Oil, Gas, And Fracking News Reads 25August, 2019 – Part 2

Written by rjs, MarketWatch 666

Here are some more selected news articles about the oil and gas industry from the week ended 25 August 2019. Go here for Part 1.

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

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Long Train Runnin’ – Unit Trains Now Delivering U.S. Propane To Mexico –In May 2019, Twin Eagle Liquids Marketing shipped a 100-car train filled with propane from North Dakota to Mexico, marking the first-ever single-commodity train – i.e. “unit train” – between the Bakken and the U.S.’s southern neighbor. As it turns out, it was also the first of what appears to be a regularly scheduled run to Mexico. Since May, three more unit trains have made the journey south from the Bakken’s first unit train terminal for propane. Rail shipments of propane to Mexico as part of mixed-goods trains aren’t new, but figuring out how to economically ship large quantities of propane via unit trains has long evaded NGL marketers and producers – that is, until now. What are the economics and other factors that finally made it possible, and what are the prospects and challenges ahead for unit-train exports to Mexico? Today, we look at how the first all-propane train to Mexico came to pass and what the outlook might be Before we get to this latest development in U.S. propane exports to Mexico, it’s worth stepping back for a quick review of what’s transpired in the Mexican propane market in recent years.

Long Train Runnin’, Part 2 – The Economics Of Bakken-To-Mexico Propane Unit Trains –In May 2019, the first-ever propane unit train from the Bakken to Mexico reached its destination, and since then, three more of these 100-car, single-commodity “bulk” trains have made the same trip. Facilitating these shipments by Twin Eagle Liquids Marketing is Marathon Petroleum Corp.’s (MPC) unit train-loading terminal in Fryburg, ND, which was initially set up to load crude oil but was recently expanded to handle propane too. And soon, the terminal in Torreón, Mexico, that has been receiving these unit trains will have a new loop track too, enabling producers and marketers to take full advantage of the bulk transport option. Today, we look at the economics and challenges of this relatively new propane export route.As we discussed in Part 1, Mexico’s need for propane – widely used for cooking and heating water – is on the rise, even as local supply has been dwindling. That’s boosted propane imports to the c ountry, including from the U.S. and Canada in recent years. While most of those imports come to Mexico via ship (~52% or 83 Mb/d in 2018) or are trucked across the U.S.-Mexico border (33 Mb/d or 21%), a good portion (29 Mb/d or 18%) of it is railed in. [Only 14 Mb/d, or less than 10%, of it was transported via pipeline last year, owing to the limited pipeline capacity and routes available to reach key markets in interior Mexico.]

Revealed: emails raise ethical questions over Trump official’s role in gas project –The US interior secretary, David Bernhardt, is promoting a fossil fuel project for which his former employer, a lobbying firm, is a paid advocate, e-mails obtained by the Guardian suggest.Experts say Bernhardt is probably violating ethics guidelines issued by the Trump administration with the stated goal of “draining the swamp”. Based on these rules, Bernhardt should be recused from specific issues involving a former client for at least two years.The Jordan Cove Energy Project was proposed by the Canadian energy giant Pembina to transport fracked natural gas through Oregon to the international port at Coos Bay in the state. It would include a new 232-mile pipeline thatpasses through several dozen miles of interior department land.Several county commissioners from Colorado, where much of the gas is fracked, met with Bernhardt in Washington DC to boost the project in March. They included Mike Samson, Bernhardt’s former high school teacher. “Awesome time in DC he is totally behind the project and has people working on it towards completion,” Samson wrote concerning Bernhardt in a 7 March email to Ray Bucheger, a Jordan Cove lobbyist with the firm FBB Federal Relations. “He recognizes that time is of the essence and that meaningful progress needs to [be] made this year.” A screenshot from the email. A separate text message also shows that Bucheger had hosted the county commissioners at a dinner the night before the meeting and had asked Samson to report to him what Bernhardt said about Jordan Cove. Bernhardt represented oil companies and agribusiness interests at the Brownstein Hyatt Farber Schreck lobbying firm before joining the Trump administration in August 2017. Brownstein Hyatt has worked to promote the Jordan Cove project since December 2018, federal records show.

California regulators still allowing industry to inject toxic oilfield waste into drinking water aquifers, violating Safe Drinking Water Act; Companies will sue if ordered to stop. – Encana frac’d about 200 gas wells into fresh water zones at Rosebud (before April 2006), of which about 60 were more shallow than 200 metres bgs, including intentionally into the community’s drinking water aquifers, two most shallow gas wells perf’d at 100.5 m and 121.5 m bgs (Encana injected 18 million litres frac fluid into drinking water aquifers on this one gas well alone] In response to reporting from the Desert Sun that California regulators continue to allow oil field wastewater injection into potential drinking water sources in Kern County, Andrew Grinberg of Clean Water Action issued the following statement:“It’s unacceptable that oil companies are still injecting toxic wastewater into potential drinking water sources, in violation of the Safe Drinking Water Act. Despite significant progress by state agencies in recent years to improve California’s Underground Injection Control program, the oil and gas industry still has far too much influence. State regulators need to stand up to fossil fuel interests and take more aggressive action to protect our water.… Regulators have failed to rein in these harmful impacts of this industry and protect our communities.California can no longer afford to be a fossil fuel state – it’s time to accelerate the transition away from our oil-soaked history and toward a clean energy future. If the oil industry can’t operate responsibly, then it shouldn’t operate here at all. Clean water is the most important resource for California’s future. After committing $130 million annually to help the one million Californians without safe drinking water, and adopting new underground injection regulations in April, Governor Newsom, his regulators, and the Legislature need to ensure the immediate protection of California groundwater from the threat of oil field wastewater injection.”

The U.S. leads global petroleum and natural gas production with record growth in 2018 – EIA – U.S. petroleum and natural gas production increased by 16% and by 12%, respectively, in 2018, and these totals combined established a new production record. The United States surpassed Russia in 2011 to become the world’s largest producer of natural gas and surpassed Saudi Arabia in 2018 to become the world’s largest producer of petroleum. Last year’s increase in the United States was one of the largest absolute petroleum and natural gas production increases from a single country in history. For the United States and Russia, petroleum and natural gas production is almost evenly split; Saudi Arabia’s production heavily favors petroleum. Petroleum production is composed of several types of liquid fuels, including crude oil and lease condensate, natural gas plant liquids (NGPLs), and bitumen. The United States produced 28.7 quadrillion British thermal units (quads) of petroleum in 2018, which was composed of 80% crude oil and condensate and 20% NGPLs. U.S. crude oil production increased by 17% in 2018, setting a new record of nearly 11.0 million barrels per day (b/d), equivalent to 22.8 quadrillion British thermal units (Btu) in energy terms. Production in the Permian region of western Texas and eastern New Mexico contributed to most of the growth in U.S. crude oil production. The United States also produced 4.3 million b/d of NGPLs in 2018, equivalent to 5.8 quadrillion Btu. U.S. NGPL production has more than doubled since 2008, when the market for NGPLs began to expand. U.S. dry natural gas production increased by 12% in 2018 to 28.5 billion cubic feet per day (Bcf/d), or 31.5 quadrillion Btu, reaching a new record high for the second year in a row. Ongoing growth in liquefied natural gas export capacity and the expanded ability to reach new markets have supported increases in U.S. natural gas production. Russia’s crude oil and natural gas production also reached record levels in 2018, encouraged by increasing global demand. Russia exports most of the crude oil that it produces to European countries and to China. Since 2016, nearly 60% of Russia’s crude oil exports have gone to European member countries in the Organization for Economic Cooperation and Development (OECD). Russia’s crude oil is also an important source of supply to China and neighboring countries. Russia’s natural gas production increased by 7% in 2018, which exceeded the growth in exports. The Yamal liquefied natural gas (LNG) export facility, which loaded its first cargo in December 2017, can liquefy more than 16 million tons of natural gas annually and accounts for almost all of the recent growth in Russia’s LNG exports. Since 2000, more than 80% of Russia’s natural gas exports have been sent to Europe. Saudi Arabia’s annual average crude oil production increased slightly in 2018, but it remained lower than in 2016, when Saudi Arabia’s crude oil output reached a record high. Saudi Arabia’s crude oil production reached an all-time monthly high in November 2018 before the December 2018 agreement by the Organization of the Petroleum Exporting Countries (OPEC) to extend production cuts.

The United States tends to produce lighter crude oil and import heavier crude oil – EIA – In 2018, total U.S. crude oil production grew by 17%, led by increased production of relatively light, less dense crude oil. The increase in light crude oil production is largely the result of the growth in crude oil production from shale and tight rock formations, which are now more accessible because of improvements in horizontal drilling and hydraulic fracturing.Crude oil with a higher API gravity is lighter, or less dense. Production of crude oil with an API gravity greater than 40 degrees grew from 1.2 million barrels per day (b/d) in 2015 to more than 5.8 million b/d in 2018. Production in this API range accounted for 55% of total Lower 48 production in 2018, an increase from 50% in 2015, the earliest year for which EIA has crude oil production data by API gravity. API gravity can differ greatly by production area. For example, oil produced in Texas – the largest crude oil-producing state – has a relatively broad distribution of API gravities, and most crude oil produced there ranges from 30 to 50 degrees API. Relatively light crude oil with an API gravity from 40 to 50 degrees accounted for most Texas production in 2018, at 56%. Crude oil in this API gravity range – the fastest-growing category overall – reached 2.5 million b/d in 2018, driven by increasing production in the tight oil plays of the Permian and Eagle Ford. The crude oil produced in North Dakota’s Bakken formation also tends to be relatively light. Conversely, the crude oil produced in California and the Federal Gulf of Mexico tends to be heavier. In contrast to the light crude oil that is increasingly produced in the United States, imported crude oil tends to be heavier. In 2018, 7.5 million b/d (97%) of imported crude oil had an API gravity of 40 or lower, compared with 4.7 million b/d (45%) of domestic production. Although the United States has been producing record levels of domestic crude oil, it continues to import crude oil because of variations in crude oil quality. API gravity, along with sulfur content, determines the type of processing needed to refine crude oil into fuel and other petroleum products, all of which factor into refineries’ profits. Overall U.S. refining capacity is geared toward a diverse range of crude oil inputs, so it can be uneconomic to run some refineries solely on light or heavy crude oil. The API gravity of domestic and imported crude oil used in U.S. refineries has increased from a low of 30.2 degrees in 2004 to an average of 32.2 degrees in 2018. Since 2008, U.S. imports of crude oil have decreased 21%. During the same time period, domestic production grew 120% and consequently provided a greater share of refinery inputs.

A 2019 Permian Output Surge May Impact Oil Prices – The question for the longer-term is whether or not OPEC producers will respond by trying to lower global oil prices. Over the next eighteen months, pipeline capacity from the Permian is expected to increase by 1.5-2.0 mb/d, including increased delivery capacity to export terminals. This should have a number of effects, mostly positive for producers, but other constraints will mean that a sudden surge should not be expected. Higher prices for Permian crude and greater volumes will be the primary results, although an increase in flaring might bring new pressure to regulate ‘wastage’ of gas. The EIA projects slower growth in production from the 4th quarter of 2019 to the fourth quarter of 2020 — 0.99 mb/d versus 1.75 mb/d from 4th quarter 2018 to 4th quarter 2019. This could be partly due to lower capital spending by shale oil producers, but it still seems unusually low. Although pipeline capacity theoretically comes online instantaneously–pipelines have to be filled, pressure ramped up, and some testing will mean it will take place over days or weeks – the supply change should not be that strong. Instead, supply now moving by rail and truck will be switched to pipeline, at least until production exceeds capacity again. So, the market impact won’t be the same as, say, major oil fields in Libya going on- and offline suddenly. There are also constraints on how quickly production can increase. The large and growing number of unproductive wells in the Permian suggests that new pipeline capacity, allowing for higher wellhead prices, will see a surge in well fracking/completions, depending on the availability of crews. Historically, the number of wells fracked in a given month in the Permian has been as high as 668 (October 2014) versus a recent level of 530, and the rate has increased as much as 20-30/month, sometimes much higher. It seems unlikely that the number of fracked wells can increase by more than 50/month, but since the typical well adds about 600-700 b/d of gross output, the implication is that Permian output could grow by an additional 30 tb/d per month, or 360 tb/d by December 2020 versus the year earlier amount. This amount is probably incremental to existing projections

The US is set to drown the world in oil – A staggering 61% of the world’s new oil and gas production over the next decade is set to come from one country alone: the United States. The sheer scale of this new production dwarfs that of every other country in the world and would spell disaster for the world’s ambitions to curb climate change – the effects of which we’re already witnessing through massive heat waves, flooding, and extreme weather. Earlier this year, we crunched the numbers from the latest climate science and industry forecasts and found that we can’t afford to drill up any oil and gas from new fields anywhere in the world if we’re to avoid the worst impacts of climate change.In our analysis, we assumed that existing oil and gas fields are going to keep on pumping for as long as they can. That means that the decisions about new projects will shape the future for the oil and gas industry and our climate. And when it comes to these new oil and gas fields, production from the US is set to eclipse the rest of the world. Production from new fields in the US is set to be eight times that of the next largest producing country – Canada. New US production is forecast to be 20 times that of Russia and more than 1.5 times the total of all other countries combined.Output is set to be so vast that if US states were treated as countries, Texas is forecast to be the biggest producer of new oil and gas in its own right, with production nearly four times that of Canada. Seven out of the top 10 biggest oil and gas producers would be US states, with only Canada, Brazil and Russia making it onto the list. Pennsylvania is set to be the third largest producer of new oil and gas, producing more than double that of Russia.If things don’t change, by the end of the next decade, new oil and gas fields in the US will produce more than twice what Saudi Arabia produces today. The future of our changing climate and its increasingly devastating impacts across the globe will be shaped by future oil and gas production. And if the future of oil and gas production is decided by what happens in new fields, then it will be determined by what happens in the US in the next decade.

US Fracking Sector Disappoints in 2Q – A review of 29 fracking-focused oil and gas companies revealed “meager” cash returns in the second quarter of 2019. The report, which was carried out by Sightline Institute and the Institute for Energy Economics and Financial Analysis (IEEFA), noted that only 11 of the 29 companies under review registered positive free cash flows and that the 29 companies combined generated $26 million in aggregate free cash flows. These aggregate free cash flows were said to be “far too modest to make a significant dent in the more than $100 billion in long-term debt owed by these companies, let alone reward equity investors who have been waiting for a decade for robust and sustainable results”. The report, which stated that free cash flow is a crucial gauge of financial health, highlighted that “disappointing” cash flows have “soured” investors on the sector. It also noted that, at the close of 2Q, the oil and gas sector was near the bottom of the S&P 500 and stated that by August 15, the sector hit “rock bottom, with drilling, exploration and production, and equipment and services leading the decline”. “There were winners and losers this quarter, but overall, the oil and gas sector is still underperforming on virtually every financial measure,” Sightline Institute’s Clark Williams-Derry said in a company statement. “Fracking remains a highly tenuous proposition for investors,”

U.S. refiners limit crude processing amid slack fuel demand- Kemp (Reuters) – U.S. refineries have cut the volume of crude processed so far this year, but stocks of gasoline and distillates remain ample, highlighting the slack demand for transportation fuels. Fuel consumption has stalled, part of a worldwide slowdown in oil demand associated with the slackening of manufacturing and freight activity. U.S. refineries have reduced crude input by an average of 247,000 barrels per day since the start of the year compared with the same period in 2018, according to data from the U.S. Energy Information Administration (EIA).Year-to-date processing rates have fallen for the first time since 2011 and by the most since the recession of 2008/09 (“Weekly petroleum status report“, EIA, Aug 21).Refinery crude consumption has fallen by around 56 million barrels so far compared with the same period in 2018 (https://tmsnrt.rs/2NvuABQ).Refineries cut processing sharply during the regular maintenance season in March and April and have never made up the shortfall.Processing has remained at or below prior-year rates throughout the summer driving season, normally the highest demand of the year.Philadelphia Energy Solutions’ 335,000 bpd refinery on the East Coast has been shut since a fire and explosion on June 21, which may have contributed to the loss of crude processing.But processing was already running below prior-year rates before the plant exploded and has been below 2018 rates for 13 out of the last 16 weeks since the start of May.Refiners on the East Coast have cut processing by an average of almost 120,000 bpd so far this year (mostly due to the Philadelphia explosion).But they have also reduced processing by 87,000 bpd in the Midwest, 15,000 bpd along the Gulf Coast and 45,000 bpd on the West Coast.Despite the reduction in processing, there has been no shortage of either gasoline or distillate fuel oil, with gasoline stocks level with last year and distillates comfortably above it. Fuel consumption is broadly unchanged compared with 2018, with the volume of gasoline supplied to domestic customers flat so far this year and distillate consumption down slightly.

Shale Bond Buyers Get Picky— After years pouring funds into the shale boom, bond buyers are getting increasingly selective as defaults rise and many explorers continue to burn more cash than they make. While Exxon Mobil Corp. and Occidental Petroleum Corp. have recently sold a combined $20 billion of investment-grade debt, junk rated issuers are getting a far different market reception. High-yield energy companies have sold about half as much corporate debt this year as they had at the same time in 2018, according to data compiled by Bloomberg. Issuance in the broader junk bond market, by contrast, was up about 30%. “We haven’t seen new energy deals getting done in the first seven months of the year for anything rated lower than B,” Eric Rosenthal, senior director for leveraged finance at Fitch Ratings, said in a telephone interview. Wary investors are more than ever pushing shale explorers to shift from the growth-focused novelty they once were to better-managed, cash-generating businesses. While they’re sitting on a wealth of crude in regions like the Permian Basin of West Texas and New Mexico, constantly tapping those resources with high-tech rigs and fracking technology can be a money drain that some have handled poorly. And while oil has more than doubled from the 2016 low, trading has been erratic. Earlier this month one oil benchmark suffered the steepest one-day drop since February 2015, as the escalating trade war between the U.S. and China roiled financial markets. Falling crude prices hurt revenue and make it difficult for companies to continue spending as much money on projects. “Ultimately, investors are also becoming a little more disciplined, if you will, and part of it may be just because of volatility on the commodity side,” said Mark Freeman, Founder and Chief Investment Officer at Socorro Asset Management LP. On Monday, West Texas Intermediate oil futures were trading around $55 a barrel. The energy sector, which makes up the biggest chunk of the U.S. high yield bond market, has been the laggard this year in the Bloomberg Barclays high-yield index as defaults ratcheted higher.

Investors Are Ditching High-Yield Shale Bonds – Investors in high-yield riskier bonds of U.S. shale firms have caught up with equity investors in showing impatience over the mounting debt that the shale patch has piled up to fund production growth at the expense of cash flow and profits. So far this year, bond issues of high-yield energy firms have been half the amount they had sold at this time last year, while total bond issues by all junk rated companies have grown by 30 percent, data compiled by Bloomberg shows.In the Bloomberg Barclays high-yield index, the energy bond issuance has been underperforming the other sectors. The energy sector itself represents the single largest portion of the high-yield bond market in the United States. Persistently low oil prices and high corporate debt at the high-yield energy companies point to more pain and more defaults ahead, analysts say.Signs have already started to emerge. Earlier this month, Halcon Resources Corporation filed for Chapter 11 bankruptcy proceedings, its second Chapter 11 this decade.A few days later, Sanchez Energy also filed for reorganization under Chapter 11 following “an extensive review of strategic alternatives to align its capital structure with the continued low commodity price environment.”In July, Fitch Ratings expected the energy sector to lead U.S. high yield default volume for the third consecutive month after Weatherford’s bankruptcy. The trailing 12 months (TTM) energy default rate stood at 4.1 percent in July, compared to 1.9 percent for the overall market, Fitch said. The Halcon and Sanchez bankruptcies in August pushed the U.S. high yield energy default rate to 5.7 percent from 4.1 percent, marking the sixth consecutive month of an energy filing, Fitch Ratings said in a report last week.

Oil CEOs Sell Stock and Rip Investor Apathy, Raymond James Says – The top executives at America’s independent oil and gas producers say over and over again that their poor stock performance presents a buying opportunity. That hasn’t stopped them from dumping their own shares.That’s the result of a Raymond James analysis of chief executive officers’ pay across U.S. explorers. Over the past five years, the typical CEO liquidated about $4 million worth of equity, based on the median of data assessed by Raymond James, and almost 60% were net sellers.It’s a trend that makes it harder to buy CEOs’ oft-repeated message that their companies are undervalued. An index of independent explorers is down 27% in the last year, while the S&P 500 is up 2.6%.Investors and analysts have been calling on companies to better align executive compensation plans with shareholder returns, rather than production growth. That’s generally happening, according to Raymond James analysts including John Freeman, but shareholders keep complaining that CEOs don’t have enough “skin in the game.”The CEOs of about 80% of the companies in Raymond James’ coverage space hold less than 1% of outstanding shares, the report said.

Bankruptcy Filings Rise Among US Energy Producers, Report – According to a new report from law firm Haynes and Boone LLP, bankruptcies in the upstream sector are increasing this year as energy spot prices remain subdued amid a cyclical downshift in the economy. So far, 26 exploration and production (E&P) firms have filed for bankruptcy through mid-August, with debts totaling $10.96 billion. The firm noticed a surge in bankruptcies began in May, following a -23% correction in WTI prices from mid-April to mid-June. In 2018, 28 E&P firms filed for bankruptcy, posting $13.2 billion in debt, while 24 firms asked for protection in 2017 with $8.5 billion in debt. The firm points out that insolvencies in the energy patch are gaining momentum.“So far this year there has been an uptick in the number of filings,” Haynes & Boone said. Oil and gas prices have remained depressed for 2019. The law firm said it’s hard to tell if a new bankruptcy wave is imminent, but said, “some stakeholders may have given up hope that resurgent commodity prices will bail everyone out,” especially operators who have been on the verge of bankruptcy.”For these producers, the game clock has run out of time to keep playing ‘kick the can’ with their creditors and other stakeholders,” the firm warned.Buddy Clark, a Haynes & Boone partner, told Reuters that many of 2019’s bankruptcies are pre-planned, Chapter 11 restructurings, where creditors agree in advance on restructuring plans.”I don’t think you will see a lot of Chapter 7 (liquidations),” he said. “When you see Chapter 7s is when there are no assets left. Typically, there are always assets left.” Natural Gas Intelligence believes a bankruptcy wave for the upstream sector could be nearing. This is because operators across the country have been scaling back since oil crashed -44% in 4Q18. Producers have been faced with margin compression, high debt loads, and oversupplied markets so far this year.

Shale Bleeds Cash Despite Best Quarter In Years – The second quarter earnings results are complete, and it was another rough three-month period for U.S. shale. Oil prices climbed in the second quarter, with Brent topping out in the mid-$70s, before falling again after the U.S.-China trade war escalated. Notably, the extension of the OPEC+ cuts failed to rally oil prices amid growing concerns about demand. For U.S. shale, higher oil prices helped to some degree, but by and large it was another period of disappointment for a sector that has underwhelmed for years. Investors are increasingly losing patience, punishing the energy sector as a whole, and financially-strapped companies in particular. In a study of 29 fracking-focused oil and gas companies by the Sightline Institute and the Institute for Energy Economics and Financial Analysis (IEEFA), only 11 companies posted positive free cash flow. Even then, the figures were paltry. Collectively, the group only reported $26 million in free cash flow for the second quarter, “far too modest to make a significant dent in the more than $100 billion in long-term debt owed by these companies, let alone reward equity investors who have been waiting for a decade for robust and sustainable results,” the report said.To be sure, the free cash flow result – only slightly positive – was the best result in years, the IEEFA/Sightline Institute report said. It points to progress for U.S. shale, a sector that routinely posted billions of dollars of red ink and negative cash flow in years past. The second quarter result stands in sharp contrast to the $2.81 billion the group of companies lost in the first quarter.Yet, despite the dramatic improvement, the financial results remained unimpressive. It’s an indictment of the business that one of the best quarters in years was barely cash flow positive “Last quarter’s cash performance – just a hair over breaking even – would count as a bitter disappointment in virtually any other sector of the economy,” the report stated. “But for an industry that has posted negative cash flows for a decade, these mediocre results represent a financial high-water mark.”

Investigation and cleanup underway after oil spill near Edmonton – The Alberta Energy Regulator is investigating an oil spill southwest of Edmonton. The spill happened in the Washout Creek Natural Area, which is about 150 kilometres from Edmonton.The AER first received notice of the spill on Thursday night. It’s believed 40 cubic metres of crude oil spilled into the creek, a tributary of the North Saskatchewan River. Containment booms have been put in place. The pipeline belonged to Bonterra Energy Corporation which has been ordered to clean up the site.

Alberta Extends Oil Output Cuts to End of 2020 — Canada’s oil-rich province of Alberta is extending its output cuts by a year as delays to key pipelines threaten to prolong a glut of crude in the region. The curtailment program, which will now end in December 2020, had been slated to wrap up at the end of this year as Enbridge Inc.’s expansion of the Line 3 pipeline began moving oil. But that project was set back by a year because of permitting delays in Minnesota, leaving the province’s drillers churning out more oil than they could ship to refineries. TC Energy Corp.’s planned Keystone XL line and the Canadian government’s expansion of the Trans Mountain conduit also have been bogged down by legal challenges. Alberta’s delay in ending the curtailment program may help support oil prices, as U.S. Midwest and Gulf Coast refiners face the prospect of constrained shipments of Canadian heavy crude at the same time that they’re getting reduced supplies from Mexico and Venezuela. The policy is a mixed bag for Canadian drillers, who are benefiting from the higher prices but frustrated by their inability to expand output. “This is a short-term solution, and it is the last thing we want to be doing,” Alberta Energy Minister Sonya Savage said during a news conference. “We’re doing it because it’s essential.” Ending the program too early could cause a collapse in Western Canadian Select crude prices, hurting producers and reducing the value of royalties paid to the province, she said. Alberta could still end the curtailment before December 2020, but will need to do so in an orderly fashion, she said.

Foreign Oil Firms Are Bailing on Canada— Capital keeps marching out of Canada’s oil industry, with Kinder Morgan Inc.’s sale of its remaining holdings in the country on Wednesday adding to more than $30 billion of foreign-company divestitures in the past three years.Pembina Pipeline Corp., based in Calgary, is snapping up Kinder’s Canadian assets and a cross-border pipeline in a $3.3 billion deal. For Houston-based Kinder, the deal completes an exit from a country that has frustrated more than a few companies — from ConocoPhillips and Royal Dutch Shell Plc to Marathon Oil Corp.The drumbeat of exits, rare for such a stable oil-producing country, adds an extra layer of gloom for an industry that accounts for about a fifth of Canada’s exports. The energy sector — centered around Alberta’s oil sands — has struggled to rebound since the 2014 crash in global oil prices, with capital spending declining for five straight years and job cuts pushing the province’s unemployment rate above 6%. Alberta is forecast to post the slowest growth of any region in Canada this year.The situation isn’t likely to improve any time soon, with key pipelines like TC Energy Corp.’s Keystone XL and Enbridge Inc.’s expansion of its Line 3 conduit bogged down by legal challenges. The lack of pipelines has weighed on Canadian heavy crude prices for years, sending them to a record low late in 2018.“If they thought things were getting better in Canada, they might hold on, but they don’t see things getting better,” Laura Lau, who helps manage more than C$2 billion ($1.5 billion) at Brompton Corp. in Toronto, said in an interview. “The pipeline situation is getting worse; everything is getting worse.”Other recent major divestitures include ConocoPhillips’ $13.2 billion sale of oil-sands and natural gas a ssets to Cenovus Energy Inc. in 2017, and Shell’s and Marathon’s sales of their stakes in an oil-sands project to Canadian Natural Resources Ltd. for about $10.7 billion that same year. Canadian Natural also bought Oklahoma City-based Devon Energy Corp.’s Canadian heavy oil assets this year for $2.79 billion. Norway’s Equinor ASA pulled out in 2016 after facing pressure at home to invest in lower-emission projects.

Shale gas developer frustrated by uncertainty surrounding fracking — The New Brunswick government has yet to fulfill a controversial election promise to reopen the door to natural-gas fracking, and now one of the key players in the gas industry says the uncertainty surrounding fracking is becoming an issue. With more than two dozen wells in the Sussex area, Corridor Resources is the biggest player in the province’s domestic-gas industry, but the company is waiting for the moratorium on fracking to be lifted in the area. As a result, the company has halted the process. Corridor has also expressed concern over coming consultations with the Aboriginal community. “Predicting a timeline as to when the consultation process is completed is difficult,” states the company in its quarterly report. But the New Brunswick Aboriginal Peoples Council says it has many questions about fracking and needs to be properly consulted on the issue. “What is actually going on here? Can it be done safely? Can it not be done safely? Is it going to affect the water? How is it going to affect the water? The whole process, they have to come and sit down and properly consult,” said Chief Barry Labillois. Holland says consultations with First Nation groups over the possible extraction of natural gas in Sussex have been ongoing, and he plans to set up in-person meetings soon. Meanwhile, environmental groups say First Nation communities are being made into scapegoats. “Oil companies and the gas companies, and some slow-to-the-case premiers, like to blame regulatory uncertainty and First Nations vetoes for just about everything,” said Lois Corbett of the New Brunswick Conservation Council.

Legal Tussle Prevents $2.5 Billion Gas Pipeline to Mexico From Opening – WSJ – In June, construction crews finished work on a 500-mile, $2.5 billion natural-gas pipeline that runs under the Gulf of Mexico from South Texas to the port of Tuxpan in northeastern Mexico. Once it turns on, the pipeline will increase Mexico’s capacity to import natural gas by 40%, fueling the power plants and industrial installations that drive the country’s export-driven manufacturing economy. But…

CNPC Shuns Venezuela Oil on Tighter US Sanctions— China’s biggest energy company is backing away from direct purchases of Venezuelan crude as the Trump administration tightens sanctions against the South American nation. China National Petroleum Corp. has canceled plans to load about 5 million barrels worth of Venezuelan oil onto ships this month in the aftermath of the latest executive order by President Donald Trump, according to people with knowledge of the situation who asked not to be identified discussing proprietary information. CNPC joins Turkey’s largest bank, Ziraat Bank, which severed its relationship with Venezuela’s Central Bank following sanctions. The moves represent a setback for Venezuelan President Nicolas Maduro, who has been counting on both China and Russia to keep the country going amid a humanitarian crisis, food shortages and hyperinflation. China became the top destination for Venezuelan crude after U.S. sanctions against state-owned Petroleos de Venezuela SA were announced at the end of January. Venezuela may run low on options without the help of CNPC to export oil, a main source of revenue that bankrolls the Maduro regime. The three August-loading cargoes canceled by CNPC’s subsidiary PetroChina Co. Ltd. haven’t so far attracted another buyer, according to reports seen by Bloomberg. PetroChina’s press office declined to comment on market speculation, citing company policy. On Aug. 5, Trump signed an executive order authorizing sanctions on anyone who provides support to Maduro. Opposition leader Juan Guaido, recognized by the Trump administration as the country’s leader, is backed by more than 50 countries. PetroChina’s pullback doesn’t mean China will completely turn away from Venezuelan oil. Other companies can continue to supply China’s independent refiners known as teapots with the South American nation’s crude, according to people familiar with the matter. China has been a staunch supporter of the Venezuelan government since its first oil-backed loan to late president Hugo Chavez. The Asian nation has loaned $50 billion in the past decade in exchange for oil. China, along with Russia, is one of 14 nations that support Maduro.

Half of Venezuela’s Oil Rigs May Shut Down If US Waivers Lapse — A looming U.S. sanctions deadline is threatening to clobber Venezuela’s dwindling oil-rig fleet and hamper energy production in the nation with the world’s largest crude reserves. Almost half the rigs operating in Venezuela will shut down by Oct. 25 if the Trump administration doesn’t extend a 90-day waiver from its sanctions, according to data compiled from consultancy Caracas Capital Markets. That could further cripple the OPEC member’s production because the structures are needed to drill new wells crucial for even maintaining output, which is already near the lowest level since the 1940s. A shutdown in the rigs will also put pressure on Nicolas Maduro’s administration, which counts oil revenues as its main lifeline. The U.S. is betting on increased economic pressure to oust the regime and bring fresh elections to the crisis-torn nation, a founding member of the Organization of Petroleum Exporting Countries and Latin America’s biggest crude exporter until recent years. Venezuela had 23 oil rigs drilling in July, down from 49 just two years ago, data compiled by Baker Hughes show. Ten of those are exposed to U.S. sanctions, according to calculations by Caracas Capital Markets. The Treasury Department extended waivers in July for service providers to continue for three more months, less than the six months the companies had sought. Most other government agencies involved in the deliberations opposed any extension, a senior administration official said last month, adding that another reprieve will be harder to come by.

U.S. Sanctions Backfire, Lead To Boost In Russian Oil Exports – U.S. sanctions against Venezuela and Iran have had an unplanned side effect: they have increased exports of heavy, sour crude from Russia, Bloomberg reports, adding that calculations have shown Russian oil companies raked in an additional US$905 million at least from these sales between November and July. The Urals blend is the big winner of the U.S. sanctions, according to Bloomberg’s calculations. Venezuela is one of the main global suppliers of heavy crude, but U.S. sanctions have shrunk its exports significantly. Iran also produces heavy, which has now become less readily available to foreign buyers, freeing up space for Urals. Finally, OPEC members prioritized cutting their heavy crude production as part of their December 2018 agreement and that added to the strain on heavy crude supply. Like heavy crude in general, Urals normally trades at a discount to Brent. However, like other heavy blends, the Russian one has narrowed the gap since November, when U.S. sanctions against Iran snapped back, despite the waivers granted to eight importing countries. Eventually, it swung to a premium, especially in the Mediterranean, where a lot of Iranian oil used to go.Right now, Urals is trading at a discount of more than $2 per barrel to Brent crude but at a premium to West Texas Intermediate. It has swung to a premium to Brent several times this year. Meanwhile, according to information from oil data analytics firm OilX, Russia’s overall production is also on the rise, after a temporary decline. As of August, this climbed back above 11.3 million bpd, after dropping below 11.2 million bpd in July. U.S. sanctions are definitely changing production and price patterns in heavy crude and so is U.S. production. Italy’s Eni said in its latest World Oil Review report recently that last year that the portion of heavier sour crude grades had fallen below 40 percent of the total for the first time ever. At the same time, thanks to the U.S. shale revolution, the share of light, sweet crude increased to more than 20 percent. This, too, has had an effect on the price difference between lighter and heavier crudes.

Trump Sanctions Leave Russian Exporters $1B Richer – — U.S. President Donald Trump’s sanctions against Iran and Venezuela have inadvertently increased demand for a Russian brand of crude oil, boosting revenues for the nation’s exporters.Russian oil companies received at least $905 million in additional revenues between November and July, data compiled by Bloomberg show. The calculation is based on difference between the Urals spread to the Brent benchmark over the period compared to the five-year average.The sanctions added to a jump in demand for Russian crude in the wake of output cuts from the Organization of Petroleum Exporting Countries and their partners. As a result, Russia’s Urals blend of crude has started to regularly trade at a premium to Brent.“There is a shortage of competing heavier, sourer crude right now as a result of sanctions on Iran and Venezuela, but also because of OPEC+’s current production cut agreement,” Konstantsa Rangelova, analyst at JBC Energy, said by email. “Urals in the Mediterranean is at an all-time high.”The Bloomberg calculations are based on terminal data, oil loading programs for Russian ports and information from a trader monitoring S&P Global Platts oil assessments. The estimate doesn’t include any of the overall effect on Brent prices from Trump’s policies or the OPEC+ deal, just the shift in relative prices. The U.S. announced sanctions against Venezuela in late January and removed the remaining waivers for buyers of Iranian oil from May. The measure created a shortage of the heavy, sour kind of crude that the two export, a variety similar to that produced in Russia. While this oil is considered to be of lower quality, some refineries are built to process it and switching to other grades is costly.

Exclusive: Russia’s Rosneft to switch to euros in oil products tenders – traders (Reuters) – Russia’s Rosneft, one of the world’s top oil producers and exporters, has notified customers that future tender contracts for oil products will be denominated in euros not dollars, five trading sources told Reuters. The move, which could come as soon as this year, is likely to be seen as an attempt to offset any potential negative impact of U.S. sanctions on Russia. Rosneft, which accounts for over 40% of oil output in Russia, produced 45.8 million tonnes of oil products at home in the first six months of this year – from diesel and gasoline to fuel oil and petrochemicals. Around half was exported to west and south-east Europe and to Asia, according to the company’s own data. The bulk of oil products for export are sold at tenders: Rosneft holds annual tenders as well as a number of spot or short-term tenders, with BP, Glencore, Trafigura, Vitol and Cetracore among top buyers. Last year, trading sources told Reuters that Russian energy majors were asking Western oil buyers to prepare to make payments in euros instead of dollars. Rosneft last week asked buyers to use the euro as the default currency for the first time in a spot tender to sell naphtha, an official company document showed. Rosneft was included in a list of some U.S. sanctions imposed on Russian companies in 2014, although those sanctions do not limit U.S. dollar usage in Rosneft tenders.

Rosneft becomes top Venezuelan oil trader, helping offset U.S. pressure (Reuters) – Russian state oil major Rosneft has become the main trader of Venezuelan crude, shipping oil to buyers in China and India and helping Caracas offset the loss of traditional dealers who are avoiding it for fear of breaching U.S. sanctions. Trading sources and Refinitiv Eikon data showed Rosneft became the biggest buyer of Venezuelan crude in July and the first half of August. It took 40% of state oil company PDVSA’s exports in July and 66% so far in August, according to the firm’s export programs and the Refinitiv Eikon data, double the purchases before sanctions. Three industry sources said Rosneft, which produces around five percent of the world’s oil, is now taking care of shipping and marketing operations for the bulk of Venezuelan oil exports, ensuring that PDVSA can continue to supply buyers. Rosneft used to resell volumes it bought from PDVSA to trading firms and was less involved in marketing. Now it has started supplying some PDVSA clients – Chinese and Indian refineries – while trading houses such as Swiss-based Trafigura and Vitol have walked away because they fear they could breach secondary U.S. sanctions, according to six trade sources. Oil accounts for more than 95 percent of Venezuela’s export revenue and Washington has warned trading houses and other buyers about possible sanctions if they prop up Caracas.

Trade war impasse casts a ‘dark cloud’ over outlook for US oil shipments, analysts warn –An escalating trade war between the world’s two largest economies is negatively impacting the outlook for U.S. crude shipments, energy analysts have warned, amid fears that China could soon dramatically reduce its intake of American oil.Trade tensions between Washington and Beijing prompted some external observers to warn the outlook for China-bound U.S. crude shipments wasfirmly skewed to the downside.“Casting another dark cloud over the outlook for U.S. crude shipments is the ongoing U.S.-China trade impasse,” Stephen Brennock, oil analyst at PVM Oil Associates, said in a research note.It was around this time last year that China emerged as the biggest buyer of U.S. crude, Brennock said, but Chinese buyers were now seen as a “virtual shoo-in” to halt their intake of American oil.He explained that while losing what was once your biggest customer could hardly be conducive to sustained growth, any drop-off in Chinese purchases might be offset by an increase in exports to other consumers.“All things considered, the U.S. crude-export machine may struggle to maintain its record-breaking run,” Brennock said. At the start of August, President Donald Trump announced the White House would impose additional 10% tariffs on $300 billion worth of Chinese imports from September 1. In response, China let its yuan weaken below the key 7-per-dollar level for the first time in more than a decade. Trump appeared to escalate tensions even further by declaring China as a currency manipulator. The tit-for-tat dispute sent oil prices tumbling, with crude futures dropping to a seven-month low at one stage.Oil prices have since pared some of their recent losses. International benchmark Brent crude traded at $59.08 Monday afternoon, up around 0.8%, while U.S. West Texas Intermediate (WTI) stood at $55.32, almost 0.9% higher.

Cuadrilla Halts UK Fracking Again After Biggest Tremor Yet – Just a week after resuming fracking at its UK site, Cuadrilla paused operations – yet again – after a tremor estimated to be the biggest yet since the UK shale gas company began hydraulic fracturing exploration in northwest England last year.Cuadrilla confirmed that micro seismicity had been detected at the monitoring system in place at the shale gas exploration site at Preston New Road near Blackpool in Lancashire. The company said that “Most local people will not have felt it due to its small size,” adding that it was pausing operations and would monitor the situation for the next 18 hours. The halting of fracking comes just a week after Cuadrilla resumed fracking at a second well at Preston New Road after it secured all permits to do so. Cuadrilla resumes its fracking operations in Lancashire amid opposition from local residents, while the company – as well as the British government – believe that shale gas could reduce the UK’s gas import dependence and contribute to its net zero emissions target by 2050.At the Preston New Road fracking site, Cuadrilla has stopped fracking at its first well multiple times over the past year, because under UK regulations, in case of micro seismic events of 0.50 on the Richter scale or higher, fracking must temporarily be halted and pressure in the well reduced.While Cuadrilla aims to continue with its well completion program at the site andtouts spending on shale gas as boosting the Lancashire economy, climate activists and local residents continue to voice their opposition to the activities. Friends of the Earth UK says that “It’s time for this climate-wrecking industry to be banned,” and calls on the new UK government “not to frack it up.”

UK has five times less shale gas than previously thought, fracking study finds – There may be a lot less shale gas in the UK than previously thought – and fracking may only yield 10 years’ worth of the fuel, a study has suggested. This is five times less than 2013 estimates of 50 years’ worth, according to analysis of Bowland Shale Formation in north England. The new estimates are based on lab analysis by the University of Nottingham and British Geological Survey (BGS). Researchers used a high-pressure water technique that simulates oil and gas generation in deep reservoirs and applied it to shale to evaluate in the laboratory how much gas could be extracted. Fracking has proved controversial in the UK. Backers, including the government, claim exploiting the fossil fuel could reduce reliance on imports, secure supplies, help cut carbon emissions and create jobs. But opponents say fracking can cause earthquakes, damage the countryside and keep the UK hooked on fossil fuels instead of focusing on renewables to help tackle climate change. Researchers analysed shale rock in two locations, and extrapolated the findings to the whole of the Bowland Shale. They concluded that the maximum gas there equated to “potentially economically recoverable reserves of less than 10 years of current UK gas consumption”. Report author Professor Colin Snape said: “We have made great strides in developing a laboratory test procedure to determine shale gas potential. “This can only serve to improve people’s understanding and government decisions around the future of what role shale gas can make to the UK energy’s demand as we move to being carbon neutral by 2050.”

Ever Fewer Wealthy, Ever More Poor, Projected To Equal Ever More Demand?!? –

• Wealthier half of the world population (with incomes of $4k+) consumes 90% of total energy and oil.
• The under 65yr/old population of the wealthier nations begins declining (depopulating) in 2023, declining in excess of 10 million annually by 2035.
• Despite the imminent decline in working age / consumer age populations of wealthier nations, total global energy and oil consumption are projected to continue rising on growth among the poor.

First chart is the 0 to 65 year old population of the worlds nations that have in excess of $4,000 annual gross national income per capita or average of $16k per capita (solid blue line) and their total energy consumption (dashed blue line). This is versus the worlds nations with annual gross national income per capita below $4,000 or average of $1.6k per capita (solid red line) and their total energy consumption (dashed red line). Same variables as above but showing the annual change in the nations with $4k+ and annual change in population under $4k…again versus their total energy consumptions. Population data includes anticipated ongoing immigration to the wealthier nations away from poorer nations at present rates…absent this, the wealthy nation depopulation begins sooner and is even more significant. Global oil consumption with EIA projection through 2040 (black line), annual wealthier under 65 year old population growth (blue columns), annual poorer under 65 year old population growth (red columns), plus Federal Reserve set federal funds rate (yellow line). Finally, just two variables – the change per five years of the 0 to 65 year old wealthier (blue columns) and poorer (red columns) nations populations versus change per five years of global oil consumption (black line). As the population of nations that consumes 90% of oil globally begins declining and growth among the poorer nations decelerates, oil consumption is projected to continue increasing?!? Despite population growth driving up to half of GDP growth and the poorer nations reliant on growth among wealthier nations for their own growth…despite present near zero, zero, and negative interest rates to accommodate massive debt loads…somehow depopulation amidst the heavily indebted nations that consume 90% of global energy (coupled with conservation and innovation) is projected to be offset and outweighed by demand growth among the consumers of 10% of global energy?!?. Go figure.

Glencore, BP stuck with tainted Russian crude – (Reuters) – BP and Glencore are struggling to sell around 600,000 tonnes of tainted Russian oil more than three months after the contamination was discovered, according to six trading sources. Russia’s oil industry was plunged into a crisis in April after about 5 million tonnes of oil for export was found to be contaminated with organic chloride, a chemical used to help boost oil extraction but which can damage refining equipment. Exports through the Druzhba pipeline that transports oil to Germany, Poland, Hungary, Slovakia, the Czech Republic, Ukraine and Belarus were halted. The Baltic port of Ust Luga loaded some 15 cargoes or 1.5 million tonnes of the contaminated oil for Western buyers. At least 6 cargoes that sailed from Ust Luga remain unsold, according the trading sources. Glencore is stuck with 500,000 tonnes in one very large crude carrier (VLCC) Amyntas and two smaller tankers – Searanger and Searuby, according to the sources and Refinitiv Eikon vessel tracking system. BP has tried to sell its cargo Fsl Shanghai at a tender earlier this month but failed, according to the same traders. BP and Glencore both bought the oil from Russian state oil major Rosneft. BP and Glencore declined to comment. Rosneft did not respond to a Reuters request to comment. They cannot claim compensation until they sell the oil. “You can’t file a claim against Russia until you have actually sold your oil and counted your losses,”

South Sudan Makes New Oil Discovery in Adar— South Sudan has made a new crude find in the northern oilfields of Adar and plans production by the end of the year, Information Minister Michael Makuei Lueth said. The oil will be linked to the nearby Paloch oilfields that are managed by Dar Petroleum Operating Co., Lueth said Monday by phone from the capital, Juba. Petroleum Minister Awow Daniel Chuang announced the discovery to the cabinet on Friday, Lueth said. “It will start as soon as they finish connectivity and the production will likely begin towards the end of this year,” Lueth said, without giving further details. “This is a new discovery and hence people will have to do so many things in order get to production. It needs a pipeline to connect it to the main pipe.” Ruined by war, South Sudan is trying to recover by resuming crude production. Output has increased to 180,000 barrels per day from 130,000 barrels per day during its five-year civil war.

Qatar may be losing the top spot as world’s biggest LNG exporter – Qatar will lose its title as the world’s largest exporter of liquefied natural gas (LNG) within the next year, as Australia ramps up production on a slew of multi-billion dollar export projects. “Australia and Qatar continued to jostle for the title of the world’s largest LNG exporter over the first five months of 2019,” the Australian government said in a recent report. Australia exported more LNG than Qatar in November 2018 and April 2019. But now, the U.S Energy Information Administration (EIA) says Australia is on track to consistently export more LNG than Qatar, as recently commissioned projects such as Wheatstone, Ichthys, and Prelude ramp up production. Prelude, Royal Dutch Shell’s floating LNG facility in a remote field northeast of Broome in Western Australia, shipped its first LNG cargo to customers in Asia in June. The landmark facility, capable of holding 175 Olympic-sized swimming pools of LNG in its storage tanks alone, was the last of eight new LNG projects that came online in Australia between 2012 and 2018. The new facilities have pushed Australia’s export capacity from 2.6 billion cubic feet per day (bcf/d) in 2011 to more than 11.4 bcf/d in 2019. The EIA says Australia has already surpassed Qatar in LNG production capacity. More supply will pressure spot prices The ramp up of new capacity and exports combined with fragile demand from key customers in Japan, China and South Korea has resulted in a drastic decline in spot LNG prices since late 2018.

China’s petrochemical expansion to overwhelm Japan, South Korea producers – (Reuters) – A massive surge in China’s manufacturing capacity for paraxylene, a petrochemical used to make textile fibers and bottles, could force leading exporters in Japan and South Korea to cut production as early as the second quarter of 2020. China will add about 10 million tones of paraxylene manufacturing capacity from March 2019 to March 2020, according to company reports and officials, that is enough for making 22 trillion 500-milliliter plastic bottles. The world’s top consumer of paraxylene (PX), China imports 60% of its need for the chemical to feed polyester demand that has more than doubled since 2010. Over half of China’s PX imports come from South Korea and Japan and the new capacity is expected to cut Chinese imports by about 50%. Without Chinese demand, the profit margins for regional manufacturers such as Japan’s JXTG Holdings Inc (5020.T), South Korea’s Lotte Chemical (011170.KS) and Hyundai Cosmo Petrochemical and domestic producer Dalian Fujia are expected to drop further, likely causing a rollback in output and decline in earnings. “We will see drastic cutbacks in PX operating rates among many Asian exporters, and potential capacity rationalization in sites where integrated refining-aromatics margins are poor,” said Darryl Xu, principal analyst for Asia chemicals at consultancy Wood Mackenzie. Private companies are leading China’s latest PX boom through a string of projects often integrated with big oil refineries which make them more cost competitive and flexible. China’s Hengli Group launched in March a PX plant capable of producing 4.5 million tonne per year (tpy) in the city of Dalian and Zhejiang Petrochemical is slated to start a 4 million tpy plant in Zhoushan late in 2019. In July, Shandong-based Hongrun Petrochemical began trial runs at its 700,000 tpy plant and China Petroleum and Chemical Corp, or Sinopec (0386.HK), will start a plant in Hainan producing 1 million tpy in the third quarter.

China-Owned Tanker Carrying 2M Barrels Of Iranian Oil Caught ‘Ghosting’ –China continues to play a large part in preventing Trump’s desire to take Iran’s crude exports down to zero, despite a noticeable drop on its Iran oil imports over the summer after the end of the US waiver program; however, more evidence has emerged that the sanctions evasion continues. A Chinese owned tanker believed carrying about 2 million barrels of oil has been caught ‘ghosting’ according to ship tracking data:While in the Indian Ocean heading toward the Strait of Malacca, the very large crude carrier (VLCC) Pacific Bravo went dark on June 5, shutting off the transponder that signals its position and direction to other ships, ship-tracking data showed.Reuters says an American official has put ports in Asia on notice, warning them not to allow the Pacific Bravo to dock in violation of US sanctions. Besides ‘ghosting’ – a common tactic used in Iran sanctions busting – the tanker also appears to have tried concealing its identity with a name change, on July 18 suddenly presenting on global trackers as the VLCC Latin Ventura and appearing off Port Dickson, Malaysia.Tracking data shows this was nearly 1000 miles from where the Pacific Bravo had last been signalling. Reuters describes the gambit was easily uncovered, with US authorities accusing the ship of evading sanctions:But both the Latin Venture and the Pacific Bravo transmitted the same unique identification number, IMO9206035, issued by the International Maritime Organization (IMO), according to data from information provider Refinitiv and VesselsValue, a company that tracks ships and vessel transactions… Since IMO numbers remain with a ship for life, this indicated the Latin Venture and the Pacific Bravo were the same vessel and suggested the owner was trying to evade Iranian oil sanctions.

US Sanctions Force Iran to Ditch Cleaner Fuels Push— Iran is about to burn a lot more fuel oil as a result of U.S. sanctions and new global shipping rules, reversing the nation’s progress in switching to cleaner-burning natural gas. Power plants and other industrial facilities will burn more than 200,000 barrels a day of highly polluting fuel oil next year, double the amount Iran used in 2018, according to a forecast by Iain Mowat of consultant Wood Mackenzie Ltd. Iran produces a surplus of fuel oil, and the excess has swelled since the U.S. began restricting the OPEC member’s exports last year. Sanctions also prevent Iran from importing the equipment it would need to refine the heavy oil product into less-polluting products like gasoline and, even if they find a way building refineries takes time. The situation will only worsen once the International Maritime Organization restricts the use of high-sulfur fuel oil for most vessels starting Jan. 1. Commercial ships and power stations are the two main sources of demand for fuel oil. By curbing the shipping industry’s appetite, the UN agency’s new measure will leave Iran little choice but to burn more fuel oil at home to generate electricity. Iranians “will have no choice but to dump it at whatever low price they can get for it, cut back on refining or use it themselves,” said Robin Mills, chief executive officer of Dubai-based consultant Qamar Energy. Since anyone buying Iranian fuel oil would run afoul of U.S. sanctions, even rock-bottom prices might not be enough to stimulate sales, he said. Iran is a prime candidate for flouting the next year’s new IMO rules by using high-sulfur fuel oil in its own fleet, Mills said. International ports, however, have arranged for harsh penalties for violators. Iran’s government says it wants to build new refineries to process fuel oil into other products. Although refineries typically take four years to complete, Tehran is hoping for faster results, said Sakineh Almasi, a spokeswoman for the parliamentary energy commission, according to the parliament’s Icana news service. Almasi didn’t say how the government plans to work around U.S. sanctions. Meanwhile, Iran’s storage facilities for oil and fuel are filling up fast. Because the government prefers to reserve precious spare storage capacity for higher-value products such as condensate, it can’t accumulate surplus fuel oil for long, Mills said.

OPEC Turns Bearish On Oil – OPEC sees a “somewhat bearish” outlook for the rest of 2019, even as supplies remain tight in the short run. In its latest report, OPEC only slightly downgraded its forecast for global oil demand, lowering it to 1.10 million barrels per day (mb/d) for 2019, down only a minor 0.04 mb/d from a month earlier. That estimate could end up being too optimistic, and OPEC itself said the forecast is “subject to downside risks stemming from uncertainties with regard to global economic development.” Notably, OPEC said that global supply could grow by 1.97 mb/d this year, significantly outpacing demand growth. Still, that figure is down by 72,000 bpd from a previous estimate, due to lower-than-expected production growth in the U.S., Brazil, Thailand and Norway. In another worrying sign of a brewing supply surplus, OPEC said that oil inventories in OECD countries rose by 31.8 million barrels in June from a month earlier, rising to 67 million barrels above the five-year average. In other words, just as OPEC+ was meeting to extend the production cuts for another 9 months, inventories were rising, an indication of an oversupplied market. On a slightly positive note (for OPEC), the group revised up demand for its crude by 0.1 mb/d for both 2019 and for 2020. Still, it said that demand for its oil, often referred to as the “call on OPEC,” would drop to 29.4 mb/d in 2020, down from 30.7 mb/d this year. Based on those numbers, OPEC+ is staring down a serious supply glut next year absent further action. The group can either stick with current production levels and risk another market downturn, or it can swallow further production cuts.

Oil market starts to rebalance at lower prices- Kemp – (Reuters) – Global oil consumption is falling at the fastest rate for almost five years as manufacturing activity and trade flows slip around the world and vehicle production tumbles. Consumption in the top 18 consuming countries, each using more than 1 million barrels per day (bpd), fell by almost 0.2% in the three months between March and May compared with the same period a year earlier. Oil use is falling at the fastest rate since the third quarter of 2014, according to national government data submitted to the Joint Organisations Data Initiative. Falling consumption five years ago, combined with surging U.S. shale output and Saudi Arabia’s refusal to cut production, led to the price slump in 2014-2016. This time around, consumption has also stalled, and shale output is surging again, but Saudi production cuts have limited the fall in prices. Front-month Brent futures prices have so far fallen by $27 per barrel, or just over 30%, from their recent peak compared with a decline of almost $90 – or 77% – between June 2014 and January 2016. Like the earlier episode, however, a sustained period of lower prices will be needed to curb shale production growth and make consumption more affordable to restore market balance. The adjustment is already underway, with the number of rigs drilling for oil in the United States down by almost 120, or 13%, over the last nine months (https://tmsnrt.rs/2ZbDOKZ). U.S. crude oil production growth has decelerated to a year-on-year rate of around 1.6 million bpd, down from more than 2.0 million bpd at the end of 2018. As a rule of thumb, it takes 3-4 months for a change in benchmark oil prices to filter through to U.S. drilling rates and 9-12 months to affect production.

Oil up after drone attack on Saudi field, but OPEC report caps gains – Crude oil prices rose on Monday following a weekend attack on a Saudi oil facility by Yemeni separatists and as traders looked for signs of progress in U.S.-China trade negotiations. Price gains were, however, capped to some degree by an unusually downbeat OPEC report that stoked concerns about growth in oil demand. Brent crude, the international benchmark for oil prices, was up 67 cents, or 1.1%, at $59.31 a barrel. U.S. West Texas Intermediate (WTI) crude futures were up 76 cents, or 1.4%, at $55.63 a barrel. A drone attack by Yemen’s Houthi group on an oilfield in eastern Saudi Arabia on Saturday caused a fire at a gas plant, adding to Middle East tensions, but state-run Saudi Aramco said oil production was not affected. “The oil market seems to be pricing in again a geopolitical risk premium following the weekend drone attacks on Saudi Arabia, but the premium might not sustain if it does not result in any supply disruptions,” said Giovanni Staunovo, oil analyst for UBS. Iran-related tensions appeared to ease after Gibraltar released an Iranian tanker it seized in July, though Tehran warned the United States against any new attempt to seize the tanker in open seas. Concerns about a recession also limited crude price gains.

Oil rises 2% after attack on Saudi field, stimulus expectations (Reuters) – Oil prices gained roughly 2% on Monday after a weekend attack on a Saudi oil facility by Yemen’s Houthi forces threatened crude supplies and as traders looked for signs that top economies would take measures to counteract a global slowdown. Brent crude LCOc1, the international benchmark for oil prices, settled at $59.74 a barrel, rising $1.10, or 1.88%. U.S. West Texas Intermediate (WTI) crude futures CLc1 settled at $56.21 a barrel, up $1.34, or 2.44%. Signs of a slight softening of the trade war between the United States and China, including Washington extending a reprieve that permits China’s Huawei Technologies HWT.UL to buy components from U.S. companies, also helped oil prices. A drone attack by the Houthi group on an oilfield in eastern Saudi Arabia on Saturday caused a fire at a gas plant, adding to Middle East tensions, but state-run Saudi Aramco said oil production was not affected. “The oil market seems to be pricing in again a geopolitical risk premium following the weekend drone attacks on Saudi Arabia, but the premium might not sustain if it does not result in any supply disruptions,” said Giovanni Staunovo, oil analyst for UBS. Iran-related tensions appeared to ease after Gibraltar released an Iranian tanker it seized in July, with the vessel sailing for Greece, though Tehran warned the United States against any new attempt to seize the tanker in open seas.

Oil rises slightly as hopes of easing trade tensions lend support – Oil prices steadied on Tuesday on optimism U.S.-China trade tensions will ease and hopes major economies will take stimulus measures to ward off a possible economic slowdown, after falling earlier on concerns over future demand. Brent crude rose 3 cents to $59.77 a barrel by 12:10 p.m. EDT (1510 GMT), while U.S. crude was down 11 cents at $56.10 a barrel. Both contracts had traded lower earlier in the session. The United States said it would extend a reprieve that permits China’s Huawei Technologies to buy components from U.S. companies, signaling a slight softening of the trade conflict between the world’s two largest economies. “It’s the ebbing and flowing of the U.S.-China trade war and some hope of economic stimulus that’s coming at these markets, including potential fiscal stimulus by the Germans,” said John Kilduff, a partner at Again Capital in New York. Concerns over the overall level of demand for oil continue to weigh on crude prices. The Organization of the Petroleum Exporting Countries cut its forecast for global oil demand growth in 2019 by 40,000 barrels per day (bpd) to 1.10 million bpd and indicated the market would be in slight surplus in 2020. A rally in equity markets around the world on growing expectations that global economies will take action against slowing growth also gave oil prices a floor.

Oil Markets On Edge Over Trade War Uncertainty – Oil prices rose slightly on Monday after a Houthi drone attack on a Saudi oil field led to concernsabout geopolitical unrest. That trend reversed on Tuesday however after Secretary of State Mike Pompeo issued harsh comments about Huawei and the threat of China. An analysis from Raymond James found that top CEOs at U.S. oil and gas firms have sold an average of $4 million worth of stock in their own companies over the past five years, at a time when they talk up their stocks to investors. Bakken flaring has spiked as production of both oil and gas rises amid a pipeline bottleneck. Drillers are now flaring roughly 24 percent of the gas produced in the Bakken, which is twice as high as state limits. China’s CNPC suspended oil purchases in August from Venezuela following stricter U.S. sanctions. “We were told that China oil will not load any oil in August. We don’t know what will happen after,” a source told Reuters. Bloomberg reports that Saudi Aramco has picked Lazard Ltd. and Moelis & Co. to advise the company on its IPO. In a blow to the Trump administration’s efforts to slash fuel economy standards, Mercedes-Benz is preparing to join four other automakers in agreeing to the stricter fuel economy standards laid out by California. The New York Times also reported that the policy process within the Trump administration is in disarray. The balking of top automakers and the internal disorder could imperil the deregulation effort. The U.S. government extended waivers on sanctions on companies doing business with Huawei, viewed as a conciliatory gesture towards China. Fears of an economic recession seem to have the Trump administration concerned, and top U.S. officials have talked up trade negotiations. The Trump administration is also reportedly exploring a payroll tax amid growing concerns about the economy. The Standing Rock Sioux Tribe has asked a judge to toss out a federal permit for the Dakota Access pipeline, due to lack of consultation. The issue comes as the pipeline’s owner, Energy Transfer Partners. hopes to double the pipeline’s capacity. Meanwhile, several Democratic presidential candidates vowed to revoke the pipeline’s permits if they became president. . The number of oil and gas wells completed in Texas declined by 12 percent in the first 7 months of 2019 compared to the same period a year earlier. Permits to drill new wells also declined by 14 percent. Slower activity has been a blow for oilfield services companies.

Front-month oil futures settle higher, with data expected to reveal a weekly decline in U.S. crude supplies – Front-month oil futures contracts settled higher for a third straight session on Tuesday, ahead of U.S. government data that are expected to reveal a weekly decline in domestic crude stockpiles, following back-to-back weekly supply increases. Prices also climbed on Monday, with that rally partly fueled by reports that Yemen’s Houthi rebels launched a drone attack over the weekend on one of Saudi Arabia’s largest oil fields.“Crude’s trading path over the next 48 hours should be heavily influenced by U.S. inventories once again, especially given the turn towards crude storage builds in recent weeks,” said Robbie Fraser, senior commodity analyst at Schneider Electric. The U.S. government has reported crude supply increases in each of the last two weeks. “Consensus market estimates have called for a slight draw” from American Petroleum Institute numbers due out late Tuesday, followed by Wednesday’s “more definitive” Energy Information Administration report, said Fraser, in daily commentary. “However, as WTI’s discount to Brent narrows, U.S. exports could be challenged, leaving more supply to be absorbed by a U.S. refining sector that is nearing the end of the peak demand season.” West Texas Intermediate crude for September delivery tacked on 13 cents, or 0.2%, to finish at $56.34 a barrel on the New York Mercantile Exchange, shaking off earlier losses. The front-month contract, which expired at the end of the day’s regular trading session, gained 2.4% on Monday. The most-active, and new front-month October WTI contract shed a penny to settle at $56.13. The October contract for global benchmark Brent crude edged 29 cents, or 0.5%, higher at $60.03 a barrel on ICE Futures Europe, with prices settling back above $60 for the first time in a week. Analysts polled by S&P Global Platts expect the EIA on Wednesday to report a fall of 3.1 million barrels in U.S. crude stockpiles for the week ended August 16, along with supply declines of 1.6 million for gasoline and 200,000 barrels for distillates, which include heating oil.

WTI Hovers At $56 As Algos Unimpressed By Bigger-Than-Expected Crude Draw — Oil prices dumped and pumped after US SecState Pompeo raised more uncertainty about MidEast and China during an interview with CNBC this morning. WTI did recover back to $56 by the NYMEX close ahead of the inventory data. “The weakening global economic backdrop continues to control the narrative across equities and other asset classes and the oil market is certainly not being spared,” said Michael Tran, commodity strategist at RBC Capital Markets. API

• Crude -3.454mm (-1.8mm exp)
• Cushing -2.803mm – biggest draw since Feb 2018
• Gasoline -403k
• Distillates +1.806mm

After two weekly builds, API reports a bigger than expected crude draw, with Cushing stocks plunging most since Feb 2018… WTI hovered around $56 ahead of the data, dipped very modestly after but was basically unimpressed…

WTI Slides After Crude Inventories Drawdown Less Than Hoped – Oil prices held on to gains overnight after a surprisingly large crude draw reported by API (though crude is down about 18% from its late April highs as the trade war between the U.S. and China, the world’s biggest economies, weighs on demand.). “The drawdown will certainly help support sentiment,” said Daniel Hynes, a senior commodity strategist at Australia & New Zealand Banking Group Ltd. in Sydney. “But the market is definitely taking the glass-half-empty type approach to data.” DOE:

• Crude -2.73mm (-1.8mm exp)
• Cushing -2.485mm
• Gasoline +312k
• Distillates +2.61mm

After two weeks of unexpected builds, crude inventories drew down more than expected last week (though less than API reported) but Gasoline and Distillates stocks rose more than expected… Despite the ongoing collapse in the oil rig count, US crude production remains near record highs…

Oil rises as US crude inventories fall – Crude oil futures rose on Wednesday after U.S. government data showed a big drawdown in domestic crude stockpiles, but rises in refined product inventories limited price gains, as did lingering worries about the global economy. Brent crude futures rose 1.2%, to $60.72 a barrel. It reached a session high of $61.41 a barrel. U.S. West Texas Intermediate (WTI) crude futures rose 0.5%, to $56.42 a barrel, after hitting $57.13 a barrel. Prices pared gains after inventory data from the U.S. Energy Information Administration showed builds in gasoline and distillate stocks. Crude stockpiles decreased by 2.7 million barrels in the week to Aug. 16, the data showed, a bigger drawdown than the 1.9 million barrels that analysts had forecast. Gasoline stocks rose by 312,000 barrels, while distillate stockpiles gained by 2.6 million barrels “It looks like gasoline demand has peaked for the season, and will only trend lower from here,” said John Kilduff, partner at energy hedge fund Again Capital Management in New York. Tensions between the United States and Iran remained in focus. Iranian President Hassan Rouhani said that if Iran’s oil exports are cut to zero, international waterways will not have the same security as before, cautioning Washington against tightening pressure on Tehran. The comment coincided with a remark by Iranian Foreign Minister Mohammad Javad Zarif that Tehran might act “unpredictably” in response to U.S. policies under President Donald Trump.

U.S. oil prices settle lower as crude supplies log first weekly slump in 3 weeks — U.S. oil futures settled lower Wednesday after the government reported a weekly decrease in domestic crude supplies, the first in three weeks, but smaller than the market expected. Concerns over energy demand also continued to pressure prices. Looking at the inventory data from a trend standpoint, “it appears the stretch of steep draws in crude supply, which were offering fundamental price support to the oil market earlier in the summer, have abruptly ended according to the last three EIA reports, as stockpiles have actually risen modestly since late July,” said Tyler Richey, co-editor at Sevens Report Research. “Demand concerns linked to a potential global economic slowdown remain the No. 1 headwind for oil right now,” he added. West Texas Intermediate crude for October delivery, +0.36% fell by 45 cents, or 0.8%, to settle at $55.68 a barrel on the New York Mercantile Exchange, following gains in each of the last three trading sessions. It was at $56.77 shortly before the supply data. The October contract for global benchmark Brent crude BRNV19, +0.52%, however, rose 27 cents, or 0.5%, to $60.30 a barrel on ICE Futures Europe. On Tuesday, Brent finished above $60 for the first time in a week. The Energy Information Administration on Wednesday reported that U.S. crude supplies fell by 2.7 million barrels for the week ended Aug. 16. That followed increases in each of the previous two weeks. Analysts polled by S&P Global Platts, on average, expected a decline of 3.1 million barrels, while the American Petroleum Institute on Tuesday reported a 3.5 million-barrel decrease. The EIA data also showed that inventories of gasoline edged up by 300,000 barrels, while distillate stockpiles rose by 2.6 million barrels last week. The S&P Global Platts survey had shown expectations for a supply decreases of 1.6 million barrels for gasoline and 200,000 barrels for distillates. On Nymex, September gasoline rose 1.3 cents, or 0.8%, to $1.6938 a gallon, while September heating oil added nearly half a cent, or 0.2%, to $1.8573 a gallon. Also on Nymex, September natural gas fell 4.8 cents, or 2.2%, to settle at $2.17 per million British thermal units. A report from the EIA due Thursday is expected to show a 61-billion-cubic-foot climb in last week’s U.S. natural-gas inventories, according to analysts polled by S&P Global Platts. Oil prices saw little reaction to the Wednesday release of minutes from the Federal Open Market Committee’s July meeting. Fed officials shied away from saying how many more easing steps they might be willing to support this year. Some officials said the Fed had to remain “flexible” and focused on the economic data given the risks weighing on the economy.

Oil slips below $60, Jackson Hole summit in focus – Oil slipped below $60 a barrel on Thursday despite a drop in U.S. crude inventories and OPEC-led supply cuts as worries about the global economy weighed on crude prices. Brent crude fell 45 cents to $59.85 a barrel while U.S. West Texas Intermediate crude shed 42 cents to $55.26. Traders on Thursday parsed through commentary from Federal Reserve officials delivered from Jackson Hole, Wyoming. Both Kansas City Federal Reserve President and Philadelphia President told CNBC they don’t believe further interest rate cuts are needed, fostering fears that the central bank won’t come to the rescue if the U.S. economy decelerates. Still, the losses were limited given inventories data. “Today prices are basically unchanged in the same relatively small range,” said Olivier Jakob of Petromatrix. “The focus now is going to be on Jackson Hole, I think, to the end of the week.” U.S. crude inventories fell by 2.7 million barrels last week, more than analysts expected. Still, the U.S. Energy Information Administration also said gasoline and distillate inventories rose. The price of Brent is up by 12 percent this year, supported by supply cuts led by the Organization of the Petroleum Exporting Countries, and export cuts in Iran and Venezuela which are under U.S. sanctions. Iran on Wednesday said if its oil exports are cut to zero, international waterways would not have the same security as before, cautioning Washington against raising pressure on Tehran. Still, lingering fears about slowdown in economic growth amid the U.S.-China trade dispute and Brexit has been pressuring prices and forecasters such as the International Energy Agency have been lowering forecasts for world oil demand.

Oil Prices Rise On Stock Drawdown, Iran-West Tensions – Oil prices rose on Thursday after U.S. government data showed a drawdown in domestic crude stocks. Benchmark Brent crude climbed 0.75 percent to $60.74 a barrel, extending gains for a fifth consecutive session. West Texas Intermediate (WTI) crude futures were up 0.7 percent at $56.08 per barrel. Data released by Energy Information Administration on Wednesday showed that U.S. crude stockpiles dropped by 2.7 million barrels in the week ended August 16, after registering increases in the previous two weeks. However, gasoline inventories were up 300,000 barrels last week and distillate stockpiles increased by 2.6 million barrels. Oil markets also remained supported by simmering tensions between the United States and Iran, with Iranian President Hassan Rouhani striking a muscular tone on dealings with the United States. In a speech in Tehran during the unveiling of the Bavar-373, Rouhani said that talks are useless when enemies do not accept logic. Iran’s state TV reported that the Bavar-373 is able to recognize up to 100 targets at a same time and confront them with six different weapons.

Oil slips 0.6% as global growth fears, Fed comments weigh on crude – Oil prices weakened on Thursday as worries about the global economy weighed and equity markets were under pressure as uncertainty over the outlook for U.S. interest rate cuts left investors on edge. U.S. West Texas Intermediate crude shed 33 cents to $55.35 per barrel while Brent crude lost 39 cents to $59.91. Traders are awaiting a speech from Federal Reserve Chair Jerome Powell on Friday in Jackson Hole, Wyoming, that could indicate whether the U.S. central bank will continue to cut interest rates. “The market will be shifting focus today to broader based macro headlines with comments out of Jackson Hole likely to be prioritized in this regard,” said Jim Ritterbusch, president of Ritterbusch and Associates. “While we are not expecting any dramatic developments capable of swinging the equities either way by more than 1% or so, we feel that current bullish momentum in the oil market could allow the energy complex to absorb bearish guidance much easier than any negative Jackson Hole guidance that may be forthcoming.” U.S. stocks turned lower on Thursday as the first contraction in the manufacturing sector in nearly a decade and after Philadelphia Federal Reserve Bank President Patrick Harker said on Thursday that he does not see the case for additional stimulus. The Jackson Hole speech is important for oil as signals from the Fed on monetary easing affect the U.S. dollar. A weaker U.S. currency tends to support oil prices, and the dollar eased on Thursday against a basket of currencies. Concerns over the impact of the trade tensions between Washington and Beijing on the U.S. economic expansion, the longest on record, prompted the Fed to cut interest rates last month for the first time since 2008. The prolonged trade spat has sparked worries about growth in oil demand. Forecasters such as the International Energy Agency have been lowering forecasts for world oil demand. U.S. President Donald Trump on Wednesday said he was “the chosen one” to address trade imbalances with China, even as congressional researchers warned his tariffs would reduce U.S. economic output by 0.3% in 2020.

Oil plunges 3% as new China tariffs dent global growth expectations – Crude prices plunged on Friday after China unveiled new tariffs on U.S. goods, dampening expectations of global economic growth. U.S. oil traded 3.2% lower, or $1.76 at $53.58 per barrel and reached its lowest level in a week. Brent oil fell 2%, or $1.19 to trade at $$58.75 per barrel. China said it will slap tariffs on $75 billion worth of U.S. imports ranging from 5% to 10%. The tariffs will take effect in two batches on Sept. 1 and Dec. 15. The goods targeted by China in these tariffs include autos. Earlier in the day, crude prices were up slightly while investors awaited clues on the U.S. Federal Reserve’s monetary policy. A speech by Fed Chair Jerome Powell later on Friday at a meeting of global central bankers in Jackson Hole, Wyoming, is expected to provide clues on whether the U.S. central bank will cut interest rates for a second time this year to boost the world’s largest economy. Traders’ expectations of further U.S. monetary easing were clouded by comments from two Fed officials on Wednesday who said they do not see a case for a rate cut now. “If Powell talks about lower for longer and reverses some of the hawkish comments that we heard from Fed members earlier this week, we could see it supporting oil,” said Michael McCarthy, chief market analyst at CMC Markets in Sydney.

Oil Prices Mixed for the Week – WTI and Brent crude futures declined Friday, but the Brent managed to show a slight week-on-week increase. West Texas Intermediate (WTI) and Brent crude futures declined Friday, but the latter benchmark nevertheless showed a slight week-on-week increase. The October WTI contract price lost $1.18 Friday to settle at $54.17 per barrel. It peaked at $55.60 and bottomed out at $53.24 during the late-week session. Compared to the August 16 close, the WTI is down 1.3 percent. Brent crude oil for October delivery posted a more modest decline Friday, falling 58 cents to end the day at $59.34 per barrel. Week-on-week, the Brent is up 1.2 percent. “Same old song, new verse,” commented Tom Seng, Assistant Professor of Energy Business at the University of Tulsa’s Collins College of Business. “After higher prices Monday fueled by optimism about the U.S./China trade war, oil prices traded in a fairly tight range this week until today.” Both the WTI and Brent declined amid an escalation the bilateral trade dispute, with China unveiling new tariffs to be imposed on copper and crude oil imports, Seng explained. He added that the crude tariff announcement applied more downward pressure on crude in an oil market already facing concerns about global demand growth. “The ‘tit-for-tat’ tariff impositions by the U.S. and China have turned the global economy on its head with the U.S. stock market getting thumped today after a ripple effect of this latest announcement moved across the globe overnight,” said Seng. Seng also pointed out the latest EIA Weekly Petroleum Status Report showed:

• A 2.7 million-barrel (Bbl) decline in commercial crude stocks – far higher than Wall Street Journal analysts’ forecast of a 1.5 million-Bbl draw but lower than the 3.5 million-Bbl draw reported Tuesday by the American Petroleum Institute
• A total of 438 million Bbl of crude in storage – two percent above the five-year average for this time of year
• 42 million Bbl of crude in storage at the Cushing, Okla., hub, reflecting 55 percent of capacity there and a 2.5 million-Bbl week-on-weed decline
• A 1.1-percent increase in refinery utilization to 17.7 million Bbl per day (bpd), or 95.9 percent, that contributed to a drawdown in stocks
• An 11-percent year-on-year decrease in crude imports
• Steady U.S. oil production at 12.3 million bpd for another week

Chaotic & Unpredictable – Iran Vows Oil Routes Won’t Be Safe If It Can’t Export — The White House policy of taking Iranian oil exports to “zero” still has a long way to go, thanks in no small part to China, and also despite Pompeo touting this week that US sanctions have removed nearly 2.7 million barrels of Iranian oil from global markets. US frustration was evident upon the release of the Adrian Darya 1, with Gibraltar resisting Washington pressures to hand over the Iranian vessel, given as its en route to Greece, American officials are now warning that they will sanction anyone who touches the tanker. Seizing on Washington’s frustration as part of its own “counter-pressure” campaign of recent weeks, Iran has again stated if it can’t export its own oil, it will make waterways unsafe and “unpredictable” for anyone else to to so. “World powers know that in the case that oil is completely sanctioned and Iran’s oil exports are brought down to zero, international waterways can’t have the same security as before,” President Hassan Rouhani said while meeting Supreme Leader Ayatollah Ali Khamenei, according to Khamenei’s official website. The provocative statements corresponded with similar remarks from Iranian Foreign Minister Mohammad Javad Zarif, who also warned Tehran might act “unpredictably” in response to “unpredictable” US policies under Trump, according to Reuters. Zarif made the statements in a speech at the Stockholm International Peace Research Institute (SIPRI) while on a broader tour of European countries urging leaders to resist US sanctions threats and abide by commitments under the JCPOA:“Mutual unpredictability will lead to chaos. President Trump cannot expect to be unpredictable and expect others to be predictable. Unpredictability will lead to mutual unpredictability and unpredictability is chaotic,” Zarif said. Iran’s military has repeatedly said it alone can secure the vital Strait of Hormuz tanker route, while at the same time warning any outside ‘maritime coalition’ patrols would be seen as an act of aggression, especially involving the US or Israel.

Iran tanker heads to Greece, U.S. warns against helping vessel – (Reuters) – An Iranian tanker at the center of an angry confrontation between Iran and Washington sailed for Greece on Monday after it was freed from detention off Gibraltar, as Washington called the release unfortunate and warned Greece and Mediterranean ports against helping the vessel. Tehran said any U.S. move to seize the vessel again would have “heavy consequences”. While Iranian Foreign Minister Mohammad Javad Zarif appeared to downplay the possibility of military conflict with Washington in an interview on U.S. television, he also indicated on a visit to Finland that Washington was seeking “more escalation”. The Grace 1, renamed the Adrian Darya 1, left anchorage off Gibraltar about 11 p.m. (2100 GMT) on Sunday. Refinitiv ship tracking data showed on Monday that the vessel was heading to Kalamata in Greece and was scheduled to arrive next Sunday at 0000 GMT. The seizure of the tanker by British Royal Marines near Gibraltar in July 4 on suspicion of carrying oil to Syria in violation of European Union sanctions led to a weeks-long confrontation between Tehran and the West. It also heightened tensions on international oil shipping routes through the Gulf. Gibraltar, a British overseas territory, lifted the detention order on Thursday. But the next day, a federal court in Washington issued a warrant for the seizure of the tanker, the oil it carries and nearly $1 million.

U.S. Warns Mediterranean Ports Against Aiding Iranian Tanker – The United States has issued a warning to Greece as well as to all ports in the Mediterranean Sea about providing assistance to an Iranian tanker that Washington suspects of transporting oil to Syria and having ties to a sanctioned organization, Reuters reported, citing a U.S. State Department official. Any aid would be interpreted as providing material support to Iran’s Islamic Revolutionary Guards Corps (IRGC), which Washington considers a foreign terrorist organization. Facilitating the tanker carries potential immigration and criminal consequences, the unidentified U.S. State Department official said on August 19. The warning concerns the Adrian Darya 1, formerly known as Grace 1, a supertanker that left Gibraltar on August 19 after spending 45 days in detention over British suspicions that it was violating European Union sanctions on Syria. Officials in Gibraltar on August 18 rejected a U.S. request to seize the tanker, letting it sail with $130 million worth of crude oil. U.S. Secretary of State Mike Pompeo said the tanker’s release was “unfortunate” in an August 19 interview on Fox News Channel. If Iran turns a profit from the tanker’s load, the IRGC will have “more money, more wealth, more resources to continue their terror campaign,” Pompeo said. Online vessel-tracking sites like Refinitiv show the vessel is heading toward Kalamata, Greece, and is scheduled to arrive on August 25.

Another Tanker With Iranian Oil Now Headed For Syria, Intel Sources Say — A new report suggests we could be headed toward yet another Grace 1-type incident and showdown involving an Iranian tanker intercept by US or UK forces.A tanker full of Iranian oil is said to be currently on its way to Dubai, with an ultimate offload destination of its 600,000 barrels of oil in Syria. According to the breaking Fox report, citing unnamed Western intelligence sources: The Bonita Queen loaded 600,000 barrels of crude oil on August 2 near the Iranian coast at Kharg Island. Shortly after, the tanker was de-flagged by the country of St. Kitts and Nevis, fearing retaliatory U.S. sanctions. The vessel is now headed to Dubai, where it will refuel before beginning a months-long journey around the horn of Africa, through the Mediterranean and to the shores of Syria. The Bonita Queen, according to its reported route, intends to link up with two Syrian-owned tankers in the Mediterranean in the coming months, where it will conduct a ship-to-ship transfer of the Iran-sourced crude. Analysts have claimed to identify the Syrian tankers as the “Kader” and “Jasmine” – described as owned by a businessman said to be close to Assad, Muhammad al-Qatirji. Qatirji and his firm, the Qatirji Company, are under sanction by the US Treasury. The news comes just as the newly released from Gibraltar/UK custody Iran-flagged Adrian Darya, previously called the Grace 1, is on the move and is headed to waters off Greece.

Iran Oil Tanker Makes Distress Call— The Iranian oil carrier Helm experienced technical issues in the Red Sea off the Saudi port of Yanbu and the crew is working to resolve the issues, according to the National Iranian Tanker Co. The vessel, one of the world’s largest crude tankers, signaled distress at 6:30 a.m. Iran time on Tuesday, about 75 miles (about 121 kilometers) off of Yanbu, owner NITC said in a statement. Both the ship and crew are safe and stable, NITC said without saying whether the Helm can continue the voyage. Iran’s tanker fleet is under global scrutiny amid U.S. sanctions seeking to choke off the country’s crude sales. The U.S. failed in efforts to seize a loaded supertanker allegedly bound for Syria that had been blocked in Gibraltar for more than a month. That vessel, the Adrian Darya 1, is now sailing east in the Mediterranean and signaling Greece, potentially to transfer crude to other ships. Another tanker loaded crude this month in Iran with the aim of delivering oil to Syria, Fox News reported, citing unidentified intelligence officials. Iranian tankers have turned off their satellite transponders intermittently in an apparent attempt to mask their voyages to supply crude. The Helm appears to have used that strategy since loading some crude in Iran in May. It’s unclear when the Helm entered the Red Sea or what was the ship’s last port of call, based on tanker-tracking data available on Bloomberg. Until this week when the vessel made the distress call, the tanker’s last known position was in the Persian Gulf in May when satellite signals showed the tanker was half full and heading for the Suez canal.

Houthi Drone Attack Sets Saudi Oil Field On Fire –A drone attack by the Yemeni Houthis caused fire at an oil and gas field in Saudi Arabia, the Kingdom’s Energy Minister said as quoted by the Saudi Press Agency.Khalid al-Falih also said the damage caused by the explosive-laden drones was limited to a processing unit of the natural gas processing plant at the Shaybah field.The Yemeni rebel group had earlier said it was using 10 drones to attack the Shaybah field in what they said was the “biggest attack in the depths” of Saudi Arabia yet, as per a Reuters report on the event. The Shaybah field lies about 600 miles from the Houthi-controlled parts of Yemen.The Saudi Press Agency quoted Al-Falih as referring to the event as a “terroristic attack” and noting it had resulted in no casualties and had had no effect on Saudi oil and gas production or exports.The minister also said, as quoted by the SPA, that “these attacks not only target Saudi Arabia, but also the global energy security of supply and through that the global economy, demonstrating once again the imperative for the global community to confront all terrorist entities that carry out such acts of sabotage, including the Houthi militias in Yemen.” This is by far not the first attack on Saudi oil and gas infrastructure by the Iran-affiliated Houthi rebels. Earlier this year, the group said it had a list of 300 military targets in Saudi Arabia and the United Arab Emirates, including oil and gas infrastructure. Following this Saturday’s attack, the leader of the Houthis said “The drone operation today is an important warning to the Emirates,” as quoted by an Iran-affiliated news website.

Separatists Seize Military Bases in Yemen – Separatists in Yemen supported by the United Arab Emirates have seized military bases in Abyan province in the country’s south, just over a week after making similar advances in the port of Aden. On Tuesday, the militia – which represents the pro-secession Southern Transitional Council (STC) – again clashed with government forces, who are their supposed allies in the Saudi-led coalition against the rebel Houthi movement. The government has labeled their actions a “coup” attempt. The renewed fighting raises questions about the internationally-recognized government’s control over its remaining territory, particularly since the UAE began withdrawing some of its troops from the country earlier this month. The U.N. envoy for Yemen, Martin Griffiths, said Tuesday that political fragmentation was becoming a greater threat. “The stakes are becoming too high for the future of Yemen,” he said. The fighting between the separatists and government forces seems to reflect a growing rift between the UAE and Saudi Arabia. The UAE reduced its troops and allowed the southern militia to fill in – leaving behind potential competition. Now, an STC spokesman says that it refuses to withdraw from the military bases but is open to talks with the government. Griffiths, the U.N. envoy, emphasized the urgent need to accelerate the peace process – something the UAE and Saudi Arabia appear to disagree over. The rising tensions between the southern separatists and the government could further jeopardize peace talks involving all parties in the ongoing conflict, including the Houthis.

Rebels claim to have shot down US drone in Yemen – Yemen’s Houthi rebels claimed they shot down a US drone over the country’s north, as a leading rights group said on Wednesday the Saudi-led coalition fighting the Houthis killed at least 47 Yemeni fishermen in bombing attacks on fishing boats last year. Yahia Sarie, a military spokesman for the Iran-backed Houthis, said in a statement their air defenses downed a US MQ-9 drone on Tuesday over the northern city of Dhamar.”The rocket which hit it was developed locally and will be revealed soon at a press conference,” he said.The US military’s Central Command said in a statement that it was investigating the Houthi claims that they attacked an unmanned US drone “operating in authorised airspace” over Yemen. “We have been clear that Iran’s provocative actions and support to militants and proxies, like the Iranian-backed Houthis, poses a serious threat to stability in the region and our partners,” said US Army Lt. Col. Earl Brown, a Central Command spokesman.This was the second US drone allegedly downed by the Yemeni rebels. In June, the US said an MQ-9 Reaper was shot down by the Houthis. It said Iran helped the Yemeni rebels bring down the drone.For more than a decade, the US has waged a drone war against al-Qaida in Yemen, trying to eliminate one of the most dangerous branches of the terror network. Rights groups have criticized the attacks because of its civilian casualties. An Associated Press investigation found that at least 30 civilians were killed in such attacks in 2018. Also on Wednesday, Human Rights Watch said the Saudi-led coalition carried out at least five deadly attacks on Yemeni fishing boats in 2018, killing at least 47 Yemeni fishermen, including seven children.

Yemen threatens to act internationally to stop UAE support for separatists – The Yemeni government threatened, Wednesday, to take necessary measures following international law to ensure the suspension of the UAE’s support for separatists, the so-called Southern Transitional Council, a day after Yemen’s official accusation of Abu Dhabi before the UN Security Council of supporting the separatist insurgency in Aden.A statement by Yemen’s Vice Minister of Foreign Affairs Mohammed Al-Hadhrami said: “The government is taking action to take the necessary measures per international law and the UN Charter to ensure the suspension of the UAE’s support for the Transitional Council, which has enabled the armed insurgency in Aden and Abyan.”Al-Hadhrami reiterated his appreciation of Saudi Arabia’s call for dialogue between the Yemeni government and the separatist council. But he said that the government would participate in any discussion with the “Transitional Council” only when it complies with the demands of the coalition and withdraws. Yemen’s announcement of its intention to act against the UAE came a day after the government officially accused the UAE of supporting the armed separatist insurgency in Aden. Yemen’s UN Permanent Representative, Ambassador Abdullah Al-Saadi, told the UN Security Council, Tuesday, that “without the full planning, execution and financial support of the UAE the military coup against the legitimate government in the city of Aden, would not have happened. We hold the UAE responsible for the repercussions of the armed insurgency.”

Explosion rocks arms depot north of Iraq’s Baghdad -A blast has hit an arms depot belonging to Iranian-backed paramilitaries north of Baghdad, according to media reports.The site struck on Tuesday is close to the Balad Air Base, which hosts US forces and contractors and is located about 80km north of the Iraqi capital, in the Salahuddin province.The explosion is the latest in a series of mysterious blasts in recent weeks, targeting bases and warehouses belonging to groups under the umbrella of militias known as the Popular Mobilization Forces (PMF). Some have been blamed on drone attacks, others on faulty storage.There was no immediate claim of responsibility for Tuesday’s explosion.A military official told Reuters news agency the intended target was the militia’s position near the base, while a paramilitary source said his group’s weapons depot was specifically targeted by an aerial bombardment.Witnesses told Reuters the explosion caused stored rockets to fly into nearby orchards and into Balad base itself.Separately, a police source told Reuters news agency that the cause of the explosion was still unclear, adding that two fighters were killed and five were wounded.Last week, at least one person was killed and 29 others wounded after homes were damaged by an explosion at a weapons depot in Baghdad. Some analysts have suggested the strikes might have been carried out by Israel, which last year signalled that it could attack suspected Iranian military assets in Iraq, as it has done with scores of air raids in Syria. “Iraq’s air defences have very high capability, but one thing they couldn’t detect is an advanced Israeli air attack,” Baghdad-based security analyst Hisham al-Hashimi, who advises the government, told Reuters.

Mystery Airstrikes Rock Baghdad Base With US Forces Present; Deaths Reported – Another Shiite militia base near Baghdad has been attacked by airstrikes from an unknown source on Tuesday, one week after a huge blast ripped through a separate pro-Iran militia weapons storehouse near the Iraqi capital’s ‘Green Zone’.Arabic media published images of a massive cloud of smoke coming from the Balad Air Base (also known as al-Bakr base) north of Baghdad, with Iraqi officials confirming the airstrikes. The attack is already being blamed on Israel, and comes following Iraq late last week shutting down its airspace to all ‘unauthorized’ flights not specifically approved at the top levels of the Iraqi government and military.Military Times reported of Iraq’s closure of its airspace last Thursday: “U.S. military officials in Iraq will now seek out Iraqi approval before launching any air operations, a move made a day after that nation’s prime minister announced a ban of unauthorized flights, including those involving coalition forces fighting ISIS.” Prime Minister Abdul-Mahdi had called for an end to all “unauthorized flights” including US drones, spy planes, jets, or helicopters. The directive demanded that all aerial vehicles comply with Iraqi law and operations must be under Iraqi government authorization.Crucially, Balad base – the location of the alleged new airstrikes – hosts US forces and contractors, according to Reuters. There are reports of an unknown number of fatalities at the installation which also hosts US-supplied Iraqi F-16 fighter jets.

Iraqi militias blame US and Israel for attacks on bases Iraq’s paramilitary groups backed by Iran have blamed a series of recent blasts at their weapons depots and bases on the United States and Israel, vowing to defend themselves against any future attack. The statement on Wednesday came from the Popular Mobilisation Forces (PMF), or Hashd al-Shaabi, the umbrella grouping of Iraq’s mostly Shia militias. It said the US had allowed four Israeli drones to enter the region accompanying US forces and carry out missions on Iraqi territory. “We announce that the first and last entity responsible for what happened are the American forces, and we will hold them responsible for whatever happens from today onwards,” said the statement, signed by the PMF’s deputy head, Jamal Jaafar Ibrahimi, also known as Abu Mahdi al-Mohandes. The US-led coalition, in Iraq to fight remnants of the Islamic State of Iraq and the Levant (ISIL, or ISIS) group, dismissed the statement. “The mission of CJTF-OIR in Iraq is solely to enable our Iraqi Security Force partners in the mission of an enduring defeat of Daesh,” it said, using an alternative name for ISIL. “We operate in Iraq at the invitation of the government of Iraq and comply with their laws and direction.” The statements came a day after several blasts hit a position held by a PMF group next to Balad airbase, about 80km north of the capital, Baghdad.

Iraq Closes Airspace Even To US Coalition Flights After Suspected Israeli Raid – In what is a severely under reported but perhaps the most alarming development out of the Middle East this week, Iraq’s government has said it’s ready to down any aircraft violating its airspace amid a blanket ban on ‘unauthorized’ flights not specifically approved by the prime minister’s office. Military Times reported the day after Iraq closed its airspace on Thursday: U.S. military officials in Iraq will now seek out Iraqi approval before launching any air operations, a move made a day after that nation’s prime minister announced a ban of unauthorized flights, including those involving coalition forces fighting ISIS.Prime Minister Abdul-Mahdi called for an end to all “unauthorized flights” including US drones, spy planes, jets, or helicopters on Thursday. The directive demanded that all aerial vehicles comply with Iraqi law and operations must be under Iraqi government authorization. The US Coalition on Friday issued a statement saying that it is ready to comply with the order: The US-led Coalition says it is complying with an order by Iraq’s Prime Minister banning airspace access to international aircraft [following a recent claimed US or Israeli strike on an arms dump near Baghdad, which killed a civilian and destroyed c$100m of munitions] pic.twitter.com/qtafT7csEH – Airwars (@airwars) August 16, 2019 The drastic Baghdad decision came after on Monday a massive blast ripped through a neighborhood in the city, which Iraqi officials believe was the result of an Israeli strike on a pro-Iranian militia ammunition depot. The resulting fire had raged throughout the day not far from the ‘Green Zone’ and sent mortars and exploding munitions across the city, resulting in the death of at least one civilian and wounding of nearly 40 others, many of them children. The weapons base reportedly belonged to the pro-Iran Kataib Sayyid Al-Shuhada militia, and an estimated $110 million worth of munitions were wiped out.

Hundreds of ISIL Terrorists Preparing to Attack Mosul’s Nearby Cities (FNA)- A senior Kurdish militia commander warned against an imminent attack by several hundred ISIL terrorists, who are stationed in a region in Southern Mosul, on other cities of Nineveh province, the Arabic-language media outlets said. The Arabic-language al-Ma’aloumeh news website quoted Ghias al-Sourji as saying that around 400 to 500 ISIL terrorists together with their families are still present in Qara Joukh mountain near the city of Makhmour, South of Mosul. He pointed to the ISIL’s recent increased movements in the region, and said that the presence of such a number of terrorists in Makhmour is a serious threat to Nineveh, Kirkuk and Erbil. There are reports that the terrorists stationed to the South of Mosul are getting prepared to penetrate into several Iraqi cities. In a relevant development earlier in August, a former Iraqi parliamentarian said that there are still hundreds of ISIL militants in Western Iraq even after the official declaration on the annihilation of the terrorist group. The Arabic-language website of the Russia Today quoted the former head of Iraqi Parliament’s Security and Defense Committee, Hakem al-Zameli, as saying that according to the accurate information of the Iraqi government, the total number of the ISIL’s active terrorists in Iraq currently stands at 1,500, who move between Iraq and Syria. Al-Zameli reiterated that the ISIL terrorists are deployed in desert regions, specially border regions between Iraq and Syria as well as the Hamrin mountains and areas under dispute by Iraq’s Central government in Baghdad and the Iraqi Kurdistan Regional Government. In a relevant development in late June, a prominent Iraqi security expert warned of the US plot to transfer the ISIL terrorists to the bordering areas with Syria in collaboration with the two countries’ tribes. Al-Ma’aloumeh news website quoted Hossein al-Kanani as saying that the US attempts to transfer the ISIL terrorists to the bordering areas of Iraq and Syria and build safe shelters for them through coordination with a number of tribal leaders in the region. He referred to the recent attempts by US Ambassador to Baghdad Matthew Tueller to meet the Iraqi tribal leaders, and said other goals are also pursued by the measure, including targeting the Hashd al-Shaabi (Iraqi popular forces) and Iraqi security forces in these regions and cutting Tehran-Baghdad-Damascus-Beirut connections by taking control over the Iraqi-Syrian borders.

Russia’s Sound Proposal for Gulf Peace – There is an eminently reasonable and feasible way to avoid conflict in the Persian Gulf, and to secure peace. The principles of multilateralism and international law must be adhered to. It seems almost astounding that one has to appeal for such obvious basic norms. Fortunately, Russia has presented a roadmap for implementing a security concept in the vital waterway based on the above principles.Russia’s deputy envoy to the United Nations, Dmitry Polyansky, outlined a possible international coalition to provide security for commercial shipping through the strategically important Persian Gulf. The narrow outlet accounts for up to 30 per cent of all globally shipped oil on a daily basis. Virtually every nation has a stake in the safe passage of tankers. Any disruption would have huge negative consequences for the world economy, impacting all nations.The Russian proposal, which has been submitted to the UN Security Council, is currently being considered by various parties. Crucially, the security concept put forward by Moscow relies on the participation of the Gulf n ations, including Iran. Rather than being led by an outside power, the Russian proposal envisages a region-led effort.This multilateral arrangement for cooperation between nations is solidly within the principles of the UN Charter and international law. Potentially, it can build trust and positive relations, and thereby reduce the climate of tensions and uncertainty which have intensified over recent months, primarily between the United States and Iran. One thing for sure is that the US proposal for a naval coalition led by Washington, purportedly to “protect shipping” in the Gulf, is a non-starter. Most nations have rebuffed the American plan. Germany, France and other European Union states have given it a resounding pass. Even Arab nations allied with the US, such as Saudi Arabia and the United Arab Emirates, have demurred on the idea. Significantly, too, the Gulf states have refrained from following Washington’s line of fingering Iran for the unknown sabotage incidents. After weeks of lobbying for its US-led “navy coalition”, Washington appears to have recruited just two other partners: Britain and Israel. The term “coalition” is therefore a misnomer in this context. It also has no credibility as a force serving to uphold international law and security. The position of the US-led axis is one of outright hostility towards Iran. It is premised on the flawed assumption that Iran is the “problem”.

Sudan opposition leaders form government with the army – The Force for Freedom and Change (FFC), an umbrella group of opposition groups, have signed a power-sharing agreement with the Transitional Military Council (TMC), Sudan’s military junta. The agreement reached on Saturday August 17, was initialed just days after the TMC gunned down school children in El-Obeid. It gives free rein to the military and security forces, which ousted long-term dictator President Omar al-Bashir in April to prevent the overthrow of the entire regime, to rule Sudan under the guise of a civilian “government” but on behalf of the tiny venal elite that has controlled the country since independence in 1956. The agreement was met with a palpable sense of relief in Western and regional capitals that eight months of mass protests may now finally be over. It is a shameless betrayal of the movement which brought cities across the country to a virtual standstill demanding a fundamental transformation of the entire social order. Heads of state, prime ministers and dignitaries from several countries, including Ethiopia’s Prime Minister Abiy Ahmed and South Sudanese President Silva Kiir, attended the signing ceremony. The agreement, the subject of months-long talks that stalled repeatedly amid the junta’s violent and bloody crackdowns on hundreds of thousands of protestors, was brokered by the butcher of the Egyptian revolution, President Abdel Fattah el-Sisi, in his role as the chair of the African Union (AU), and Ethiopian envoy Mahmoud Dirir. All this took place under the watchful eye of Washington and its junior partner in London, Sudan’s former colonial master, determined to ensure that the uprising does not spread to its regional allies, Saudi Arabia, the United Arab Emirates and Egypt, without whose support the junta would not have survived.

China’s Ultimate Play For Global Oil Market Control – All attention is focused on the twists-and-turns of the very noisy US-Iran dispute in the Persian Gulf, but all the while the People’s Republic of China (PRC) is rapidly and quietly consolidating a dominant presence in the area with the active support of Russia. Beijing, as a result, is fast acquiring immense influence over related key dynamics such as the price of oil in the world market and the relevance of the petrodollar. The PRC and the Russians are capitalizing on both the growing fears of Iran and the growing mistrust of the US. Hence, the US is already the main loser of the PRC’s gambit. The dramatic PRC success can be attributed to the confluence of two major trends:

• (1) The quality and relevance of what Beijing can offer to both Iran and the Saudi-Gulf States camp; and
• (2) The decision of key Arab leaders – most notably Saudi Crown Prince Mohammed bin Salman bin ‘Abd al-’Aziz al Sa’ud (aka MBS) and his close ally, the Crown Prince of Abu Dhabi, SheikhMohammed bin Zayed Al Nahyan (aka MBZ) – to downgrade their traditional close ties with the US, and reach out to Beijing to provide a substitute strategic umbrella.

Hence, the PRC offer to oversee and guarantee the establishment of a regional collective security regime – itself based on the Russian proposals and ideas first raised in late July 2019 – is now getting considerable positive attention from both shores of the Persian Gulf. Iran, Saudi Arabia, the United Arab Emirates (UAE), Qatar, and Oman appear to be becoming convinced that the PRC could be the key to the long-term stability and prosperity in the Persian Gulf and the Arabian Peninsula. Iran is also considering the expansion of security cooperation with Russia as an added umbrella against potential US retaliation. Overall, according to sources in these areas, the US was increasingly perceived as an unpredictable, disruptive element. The profound change in the attitude of the Saudi and Emirati ruling families, who for decades have considered themselves pliant protégés of the US, took long to evolve. However, once formulated and adopted, the new policies have been implemented swiftly. The main driving issue is the realization by both MBS and MBZ that, irrespective of the reassuring rhetoric of US Pres. Donald Trump and Jared Kushner, their bitter nemesis – Qatar – is far more important to the US than the rest of the conservative Arab monarchies and sheikhdoms of the GCC. There are good reasons for the US preference of Qatar. The Al-Udeid Air Base in Qatar is by far the most important US base in the entire greater Middle East. Qatar is mediating between the US and several nemeses, including Afghanistan, Iran, and Turkey. Qatar is providing “humanitarian cash” to HAMAS in the Gaza Strip, thus buying quiet time for Israel. Qatar has given generous “political shelter” to numerous leaders, seniors, and commanders of questionable entities the US would like to protect but would never acknowledge this (including anti-Russia Chechens and other Caucasians, and anti-China Uighurs).

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