few days, as the forces driving the two benchmarks apart seemed to have reversed course.For the past few weeks and months, WTI suffered a steep discount relative to Brent, a reflection of a series of factors that made North America well supplied with oil, while the rest of the world saw supplies tighten significantly. U.S. shale production has soared over the past few years, but really accelerated at a blistering pace in 2018. North America has been overflowing with oil, and much of the additional supply has been routed through Gulf Coast export terminals, if producers can get their oil out of West Texas. The result was a sort of two-speed oil market – ample supplies in the U.S., and an increasingly tight market everywhere else.The discount widened to nearly $10 per barrel in June, a staggering differential.But in a surprising turn of events, the two benchmarks converged significantly in the past few days. A week ago, the price differential topped $9 per barrel, but the gap narrowed to $6 per barrel as of Monday. The reasons for this are multiple, but they largely come down to the fact that the fortunes of both benchmarks suddenly flipped. OPEC+ decided to add more oil onto the market last week – nominally 1 million barrels per day, but in reality something more akin to 600,000 bpd. That has eased fears about a supply crunch. Meanwhile, the supply/demand balance in North America suddenly looks a bit tighter than it did earlier this month. The pipeline constraints in the Permian are starting to bite, and there are growing expectations that shale drillers will have to curb output growth because available takeaway capacity has all but vanished. More importantly, at least in the near run, was the unexpected outage from an oil sands project in Canada. Syncrude Canada saw an equipment malfunction that could reduce flows from Canada by 360,000 bpd for the month of July, “putting Cushing potentially on a path to an inventory stockout,” according to a note from Goldman Sachs. “With the global market pricing to pull crude out of the U.S., this loss of U.S. supplies will exacerbate the current global de?cit, making the increase in OPEC production all the more required.” The expected loss could translate into a reduction in inventories by around 14 million barrels. The outage in Canada led to a “sharp repricing of North American crudes with sharply stronger WTI timespreads and tighter differentials,” Goldman wrote. The cash vs. front-month WTI differential went from essentially nothing to nearly $3 per barrel immediately after Syncrude Canada’s announcement. In other words, investors became worried about the immediate availability of supply.

Analysis: US exports in focus as Brent/WTI spread converges — With stocks at Cushing, Oklahoma, falling steadily of late, the ICE Brent/WTI spread has closed sharply, lessening the incentive for US producers to ship crude overseas in pursuit of higher prices. Market observers will be watching US export figures in the coming weeks to gauge whether the price signals have had an impact. While ICE Brent’s premium to WTI has nearly halved since late May, it remains within the $3/b-$7/b range seen from August until mid-May, when US crude exports hit record highs on several occasions. Greater exports have helped tighten US crude inventories, offsetting the fact that domestic production has climbed to 10.9 million b/d. US crude stocks were 1.2% below the five-year average at 426.527 million barrels the week ending June 15. Analysts surveyed Monday by S&P Global Platts expect crude stocks fell 2.3 million barrels last week. If confirmed, that would further grow the size of the deficit to the five-year average. Stocks actually saw a slight build of around 40,000 barrels on average for the same period from 2013-17, according to Energy Information Administration weekly inventory data. US crude exports have averaged 2.074 million b/d over the last four weeks, versus 775,000 b/d over the same period a year ago. That is not surprising in light of the ICE Brent/WTI spread blowing open from less than $6/b in early May to more than $11/b a month later. S&P Global Platts Analytics estimated US crude exports averaged 1.959 million b/d last week. That forecast is derived using cFlow ship tracking data. EIA pegged exports at 2.374 million b/d the week ending June 15.

Oil Bulls Are Back On Outages — Oil prices moved up on Tuesday after reports of outages in Canada and ongoing uncertainty in Libya. The market seems to have digested the news of higher OPEC+ production, and is now moving on. The increase from OPEC+ may only reach 600,000 bpd or so, while the outages in a series of countries are accumulating. The fears of another downturn in prices in the lead up to the OPEC meeting are now in the rearview mirror. Syncrude Canada suffered an equipment malfunction at one of its oil sands facilities, which could disrupt as much as 360,000 bpd for the month of July. The outage significantly narrowed the WTI-Brent discount, pushing up WTI on expectations of much tighter supplies in North America. Lower flows from Canada could drain inventories at the Cushing hub in Oklahoma, a closely-watched metric that helps determine WTI prices. “With the global market pricing to pull crude out of the U.S., this loss of U.S. supplies will exacerbate the current global deficit, making the increase in OPEC production all the more required,” Goldman Sachs analysts wrote. . Royal Dutch Shell gave the greenlight to a project in the North Sea, the second for Shell in the region in the past six months. The natural gas project was deemed uneconomical six years ago, but Shell has dramatically reduced costs. Shell will produce from two wells in the Fram field in the central North Sea by 2020. The project is not a massive one, but it illustrates how Shell and other companies have boosted the viability of the North Sea. . A group of companies including Kinder Morgan Texas Pipeline LLC, a subsidiary of Kinder Morgan, EagleClaw Midstream Ventures LLC and Apache Corp. announced they have signed a letter of intent to develop the Permian Highway Pipeline Project, which would carry natural gas from the Permian to the Gulf Coast. The $2 billion PHP project would move 2 billion cubic feet of natural gas per day (bcf/d) from Waha, Texas to the Texas Coast and to Mexico, and the companies aim to bring it online in late 2020.

Oil Surges Above $70 On Concerns Of Iran Output Cut – So much for the Saudi “record production” intervention in pushing the price of oil lower: while the news did briefly send crude down, it immediately spiked following news that the US would also press allies to cut Iran oil imports to zero, effectively removing up to a million barrels from the market, and the result has been a sharp spike higher in the price of WTI, which has jumped above $70 for the first time since May 25. The Iran announcement was expected, and followed President Trump’s warnings that European nations should scale back their trade with the Islamic Republic or face sanctions after the US withdrawal in May from the Iran nuclear deal and administration. In the Tuesday briefing, the State Department official said that while the administration wouldn’t rule out waivers or extensions to the November deadline, which was previously announced, it isn’t discussing them either. The official, who spoke on condition of anonymity, said the U.S. was planning conversations with the governments of Turkey, India and China, all of which import Iranian oil, about finding other supplies. The official said an important part of those discussions was making sure countries aren’t “adversely affected” by cutting Iranian oil imports.According to Bloomberg, in 2017 Iran shipped 755,000 barrels a day to European customers on average, and 1.37 million barrels a day to Asia-Pacific buyers, according to data from the Organization of Petroleum Exporting Countries.As Bloomberg’s Javier Blas shows, here is a list of Iran’s top energy clients.CHART OF THE DAY: With U.S. asking allies to cut imports of Iranian oil to ZERO by November, here who’s who among Tehran energy clients — via @EIAgov Full story here: https://t.co/pNWFJXxXxq#OOTT pic.twitter.com/dZEinH6cuC – Javier Blas (@JavierBlas2) June 26, 2018

Saudis Plan Record Oil Production As US Tells Allies To Cut Iran Oil Imports To Zero — Just hours after the US Energy Secretary Rick Perry told reporters that deal between OPEC and Non-OPEC countries may “not be enough” to relieve supply constraint stress in global oil markets, Saudi Arabia has reportedly decided to take matters into its own hands, and according to Bloomberg the kingdom is planning to pump a “record amount of crude in July, embarking on one of its biggest-ever export surges to cool down oil prices.”Effectively Saudi Arabia is doing unilaterally what last week’s OPEC meeting failed to collectively by assuring the world of a major production boost, thereby pushing the price of oil lower, as Trump had been demanding.According to Bloomberg reports, Saudi state oil giant Aramco plans to boost production next month to about 10.8 million barrels a day, the people said, in the process surpassing the previous record high of 10.72 million barrels a day in November 2016.The move, as Bloomberg adds illustrates the “unprecedented response to the pressure U.S. President Donald Trump has put on OPEC to supply more oil.” The monthly increase would mark an unprecedented monthly surge in output from a nation which in May told OPEC it pumped 10.03 million barrels a day. The actual production level in July will depend on demand for exports and domestic consumption, so could end up ranging between 10.6 million and 11 million barrels a day, the people said. Domestic oil use surges during summer months as the kingdom burns crude to generate electricity for air conditioning. The Saudis have been under growing pressure from Trump to pump more oil ahead of the U.S. midterm elections in November, and to lower prices which have threatened to undo the economic boost from Trump’s tax cuts Coincidentally, as Bloomberg broke the news about the imminent Saudi boost, a State Department official said that the U.S. is pushing allies to cut oil imports from Iran to zero by Nov. 4, adding that the U.S. isn’t granting waivers on Iranian oil imports ban.If fully complied, the actions may remove as much as 1 million barrels of oil from the market.The irony, however, is that the confluence of these two reports, first sent the price of oil sliding on the Saudi report, followed by a modest boost on the Iran news, thereby perhaps assuring more angry tweets from the president.

Oil rises as outages balance trade dispute, OPEC (Reuters) – Oil prices rose on Tuesday, supported by Canadian production losses and uncertainty over Libyan exports, but under pressure from climbing OPEC supply and intensifying trade conflicts between the United States and other major economies. Benchmark Brent crude (LCOc1) was up 35 cents at $75.08 a barrel by 0720 GMT. U.S. light crude (CLc1) was 35 cents higher at $68.43 a barrel. Brent, which tends to reflect global supply and demand, was driven up by uncertainty around oil exports by Libya, a member of the Organization of the Petroleum Exporting Countries. Eastern Libyan commander Khalifa Haftar’s forces have given control of oil ports to a separate National Oil Corporation (NOC) based in the country’s east. The official state-owned oil company from the capital Tripoli, also called NOC, will no longer be allowed to handle that oil, he said. “The move increases the risk that Libyan oil output will be shut in as the NOC in Tripoli is the only legal entity with the right to sell oil,” Production problems at one of Canada’s largest oil sands facilities drove front-month U.S. crude to its highest premium above second-month futures since 2014. Higher feedstock crude oil prices, as well as surging fuel exports from China, have pulled down Asian refinery product margins to two-year lows.Uncertainty over Libya’s exports follows a move by OPEC and other oil producers to increase supply by around 1 million barrels per day (bpd). Oil markets have tightened significantly since 2017, when OPEC and its partners started withholding supply to prop up slumping prices at the time. But some analysts think oil markets will stay tight. “Despite the OPEC agreement (last week) we believe that tight supply is likely to drive oil prices higher during 2018,”

After OPEC, oil market enters a new era: Kemp (Reuters) – OPEC is changing fundamentally as power in the oil market shifts towards Saudi Arabia, acting in concert with Russia, while the other members of the organisation are increasingly marginalised. In theory, all members of the Organization of the Petroleum Countries are equal, and the group has always taken decisions by consensus (“Statute of the Organization of the Petroleum Exporting Countries”, 1961 and 2012). OPEC’s founding statute stipulates that it “shall be guided by the principle of sovereign equality of its member countries” (Article 3). In practice, some members of OPEC have always been more powerful than others, but that imbalance has been widening, with Saudi Arabia becoming the dominant decision-maker. Saudi Arabia’s oil production overtook Iran’s in the 1970s, and the gap has grown steadily wider as a result of the Iranian revolution, the Iran-Iraq war and multiple rounds of sanctions. Saudi Arabia is the only member of the organisation with a large enough share of output to have a measurable influence prices and the budgetary flexibility to adjust its production significantly. In reality, Saudi Arabia decides how much to produce given market conditions, playing the role of swing producer, while the other members of the organisation essentially produce as much as they are technically able.

Oil rallies to fresh high as US crude inventories see biggest drop since 2016 – Oil rallied more than 3% on Wednesday to its highest level this year as data showed US crude inventories last week saw the largest drawdown since 2016. West Texas Intermediate climbed as much as 3.3% to $73.04 a barrel. Brent, the international benchmark, was up 1.9% to $78.16 a barrel around 12:45 p.m. ET. A report by the Energy Information Administration showed US crude inventories dropped by 9.9 million barrels in the week ending June 22, the largest decline since September 2016. Analysts had expected a drawdown of less than half that. Prices had already been rallying this week after the US said all countries must stop buying oil from the Islamic Republic by November or face sanctions, as part of Trump’s withdrawal from the Iran nuclear deal. The international community had expected sanctions waivers for some countries, a tactic used in the Obama era to avoid supply shocks.Supply disruptions in Canada have also offered support to crude. An outage at Syncrude has threatened to withdraw about 350,000 barrels per day from the market through at least July, adding to a mounting list of major producers where output is at risk, including in Venezuela and in Libya. “With renewed geopolitical risk factors likely to stimulate concerns of supply disruptions, oil prices have scope to extend gains in the near term,” . The rally comes days after OPEC and other supply-cutting countries led by Russia reached a deal officials said was partly designed to prevent market overheating. As part of a 2015 agreement to coordinate production levels, the cartel said it would increase output beginning in July. WTI is up nearly 60% over the year.

Oil stocks drop by nearly 10 million barrels: EIA (Reuters) – U.S. crude stocks fell by nearly 10 million barrels last week as refineries hiked output, while gasoline and distillate inventories rose, the Energy Information Administration said on Wednesday. Crude inventories fell by 9.9 million barrels in the last week, compared with analysts’ expectations for a decrease of 2.6 million barrels. Crude stocks at the Cushing, Oklahoma, delivery hub fell by 2.7 million barrels, EIA said. Refinery crude runs rose by 115,000 barrels per day, EIA data showed. Refinery utilization rates rose by 0.8 percentage points. Gasoline stocks rose by 1.2 million barrels, compared with analyst expectations in a Reuters poll for a 1.3 million-barrel gain. Distillate stockpiles, which include diesel and heating oil, were up by 15,000 barrels, versus expectations for a 774,000-barrel increase, the EIA data showed. Net U.S. crude imports fell last week by 512,000 barrels per day.

Hefty Inventory Draw Boosts Oil Prices — A day after the American Petroleum Institute helped push crude prices even higher by estimating a 9.228-million-barrel draw in U.S. crude oil inventories, the EIA confirmed the draw, at 9.9 million barrels for the week to June 22.This compares with a draw of 5.9 million barrels reported for the prior week and analyst expectations for a draw of 5.1 million barrels. Amid stubbornly rising oil prices despite the OPEC+ decision to add close to 1 million bpd to global supply, the EIA also reported an increase in gasoline inventories of 1.2 million barrels. That compares with a 3.3-million-barrel increase in gasoline inventories reported for the previous week. Refineries processed 17.8 million barrels daily last week, with gasoline production at an average 10.1 million bpd, slightly higher than a week earlier. Distillate inventories remained unchanged, compared with a 2.7-million-barrel increase a week earlier. Production averaged 5.4 million barrels daily, down slightly from 5.5 million barrels daily a week earlier. Oil prices have remained highly volatile after OPEC’s meeting in Vienna, not least because traders expected a bigger cut but also because the U.S. State Department has increased the pressure on its international allies to stop importing crude oil from Iran. Despite President Trump’s tweet campaign against OPEC, in which he accused the cartel of “artificially” keeping prices high, it is now Washington’s determination to cut Iran’s access to international oil markets that is adding fuel to the price rally. Analysts are already revising their estimates of the supply outage that will result from the entry into force of U.S. sanctions in November, and refiners from Asia are starting to reduce their shipments from Iran. Additionally, a power outage at a Syncrude oil sands mine in Canada and a spike in oil export uncertainty in Libya have contributed to the higher prices, basically erasing the knee-jerk price decline from last week as the market anticipated OPEC’s decision.

Saudi Arabia plans to pump up to 11 mln bpd in July, all-time record high – source (Reuters) – Saudi Arabia plans to pump up to 11 million barrels of oil in July, the highest in its history, up from about 10.8 million bpd in June, an industry source familiar with Saudi oil production plans told Reuters on Tuesday. OPEC agreed with Russia and other oil-producing allies on Saturday to raise output from July by about 1 million bpd, with Saudi Arabia pledging a “measurable” supply boost but giving no specific numbers.

WTI Spikes Above $72 After Biggest Crude Draw Since Sept 2016 — WTI continues to soar this morning, near $72, after API reported a huge crude draw, and DOE confirmed it with a 9.891mm draw – the biggest since Sept 2016. WTI spiked above $72, helped by the second week in a row of no production increase. Bloomberg Intelligence Senior Energy Analyst Vince Piazza explains that unplanned downtime at a Canadian syncrude upgrading facility may be contributing to an uplift in domestic crude demand. Refining utilization is expected to remain elevated after hitting 96.7% in the previous reporting period, while crude oil exports are well-entrenched above 2 million barrels a day. DOE:

• Crude -9.891mm (-3mm exp) – biggest draw since Sept 2016
• Cushing -2.713mm (-1.3mm exp)
• Gasoline +1.156mm
• Distillates +15k

DOE confirmed the massive crude draw this week – even bigger than API’s – the biggest since Sept 2016 Crude exports soared to a record 3mm barrels last week… Crude oil production is just 100,000 barrels a day shy of the 11 million bpd mark, as drillers have been running at full speed ahead. With U.S. prices back above $70 a barrel, we expected continued growth in production, but instead it flatlined at 10.90mm bpd as perhaps the Permian bottleneck is starting to impact production explicitly.

U.S. oil prices settle at highest since 2014 as crude supplies notch biggest weekly drop of the year – Oil prices rallied Wednesday, with the U.S. benchmark settling at its highest since 2014 as domestic crude supplies notched their biggest weekly drop of the year so far.Traders also showed concerns over U.S. threats to sanction countries that don’t stop importing oil from Iran by Nov. 4. On the New York Mercantile Exchange, August West Texas Intermediate crude tacked on $2.23, or 3.2%, to settle at $72.76 a barrel. That was the highest finish since Nov. 26, 2014. August Brent crude, the global benchmark, settled $1.31, or 1.7%, at $77.62 a barrel on ICE Futures Europe, for the highest finish since May.The U.S. Energy Information Administration reported Wednesday that crude supplies declined by 9.9 million barrels for the week ended June 22 – the largest weekly decline so far this year. Analysts surveyed by S&P Global Platts had forecast a fall of 2.3 million barrels, while the American Petroleum Institute on Tuesday reported a drop of 9.2 million barrels.“Record crude exports and record refinery runs have combined to yield the biggest draw to crude stocks so far this year,” said Matt Smith, director of commodity research at ClipperData. “Even crude production holding at a record level has been unable to offset strong domestic and international demand.” The EIA pegged last week’s total domestic crude output at 10.9 million barrels a day, unchanged from the previous week.Gasoline stockpiles rose by 1.2 million barrels for the week, while distillate stockpiles were unchanged for the week, according to the EIA. The S&P Global Platts survey forecast supply increases of 160,000 barrels for gasoline, and 500,000 barrels for distillate stocks.On Nymex Wednesday, July gasoline RBN8, +0.65% rose 2.8% at $2.134 a gallon and July heating oil RBN8, +0.65% ended at $2.177 a gallon, up 2.3%. July natural gas rose 1.9% to $2.996 per million British thermal units. The contract expired at the end of the trading session. “We would have seen gasoline prices go up much further today if it were not for gasoline imports that approached 1 million barrels per day,” The oil-price gains came after Brent and WTI closed up Tuesday by more than 2% and nearly 4%, respectively, following threats by the U.S. to sanction countries that don’t cut their imports of Iranian crude to “zero” by Nov. 4. Tuesday’s announcement by the U.S. State Department “may well have been designed to ramp up the pressure on the Iranian regime, but it is also likely to exert further upward pressure on U.S. prices,”

Analysis: US crude differentials swing sharply on undulating Brent-WTI spread – Spot price differentials for US crude grades soared in recent weeks to multiyear highs amid widening Brent-WTI spreads, with June on track to be the strongest month in four years for many grades. But market reaction to Friday’s OPEC/non-OPEC coalition agreement to increase production put a quick and steep reversal to this upward trend, along with tightening supply at the Cushing, Oklahoma, hub. The Brent-WTI spread had risen sharply in May through much of June as oil production outpaced takeaway capacity from the prolific Permian Basin in West Texas, creating a localized glut that put downward pressure on WTI in the key Cushing hub, the delivery point for NYMEX light sweet crude. The front-month Brent premium over WTI averaged at nearly $7.05/b during the trading days in May, more than $2.16 higher month on month, and more than $4.30 wider compared with May last year. The discrepancy between the two benchmark crude contracts further widened in June, peaking at $11.15/b on June 7, the highest since February 2015, and was averaging at nearly $9.54/b through Friday, June 22. The widened Brent-WTI spread made WTI-linked US crude grades more attractive to domestic and international buyers compared with their counterparts that are priced off of Brent, pushing price differentials up to multiyear highs. June was on its way to reach the highest Brent-WTI spread monthly average since early 2014, but the recent OPEC/non-OPEC meeting in Vienna held Friday, where the 24 cooperating countries agreed to increase production by 1 million b/d through 2018, has changed Brent and WTI’s course to a converging path. S&P Global Platts assessed the July Brent-WTI swap spread Monday at $6.78/b, nearly $2.76 lower than the average during the prior trading days in June.

Analysis: US crude exports, refinery runs set records – Inventories dropped 9.891 million barrels to 416.636 million barrels for the week ended June 22, representing the biggest week-on-week draw since September 2016, EIA data showed. Analysts surveyed Monday by S&P Global Platts were looking for a decline of 2.3 million barrels. Crude exports rose 626,000 b/d last week to 3 million b/d, breaking the previous record of 2.566 million b/d set the week ending May 11. The amount of crude processed by refineries increased 115,000 b/d to 17.816 million b/d, the highest level on record, according to EIA data going back to 1982. Crude stocks now sit 3.57% below the five-year average for the same period; that figure equaled a 26.73% surplus a year ago. The EIA weekly data helped lift oil futures. As of Wednesday afternoon, NYMEX August crude was $2.24 higher at $72.77/b. ICE August Brent was $1.69 higher at $78/b. NYMEX crude’s strength relative to ICE Brent on Wednesday extended a trend that began last week. As a result, the gap between the two crude benchmarks has narrowed sharply. The ICE Brent/WTI spread has been less than $6/b since Tuesday, in from more than $10/b early last week. A trigger behind the narrowing spread has been the shutdown of Canada’s Syncrude following a power outage last week. Syncrude production could be lost through July or even later. The subsequent market reaction suggests some concern over supply around the NYMEX crude delivery point in Cushing, Oklahoma. Prompt NYMEX crude has outperformed the rest of the oil complex, which explains the narrower Brent/WTI spread along with the steeper backwardation.

US oil exports boom to record level – U.S. oil exports reached a record 3 million barrels a day last week – a greater amount than is pumped each day by all but three OPEC countries. When combined with fuel products, like diesel and gasoline, U.S. oil and related products exports totaled 8.5 million barrels a day last week, the most ever, according to U.S. Energy Information Administration weekly data.U.S. oil production also continued at a record pace of 10.9 million barrels a day, a level first reached this month. That is more oil than produced by every other country in the world, except for Russia, which does not belong to OPEC and pumps just over 11 million barrels a day. U.S. refineries also took in a record 18 million barrels of oil.To put U.S. exports in context, the U.S. was able to export more oil per day last week than most OPEC countries drilled. But of the largest producing OPEC countries, only Saudi Arabia and Iraq are exporting more oil than the U.S. did last week, according to John Kilduff, partner with Again Capital. In June, he said Saudi Arabia exported about 7.5 million barrels a day and southern Iraq exported 3.6 million. Iran exports about 2.4 million barrels a day, and the U.S. is seeking to remove those barrels from the market through sanctions. “The fact is we’re loading crude oil for export across the Texas Gulf Coast. The biggest issue that exporters are facing is getting oil from the Permian basin to the Gulf Coast because of the lack of pipeline capacity,” said Andrew Lipow, president of Lipow Oil Associates.The U.S. weekly exports fluctuate dramatically, but if they stay at this level, the U.S. would be just behind Canada, which sends about 3.5 million barrels to the U.S. each day, the bulk of of its exports. As U.S. production has grown, U.S. imports have decreased. The U.S. imported a relatively high 8.4 million barrels per day last week.The 3 million barrel level may not be sustainable just yet. Analysts said some of the oil appears to have been pulled from inventories, which fell an unusually large amount last week. “We’ve gone from zero to 3 million barrels a day in terms of crude oil exports in just over a year. It’s been a steady climb. This puts tremendous pressure on U.S. crude oil supplies despite the shale boom if this is going to persist,” said Kilduff. “The exports and the record refinery run combined created a massive draw down of nearly 10 million barrels.”

Oil futures dip on continued record-high US production – Crude oil futures were lower in mid-afternoon trade Asia Thursday as the US continues to produce record-high crude amid higher expected output from OPEC and its allies. Despite this, market sentiments remained positive on supply disruptions from Syncrude in Canada, possible sanctions on Venezuela, staggering drawdown in US crude inventory and record-high exports. At 1:55 pm Singapore time (0555 GMT), the August ICE Brent crude futures dipped 21 cents/b (0.27%) from Wednesday’s settle to $77.41/b, while the NYMEX August light sweet crude contract fell 31 cents/b (0.43%) to $72.45/b. Market participants said that production from OPEC, led by Saudi Arabia, and non-OPEC allies, led by Russia, is expected to rise after the OPEC meeting that took place in Vienna on June 22, leading to lower crude futures. Meanwhile, US domestic crude oil production remained flat week on week, albeit at a record pace of 10.9 million b/d. “Supply of crude oil in the US remains high and we expect it to increase further,”

Oil prices diverge but U.S. benchmark holds near highest since 2014 – Oil prices climbed Thursday, with the U.S. benchmark again marking its highest level since 2014 in the wake of the biggest weekly decline of the year for domestic crude supplies and ongoing global output risks. Traders also showed concerns that U.S. sanctions on Iranian oil and production issues at a Canadian oil sands facility will contribute to tighter global supplies. Natural-gas prices, meanwhile, finished lower after a U.S. government report revealed an upward revision to previously reported weekly stockpiles of the fuel. On the New York Mercantile Exchange, August West Texas Intermediate crude added 69 cents, or nearly 1%, to settle at $73.45 a barrel, for its highest finish since Nov. 26, 2014.August Brent crude the global benchmark, rose 23 cents, or 0.3%, to $77.85 a barrel, with prices settling at the highest since May. The August contract expires at the end of Friday’s session.Brent and WTI crude prices finished well off the session’s best levels. The market had been digesting threats by the Trump administration this week to sanction countries that don’t reduce their imports of Iranian crude to “zero” by Nov. 4.But CNBC reported Thursday that the U.S. State Department has clarified those comments, with an official saying that the Trump administration is “willing to work with countries that are reducing their imports on a case-by-case basis” – suggesting that imports of Iranian oil may not reach zero.President Trump last month pulled the U.S. out of a 2015 international agreement to curb Iran’s nuclear program, setting the stage for the reimposition of economic sanctions on the Islamic Republic that were already expected to hinder its oil exports. Iran currently exports around 2.4 million barrels a day of crude. Analysts had estimated that anywhere between 400,000 to one million barrels could be at risk once sanctions are fully reinstated in six months.

Oil prices spike 13% in a week. What the heck is going on? – The oil market is on fire once again. On Thursday, crude spiked above $74 a barrel for the first time since late 2014.The 13% surge over the past week has been driven by a confluence of bullish factors that will make American drivers cringe when they fill up their gas tanks.

• • Saudi Arabia agreed last week to go all in with production. Investors are betting the OPEC leader has little room to respond to a future crisis.
• • A major oil producer in Canada suffered a power outage, disrupting the flow of crude to the United States.
• • And President Trump stepped up his crackdown on Iran, the world’s fifth biggest oil producer. The State Department is now insisting that other countries stop importing Iranian oil — or face sanctions from Washington.

The end result: US crude jumped another 1.5% on Thursday and topped $74 a barrel. “You can’t tweet about high oil prices and then apply sanctions on Iran and not expect prices to go higher,” said Ben Cook, portfolio manager at BP Capital Fund Advisors. “The oil has to come from somewhere.” It’s been a wild stretch for crude. Oil prices rose sharply through the spring, as production collapsed in crisis-riddled Venezuela and traders anticipated Trump’s withdrawal of the United States from the Iran nuclear deal. But crude hit a wall in late May after Saudi Arabia vowed to pump more.

US sanctions against Iran aimed at regime change — The Trump administration further spelled out this week the draconian sanctions it intends to enforce on Iran. A senior State Department official told the media the US would take measures against any country that failed to reduce its oil imports from Iran to “zero” by November 4. Companies that fail to meet the deadline face the prospect of being excluded from the US financial system. While not completely ruling out waivers, the US official said there were unlikely to be any exemptions for corporations buying oil from Iran. The predisposition of the Trump administration, the official said, is: “No, we’re not going to do waivers.”The announcement follows Trump’s decision on May 8 to unilaterally pull out of the 2015 nuclear deal with Iran. Known as the Joint Comprehensive Plan of Action (JCPOA), it was signed with the US, Britain, France, Germany, China and Russia. Under the JCPOA, Tehran agreed to drastic curbs on its nuclear programs in return for a step-by-step easing of international sanctions. Despite the International Atomic Energy Agency (IAEA) repeatedly verifying that Iran kept its side of the bargain, the Trump administration tore up the deal. Washington wants to force Iran to fall into line with US policy throughout the Middle East, and end its nuclear and missile programs. US Secretary of State Mike Pompeo warned last month that Iran would face “the strongest sanctions in history” if it did not bow to Washington’s demands. He also strongly hinted at regime change, suggesting that the Iranian public could take matters into its own hands.

Perry: Iran sanctions will stress oil markets – Energy Secretary Rick Perry predicted Thursday that the restoration of sanctions on Iran will stress worldwide oil markets, but called on other oil-producing nations to increase their output. “The market is going to be stressed,” Perry said at a news conference at the World Gas Conference. “We look at this as an opportunity for the [Organization of Petroleum Exporting Countries] members to fill this gap.”He predicted some short-term spikes in oil prices, due both to Iran sanctions and other factors. “I think there will be some spikes in prices from time to time. But … I think that the markets are going to become calmer and calmer as we go forward, realizing that the supply is going to be there to meet the demand.” President Trump last month withdrew the United States from the Iran nuclear deal, in which Tehran agreed to restrict its nuclear weapons program in exchange for a loosening of economic sanctions by the United States and other countries. The State Department said this week that it is asking Western countries to completely stop importing Iranian oil by Nov. 4. Analysts have predicted that oil prices will spike when that deadline hits, since Iran is a significant exporter worldwide. Perry said that is likely, but didn’t express much worry. “I’m quite comfortable that the world’s producers of crude are going to meet the demands that’s out there,” he said. Perry also ruled out ordering releases from the United States’ Strategic Petroleum Reserve if such price spikes occur. “From my perspective, the Strategic Petroleum Reserve is in place for an emergency, natural disasters,” he said.

Oil Rallies Towards $80 – Brent rose more than 1 percent in early trading on Friday, and is not far off of $80 per barrel. This week saw prices gain about 10 percent compared to last week after a combination of fears of Iran production outages, disruptions in Libya and a bullish stock draw in the U.S. It was only a week ago that OPEC+ promised to add 1 million barrels per day (mb/d) to the market, but it already feels like a distant memory with the oil bulls back on the march. Earlier this week, a State Department official laid out what sounded like a “zero tolerance” policy for nations cutting oil imports from Iran. The official said that countries need to “zero” out their imports by November, and that it would be unlikely anyone would receive a waiver. The statement led to a spike in oil prices because the market had to dramatically revise up the assumed outage from Iran. On Thursday, a State Department official appeared to soften the line. “Our focus is to work with those countries importing Iranian crude oil to get as many of them as possible down to zero by Nov. 4,” the official said Thursday. “We are prepared to work with countries that are reducing their imports on a case-by-case basis. We are serious about our efforts to pressure Iran to change its threatening behavior.” The walking back of the “zero” imports mantra suggests the U.S. fears the fallout of pushing oil prices too high. India’s oil minister advised its refiners to prepare for a “drastic reduction or zero” oil imports from Iran by November, due to the threat of U.S. sanctions. India, as a close neighbor and significant purchaser of oil from Iran, appears willing to wind down oil imports from Iran even as it does not recognize the sanctions as legitimate. India’s actions are an indication that Washington could wield far-reaching influence over Iran’s oil exports, even though much of the world is not lined up with the U.S. position. Saudi Arabia reportedly will ramp up oil production to 10.8 mb/d in July, perhaps as high as 11.0 mb/d. The plans come as a series of outages around the world have pushed oil prices and left the market in a deficit. The increase in production, however, could eliminate as much as 40 percent of Saudi Arabia’s spare capacity, taking available capacity down to around 1.5 mb/d, a rather small buffer. “It basically leaves us with no spare capacity, at a time when Iran isn’t the only issue,”

Oil Rig Count Falls Amid Stagnating Production – Baker Hughes reported another dip in the number of active oil and gas rigs in the United States today. Oil and gas rigs decreased by 5 rigs, according to the report, with the number of oil rigs decreasing by 4, and the number of gas rigs decreasing by 1.The oil and gas rig count now stands at 1,047 – up 107 from this time last year.Canada, for its part, gained 12 oil rigs for the week – after last week’s gain of 21 oil and gas rigs. Despite weeks of significant gains, Canada’s oil and gas rig count is still down by 17 year over year. Oil benchmarks were up again on Friday afternoon as the market braced for the impact of multiple supply disruptions – or possible supply disruptions, rather – in Libya, Iran, Venezuela, and Canada. While oil supply disruptions in Libya, Canada, and Venezuela are already underway and expected to be either moderately long-term (Libya) in some cases, or infinite in others (Venezuela), Iran’s supply disruptions, or export disruptions, have not yet materialized, although the general consensus is that approximately 1 million barrels per day will be taken out of the market as the US squeezes Iran.At 10:57am EDT, the WTI benchmark was trading up 1.05% (+$0.77) to $74.22, with Brent up1.61% (+$1.25) to $78.86. Both benchmarks are up by multiple dollars per barrel week over week, as traders disregard Saudi Arabia’s promise to increase production to meet demand.Even US oil production is unable to keep oil prices in check, and for the third week in a row, US production stagnated at 10.9 million bpd – close to the 11 million bpd production that many had forecast for the year. At 6 minutes after the hour, WTI was trading up 1.06% at $74.23, with Brent trading up1.92% at $79.10.

WTI rallies to fresh multi-year highs above $74 – Following a consolidation phase during the first half of the day, crude oil extended its rally in the NA session with the barrel of West Texas Intermediate rising above $74 for the first time since November 2014. As of writing, the barrel of WTI was trading at $74.30, adding 85 cents, or 1.15% on the day. Earlier today, Reuters published the results of a recent survey that it conducted with 35 economists and analysts. According to Reuters, Brent is expected to average $72.58 a barrel in 2018, 90 cents higher than the $71.68 forecast in last month’s poll while the WTI is now seen averaging $66.79 a barrel in 2018, compared with $66.47 forecast last month. “A number of other geopolitical risks weigh on the global outlook, and these are likely to have a larger impact on prices than in previous years, when oil stocks were comfortable,” Cailin Birch, an analyst at the Economist Intelligence Unit, told Reuters. In the meantime, supply disruptions in Libya, Venezuela, and Canada, in addition to the larger-than-expected decrease in crude stocks in the U.S., provided extra fuel to crude oil throughout the week. Furthermore, investors continue to price the expectations of Iran’s supply getting cut from the markets on the U.S. & its allies sanctions.

Weekly Natural Gas Storage Report: Surplus Should Be Obvious — EIA reported a storage build of 66 Bcf for the week ending June 22. This compares to the +71 Bcf we projected and consensus average of +71 Bcf. The +66 Bcf also was 6 Bcf lower than the five-year average of +72 Bcf, and 20 Bcf higher than last year’s. One thing to note in this report is that EIA revised higher the storage build last week, from 91 to 95 Bcf. We have made changes to our prior tracking error as a result. The natural gas bulls and bears both have ample ammunition to fire at each other.On one end, natural gas bulls contend that with natural gas storage expected to enter withdrawal season 350-plus Bcf below the five-year average, natural gas prices over the winter could really surprise to the upside. Natural gas storage levels also are low today so even if injections come in higher than the five-year average, storage will still be in deficit.On the other end, natural gas bulls contend that with Lower 48 production rising, storage becomes a more meaningless measurement of the surplus or deficit in the market. If supply is 4+ Bcf/d over demand today, then the relevance of the five-year average is meaningless. And if production keeps increasing, then natural gas prices will remain under pressure. As our readers will know, our view is toward the bearish side. We have documented in the past that even if this summer turns out to be bullish (warmer than normal), we will still have enough natural gas storage by April 2019 because Lower 48 production continues to increase. Take for example that Lower 48 production reached another all-time high yesterday at ~81.2 Bcf/d: This is on pace to reach the ~83 Bcf/d we had projected for year-end, and this will calm the market even if storage levels move lower.

NYMEX August gas settles at $2.94/MMBtu, down 4.1 cents on weak build – NYMEX August natural gas futures slid on its debut as the front-month contract Thursday, settling at $2.94/MMBtu, down 4.1 cents, despite a low 66-Bcf build to storage stocks that the Energy Information Administration posted earlier Thursday. The front-month contract was trading in the range of $2.93/MMBtu-$3.021/MMBtu so far in the session. The same pattern was seen for several other contracts. September was down 3.2 cents, closing at $2.919/MMBtu, while the October contract was down 2.8 cents to settle at $2.927/MMBtu. The 66-Bcf build for the week ending June 22 trailed the five-year average injection of 72 Bcf for the same period and was below the 74-Bcf build forecast by a consensus of analysts surveyed by S&P Global Platts Analytics. The net increase in storage put current national stocks at 2.074 Tcf, nearly 26% below the 2.809 Tcf level during the same time last year and at a deficit of 19.5% to the five-year average of 2.575 Tcf. The market moved south and shed value due to “competing factors,” said Phil Flynn, senior market analyst Price Futures Group. “Record production and upward revision of last week’s [storage] number” kept the market from reacting to the bullishness of the report, he said. The EIA revised the storage report for the week ended June 15 from 91 Bcf to 95 Bcf, which offset the bullishness of Thursday’s report. The reported revision Thursday caused inventory for the same week to change from 2.004 Tcf to 2.008 Tcf.

Surging Production Trips Up Natural Gas Futures Despite Heat – Natural gas futures lost ground during an uneventful session Friday as strong production limited the impact of sizzling temperatures forecast for key demand markets into the first week of July. In the spot market, prices for weekend and Monday delivery slipped throughout the Gulf Coast, Midwest and East as traders in those regions apparently felt prepared to beat the heat; the NGI National Spot Gas Average fell 6 cents to $2.69/MMBtu. Nymex August Henry Hub futures settled at $2.924 Friday, down 1.6 cents on the day after trading as high as $2.954 and as low as $2.910. The September contract dropped 1.8 cents to settle at $2.901. “Natural gas prices traded within a narrow range as expected” Friday, “sitting lower through the day as dry production continued to hit record levels,” Bespoke Weather Services told clients. “Prices sit near the bottom of a long-term rising channel, yet the winter strip lagged into the settle and prices struggled to show many signs of firming up. “Weather through the short-term will be very hot, and we expect forecasts for next week to stay about equally as hot over the weekend, yet even so cash prices struggled to rally significantly on the day,” the firm said. Potentially weighing on prices, forecasts Friday showed heat in the short- and medium-term easing off by mid-July, Bespoke said. Even with strong cooling demand, record-level production has kept natural gas on the wrong side of $3 from the bulls’ perspective. Government data released Friday corroborates the growth trends observed by traders and analysts. The Energy Information Administration (EIA), in its monthly natural gas update Friday, said April 2018 dry gas production totaled 2.39 Tcf, or 79.7 Bcf/d, 8.0 Bcf/d (11%) higher year/year (y/y). That marks the eleventh straight month that production has surpassed the corresponding year-ago period, according to EIA.

China Becomes World’s Biggest Natural Gas Importer – China has outpaced Japan to become the world’s largest importer of natural gas, a welcome sign for the developers of liquefaction plants in the Pacific Basin and beyond. Chinese buyers purchased 34.9 million tons of imported gas for the year through May, edging past the 34.5 million tons purchased by Japan. For now, China gets just over half of its gas import volume from LNG shipments, and its demand for liquefied gas has been accelerating rapidly. It imported about 38 mtpa in LNG last year, up from about 10 mtpa in 2010. Half of that increase came in the last two years alone, and China achieved second-largest-importer status just last year. A portion of the new volume is shipped from recently-built liquefaction plants in the United States. The U.S. supplied four percent of China’s LNG demand last year, making it the nation’s fifth-largest supplier. Despite growing signs of a potential trade war with the U.S., China has excluded LNG from a list of proposed retaliatory tariffs that it seeks to impose on American goods – a reflection of the priority that Beijing places on maintaining acccess to LNG. Under Chinese President Xi Jinping, China has begun a large-scale push to shift from coal-fired power to gas, a measure that will significantly reduce smog-creating emissions of particulate matter and SOx. Beijing hopes to power 15 percent of the Chinese economy by 2030, according to its National Development and Reform Commission, an amount that outstrips the domestic supply. The changeover policy led to widespread gas shortages last December as temperatures dropped and heating demand outpaced the supply, and China is eager to avoid a recurrence next winter. Hebei, the province surrounding Beijing, has decided to forego further work on its coal-to-gas conversion projects until Gazprom’s massive “Power of Siberia” pipeline is completed. Once operational, the line will deliver up to 60 billion cubic meters per year from Russia to China, an amount equal to about 45 mtpa of LNG – more than the total that China imported in 2017 – and the parties are already in negotiations over a second, parallel pipeline with equivalent capacity.

Analysis: China’s fuel oil imports may feel the pinch from US trade war – China’s fuel oil imports may ease in the coming months amid fears that bunker fuel demand might fall after US tariffs come into effect next month, curbing shipment of some commodities from China to the United States. As markets keep a close watch on how trade flows might be affected after July 6 when some duties come into effect, traders in China said fuel oil importers are adopting a cautious approach, and are not rushing to finalize import deals. “Until now, we have not seen demand for container cargoes and dry bulk cargoes shrinking,” a source with Chimbusco in Beijing said. “But once the tariffs are effective, it is likely that demand for container cargoes will drop, leading to less demand for bunker fuel.” A drop in bunker fuel demand could further slow China’s imports of fuel oil, which fell 3.4% month on month to 1.46 million mt in May, the General Administration of Customs’ latest data showed. This is despite higher demand from independent refineries, which account for a relatively small portion of the fuel oil demand. The bulk of the imported cargoes are resold in the domestic market as bonded bunker fuel to ships plying international waters. “Demand for bunker fuel has been relatively stable recently, but supplies have been tight,” a source with Chinaoil Shanghai said. Chinaoil imports fuel oil to sell to bunker fuel distributors. As the latest custom data did not show imports by destination, it was not clear imports from which regions had fallen.