Oil, Gas, And Fracking News Reads 19August 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 19 August 2018. Go here for Part 1.

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

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Pale Blue Dot: University must protect community from oil industry — There over 1,071 active oil wells in the city of Los Angeles, 759 of which are within 1,500 feet of residential areas. Due to a history of discriminatory zoning, the majority of these dangerous neighborhood wells are functioning in South L.A., in close proximity to USC. But even though these low-profile processing sites are not as visually striking as their old-fashioned counterparts, they continue to impose themselves in the lives of Angelenos.Oil extraction sites are extremely dangerous to the people who live near them, leaking gases and pollutants into homes, schools, hospitals and public spaces. Living near a development site can increase cancer risk and lead to conditions such as headaches, nausea and upper respiratory illness. There is also a constant risk of deadly accidents due to the use of harmful acids, toxic gases and explosive materials at these facilities. Noise pollution from gas compressors, drills and other heavy equipment can cause sleep issues and raise blood pressure, while long-term exposure to noise pollution can contribute to endocrine issues, diabetes and learning disabilities in children. Now that much of the easily accessible oil has been drawn out of the area, companies are turning to experimental, generally unregulated methods like acid stimulation and hydraulic fracturing, or “fracking.” These methods involve shooting a slurry of water and corrosive chemicals into the earth in order to drill into hard-to-reach areas, and can trigger frequent, violent earthquakes. They are so new that their health effects have yet to be formally studied, but anecdotal evidence indicates that residents living near fracked wells can develop chronic cases of coughing and wheezing, and that pregnant women living near fracked wells are more than 30 percent more likely to give birth to a premature or high-risk baby. As oil extraction methods become more extreme and secretive, the surrounding neighborhoods – mostly low-income communities of color – become more at-risk.

The Dakota Access Pipeline wants to ship even more oil across tribal lands – As if the original Dakota Access Pipeline didn’t cause enough drama, its developer now wants to expand the crude oil pipeline, which is still pending a new federal environmental review.Energy Transfer Partners CEO Kelcy Warren spoke at an event Monday where he mentioned he’d be announcing an expansion of the 1,172-mile long pipeline soon, according to the Bismarck Tribune. The energy company had tried to gauge interest back in March, and, apparently, the interest is there. Energy Transfer Partners hinted at this expansion last week, too.Since 2017, the pipeline has moved 500,000 barrels of oil a day through four states, from the Bakken Formation in North Dakota to Illinois. A company spokesperson told the Bismarck Tribune the company is considering increasing that amount to 570,000 barrels of oil a day. In North Dakota, at least, the pipeline is permitted to carry up to 600,000 barrels.What’s most confusing, perhaps, is how this expansion will happen when the Army Corps has yet to issue a final court-mandated environmental review for the project. That review was supposed to be completed in April, but the federal agency now expects to complete it later this month.The Standing Rock and Cheyenne River Sioux tribes remain in litigation with the company and the Army Corps of Engineers over the unfinished environmental review. While the Army Corps blames their lack of cooperation for the delay, the court is also keeping the relevant tribes from getting too involved. The whole situation is a heated mess with more opponents on the offense down in Louisiana where they’re challenging the company’s Bayou Bridge Pipeline, which would ultimately connect to Dakota Access. This expansion may just exacerbate the already-testy situation.

ND oil production drops as operators ‘tap the brakes’ | Grand Forks Herald: – North Dakota oil production dropped nearly 2 percent in June as producers scaled back activity, primarily to keep natural gas flaring from exceeding state limits, the state’s top oil regulator said Thursday, Aug. 16. The state produced an average of nearly 1.23 million barrels of oil per day, a drop of more than 20,000 barrels per day from the May record of nearly 1.25 million barrels. “Industry’s tapping the brakes a little bit,” said Lynn Helms, director of the Department of Mineral Resources. Operators flared 388 million cubic feet of natural gas per day in June, falling short of the gas capture target set by the North Dakota Industrial Commission for the second month in a row. Helms said operators voluntarily restricted oil production in June in order to stay in compliance with the gas capture policy, which calls for companies to capture 85 percent of Bakken natural gas. Natural gas production decreased about 1 percent in June to an average of 2.3 billion cubic feet per day, according to the preliminary figures. Operators captured 83 percent of natural gas statewide in June and 84 percent of Bakken natural gas, Helms said.It continues to be rare for regulators to restrict oil production for companies that fall below the gas capture target. Eleven operators captured less than 85 percent of Bakken natural gas in April and nine fell below the target in May, according to the Department of Mineral Resources. No oil production restrictions were imposed for April or May, said department spokeswoman Katie Haarsager. June flaring figures are still being analyzed. The gas capture target is set to increase to 88 percent in November. Helms said operators are concerned about reaching that goal, but they’ll get some relief with two gas plants scheduled to come online later this year. Currently, natural gas production exceeds processing capacity, but six new plants or expansion projects are under construction or in development.

DUCs in the Lower 48 still growing – The number of DUCs, drilled but uncompleted wells, in the Lower 48 U.S. states seven most prolific plays/basins rose by 165 from June to July, the Energy Information Administration reported. With the added 165 DUCs, a total of 8,033 drilled, but uncompleted wells were on the books as of July 31, up from 7,868 in June. The Permian Basin by far added the most DUCs from June to July, 167, more than five times the number added by the Eagle Ford Shale play, which added the second-most DUCs. The Permian’s total DUC count rose to 3,470 in July, from 3,303 in June, Kallanish Energy reports. The Eagle Ford added 32 DUCS from June to July, bring its total to 1,512, from 1,480, EIA reported. The Anadarko and Bakken were the other two plays/basins that added DUCS, seven and four, respectively, bringing their total DUC count to 923 and 760, respectively. The Niobrara saw the most DUCs converted to producing wells, as 40 wells were turned, bringing its DUC count to 432, from 472. Appalachia, which includes the Marcellus and Utica Shale plays, turned five DUCs to production, bring down its total remaining DUC number to 754. The Haynesville Shale was the lone play/basin that saw no change in DUCs from June to July, staying steady at 182.

US shale growth will offset global production problems over the coming months, analysts say — A sustained upswing in U.S. shale growth is likely to offset global production problems over the coming months, energy analysts told CNBC on Wednesday.The mood music in the energy market has been heavily influenced by a flurry of demand-side developments of late, with investors continuing to monitor an escalating trade war between the U.S. and China, the financial crisis in Turkey and a resurgent U.S. dollar.Yet, industry analysts point out the U.S. shale boom is perhaps the most notable supply consideration not currently receiving the attention it deserves.”The explosion in U.S. tight oil production has long been the dominant supply catalyst within the energy complex but now finds itself at the tail end of concerns. Even so, its ascent continues apace,” Stephen Brennock, oil analyst at PVM Oil Associates, said in a research note published Wednesday. On Tuesday, the American Petroleum Institute (API) reported U.S. crude stocks rose by almost 4 million barrels per day in the week to August 10 – climbing to levels of 410.8 million barrels.Alongside a weakening global economic outlook, the API report appeared to weigh on oil prices on Wednesday afternoon, with international benchmark Brent crude trading at around $71.97 – down almost 0.7 percent. Meanwhile, U.S. West Texas Intermediate (WTI) stood at $66.38, off nearly 1 percent.”U.S. shale doom-mongers should not get ahead of themselves. They ought to remember that the U.S. shale patch is in better financial shape than ever … When it comes to U.S. shale, it is still very much a case of the only way is up,” Brennock said.

Rule Change Cuts Demand for Canadian Oil | Rigzone — As if pipeline bottlenecks weren’t enough, Canadian heavy oil producers are facing a new barrier to marketing their crude. New rules limiting the amount of sulfur allowed in shipping fuel is expected to cut demand for both high-sulfur fuel oil and the sour crude that yields it. In Canada, that could extend — or worsen — the biggest price slump in nearly five years. As surging production runs up against limited pipeline space, Western Canada Select’s discount to West Texas Intermediate widened to more than $31 a barrel this month from an average of about $13 a barrel last year, data compiled by Bloomberg show. The bigger discount is needed to incentivize shipping by rail, which costs more, Kevin Birn, a director on the North American crude oil markets team at IHS Markit, said in a phone interview. While the pipeline bottleneck is expected to ease up next year, a new International Maritime Organization rule that goes into effect in 2020 will keep heavy crude at a discount of $31-$33 a barrel against WTI, according to a July report by the Canadian Energy Research Institute, or CERI. “We think you get a double whammy effect” in 2020, he said. “You have prices set by rail and, compounding that, is the IMO” rule. Under the new rules, ocean-going ships worldwide will either have to install expensive, sulfur-removing scrubbers or use a fuel that has 86 percent less sulfur. The resulting increase in demand for lighter crude will push more crude toward the complex North American refineries that currently turn heavy Canadian oil into higher-value fuels such as gasoline and diesel, putting downward pressure on heavy crude prices, according to CERI. The rule change will come just as Canadian producers should be getting some relief in the form of greater pipeline access to U.S. and international markets. Enbridge Inc.’s expanded Line 3, is schedule to start operating in late 2019, delivering heavy oil from Alberta to Wisconsin. The C$9.3 billion ($7.1 billion) expansion of the Trans Mountain oil pipeline from Alberta to the British Columbia coast is scheduled to start about a year later and TransCanada Corp.’s Keystone XL pipeline awaits a final investment decision but could start operating early in the next decade.

Global Oilfield Service Sector to Hit Pre-Downturn Market Levels by 2024 – Rystad Energy announced Friday that it expects the global oilfield service sector to be back at pre-downturn market levels by 2024.The independent energy research and business intelligence company said shale will make up 23 percent of the total service market in 2024, compared to 19 percent in 2014.“Offshore is losing market share due to the sanctioning draught in 2015-2017, which is keeping greenfield spending at lower levels going forward,” Rystad said in a statement published on its website. “In terms of service markets, well services and commodities, subsea and MMO will surpass 2014 levels in 2024, but drilling contractors and EPCI will not due to continued pressure on service prices, downsizing and efficiency gains in the value chain,” the statement added.Earlier this year, a report from BMI Research outlined that oilfield services companies around the globe would face stronger demand for their services this year.“As some of the industry’s most vulnerable companies to the fall in crude prices, rising commodity prices and strengthening demand for onshore services is reviving this sector after a three-year contraction,” BMI analysts said in a statement sent to Rigzone back in February.“Having retired or pulled back from a number of segments since 2014, we expect OFS [oilfield services] firms will redeploy assets into the field this year as investment activity begins to recover,” the analysts added.In the report, BMI highlighted that a rise in crude prices had boosted revenues at the top global OFS companies.“At Schlumberger and Halliburton, Q4 17 revenue rose by 15.1 percent year-on-year, 47.7 percent year-on-year, respectively,” the analysts stated. Last month, Rystad revealed that oil majors are “on pace” to approve over $37 billion in projects during the calendar year. The company said over 30 percent ($12 billion) of these had already been approved during the second quarter.

The One Oil Industry That Isn’t Under Threat — Peak oil demand might be near, but the consumption of oil for plastics will keep demand elevated for decades. Indeed, the IEA has said that plastics and other petrochemicals are the only sector in which oil consumption could continue to grow well into the 2030s. Rising plastic consumption is driven by population growth, higher median incomes and urbanization. Plastic production and consumption has absolutely skyrocketed over the last two decades and the growth in emerging economies such as China and India will ensure that consumption continues on its steep upward trajectory.While there are multiple feedstocks for plastics, solvents and other derivatives, the two main feedstocks are ethane and naptha, which come from natural gas and crude oil.Oil demand in the transportation sector is expected to peak, and while there is a great deal of disagreement over when we might arrive at that date, many forecasts converge at around the 2030s as the most likely period. But long before then, oil demand for transportation will begin to slow as more and more electric vehicles cut into the market share of the internal combustion engine.With oil demand in transit slowing, petrochemicals take on a larger role. Over the next two decades, petrochemicals could account for the largest portion of oil demand growth, and by 2035, petrochemicals will “account for almost all growth” by 2035, according to a new report from Wood Mackenzie. Surging petrochemical production and consumption largely comes down to plastics. To be sure, the ghastly levels of plastic in the world’s oceans and waterways have sparked a nascent movement to ban plastic, at least in some form. Starbucks made headlines when it recently announced plans to phase out plastic straws by 2020. In their place, Starbucks will use a recyclable strawless lid and alternative materials for straws. The company also said it would spend $10 million to develop compostable cups.

UK government drops fracking question from public attitudes tracker — The government has stopped asking the British public whether they are for or against fracking for shale gas just weeks before the first fracking operation in seven years is due to start. The number of people against extracting shale gas has outweighed those in favour since 2015, and the latest polling by officials found 32% opposed with just 18% in support. Now the government, which backs fracking and recently relaxed planning rules to help the shale industry, has temporarily suspended that line of questioning. “This is scandalous as the government knows full well that there is overwhelming public opposition to fracking,” said Rebecca Long-Bailey, Labour’s shadow business secretary. Fracking, or hydraulic fracturing, is a way of extracting natural gas from shale rock formations that are often deep underground. The technology has transformed the US energy landscape in the last decade, owing to the combination of high-volume fracking – 1.5m gallons of water per well, on average – and the relatively modern ability to drill horizontally into shale after a vertical well has been drilled. Tony Bosworth, a campaigner at Friends of the Earth, said: “Perhaps having recently tried to change planning rules so that fracking companies could drill more easily, they were just scared of a record bad survey result for them this time, so have stopped even asking anymore.” The question was dropped from the latest update of the four-year-old public attitudes tracker run by the Department of Business, Energy and Industrial Strategy.

Russia loses bulk of WTO challenge to EU gas pipeline rules – (Reuters) – Russia largely failed in its bid to overturn the European Union’s gas market rules in a World Trade Organization ruling published on Friday. Russia launched the dispute in 2014, claiming that the EU’s “Third Energy Package” and the EU’s energy policy overall unfairly restricted and discriminated against Russia’s gas export monopoly Gazprom (GAZP.MM). Russia argued that the EU broke WTO rules by requiring the “unbundling” of gas transmission assets and production and supply assets, which effectively stopped Gazprom – long the major supplier of gas to Europe – from owning the pipelines through which it sent gas to the European market. Russia said the EU had unfairly discriminated in favor of liquefied natural gas and upstream pipeline operators by exempting them from those unbundling requirements. The panel of three WTO adjudicators ruled against Russia on those points. However, they upheld Russia’s complaint about an unbundling exemption for Germany’s OPAL pipeline, granted on condition that Gazprom supplied no more than 50 percent of the gas in the pipeline. The 50 percent cap could only be exceeded if 3 billion cubic meters of gas was released annually at a fixed price to competing suppliers on the Czech market. The WTO panel also agreed that Croatia, Hungary and Lithuania had discriminated against Russia by requiring a security of energy supply assessment for foreign, but not domestic, pipeline operators. The European Commission called the ruling an important positive outcome that secured the core elements of the Third Energy Package, a 2009 reform that sought to integrate the EU’s energy market while increasing competition. Russia’s Economy Ministry said the parts of the ruling that went in its favor would help to improve access for Russian gas on the European market, and to level the playing field for pipeline service providers.

Russian oil industry would weather U.S. ‘bill from hell – (Reuters) – Stiff new U.S. sanctions against Russia would only have a limited impact on its oil industry because it has drastically reduced its reliance on Western funding and foreign partnerships and is lessening its dependence on imported technology. Western sanctions imposed in 2014 over Russia’s annexation of Crimea have already made it extremely hard for many state oil firms such as Rosneft to borrow abroad or use Western technology to develop shale, offshore and Arctic deposits. While those measures have slowed down a number of challenging oil projects, they have done little to halt the Russian industry’s growth with production near a record high of 11.2 million barrels per day in July – and set to climb further. Since 2014, the Russian oil industry has effectively halted borrowing from Western institutions, instead relying on its own cash flow and lending from state-owned banks while developing technology to replace services once supplied by Western firms. Analysts say this is partly why Russian oil stocks have been relatively unscathed since U.S. senators introduced legislation to impose new sanctions on Russia over its interference in U.S. elections and its activities in Syria and Ukraine. The measures introduced on Aug. 2, dubbed by the senators as the “bill from hell”, include potential curbs on the operations of state-owned Russian banks, restrictions on holding Russian sovereign debt as well as measures against Western involvement in Russian oil and gas projects. While the ruble has fallen more than 10 percent and Russian banking stocks have slumped 20 percent since the legislation was introduced, shares in Russian oil firms have climbed 2 percent, leaving them 27 percent higher so far in 2018 The prospects for the latest U.S. sanctions bill are not immediately clear. It would have to pass both the Senate and House of Representatives and then be signed into law by President Donald Trump.

Landmark Caspian Sea oil and gas agreement signed by five nations — Iran and four ex-Soviet states, including Russia, agreed in principle on Sunday how to divide up the potentially huge oil and gas resources of the Caspian Sea, paving way for more energy exploration and pipeline projects. However, the delimitation of the seabed – which has caused most disputes – will require additional agreements between the nations bordering the sea, Iranian president Hassan Rouhani said. For almost three decades, the five coastal states – Russia, Iran, Kazakhstan, Turkmenistan and Azerbaijan – have argued over how to divide the world’s biggest enclosed body of water. And while some countries have pressed ahead with large offshore projects such as the Kashagan oil field off Kazakhstan’s coast, disagreement over the sea’s legal status has prevented some other ideas from being implemented. One of those is a pipeline across the Caspian which could ship natural gas from Turkmenistan to Azerbaijan and then further to Europe, allowing it to compete with Russia in the Western markets. Some littoral states have also disputed the ownership of several oil and gas fields, which delayed their development. “We have established 15-mile-wide (24km) territorial waters whose borders become state borders,” Kazakhstan president Nursultan Nazarbayev told a briefing after signing the Caspian convention. “Adjacent to the territorial waters are 10 miles of fishing water where each state has exclusive fishing rights,” he said.

Venezuela’s PDVSA To Start Using ‘El Petro’ Next Week – Venezuela’s state-owned oil company PDVSA will start using the local cryptocurrency El Petro for all its transactions on August 20, President Nicolas Maduro said, as quoted by Sputnik. The president did not mention whether PDVSA’s business partners agreed with the change.Yet the shift to a cryptocurrency in all of PDVSA’s business dealings is only part of a much bigger monetary overhaul. From August 20, the petro will begin to be used in parallel with the national currency the bolivar, and its prices will be pegged to that of the bolivar. Maduro said that the central bank will start issuing daily exchange rates for the two as well. Last December, Maduro shocked analysts who follow both the country’s flirtations with default and the cryptocurrency community by announcing that Venezuela would launch the petro cryptocurrency, backed by oil, diamonds, and gold reserves, to help the country to “advance in issues of monetary sovereignty, to make financial transactions and overcome the financial blockade.”The cryptocurrency was launched in February this year despite opposition from parliament. The digital currency will be backed by Venezuela’s oil and gold reserves. During the presale period alone, according to Maduro, the petro, which has already been sanctioned by Washington, generated US$6 billion in proceeds.The Venezuelan economy, however, has continued to deteriorate with thousands of people leaving for neighboring Colombia and Ecuador every day, prompting the Ecuadorian authorities to declare a state of emergency in several provinces. Meanwhile, Caracas has decided to knock off five zeroes from the bolivar as hyperinflation races ahead. How this will help matters remains unclear, but there is precious little else the government could do. Maduro, however, said during the presentation of the monetary reform that thanks to the addition of the petro to the national currency and the other changes this will entail, Venezuela will recover by 2020 as “a new economic model” is developed.

Marked for demolition? Ugandans on pipeline route fear land loss – Ugandan farmer James Mubona, 73, looked pensive as he sat in a blue plastic chair under a mango tree next to three of his four wives, one breastfeeding a five-month-old baby, contemplating the imminent loss of his 22-acre farm to an oil pipeline. The government is set to take about half of the land, which feeds Mubona’s 20 children and numerous grandchildren, to build the world’s longest electrically heated oil pipeline from northwest Uganda to Tanzania’s Tanga port on the Indian Ocean. “I am worried because I don’t know where to go when this land is taken,” Mubona told the Thomson Reuters Foundation from Kyakatemba village in Hoima District, a poor region along Uganda’s western border with the Democratic Republic of Congo. “When the pipeline takes a bigger portion of your land and you remain with a small portion, what do you do with that small portion?” Uganda discovered crude reserves estimated by government geologists at 6.5 billion barrels in the Albertine rift basin more than 10 years ago. The east African country aims to refine crude oil domestically and export some via a 1,445-km (900-mile) pipeline through neighboring Tanzania by 2020. An energy ministry official told Mubona that a chunk of his land will be used to run a 30-metre wide pipeline, road and power line from the refinery to the sea. Uganda signed an agreement in April with a consortium, including a subsidiary of General Electric, to build and operate a 60,000-barrel-a-day refinery that will cost up to $4 billion, the president’s office said. Yusuf Masaba, a spokesman for Uganda’s energy ministry, said the entire pipeline route had been mapped out and plans to compensate and resettle people were at an advanced stage. “Once the government valuer is done with valuation, then compensation will be done. I cannot say when they will be compensated,” Masaba told the Thomson Reuters Foundation.

BP offloads last two stranded oil cargoes to Shandong refiner – sources (Reuters) – Oil major BP (BP.L) on Tuesday offloaded about 1 million barrels of Angolan crude from supertanker ‘Olympic Light’ to an independent Chinese refiner after holding the oil at sea for about three months, people with knowledge of the discharge said on Wednesday. The oil had been aboard one of four supertankers held up or delayed off China’s east coast near Shandong since as long ago as April, unable to discharge BP’s oil due to slowing buying from private refiners in the world’s second-biggest economy. All four have delayed cargoes, totalling about 4 million barrels, have now been offloaded to Shandong Qingyuan Group, one of China’s largest independently run lubricant producers, according to sources.. Shippers and oil traders said it was not unusual for producers like BP to ship cargoes before finding a buyer, but having cargoes orphaned for several months was uncommon. It wasn’t immediately clear who will pay the bill for the months’ demurrage – charges paid by a vessel’s charter to its owners for delayed operations – which shipping agents have estimated costs roughly $30,000 a day for a supertanker. The ‘Olympic Light’ discharged its cargo at Qingdao port, the people said. Last Sunday, BP discharged a similar-sized cargo at Rizhao port from another supertanker, ‘Olympic Luck’, to the same refiner, the people said, after holding the oil at sea for about one and half months. Qingyuan, which operates a 104,000 barrels per day refinery, is a regular customer of BP, which has expanded its crude oil marketing to Chinese independent refiners since 2015 after China opened crude oil imports to nearly 40 local plants.

UAE oil giant making ‘good progress’ with expansion plans in Saudi Arabia, executive says –The United Arab Emirates’ biggest fuel retailer promised investors on Monday that there is “a lot more to come” regarding the firm’s expansion plans in Saudi Arabia.John Carey, ADNOC Distribution’s deputy chief executive told CNBC’s “Capital Connection” that the company is making good progress on its plans to expand in the region.”Our expansion plans: Firstly, across the UAE … we have made very, very good progress on that. We have got sites that we will be opening in the coming months across Dubai which gives us a stronger platform for our customers.””And, as you said, in Saudi Arabia, we have gained our license and we are in talks with a number of partners and people in Saudi Arabia to ensure we develop that market in a strong, responsible way as well. So good progress but a lot more to come,” he added.

Eni Plans More Offshore, Onshore Egypt Drilling –Eni has further strengthened its position in Egypt by securing the “Nour” offshore exploration license in the East Nile Delta Basin of the Mediterranean Sea, the Italy-based company reported Tuesday. Eni said that it will drill an exploration well in the concession, located approximately 50 kilometers offshore in water depths ranging from 50 to 400 meters, during the second half of this year. The company also noted that it will operate Nour through its IEOC subsidiary and in conjunction with Egyptian Natural Gas Holding Co. (EGAS). Eni and Tharwa Petroleum Co. hold 85-percent and 15-percent interests, respectively, in the 739-square-kilometer Nour license. In a separate announcement Tuesday, Eni also stated that Egyptian authorities have granted lease extensions for additional offshore and onshore assets. Offshore, the company reported that it has secured a new Nile Delta Concession Agreement that allows a 10-year extension of the Abu Madi West Development Lease, which includes the prolific “Great Nooros Area.” Eni noted that its Nooros field is located in Great Nooros and added that the lease extension will enable it to conduct further exploration activities in another asset in the lease: the onshore El Qar’a gas discovery. “The Great Nooros Area’s asset lease extension strengthens Eni’s gas portfolio while confirming the success of Eni’s strategy of near field exploration that has revitalized production in the Nile Delta area, where the Nooros field is currently producing 32 million cubic meters of gas per day,” stated Eni, which holds a 75-percent stake in the concession. BP owns the remaining 25 percent stake, and Petrobel – a joint venture of IEOC and Egyptian General Petroleum Corp. (EGPC) – operate “Nile Delta.” Egyptian authorities have also granted a five-year extension of the onshore Ras Qattara Concession Agreement and a development lease in the country’s Western Desert basin, Eni reported. The company stated that the extension will facilitate a new drilling campaign in the Zarif and Faras fields.

Sanctions closing in, Iran to attend September OPEC monitoring committee to protest oil quota reallocation – Iran will send its oil minister, Bijan Zanganeh, to a September meeting of the monitoring committee overseeing OPEC’s supply accord with Russia and other allies, in another bid to preserve the sanctions-hit country’s crude market share. The Joint Ministerial Monitoring Committee is scheduled to meet September 23 in Algeria, just six weeks before US sanctions that could shut in 1 million b/d or more of Iran’s crude sales are scheduled to take effect November 5. Chaired by Iran’s chief geopolitical rival Saudi Arabia, the JMMC is tasked with assessing member compliance with production quotas in force since January 2017. But with OPEC and its partners agreeing in late June to a 1 million b/d output rise, Saudi energy minister Khalid al-Falih has said the committee will be responsible for reallocating those quotas, given some countries’ inability to pump more. That has drawn fierce opposition from Zanganeh, who maintains that the deal does not allow countries to produce beyond their individual quotas. Besides Falih, the committee comprises ministers from Russia, Kuwait, Venezuela, Algeria and Oman. Zanganeh is not a member, though ministers from the 24 participating countries in the OPEC/non-OPEC deal are welcome to observe its proceedings. His attendance at the September meeting was confirmed to S&P Global Platts by an Iranian oil ministry official who declined to comment further. Since the output increase was announced, the minister has written several strongly worded letters to his OPEC counterparts denouncing their production boosts and accusing them of violating OPEC statutes, which require the organization to act in the collective interest of all members.

Who Profits From Iran’s Oil Major Exodus? –Donald Trump’s decision to leave the Iran nuclear deal and slap sanctions on Teheran is the most significant energy development of 2018. The first round of Iran sanctions, in place since August 4th, targeting Iran’s automotive and metal sectors, has only added fuel to the increasingly dangerous geopolitical fire, as Teheran’s blocking the Hormuz Strait has become a fully imaginable prospect for the first time since the Iran-Iraq war ended in 1988. Understandably, media are buzzing with expert analysis regarding trade implications – spreads narrowing, crude flows changing and third-party actors using the Iran-U.S. conflict to their advantage – yet it would be also of interest to look at the upstream ramifications of the impending sanctions. By looking closely at five unfolding scenarios, one can get a fairly clear understanding of where things are headed if the implementation of sanctions goes ahead as currently expected – meaning no softening of bellicose rhetoric, no top-level meeting like the Trump-Kim Summit in Singapore and no significant pressure from European countries that had alleged to stick to their commitments under the JCPOA. Following the Iran Petroleum Contract (IPC) Summit in November 2015, 18 exploration blocks were appraised by international majors, ranging from Total to Russian companies like Gazprom Neft and Lukoil. Despite their apparent intention to keep Iranian projects intact, European companies seem to be on the retreat from Iran, however, since nature abhors a vacuum, as it seems their place will be quickly replaced by Russian and Chinese national oil companies.

U.S.-Iran Sanctions Give China Lead in Globe’s Top Gas Field — China National Petroleum Corp. is expected to take the lead on a $5 billion project to develop Iran’s share of the world’s biggest gas deposit, taking over from France’s Total SA, which halted operations after U.S. President Donald Trump reimposed sanctions on the Islamic Republic. State-owned CNPC, which joined a consortium with Total and Iran’s Petropars Ltd. in 2016 to develop Phase 11 of the South Pars Gas field, is set to increase its stake in the project from the current 30 percent. Total had originally agreed to take a 50.1 percent interest. CNPC will become the lead operating partner, the state-run Islamic Republic News Agency reported, citing Mohammad Mostafavi, National Iranian Oil Co.’s investments and business head. Terms of the contract haven’t yet officially changed, according to Shana, the Oil Ministry’s news service. Calls to CNPC went unanswered on Sunday. Total declined to comment. Total, which finalized its agreement with Iran in July 2017, had already spent some 40 million euros ($45.7 million) on the project when Trump announced in May that the U.S. would exit the 2015 international nuclear deal with Iran and reimpose sanctions on Tehran. The first round of U.S. sanctions was put back into place this week, with more to come in November, greatly complicating efforts by companies that rushed into the Islamic Republic after the nuclear accord was signed by Iran, the U.S. and five other countries plus the European Union. Scores of European companies, including Total, have withdrawn from the oil-rich Persian Gulf country since the U.S. reversal. Trump marked the return of sanctions with a tweet on Aug. 7: “Anyone doing business with Iran will NOT be doing business with the United States.” Iran, which holds the world’s largest natural-gas reserves, shares South Pars, also known as the North Dome field, with neighboring Qatar. Total had previously withdrawn from the field in 2009 because of sanctions. It planned initial investment of $1 billion for Phase 11, with the aim of eventually producing 2 billion cubic feet a day, or 400,000 barrels of oil equivalent including condensate, it said in July 2017. At the time, Total said the contract was for 20 years.

Iran Sanctions Fallout: China Takes Over French Share In Giant Iran Gas Project – When it comes to the Middle East, China has not been shy about its recent ambitions to expand its geopolitical influence in the Gulf region: Just last week we reported that the Chinese Ambassador to Syria, Qi Qianjin, shocked Middle East pundits and observers by indicating the Chinese military may fill the void left in the wake of the collapse of ISIS – and most regional armies – and directly assist the Syrian Army in an upcoming major offensive on jihadist-held Idlib province. And having staked a military claim in Syria, China was next set to expand its national interest in that other key regional nation which has been the source of so much consternation to its neighbors and world powers in recent months and which has emerged as a key source of crude oil exports to Beijing: Iran. It did so today when China’s state-owned energy giant, CNPC – the world’s third largest oil and gas company by revenue behind Saudi Aramco and the National Iranian Oil Company – finally took over the share in Iran’s multi-billion dollar South Pars gas project held by France’s Total, Iran’s official news agency Shana reported on Saturday. To many the move had been expected, with only the details set to be ironed out. Recall that back in May we wrote that CNPC – the world’s third largest oil and gas company by revenue behind Saudi Aramco and the National Iranian Oil Company – was set to take over a leading role held by Total in a huge gas project in Iran should the French energy giant decide to quit amid US sanctions against the Islamic Republic.That finally happened when the Chinese energy giant took advantage of Trump’s sanctions to step in the void left by the French major. As a reminder, Total signed a contract in 2017 to develop Phase II of South Pars field with an initial investment of $1 billion, marking the first major Western energy investment in the country after sanctions were lifted in 2016. South Pars has the world’s biggest natural gas reserves ever found in one place. And after then the French company said it would pull out unless it secured a U.S. sanctions waiver – which it was unable to do – in June, the deputy head of the National Iranian Oil Company, Gholamreza Manouchehri, said that CNPC would take over if Total were to walk away.

Will Myanmar Become A Conduit For Iranian Crude Into China? – On June 1, sometime between the US withdrawal from the JCPOA in early May, and its demand in late June that Asian buyers fully halt Iranian oil purchases, PetroChina snuck in a shipment of Iranian crude through Myanmar to its Yunnan Petrochemical refinery in southern China. On any other route, this would have been just another Iranian oil shipment. But using the Myanmar-China oil and gas pipeline brings new complications. That’s because the pipeline has a new avatar – it is now a part of China’s Belt and Road Initiative, along with other large infrastructure projects that were not originally a part of BRI, but were included later to boost the profile of the program. Sending Iranian crude through an oil pipeline with the “Belt and Road” label removes any doubts of whether BRI’s projects have political motives or not. For critics of BRI, it adds fodder to the narrative that the infrastructure plan is a tool for China to undercut the influence of the US. BRI already has a serious public relations problem and is viewed with suspicion, sometimes for good reason. Earlier this week, the renewal of US secondary sanctions on Iran faced strong opposition from the remaining JCPOA signatories. China has made it clear it will continue to import Iranian barrels, and using a BRI project to do so will give the US ammunition to criticize BRI openly, potentially leaving the host country open to US reprisals. BRI has not been particularly polarizing so far, and its participants have included US allies. Oil and gas pipelines are magnets for controversy, however. From the Sumed pipeline in the Middle East to Nordstream 2 in Europe, there hasn’t been an international oil or gas pipeline that was devoid of geopolitics. Myanmar will be no different. The Panama-flagged Dore delivered its cargo of Iranian crudes at Maday Island on June 1, the only vessel to have shipped oil from Iran to Myanmar since the 13 million mt/year (260,000 b/d) Yunnan Petrochemical refinery in southern China started operations in August last year. . This was the first batch of Iranian Heavy crude processed by a PetroChina refinery, and is unlikely to be the last.

Slowdowns in China and India eat away at Asian oil demand (Reuters) – Oil demand from Asia’s biggest importers, China and India, is growing more slowly than expected, exposing weakness in two of the world’s largest economies and eroding a key pillar of global petroleum prices amid trade tensions. The two countries buy a combined 12 percent of the world’s oil, and their growth has helped drive the recovery in oil prices since 2016. Yet their shipped imports in July were about half a million barrels per day (bpd) below their Jaunary-June average of 12.4 million bpd, shipping data shows. That has dragged down demand growth in Asia, despite inflated purchases ahead of U.S. sanctions on Iran and increased imports from Japan and South Korea as they struggle with record-setting heat waves. Shipping data shows annualized growth in demand from Asia’s five largest oil importers – China, India, Japan, South Korea and Taiwan – fell from more than 3.5 percent in 2016 to around 2 percent so far this year. “Everything is weakening, but from a pretty elevated level,” said Jeff Brown, president of energy consultancy FGE. Traders expect growth to slow further as the Iran sanctions take hold, the trade spat between the United States and China escalates, and as Asia’s emerging markets show signs of cooling. “Any further escalation in the trade conflict between them is clearly an important downside risk and could lead to a further slowdown in oil demand growth for 2019, leading to a downward pressure on oil prices,” said Sushant Gupta, research director at energy consultancy Wood Mackenzie. Renewed U.S. sanctions against major oil exporter Iran, which from November will target the petroleum sector, are expected to disrupt the market. Iran’s oil exports peaked at almost 3 million bpd in May this year, but they have since fallen to around 2 million bpd as Asian buyers, including Japan, South Korea and India, began to shun its crude ahead of the sanctions.

OPEC Monthly Oil Market Report: Lowers 2019 oil demand growth forecast – According to OPEC’s Monthly Oil Market Report, released this Monday, Saudi Arabia lowered its oil production in July even as the kingdom has pledged to raise output significantly to make up for an expected drop in Iranian exports. Key highlights:

• Saudi Arabia pumped 10.288 mil bpd in July, down 200k bpd from June.

• 2019 oil demand growth lowered by 20k bpd to 1.4 million bpd.

• 2019 non-OPEC oil supply estimate revised up by 30k bpd to 2.13 million bpd.

• July output rose 41,000 bpd m/m to 32.32 million bpd.

• Sees further tightness in the diesel market, partly due to lack of refining investments.

Saudi Arabia cuts oil production in July despite OPEC agreement to hike output –OPEC’s oil production ticked higher in July, but cuts by top exporter Saudi Arabia weighed on the 15-member group’s output just one month after it agreed to start pumping more crude.The Saudis throttled back drilling last month after agreeing with OPEC, Russia and several other producers toput more barrels on the market in June. The kingdom is facing pressure from big oil consuming nations like China and India, as well as the Trump administration, to tamp down fuel costs ahead of the renewal of U.S. sanctions on Iran, OPEC’s third biggest producer.President Donald Trump is aiming to cut Iran’s oil exports to zero by November, a policy that threatens to leave the world short of oil and boost prices at the pump if OPEC and Russia cannot fill the gap. A group of two dozen oil-producing nations has been limiting its production since January 2017 in order to drain oversupply, but has scaled back that policy in light of the Iranian sanctions and output declines in places like Venezuela and Angola.”Compared to a year earlier, there has been an overall improvement in crude oil prices in 2018,” OPEC said in its monthly report. “At the same time, product prices have generally followed the upward trajectory of crude oil prices.”In another twist for the market, OPEC’s latest report shows a significant discrepancy between July production figures provided by Saudi Arabia and data compiled by independent sources. While the kingdom says it cut output by about 200,000 barrels per day, an average of estimates from several outside sources puts the drop at nearly 53,000 bpd. Saudi Arabia had telegraphed the drop prior to the release of the report. However, S&P Global Platts and the U.S. Energy Information Administration estimated the Saudis actually hiked outputto 10.6 million bpd in July, The Wall Street Journal reported last week. According to the Journal, the Saudis asked several sources whose estimates underpin the independent figure to make an adjustment for July, but Platts stuck by its analysis.

OPEC sees 33.40 mil b/d demand for its crude oil in H2 2018, but July output at 32.32 mil b/d – Platts – OPEC still has to show the market more crude oil barrels if it wants to avoid a supply squeeze later this year, the producer group’s own analysis shows. In its closely watched monthly oil market report, OPEC’s analysis arm forecast global demand for OPEC’s crude at 33.40 million b/d for both the third and fourth quarters of 2018. That is 1.08 million b/d more than the bloc’s July production level, as assessed by the independent secondary sources used by OPEC to track member output. But any market tightness will ease in 2019, OPEC forecast, as growth in non-OPEC supplies will far outpace the projected increase in global demand, dropping the so-called call on OPEC crude back down to 32.05 million b/d for the year. The report warned, however, that “if any unexpected supply outages should occur due to natural disasters/technical shortcomings and these coincide with any geopolitical supply disruption, it could bring the market into an imbalanced situation,” adding that industry investment had yet to recover to levels seen before the 2014 price crash. As for the US-China trade dispute, OPEC said its analysis of probable outcomes indicates that “tariffs under the most likely case will not have a significant impact on global GDP or oil demand growth in 2018 and 2019.” Still, OPEC nudged downward its forecasts of year-on-year oil demand growth for both 2018 and 2019, while raising its projections of year-on-year non-OPEC supply growth. World demand will average 98.83 million b/d in 2018, rising to 100.26 million b/d in 2019, OPEC said. Non-OPEC supply will average 59.62 million b/d in 2018 and 61.75 million b/d in 2019, with the US, Brazil and Canada contributing most of the growth. OECD commercial oil inventories stood at 2.822 billion barrels as of June, 33 million barrels below the five-year average but 251 million barrels above the January 2014 level, OPEC said. OPEC and 10 non-OPEC partners agreed on June 23 to boost output by 1 million b/d by reducing overcompliance with cuts that had been in place since January 2017. The move is intended to alleviate any shortages caused by the reimposition of US sanctions on Iran in November and Venezuela’s continuing collapse. OPEC produced 32.32 million b/d in July, according to secondary sources, up 40,000 b/d from June. Saudi Arabia, OPEC’s largest producer, has declared it would take on the bulk of the increase, but instead cut production by 50,000 b/d from June to 10.39 million b/d, secondary sources estimated. The kingdom self-reported an even larger drop of 200,000 b/d to 10.29 million b/d. Second-largest producer Iraq boosted its output 20,000 b/d to 4.56 million b/d, according to secondary sources, though it self-reported production of 4.46 million b/d, a 100,000 b/d increase from June.

Watch: All eyes on China’s ‘blue skies’ announcement; Chinese LPG buyers seen to keep reselling US-origin cargoes – (Platts video) As the US-China trade war continues, Chinese LPG buyers are expected to continue reselling their US-origin cargoes, while taking in barrels from elsewhere. This move is seen to push up prices for non-US LPG for prompt delivery in the coming weeks.The LNG industry also continues to assess the impact of a potential 25% Chinese tariff on US LNG imports. If imposed, the tariff could affect future Atlantic-Pacific trade flows, and provide a lift to near-term Asian LNG prices.Meanwhile, the steel and metals markets are waiting for an official announcement on whether China will suspend more steel capacity in the coming winter heating season. An analysis jointly published by S&P Global Platts and S&P Global Market Intelligenceoutlines the “2+42” cities that are likely to be affected. In petrochemicals, margins for paraxylene producers from CFR Japan naphtha hit a near two-year early this month and market participants expect the bull run to continue for another two weeks, until the September futures contract expires.

Frothy oil market turns increasingly flat: Kemp (Reuters) – Persistent hedge fund liquidation over the last four months has weighed heavily on the oil market, both spot prices and calendar spreads, ending the previous rally and putting the cyclical upswing into a prolonged pause.Hedge funds resumed their liquidation of bullish long positions in petroleum last week, after a two-week hiatus, according to the most recent regulatory and exchange data.Hedge funds and other money managers cut their net long position in the six most important petroleum futures and options contracts by another 30 million barrels in the week to Aug. 7.Bullish long positions were reduced by 32 million barrels to 1.021 billion, while bearish short ones were also trimmed by 2 million barrels to 108 million (https://tmsnrt.rs/2MGLCd9).Net long positions have been cut in 11 of the last 16 weeks, with a total reduction of 380 million barrels, or 27 percent, since April 24.As in previous weeks, liquidation was concentrated in crude, with net positions in Brent cut by 18 million barrels and in ICE and NYMEX WTI by 9 million barrels. Portfolio managers made only very minor changes to net length in U.S. gasoline (-1 million barrels), U.S. heating oil (-2 million barrels) and European gasoil (essentially unchanged). price

US dollar strength could soon become an ‘unbearable burden’ on the oil market, analyst says – The prospect of continued strength in the U.S. dollar over the coming months should constitute an even greater concern to bullish oil traders than an escalating trade war between the world’s two largest economies, an analyst told CNBC on Monday.Investors are currently seen weighing bullish factors that include potential supply disruptions to Iranian crude exports against more bearish indicators, such as broad greenback strength and a ramp-up in production byOPEC and its allied partners.”There are lots of variables in the oil market, the most important of which is Iran. If 1 million barrels per day or more of Iranian exports go AWOL, the current fragile supply-demand balance will be upended – potentially sending oil prices above the May peak,” Tamas Varga, senior analyst at PVM oil associates, said in a research note published Monday.”The most obvious thing that could change this bullish view is not the U.S.-China trade war, but the strong dollar that, if (it) lasts, will put (an) almost unbearable burden on consuming countries,” he added.International benchmark Brent crude traded at around $72.80 on Friday morning, little changed from the previous session, while U.S. West Texas Intermediate (WTI) stood at $67.43, down around 0.3 percent.Meanwhile, the U.S. dollar climbed to a 13-month high against a basket of six major currencies on Monday, amid renewed financial turmoil in Turkey. The greenback edged around 0.1 percent higher during early afternoon deals, trading at 96.460 against major peers. Typically, crude futures trade inversely to the greenback. A stronger dollar makes oil more expensive to much of the world, so oil prices tend to fall as the dollar rises.

Fuel markets confirm global growth slowdown: Kemp – (Reuters) – If the global economy starts to grow more slowly, the impact will show up first in the price of refined fuels such as road diesel, marine gasoil and jet fuel that play a central role in the freight transport system. Middle distillate fuels are principally burned in the high-powered engines used in trucks, railroads, ships, barges and aircraft to move freight around the world, as well as in factories, on farms and at mines and oilfields. Mid-distillates account for more than a third of the oil used around the world every day, and are the single-largest category of refined products, (“Statistical review of world energy“, BP, 2018).Distillate fuels are closely correlated with the global economic and trade cycle, and at the moment they confirm other indications the rate of growth is slowing.U.S. distillate stocks, which had been drawing down faster than usual during the first four months of 2018, have now been building faster than normal since late May (https://tmsnrt.rs/2vPGI7d).European gasoil futures prices, which had been in substantial backwardation, have shifted towards flat or even contango since the end of May, reflecting improved availability.Gasoil futures still command a hefty premium over crude for deliveries in 2019, but the premium has been eroding over the same time frame.In line with these trends, hedge funds and other money managers have become markedly less bullish on the outlook for distillate prices over the last three months. Hedge fund managers have cut their bullish positioning in U.S. heating oil by 29 million barrels (33 percent) and in European gasoil by 53 million barrels (33 percent) since late May.Over the same period, bullish positions in U.S. gasoline have been cut by 14 million barrels (12 percent), according to regulatory and exchange data. Distillate markets are sending the same signal as a range of other indicators: the rate of global output growth has decelerated in recent months after a very strong expansion in 2017.

Crude Oil Prices Settle Lower as OPEC Lowers Oil Demand Growth Outlook — WTI crude oil prices settled lower on Monday after OPEC revised lower its estimate for oil-demand growth next year and revealed Saudi Arabia had cut production last month. On the New York Mercantile Exchange crude futures for September delivery fell 43 cents settle at $67.20 a barrel, while on London’s Intercontinental Exchange, Brent fell 0.47% to trade at $72.47 barrel. In its monthly report, OPEC lowered its estimate for global oil demand growth for 2019 by 20,000 barrels per day (bpd) to 1.4 million bpd, while non-OPEC oil supply in 2019 was revised higher by 30,000 bpd to 2.13 million bpd. OPEC production for July (from secondary sources) rose 41,000 bpd to 32.32 million bpd, led by increases in Nigeria, Kuwait, Iraq and UAE. This was partially offset, however, by decreases in Saudi Arabia, Iran, Libya and Venezuela. The rise in OPEC production comes just a few months after the oil cartel agreed to ease curbs on output restrictions, which had been put in place by the production-cut pact in November 2016 to rid excess crude supplies from the market. OPEC agreed in June to raise output at a nominal increase of 1 million barrels a day (bpd) in an effort to stabilize oil prices and ease the threat of a global supply deficit amid expectations for a drop in Iranian exports. The somewhat bearish OPEC monthly report on global oil demand growth paled in comparison to the International Energy Agency’s report. The International Energy Agency (IEA) on Friday raised its estimate for world oil demand growth next year to 1.5 million barrels a day (bpd) from 1.4 million bpd. The bearish turn in U.S. oil prices, which posted their second-straight loss in a week last week, showed no sign of abating as traders increased their bearish bets on oil prices, data showed. CFTC COT data showed money managers reduced their net long positions in WTI crude futures to 378,578 lots from 386,764 lots for the week ended Aug. 7.

Oil Drops on Strong Dollar, Turbulence in Turkey — Oil dropped as economic turbulence in Turkey and the strengthening greenback heightened concerns about global oil demand. Futures dipped 0.6 percent in New York on Monday, paring some of its losses as the commodity tracked choppy movements in the dollar during the session. Yet, the U.S. currency maintained its advance, reducing the appeal of raw materials as an investment. In Turkey, an economy that’s larger than the Netherlands or Taiwan, bonds and stocks dropped along with the lira as investor confidence plunged. Meanwhile, OPEC raised production in July and stockpiles at the key Cushing, Oklahoma supply hub in the U.S. are seen rising. “It’s a strong dollar situation. That reverse correlation is putting pressure on the barrel for starters,” said Bob Yawger, director of futures division at Mizuho Securities USA LLC. “Perceptions about emerging-market demand are also going to be negative for the energy complex.” The U.S. benchmark crude has declined more than 2 percent this month as international trade disputes threatened to deflate energy demand growth. Turkey’s central bank pledged to “take all necessary measures” to bolster the financial system, lowering the amount commercial lenders must park at the regulator and easing rules governing lira and foreign-currency liquidity. West Texas Intermediate crude for September delivery slid 43 cents to settle at $67.20 a barrel on the New York Mercantile Exchange. Total volume traded was about 14 percent below the 100-day average. Brent for October settlement declined 20 cents to end the session at $72.61 a barrel on the London-based ICE Futures Europe exchange, and traded at a $6.04 premium to WTI for the same month. The Bloomberg Dollar Spot Index rose for a third straight session, advancing as much as 0.3 percent on Monday. OPEC’s output averaged 32.32 million barrels a day in July, up 41,000 barrels a day from June, the cartel said in a report citing secondary source figures. The group also lifted forecasts for supply from rivals for the rest of the year. At the same time, in the U.S., the Energy Information Administration sees output at major shale plays rising to 7.52 million barrels a day in September. Meanwhile, Cushing crude stockpiles are seen increasing 500,000 barrels last week, according to a Bloomberg forecast.

Oil prices edge up as Saudi cuts output, but looming demand slowdown drags – Oil prices jumped on Tuesday after Saudi Arabia said it cut production, adding to concerns over global supply as U.S. sanctions against Iran curb its exports.However, the prospect of a slowdown in global economic growth kept a lid on markets.Global benchmark Brent crude was up 94 cents, or 1.3 percent, at $73.55 by 8:57 a.m. (1257 GMT), after hitting a high of $73.75. U.S. light crude was up 91 cents, or 1.4 percent, at $68.11.”Oil prices are on the rebound as bulls take heart from an unexpected dip in Saudi oil output and the lingering Iranian wildcard,” said Stephen Brennock, analyst at London brokerage PVM Oil Associates.Saudi Arabia told the Organization of the Petroleum Exporting Countries that it had reduced crude output by 200,000 barrels per day (bpd) to 10.29 million bpd in July.OPEC itself, using secondary sources, estimated in a report published on Monday that Saudi production was at a slightly higher level of 10.39 million bpd last month.But both figures suggest the kingdom, de facto leader of OPEC, is keen to avoid a repeat of a global glut that has depressed prices over the past few years.”We do not think that Saudi Arabia is interested in seeing Brent crude below $70 a barrel,” said SEB commodities analyst Bjarne Schieldrop.Saudi Arabia is OPEC’s biggest producer and the only major exporter that can easily adjust output to balance global supply.The lower Saudi output comes at a time of expected export declines from Iran as the United States re-imposes sanctions on Tehran’s oil industry.But output from non-OPEC countries, particularly the United States, is rising quickly, limiting demand for OPEC oil.OPEC expects oil supply by countries outside the cartel to increase by 2.13 million bpd next year, 30,000 bpd more than forecast last month, with much of the increase coming from new U.S. shale production. U.S. oil output from seven major shale basins is expected to rise 93,000 bpd in September to 7.52 million bpd, the U.S. Energy Information Administration (EIA) said in a monthly report on Monday.

Oil Prices Fall Despite Supply Fears — Oil prices rebounded in early trading on Tuesday before falling in the afternoon as economic uncertainty stemming from Turkey’s currency crisis dampened bullishness. Saudi Arabia’s oil production reduction in July and rising fears of Iranian outages weren’t enough to keep oil prices in the green . Oil prices fell on Monday after Turkey’s currency crashed, raising fears of emerging market financial contagion. Turkey’s lira has declined 30 percent in the past week alone. China’s yuan dipped again. Argentina’s central bank just hiked interest rates by 5 percentage points. India’s rupee fell to a historic low against the dollar. Analysts don’t see an emerging market crisis as necessarily likely, but it isn’t impossible either. An emerging market slowdown raises the risk of much slower-than-expected oil demand. The first wave of megaprojects since the oil market downturn in 2014 is on the verge of receiving a greenlight. According to Wood Mackenzie, the oil and gas industry is set to move forward with $300 billion of new spending in 2019 and 2020, more than the combined total of the three-year period between 2015 and 2017. The aggressive spend seems to run in contrast to the promise from industry executives to maintain capital discipline. Oil executives seem to think that they can return to megaprojects while avoiding the cost blowouts of the past, but that remains to be seen. “Oil companies have improved their delivery in small projects, but can they do it with bigger ones?” Angus Rodger, a WoodMac analyst, told Bloomberg. “There’s massive upside on the table if they can show sustained success with capital discipline as oil prices rise. They could deliver the best returns in a decade.” Shell says that the economics of drilling have “flipped” back in favor of deepwater drilling after several years of low investment. Shell says that dramatic cost declines mean that deepwater drilling can breakeven at $30 per barrel, and offshore offers a better return than onshore shale. “It’s great to have both in the portfolio and we are growing our shales business… but in terms of sheer cash flow delivery, our deepwater has significantly more cash flow potential,” Shell’s head of exploration and production Andy Brown told the FT.

Oil prices inch up on Saudi output cut, but slowing economic growth drags (Reuters) – Oil prices edged lower on Tuesday, weighed down by a strengthening U.S. dollar as investors remained concerned about the financial crisis in Turkey. Brent crude LCOc1 dipped 15 cents to settle at $72.46 a barrel, while U.S. West Texas Intermediate (WTI) crude CLc1 futures fell 16 cents to close at $67.04 a barrel. Futures extended losses in post-settlement trade after data from industry group the American Petroleum Institute showed that U.S. crude stocks unexpectedly rose by 3.7 million barrels last week, compared with analysts’ expectations for a decrease of 2.5 million barrels. Earlier in the session, oil prices rose, supported by gains in equity markets, but pared gains at mid-day as the U.S. dollar index touched its highest since late June 2017. A stronger dollar makes greenback-denominated oil more expensive for holders of other currencies. “Usually when the dollar starts making highs, it’s probably a sign that we’re still concerned about the Turkish situation,” said Phil Flynn, analyst at Price Futures Group in Chicago. “There’s still a bit of nervousness on the global stage.” U.S. stock indexes broadly gained and Turkey’s lira recovered, a day after crashing to an all-time low against the dollar, feeding worries that the country’s crisis might spread to other emerging markets. TRYTOM=D3. “The equities and the U.S. dollar are keying primarily off of the unfolding saga in Turkey and although the lira has posted a significant rebound today, the standoff between Turkey and the U.S. is showing no sign of progress,” Jim Ritterbusch, president of Ritterbusch and Associates, said in a note. “Consequently, worries over contagion are apt to increase in the process of reducing risk appetite and renewing downside pressures on oil pricing.” Oil’s losses were capped by concerns over lower global crude supply from top producers. The Organization of the Petroleum Exporting Countries said on Monday that Saudi Arabia had cut production. Export declines from Iran also are expected as Washington re-imposes sanctions.

WTI Dives Back Below $67 After Surprise Crude Build – WTI continued in its rangebound mode (slightly weaker into tonight’s print) but slumped back below $67 tonight after API reported a surprise crude build. API

• Crude +3.66mm (-2.5mm exp)
• Cushing +1.64mm (+500k exp)
• Gasoline _1/56mm
• Distillates +1.94mm

The last few weeks have seen crude inventories flip-flopping between draws and builds with a big surprise gasoline build last week. And API continued the trend with a surprise crude build (and surprise Cushing build)… “Nobody wants to go home long” when forecasts are pointing to a bearish inventory report, said Bob Yawger, director of futures division at Mizuho Securities USA LLC. WTI ended the day unchanged, fading into the print, but spiked lower as API reported the surprise crude build…

Weekly Petroleum Report — EIA; WTI Plunges — August 15, 2018 — Link here.

• US crude oil inventories: increased by a whopping 6.8 million bbls
• WTI after the report: wow, down about 3.4%; falls $2.30; falls below the $66 support level; trading at $64.76;
• bad news for US shale operators: it is interesting to note that rig count has fallen steadily in the Bakken for the past couple of weeks; indicator that terminals/refineries were “full”?
• really, really bad news for Saudi; needs $70 oil is what they say; in fact, they probably need $80 oil
• US refinery operating capacity: 98.1% — wow
• think about that: refineries are working at 98.1% capacity and yet, inventories rose by a whopping 6.8 million bbls
• there seems to be a disconnect between what the EIA is telling us about US production (EIA says US production is falling) and what the producers are seeing
• imports? up a huge amount — up by over one million bbls — total imports right at 9.0 million bbls — I haven’t seen an increase this big in quite some time; what gives?
• I tracked inventories for about a year when producers / Saudi Arabia said they were going to cut back on supply — at that time, they started at 450 million bbls in US crude oil inventory and reduced it towards 400 million bbls; today it stands at 414.2 million bbls
• the old threshold was 350 million bbls (below that, bullish for oil traders; above that, bearish for oil traders
• I set the new number at 400 million bbls (below that, bullish for oil traders; above that, bearish for oil traders
• clearly, very, very bearish right now — and it’s the height of the driving season in the US
• if gasoline prices are not falling in your neighborhood, the refineries are making out like bandits
• production: magic numbers are about 10.5 and 5.0 respectively; this week, 10.2 million bbls for gasoline; 5.3 million bbls for distillate fuel

WTI Tumbles To 2-Mo Lows After Huge Surprise Crude Build – While last night’s API-reported crude build may have been a sign, DOE just reported a crude build twice as large (and massively larger than the expected draw). This sent WTI back below $65, near 2-month lows. DOE:

• Crude +6.805mm (-2.5mm exp) – biggest build since March 2017
• Cushing +1.64mm (+500k exp)
• Gasoline -740k
• Distillates +3.566mm

Record-high refinery runs couldn’t keep crude stockpiles from surging – The 6.88mm crude build is the biggest since March 2017 (and Cushing stocks surged after 12 weeks of draws) as Distillates inventories rose for the 3rd week in a row… US Crude production ticked up (remember that new formulations mean that production jumps in 100k intervals now). The increase in production looks to be due to higher production from Alaska, driven by an increase at Prudhoe Bay, which had been lower for the past several weeks. All of which sent WTI back below $65… To 2-month lows… As Bloomberg notes, August is a bad month for WTI to be suffering from a bouncing dollar and worries about demand destruction from trade wars and EM currency weakness causing economic slowdowns. That’s because crucial late-summer oil-product demand data has been damaging, and might again damage, the bullish case through stockpile builds. Last week’s EIA data showing the largest gasoline build for early August in the last 20-plus years is colliding with this week’s EIA-reported biggest crude build in 17 months is not supportive of the ‘no brainer’ crude narrative.

Oil prices sink after big, unexpected jump in US crude stockpiles — Oil prices plunged on Wednesday after government data showed a big, unexpected jump in stockpiles of U.S. crude, compounding pressure as the outlook for global economic growth darkened and the stock market slumped. U.S. light crude ended Wednesday’s session down $2.03 a barrel, or 3 percent, at $65.01, it’s lowest closing prices since June 6. The contract hit an eight-week intraday low at $64.51. Global benchmark Brent crude oilfell $1.68, or 2.3 percent, at $70.78 by 2:26 p.m. ET, after hitting a four-month low at $70.30. U.S. commercial crude inventories rose by 6.8 million barrels in the week through Aug. 10, the Energy Information Administration reported. Analysts in a Reuters poll had forecast stockpiles would fall by 2.5 million barrels. The jump in stocks occurred as the nation’s crude imports surged by 1 million barrels a day, while its exports fell by more than 250,000 bpd. That offset record activity at American refineries, which ran at 98 percent capacity. “The imports of crude oil are just remarkable,” said John Kilduff, founding partner at energy hedge fund Again Capital. “That we were able to build that much crude oil in inventory in the face of a 98 percent refinery run rate speaks volumes about the burst of supply that hit the market last week.” Stocks at the closely watched U.S. delivery hub at Cushing, Oklahoma rose by 1.6 million barrels. The East and West coasts both saw inventory levels jump by more than 2 million barrels. Stockpiles of gasoline were down slightly more than expected, while inventories of distillate fuels, including diesel and home heating fuel, rose by 3.6 million barrels, more than three times the increase projected in the Reuters poll.

Oil prices fall on rising US crude inventories, darkening economic outlook – Oil prices fell on Wednesday, weighed down by a gloomier global economic outlook and a report of rising U.S. crude inventories, even as U.S. sanctions on Tehran threatened to curb Iranian crude oil supplies.Global benchmark Brent crude oil was down 50 cents a barrel at $71.96 by 0830 GMT. U.S. light crude was 55 cents lower at $66.49.”Sentiment is sandwiched between a darkening global economic outlook and looming Iranian supply shortages,” said Stephen Brennock, analyst at London brokerage PVM Oil Associates.U.S. crude stocks rose by 3.7 million barrels in the week to Aug. 10, to 410.8 million barrels, private industry group the American Petroleum Institute (API) said on Tuesday. Crude stocks at the Cushing, Oklahoma, delivery hub rose by 1.6 million barrels, the API said.Official U.S. oil inventory data was due to be published later on Wednesday by the Energy Information Administration.Investors are concerned by the health of the world economy at a time of escalating trade disputes between the United States and its major trading partners.The OECD’s composite leading indicator, which covers the western advanced economies plus China, India, Russia, Brazil, Indonesia and South Africa, peaked in January but has since fallen and slipped below trend in May and June.World trade volume growth also peaked in January at almost 5.7 percent year-on-year, but nearly halved to less than 3 percent by May, according to the Netherlands Bureau for Economic Policy Analysis.The United States and China have been locked in a tit-for-tat trade spat for a few months, gradually adding tariffs to each others’ products in a dispute that threatens to curb economic activity in both countries.Chinese oil importers now appear to be shying away from buying U.S. crude oil as they fear Beijing may decide to add the commodity to its tariff list.Not a single tanker has loaded crude oil from the United States bound for China since the start of August, Thomson Reuters Eikon ship tracking data showed, compared with about 300,000 barrels per day (bpd) in June and July. Meanwhile, investors are watching the impact of U.S. sanctions on Tehran, which analysts say could remove as much as 1 million bpd of Iranian crude from the market by next year.

Oil falls sharply, ends at 10-week low after unexpected rise in U.S. crude inventories – Oil futures fell sharply Wednesday, leaving the U.S. benchmark with its lowest close in 10 weeks after data showed an unexpected and surge in U.S. crude inventories. West Texas Intermediate crude for September delivery on the New York Mercantile Exchange fell $2.03, or 3%, to settle at $65.01 a barrel, its lowest finish since June 6. The global benchmark, October Brent crude dropped $1.70, or 2.4%, to $70.76 a barrel, the lowest close since April 9.The Energy Information Administration said crude inventories rose 6.8 million barrels in the week ended Aug. 10. Analysts surveyed by The Wall Street Journal had forecast a fall of 2.4 million barrels. Futures had been nursing losses ahead of the EIA data after the American Petroleum Institute late Tuesday said stocks had risen by 3.7 million barrels. Oil stored in Cushing, Okla., the delivery hub for Nymex futures, rose by 1.6 million barrels, the EIA said. “Prices have been on a downward trend after the release of the API data on Tuesday afternoon. The confirmation by the Energy Information Administration drove prices lower as traders continue to monitor the situation between the United States and Turkey,” . Indeed, concerns about Turkey and the possibility that spillover effects from the country’s currency crisis could affect global growth and demand for crude have been cited as a weight on overall commodity prices. A stronger dollar has also contributed to pressure.

Oil edges up as China, US set for talks to resolve trade disputes – Oil prices on Thursday clawed back some of the previous day’s losses after Beijing said it would send a delegation to Washington to try to resolve a trade dispute between the United States and China that has roiled global markets.Market sentiment, though, remains bearish amid the dispute and concerns of an economic slowdown in emerging markets.Brent crude oil futures were at $71.11 per barrel at 0712 GMT, up 35 cents, or 0.5 percent, from their last close.U.S. West Texas Intermediate (WTI) crude futures were up 15 cents, or 0.2 percent, at $65.17 a barrel, held back somewhat by rising U.S. crude production and storage levels.Both benchmarks lost more than 2 percent during the previous day’s trading.Traders said Thursday’s markets were pushed up by news that a Chinese delegation led by Vice Minister of Commerce Wang Shouwen will hold talks with U.S. representatives led by Under Secretary of Treasury for International Affairs David Malpass later in August.China and the United States have implemented several rounds of tit-for-tat tariffs on each others goods and threatened further duties on exports worth hundreds of billions of dollars.Sentiment in oil markets was also cautious due to the rise in U.S. crude production and storage levels, as well as weakness in emerging market economies, particularly in Asia, that could limit demand growth.Output of U.S. crude rose by 100,000 barrels per day (bpd) in the week ending Aug. 10, to 10.9 million bpd, according to the U.S. Energy Information Administration (EIA) weekly production and storage report.At the same time, U.S. crude inventories climbed by 6.8 million barrels, to 414.19 million barrels, the EIA said.”This build certainly hasn’t helped market sentiment,” Dutch bank ING said after the release of the EIA report. While supply rose in the United States, Asia’s markets were showing signs of economic slowdown due to trade disputes with the United States and currency weakness, dragging on oil market sentiment.

Oil steadies but outlook for demand grows gloomy (Reuters) – Oil rose slightly as global markets steadied on Thursday, recovering some of the previous day’s 2 percent slide, though a weakening outlook for crude demand kept prices in check. The oil market slid on Wednesday as data showing a large build in U.S. inventories fed concern about the fuel demand outlook, while crude was also pressured by broader selling of industrial commodities such as copper. China and the United States have implemented several rounds of tariffs and threatened further duties on exports worth hundreds of billions of dollars, which could knock global economic growth. The crisis gripping the Turkish lira has rattled emerging markets and reverberated across equities, bonds and raw materials. Brent crude oil futures settled 67 cents higher at $71.43 a barrel, while U.S. crude futures rose 45 cents to $65.46 a barrel. Earlier, U.S. crude had hovered around its 200-day moving average of $65.18 a barrel, an important technical benchmark. Moving below that level could trigger a further surge downward. “The growth story is now more or less a U.S. growth story. The rest of the world isn’t playing along any longer,” “It also really reflects how the theme in the commodities market has so quickly changed from being one where the worry was about supply, with Iran sanctions for oil or Chilean (miner) strikes for copper, and now the focus is on demand.” Brent crude futures are resting on the 200-day moving average, a key technical level, for the first time in a year. Analysts say a break below this point could trigger another swift sell-off. “In Brent, we trace a first support at $71.00 followed by the 200-day moving average at $70.23 and $70.00,” On the supply front, U.S. data on Wednesday showed crude output rose by 100,000 barrels per day (bpd) to 10.9 million bpd in the week ending Aug. 10. Crude inventories increased by 6.8 million barrels, representing the largest weekly rise since March last year.

Oil prices fall amid fears over global economic growth – Oil prices rose on Friday but were heading for yet another weekly decline as concerns intensified that trade disputes and slowing global economic growth could hit demand for petroleum products. Brent crude oil futures were up 98 cents, or 1.4 percent, at $72.41 a barrel by 9:11 a.m. ET (1311 GMT). U.S. West Texas Intermediate (WTI) crudefutures rose 74 cents, or 1.1 percent, to $66.20 a barrel.Brent is heading for a decline of less than 1 percent this week, a third consecutive weekly drop. WTI is on track for a seventh week of losses, with a fall of more than 2 percent.Traders said the main drags on prices were the darkening economic outlook due to trade tensions between the United States and China, and weakening currencies in emerging economies that are weighing on growth and fuel consumption.U.S. investment bank Jefferies said on Friday there was an emerging “lack of demand” for crude oil and refined products. Singaporean bank DBS said on Friday that Chinese data showed a “steady decline in activities” and that “the economy is facing added headwinds due to rising trade tensions with the U.S.”

Crude oil is getting crushed, but one expert sees year-end rally – Crude oil just posted its worst week since July as a surging dollar, slowing emerging markets and supply concerns have all weighed on the commodity. But despite the price declines, one commodities trader sees a rally in the cards.Bill Baruch, president of Blue Line Futures, told CNBC’s “Trading Nation” on Thursday what investors can expect next. Here’s what he said.

• · A bearish inventory report earlier in the week pushed oil down to its lowest level since June, but crude bulls still have reasons to feel good. For instance, it’s easy to forget crude oil is still trading near multiyear highs, with a gain of 9 percent year to date and 40 percent in the last 12 months.
• · One of the biggest stories weighing on crude may be set to dissipate and take some pressure off the commodity: trade tension between the U.S. and China. We may see meaningful headway on trade over the coming weeks, and fears of slowing growth in China may be alleviated.
• · My biggest concern, however, is spare capacity. Saudi Arabia promised to ramp up crude production in July, but it actually fell 200,000 barrels per day. Still, the U.S. estimated that production in the lower 48 states has stalled over the last three weeks, and tighter spare capacity can be extremely bullish.
• · During this seasonally weak time for crude, investors should look to buy pullbacks; the technical picture should support this strategy. There is tremendous support from $62.50 to $64.50 per barrel, and oil should be positioned to rally back up to between $70 and $80 per barrel later this year. The key level to the downside would be $62.

Bottom line: Despite a 3 percent decline in crude oil this week, Baruch sees the commodity surging into year-end.

‘More volatility’ expected as Iran sanctions set to prompt wild swings in oil prices, CEO says –A shipping revolution and a U.S. plan to impose targeted crude sanctions against Iran is likely to prompt wild swings in the oil price over the coming months, Vopak’s chief executive told CNBC on Friday.Energy market participants are currently seen weighing bullish factors that include potential supply disruptionsto Iranian crude exports against more bearish indicators, such as the darkening global economic outlook and a resurgent U.S. dollar.International benchmark Brent crude traded at around $72.07 on Friday afternoon, up almost 1 percent, while U.S. West Texas Intermediate (WTI) stood at $65.77, up more than 0.5 percent.”With new sanctions coming into play and also the IMO 2020, we see there is more volatility and therefore more opportunities to trade. So, we see our customers taking, slowly but surely, positions for that to happen,” Eelco Hoekstra, CEO of Vopak, told CNBC’s “Squawk Box Europe” on Friday.On January 1, 2020, the International Maritime Organization (IMO) will enforce new emissions standards designed to significantly curb pollution produced by the world’s ships.The rule changes – which one leading energy analyst recently described as the “biggest in the history of the market” – are seen as a source of great concern for some of the world’s largest oil producers. That’s because global energy and shipping industries are thought to be ill-prepared for the new measures.Further to the IMO’s changes, external observers are particularly concerned about the supply disruptions caused by Washington’s plan to impose further sanctions against Iran in November. Tehran is OPEC’s third-largest oil producer – behind Saudi Arabia and Iraq – and currently pumps around 3.65 million barrels per day, according to Reuters data.

U.S. Drillers Turn On The Brakes – Rig Count Remains Unchanged – Baker Hughes reported no change to the number of active oil and gas rigs in the United States on Friday. Oil and gas rigs stayed at 1,057, according to the report, with the number of active oil rigs and the number of gas rigs staying the same. The oil and gas rig count is now 111 up from this time last year. Oil prices had been trading up earlier on Friday, but prices were still on track to end the week in the red. In fact, this week marks the seventh weekly loss as trade wars, unrest in Turkey, and anticipated Iranian production loss sparked fears of waning global demand growth. Contrary to those fears, the International Energy Agency (IEA) reported last week that it foresaw a boost to global oil demand growth by 110,000 barrels per day to 1.5 million barrels per day for 2019.By 12:35am EDT, WTI was trading up $0.31 (+0.47%) at $65.77 per barrel, with Brent trading up $0.31 (+0.43%) at $71.74 – both down week on week. Canada’s oil and gas rigs for the week rose by 3, bringing its total oil and gas rig count to 212, which is 2 fewer than this time last year, with a 1-rig gain for oil and a 2-rig gain for gas. The price of Western Canada Select (WCS) continued to fall this week, trading at $36.16 as of 12:52pm. EIA estimates for US production were up 100,000 barrels per day for the week ending Augusts 10, averaging 10.9 million bpd. By 1:08pm EDT, WTI and Brent were still trading up. WTI was trading up 0.26% (+$0.17) at $65.63. Brent crude was trading up 0.22% (+$0.16)at $71.59 per barrel.

Crude Oil Prices Settle Higher as US, China Mull Plans to Resolve Trade War – WTI crude oil prices ended lower for a third-straight week, despite settling higher Friday amid reports the U.S. and China are mapping out plans to resolve their trade war later this year. On the New York Mercantile Exchange crude futures for September delivery rose 45 cents settle at $65.91 a barrel, while on London’s Intercontinental Exchange, Brent rose 0.63% to trade at $71.88 barrel. Chinese and U.S. negotiators are drawing up plans for talks between President Donald Trump and Chinese counterpart Xi Jinping in November to end their trade war, according to the Wall Street Journal. Oil prices were also lifted by signs of a slowdown in domestic output, despite data this week showing domestic producers increased production for the first time in three weeks. Oilfield services firm Baker Hughes reported on Friday that the number of U.S. oil drilling rigs in operation was unchanged at 869. Yet the rise in oil prices proved to be too little, too late amid heavy losses during the week on the back of rising U.S. inventories and concerns slowing growth in emerging markets and China would dent oil demand. Inventories of U.S. crude rose by 6.805 million barrels for the week ended Aug. 10, confounding expectations for a draw of 2.449 million barrels, according to data from the Energy Information Administration (EIA). The unexpected build in crude supplies emerged as imports rose by about 1.341 million barrels a day (bpd), while exports fell by 2.58 million bpd, data from EIA showed.

A Tough Week For Oil Markets – Oil posted steep losses mid-week on sudden concerns about global economic stability. Turkey’s currency crisis has raised fears of destabilization in emerging markets. With higher financial risks in mind, traders sold off oil. The EIA reported a 6.8-million-barrel increase in crude stocks this week, sending prices down on Wednesday. The abnormally large build sent a shudder through the oil market, raising the prospect of a slowdown. The Turkish lira crisis has put concerns about the health of the global economy front and center. Bloomberg says that if the economy falters, it will show up in timespreads for oil futures. “Crude oil prices and the crude curve structure are typically the indicator which picks up all the demand side factors and all the supply side factors into one number,” said Bjarne Schieldrop of SEB. For much of 2018, Brent futures were in a state of backwardation. The recent flip into contango – in which front month contracts trade at a discount to longer-dated futures – is a bearish sign. The plunge in the lira has infected several other emerging market currencies, most notably, Argentina’s peso and India’s rupee. That makes oil vastly more expensive in those countries, which ultimately could undercut demand. “Higher oil prices paired with a weakening domestic currency spells trouble for major emerging market oil demand growth countries like India, where consumers are already paying near record levels for retail petrol,” said Michael Tran, global energy strategist at RBC Capital Markets LLC. A new round of protests by workers at Libya’s key Zawiya oil export terminal threaten to disrupt production at the Sharara oil field, according to S&P Global Platts. Libya has succeeded in restoring production after previous events, pushing output back above 1 mb/d. But the latest protests could shut in the 340,000-bpd Sharara field this weekend. “We are expecting a complete shutdown [at Sharara] because of some problems at Zawiya refinery. Tomorrow a tanker is due but maybe loading will be stopped by the guys causing the problems,” a source at the Sharara field said, according to S&P Global Platts.

Analysts: Oil Price Rise to Drive Up Drilling Globally – The rise in oil prices will continue to drive up drilling activity globally over the second half of the year and 2019, according to oil and gas analysts at Fitch Solutions Macro Research. The rise in oil prices is feeding through into higher spending in the oil and gas sector and will continue to drive up drilling activity globally over the second half of the year and 2019, according to oil and gas analysts at Fitch Solutions Macro Research. “Globally, rotary rig counts have averaged 183 rigs higher in the year to date, compared to the same period last year,” the analysts said in a report sent to Rigzone on Tuesday. “The majority of additions have been made in North America, as shale developments continue to pick up pace. Internationally, the rig count has averaged 23 rigs higher, but performance has been widely varied between the different regions,” the analysts added. Fitch Macro Solutions Research analysts said they expect “continued strong growth in US shale, with producers set to add around 1.25 million barrels per day of crude and condensates over 2018 on an annual average basis”. In the report, the Fitch Macro Solutions Research representatives also stated that “there is a shift underway away from gas and towards oil-directed drilling”. “When oil prices decline, both oil-and gas-directed rig counts tend [to] fall, due to the outsize impact of oil revenue on capex [capital expenditure]. However, due to a number of factors, including differences in cost and contracting structures, gas-directed drilling tends to face less downside pressure overall,” the analysts said. “As oil prices continue to recover, and investor confidence with them, we expect the focus to swing back towards oil over the coming years. However, we view the shift as a cyclical and not a structural one, with secular trends in policy, pricing and technology strongly favoring gas over a longer-term (multi-decade) horizon,” the analysts added.

Saudi Arabia Weighs Larger Tesla Stake as Part of Plan to Make Electric Cars –Saudi Arabia’s desire to take a big stake in Tesla Inc. reflects its ambitious plan to build a base in the kingdom for electric-car production and diversify away from oil. Its sovereign-wealth fund is considering raising its nearly 5% holding in Tesla, people familiar with the matter said. Discussions among Saudi officials about increasing the Public Investment Fund’s stake accelerated after Tesla Chief Executive Elon Musk last week proposed to take the car company private in a tweet, the people said.On Monday, Mr. Musk said in a blog post that he had been in discussions with the fund since early last year about a major investment that would help Tesla go private. In recent months, executives from PIF have approached Tesla multiple times about investing in the company, the people said. It’s unclear whether the Saudi fund is actively in talks with Mr. Musk about a plan to take the auto maker private, and whether it would have the financing available to do so. Two people familiar with PIF’s finances said they doubt there are any serious discussions under way about the fund taking a significantly larger stake in Tesla. Indeed, the fund is struggling to find ways to finance its existing commitments. Still, a deal with Tesla would represent an extraordinary wager on technologies that compete with Saudi Arabia’s biggest generator of income: oil. Tesla’s electric vehicles, if manufactured inside the kingdom, would complement other technology investments and create a base of industry that some Saudi officials are calling the “Grand Vision” of the future, said one person familiar with the matter. Mr. Musk’s company also encompasses SolarCity, a supplier of solar panels and batteries. Saudi Arabia has said it will build a massive solar-power generation project that would replace oil-and-gas-generated electricity and create a solar-panel and battery manufacturing hub in the Middle East. The country’s plans go beyond the solar project and electric cars. It also wants to build a city in the desert called Neom, which would be powered by renewable energy and showcase robots and driverless cars. Officials hope the plan will draw global technology investment and innovation.

Saudi Crackdown On Canada Could Backfire — Like many spats these days, the Saudi Arabia/Canada one started with a tweet. Canada’s Foreign Minister Chrystia Freeland called for the release of Samar Badawi, a women’s rights activist who is the sister of jailed blogger Raif Badawi, whose wife is a Canadian citizen. The arrests had taken place in OPEC’s largest producer and leading exporter Saudi Arabia, which has amassed its wealth from oil and now looks to attract foreign investors as it seeks to diversify its economy away from too much reliance of crude oil sales.Canada’s foreign ministry’s global affairs office urged “the Saudi authorities to immediately release” civil society and women’s rights activists.Saudi Arabia – often criticized for its far from perfect human rights and women’s rights record – didn’t take the Canadian urge lightly. Saudi Arabia expelled the Canadian ambassador, stopped direct Saudi flights to Canada, stopped buying Canadian wheat, ordered Saudi students and patients to leave Canada, froze all new trade and investment transactions, and ordered its wealth funds to sell their Canadian stock and bond holdings in a sweeping move that surprised with its harshness many analysts, Canada itself, and reportedly, even the U.S.The Saudi reaction shows, on the one hand, the sensitivity of the Kingdom to criticism for its human rights record. On the other hand, it sent a message to Canada and to everyone else that Saudi Arabia won’t stand any country meddling in its domestic affairs, or as its foreign ministry put it “an overt and blatant interference in the internal affairs of the Kingdom.”The Saudi reaction is also evidence of Crown Prince Mohammed Bin Salman’s harsher international diplomacy compared to the previous, ‘softer’ diplomacy, analysts say. Saudi Arabia is also emboldened by its very good relations with the current U.S. Administration, and picking a fight with Canada wouldn’t have happened if “Trump wasn’t at the White House,” Haizam Amirah-Fernflndez, an analyst at Madrid-based think tank Elcano Royal Institute, told Bloomberg.The United States hadn’t been warned in advance of the Saudi reaction to Canada and is now trying to persuade Riyadh not to escalate the row further, a senior official involved in talks to mediate the dispute told Bloomberg. The row, however, will not affectcrude oil exports from the Kingdom, Saudi Energy Minister Khalid al-Falih has said, adding that Riyadh’s policy has always been to keep politics and energy exports separate.

Thousands attend funerals of children killed in Yemen bus attack –Thousands of people gathered in Yemen‘s war-ravaged city of Saada on Monday for the funerals of 51 people, including 40 children, who were killed in air strikes by a Saudi-UAE military alliance, backed by the US. Scores of cars covered in green, which is a hugely symbolic colour in Islam, transported the victims’ coffins from a hospital morgue to a large square for funeral prayers, in a ceremony which was attended by several high-ranking Houthi officials. Mohammed Ali al-Houthi, who has a $20 million bounty on his head, slammed the killings as a “crime by America and its allies against the children of Yemen”. The funerals were supposed to take place on Saturday – in Islam, the dead should be buried as soon as possible. However, the Houthis, who control Saada province and large parts of north Yemen, said such gatherings could be targeted by further raids. Mourners carried pictures of the 40 children killed, while Al-Masirah, a pro-Houthi TV network, broadcast images of small graves being dug at a cemetery where the children were to be buried. “My son went to the market to run house errands and then the enemy air strike happened and he was hit by shrapnel and died,” said Fares al-Razhi, mourning his 14-year-old son.”For my son, I will take revenge on Salman and Mohammed Bin Zayed,” he said, referring to the leaders of Saudi Arabia and the United Arab Emirates. With logistical support from the US, Saudi Arabia and the UAE have carried out attacks in Yemen since March 2015 in an attempt to reinstate the internationally recognised government of President Abu-Rabbu Mansour Hadi. The strikes have failed to reverse thei Houthis’ gains, and instead, made Yemen the worst humanitarian crisis in more than 50 years.

Guided Bomb Fragments At Site Of Yemen Bus Airstrike Trace Back To Lockheed Martin – A prominent Yemeni journalist who throughout the war has been instrumental in getting images and information out of the country ahead of Western journalists has photographed and examined fragments from one of the exploded missiles found at the site of the US-Saudi coalition airstrike on a school bus in Yemen, which left as many as 50 people dead and 63 injured – the vast majority of which were children. The image of the missile fragment, believed to be among those that scored a direct hit on the bus full of children traveling through Dahyan market in Saada province last Thursday, appears to be a US-made MK-82 guided bomb produced by Lockheed Martin.Ben Norton, an American journalist among the first to track down publicly available government contract information showing the MK-82’s likely origins, said of the bomb fragment imagery: “Yemeni journalists found this fragment of the bomb Saudi Arabia dropped on a school bus full of children in Yemen. It’s a US-made MK-82 guided bomb, which has been used in previous attacks on Yemeni civilians. The cage code on the bomb is Lockheed Martin’s.” The MK-82 is a 500-pound air dropped guided bomb which US Air Force and military publications previously touted as“causing the least amount of collateral damage” – US defense contractors have over the past few years sold the MK-82 to Saudi Arabia under contracts worth tens of millions of dollars. The CAGE Code, or Commercial and Government Entity Code, is a number assigned to suppliers of various government or defense agencies which provides a standardize method to track military items to a given facility at a specific location. According to one defense contracting consultation site, The Department of Defense’s Defense Logistics Agency, (DLA) assigns the five-character ID and uses alpha numeric identifier is assigned to entities located in the United States and its’ territories.Ben Norton says the Cage Code on the fragment reportedly found at the site traces to US government contractor Lockheed Martin.The code on the panel fragment in the photograph reads: 94271. Ben Norton further tracked down specific contracts through 2016 and 2017 showing that Lockheed Martin/General Dynamics is the key supplier of the MK-82 500-pound bombs to the Saudi military (in 1997 General Dynamics acquired Lockheed’s Armament Systems and Defense Systems productions divisions).

Saudi Arabia and Israel are killing civilians – and Britain is complicit – Will not even the massacre of children in Yemen end the silence over the murderous complicity of the British government? They were little kids on a bus on the way back from a picnic, no doubt laughing and raucous as large groups of children tend to be, and then they were burned to death. At least 29 children were among the 43 slaughtered, an atrocity perpetrated by the aircraft of Saudi Arabia and its Gulf allies. According to the Campaign Against Arms Trade, our government has supplied the grotesque Saudi dictatorship with £4.7bn worth of arms since the war in Yemen began. Aircraft, helicopters, drones, bombs, missiles: all supplied by UK plc to be quite possibly dropped on the heads of children laughing on the way back from a picnic. Just months ago, the British government feted the Saudi dictator Mohammed bin Salman: unveiling a joint £100m aid deal, granting this tyranny humanitarian PR, while BAE Systems announced the sale of another 48 Typhoon jets. It gets worse: British military personnel are directly involved in helping the Saudi war effort – to what extent remains intentionally murky. Thousands have died, mostly at the hands of the Saudi-led forces we are arming; millions have been displaced; and the country has been left on the verge of famine. Yet where is the national outrage? Where is the wall-to-wall news coverage about these horrors committed in our name? The unforgivable failure of the media to hold the British government to account has left most of the population unaware that this war is even happening. If the culpable nation were deemed a western enemy – such as Iran – there would have been calls for US-led military intervention to stop the slaughter long ago. But it’s our good friends and allies, the head-chopping extremism-exporting Saudi dictatorship, and so both the silence and the killing continues.

Explosion at makeshift arms depot kills at least 69 people in Syria – At least 69 people, including 12 children, have been killed after an explosion at what is thought to be a makeshift arms depot inSyria.Dozens more are still missing with the death toll expected to rise following the blast in the town of Sarmada in Idlib province.“Buildings full of civilians were reduced to rubble,” one White Helmetsrescuer Hatem Abu Marwan was quoted as telling the AFP news agency. It is thought the munitions depot may have been created by an arms trafficker within a five-storey residential building. Idlib is the last major rebel stronghold in war-torn Syria and is widely expected to be the next target which the country’s armed forces attempt to retake.In recent months, the government, led by president Bashar al-Assad and backed by Russia and Iran, has made major advances in its offensive against a number of rebel groups.After Sunday’s explosion, rescuers used bulldozers to remove the rubble and pull out trapped people.Many of the dead and the injured are believed to have been Syrians already displaced by the civil war from the central Homs province. But the UK-based Syrian Observatory for Human Rights said that there were dozens more people missing. The cause of the explosion was not immediately known.

Syria – Pentagon Plants High ISIS Numbers To Justify Occupation — The U.S. aim in Syria is still ‘regime change’. The Pentagon has made it clear that it wants to stay in the country even after the Islamic State vanished. A little propaganda trick is now used to create a justification for its continuing occupation.The report by the UN Security Council’s Sanctions Monitoring Team on ISIS, in parts discussed here, includes a number that smells of bullshit and manipulation: 3. Some Member States estimate the total current ISIL membership in Iraq and the Syrian Arab Republic to be between 20,000 and 30,000 individuals, roughly equally distributed between the two countries. Among these is still a significant component of the many thousands of active foreign terrorist fighters.2 Footnote 2 gives as source: 2 Member State information. The high number given by a “Member State” exceed all prior assessments. The original strength of ISIS was estimated as a few thousand and it swelled as it took more land and incorporated local auxiliary forces and newly arriving foreign fighters. In September 2014, when ISIS was near its peak, the CIA estimated a total of 31,000 ISIS fighters in Syria and Iraq. The number shrank as ISIS was kicked out of more places it earlier occupied while it lost ten thousands of its fighters to Russian, Syrian, Iraqi and U.S. bombs, artillery and other military means. In July 2017 the commanding general of U.S. Special Forces said that 60 to 70,000 ISIS fighters had been killed. The numbers in the UN Sanctions Monitor report simply make no logical sense. It is also contradicted by earlier estimates that put the number of current ISIS fighters in the low thousands. In December 2017 President Trump claimed that only “1,000 or so” fighters remained in Iraq and Syria. The U.S. is justifying its occupation of north-east Syria by claiming to fight ISIS under the legal cover of two UN Security Council resolutions. Now, as ISIS in Syria has shrunk to a few dozens of fighters, that justification is wearing thin. It is immensely important for the Pentagon to present a high number, as ISIS is its only legal justification to stay in Syria. It is doubtful that Congress would agree to a prolonged occupation if ISIS vanished.

The next drone assassination – There is no doubt that a little-known, modestly funded group could launch a drone assassination. Governments, of course, have for years developed military drones, more formally called unmanned aerial vehicles or UAVs. (The United States deploys lethal drones, and Iran’s drone program has been decades in the making, to cite just a couple of examples.)But while governments pour their millions into deadly UAVs, it is relatively cheap and easy for anyone to adapt a commercially available drone into a weapon. Beginning around 2016, militant groups in Iraq, Syria, and Ukraine began to use modified commercial drones for offensive strikes. Last year, writing in the Bulletin, Michael Horowitz and Itai Barsade of Perry World House explored what militant groups do with drones:In addition to dropping munitions on unsuspecting soldiers, they can strap explosives to drones to generate devastating effects. For example, militants can crash an explosive-laden drone into a target, creating a sort of MacGyvered cruise missile. Alternatively, militants can booby-trap drones. In one case, Kurdish fighters trying to examine a grounded drone died when it exploded. In Ukraine, Russian-backed separatists use drones to target military infrastructure and cause immense damage. For instance, they used a commercial drone to drop a Russian-made thermite hand grenade on an ammunition depot in Eastern Ukraine, causing an inferno and close to $1 billion in damage. Put simply, commercial drones are enabling militant groups to engage in a more diverse array of missions to advance their goals against militarily superior forces. While drones have not yet changed the outcome of a war, they are more than a serious annoyance for conventional armies, which must strategize ways to fend them off. “Stopping drone proliferation is not an option because of the ubiquity of the technology,” Horowitz and Barsade note. And as Wired reporter Brian Barrett writes, “most good drone defenses come with drawbacks and caveats.” Which means we won’t wait long for news of another drone attack by soldiers who are part of no army.

Iran test-fired anti-ship missile during drills last week: U.S. source (Reuters) – Iran test-fired a short-range anti-ship missile in the Strait of Hormuz during naval drills last week that Washington believes were aimed at sending a message as the United States reimposes sanctions on Tehran, a U.S. official said on Friday. The official, however, did not suggest that such a missile test was unusual during naval exercises or that it was carried out unsafely, noting it occurred in what could be described as Iranian territorial waters in the Strait. Iran’s Revolutionary Guards confirmed on Sunday it had held war games in the Gulf over the past several days, saying they were aimed at “confronting possible threats” by enemies. U.S. Army General Joseph Votel, head of the U.S. military’s Central Command, said earlier this week the scope and scale of the exercises were similar to ones Iran had carried out in the past. But the timing of this particular set of exercises was designed to get Washington’s attention. “It’s pretty clear to us that they were trying to use that exercise to send a message to us that as we approach this period of the sanctions here, that they had some capabilities,” Votel told reporters at the Pentagon. Iran has been furious over U.S. President Donald Trump’s decision to pull out of an international agreement on Iran’s nuclear program and re-impose sanctions on Tehran. Senior Iranian officials have warned the country would not easily yield to a renewed U.S. campaign to strangle Iran’s vital oil exports. Last month, Iran’s Supreme Leader Ayatollah Ali Khamenei backed President Hassan Rouhani’s suggestion that Iran may block Gulf oil exports if its own exports are stopped. Votel said the U.S. military was keenly aware of Iran’s military activities. “We are aware of what’s going on, and we remain ready to protect ourselves as we pursue our objectives of freedom of navigation and the freedom of commerce in international waters,” Votel said.

China says business ties with Iran no harm to any other country (Reuters) – China’s business and energy ties with Iran do not harm the interests of any other country, the country’s Foreign Ministry said, after U.S. President Donald Trump said companies doing business with Iran would be barred from the United States. China has already defended its commercial relations with Iran as open and transparent as U.S. sanctions on Iran took effect despite pleas from Washington’s allies. In a statement released late on Friday, China’s foreign ministry reiterated its opposition to unilateral sanctions and “long-armed jurisdiction”. “For a long time, China and Iran have had open, transparent and normal commercial cooperation in the fields of business, trade and energy, which is reasonable, fair and lawful,” it said. “This does not violate United Nations Security Council resolutions or China’s promised international obligations, nor does it harm the interests of any other country, and should be respected and protected,” the ministry added. Using sanctions at the slightest pretext or to threaten anyone won’t resolve the problem, it said. “Only dialogue and negotiations are the true path to resolving the issue,” the ministry added. China, Iran’s top oil customer, buys roughly 650,000 barrels a day of crude oil from Tehran, or 7 percent of China’s total crude oil imports. At current market rates, the imports are worth some $15 billion a year. State energy firms CNPC and Sinopec have invested billions of dollars in key Iranian oil fields such as Yadavaran and North Azadegan and have been sending oil to China. European countries, hoping to persuade Tehran to continue to respect the nuclear deal, have promised to try to lessen the blow of sanctions and to urge their firms not to pull out. But that has proven difficult, and European companies have quit Iran, arguing that they cannot risk their U.S. business.