Oil, Gas, And Fracking News Reads: 07June 2020 – Part 2

Written by rjs, MarketWatch 666

Here are some more selected news articles about the oil and gas industry from the week ended 06 June 2020. Go here for Part 1.

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

Please share this article – Go to very top of page, right hand side, for social media buttons.

US states have spent the past 5 years trying to criminalize protest –The Minnesota legislature has spent the last five years preparing for the kind of protests that have rocked the city over the past week in the wake of the police killing of George Floyd – by attempting to criminalize them. From 2016 through 2019, state lawmakers introduced ten bills that either made obstructing traffic on highways a misdemeanor or increased penalties for protesting near oil and gas facilities. Most of these legislative proposals were introduced in response to ongoing protests against a controversial oil pipeline as well as those following the police killing of Philando Castile in a St. Paul suburb in 2016. The bills would have allowed protesters to be jailed for up to a year, fined offenders up to $3,000 each, and allowed cities to sue protesters for the cost of police response. Many of the bills were introduced in 2017 after racial justice activists in the state made headlines shutting down a major highway. A coupleothers were in response to protests in 2016 and 2019 against the energy company Enbridge’s planned replacement of a pipeline running from Alberta to Wisconsin.None of the bills have yet become law, but three failed only because they were vetoed by the governor. Two bills introduced earlier this year are still on the table. One would make trespassing on property with oil and gas facilities punishable by up to three years in prison and a $5,000 fine. The other would make those who assist such activity civilly liable for damages.Over the past half-decade, a wave of bills that criminalize civil disobedience has swept state legislatures across the country – particularly those controlled by Republican lawmakers. According to a new report by PEN America, a nonprofit advocating for First Amendment rights, 116 such bills were proposed in state legislatures between 2015 and 2020. Of those, 23 bills in 15 states became law. While there is no comprehensive count of the number of people arrested and prosecuted under these new laws, activists protesting oil and gas activity have been charged with felonies in Houston and Louisiana. This year alone, four states – Kentucky, South Dakota, West Virginia, and Utah – passed laws that increased penalties and charges for either interfering with oil and gas activity or disturbing meetings of government officials. (Interfering with oil and gas activity may include obstructing the construction or operation of pipelines and other “critical infrastructure.”) As of May, 12 other bills are pending in various state legislatures – all of them introduced before the past week’s unrest. If passed, these bills would increase disciplinary sanctions for campus protesters, classify trespassing on property with oil and gas infrastructure a felony, and expand the definition of rioting, among other things. More bills increasing penalties for protesters may be on their way. In response to the recent protests against George Floyd’s killing, a Tennessee lawmaker has proposed increasing penalties for rioting and South Dakota Governor Kristi Noemhas said that her administration is looking into legislative proposals to respond to the recent unrest.

Old U.S. Oil Refinery to Pursue New Green Life After Crude Crash – HollyFrontier Corp.’s Cheyenne refinery will stop using crude oil and be repurposed to pump out renewable diesel, which is typically made from soybean oil, recycled cooking oil and animal fats. That’s after processing margins plummeted on thecollapse in fuel demand due to Covid-19-related lockdowns. Cheaper renewable energy projects have already led to decreasing coal output across the U.S., and now — in the wake of oil’s historic crash — some fuel producers are grappling with diminished returns from turning crude into fuel. The company expects to spend $125 million to $175 million to re-purpose Cheyenne to produce about 90 million gallons per year of renewable diesel by the first quarter of 2022. The plant will stop consuming crude oil at the end of July this year, and 200 workers will be laid off, according to HollyFrontier.The conversion plan comes as dozens of small refineries nationwide brace for a big spike in costs to comply with the Renewable Fuel Standard, which mandates they blend biofuel into gasoline or buy tradable credits to comply. For years, many small refineries have won exemptions from the mandate, but under a federal appeals court ruling in January, only refineries that have continually been granted waivers can count on getting them in the future.HollyFrontier is effectively shedding the Cheyenne refinery’s biofuel-blending obligation under the RFS and transforming it into a plant that stands to benefit from the program.Using the converted plant, HollyFrontier will be able to produce not just renewable diesel encouraged by the RFS but also compliance credits that can be sold separately. However the transition comes with other costs, as fewer workers will be necessary to run the converted plant. The RFS is effectively forcing theclosure of a plant that generated tax revenue and jobs for Wyoming and mandating its replacement be a smaller plant that employs far fewer people to sell fuel to California, said a refining industry official who asked not to be named discussing industry strategy.

How Amazon Is Bringing the Keystone XL Pipeline Online – Steve Horn -Amazon has cemented a partnership with the company that owns the controversial Keystone XL pipeline, recently announcing that TC Energy is “going all-in” on Amazon Web Services. The Canadian pipeline corporation, formerly known as TransCanada, has “migrated almost 90 percent of its corporate and commercial applications” to Amazon Web Services, according to a May 13th statement from Amazon. TC Energy plans to migrate all of its data to Amazon’s cloud, and AWS has already helped the pipeline company develop a suite of workflow automation, data analytics, and machine learning programs.“TC Energy is going all-in on the world’s leading cloud, moving its entire infrastructure to AWS,” the AWS release says. “TC Energy is leveraging the breadth and depth of AWS services, including machine learning, analytics, database, serverless, storage, and compute to deliver energy and generate power more efficiently for millions of homes in North America.”The announcement comes just weeks after TC Energy’s long-contested Keystone XL pipeline, which would carry some of the dirtiest, most carbon-intensive oil on the planet from the Alberta tar sands basin to Nebraska, faced a major legal setback when its permit was vacated by a federal judge. It also comes amid a time of tumult for Amazon, which has, in recent weeks, faced criticism for its treatment of frontline workers during the coronavirus pandemic, and for firing employees calling for more protections. Last year, Amazon tech workers launched a movement calling on CEO Jeff Bezos to adopt a stricter company-wide climate policy and to cancel its contracts with oil and gas companies. Bezos responded by issuing Amazon’s Climate Pledge, which promised to see the company go carbon neutral by 2040. He also stated that the company would continue to do business with the oil and gas industry. This puts Amazon at odds with Google, which recently announced it would not develop custom A.I. tools that enhanced the extraction rate of fossil fuels.“So Amazon is helping build the Keystone pipeline – as plain an example of climatic destruction and human rights abuse as exists on the planet,” said author, activist, and 350.org founder Bill McKibben, who led the opposition to Keystone XL for much of the 2010s, to OneZero in an email. “And for what? So the richest man on earth can be a little richer? The levels of ugliness here just seem endless.”

Trump rule limits states from blocking pipeline projects – The Trump administration gutted a key portion of the Clean Water Act on Monday, limiting states’ ability to block controversial pipeline projects that cross their waterways. The final rule from the Environmental Protection Agency (EPA) targets Section 401 of the law, which lets states halt projects that risk hurting their water quality. It’s been a target of President Trump, who last April ordered the agency to accelerate and promote the construction of pipelines and other important infrastructure. “Today, we are following through on President Trump’s Executive Order to curb abuses of the Clean Water Act that have held our nation’s energy infrastructure projects hostage, and to put in place clear guidelines that finally give these projects a path forward,” EPA Administrator Andrew Wheeler said in a statement. The Clean Water Act essentially gives states veto power over large projects that cut through their rivers and streams, giving them a year to weigh permits and determine how projects would impact their water quality. Environmentalists see it as a way for states to assert their power to block risky projects, but the fossil fuel industry and many Republicans say the section has been abused to stall infrastructure. “This rule is an egregious assault on states’ longstanding authority to safeguard the quality of their own waters. Despite the Trump administration’s professed respect for ‘cooperative federalism,’ it is clearly willing to steamroll states’ rights and greenlight major construction projects with no regard for how they might damage state waters,” Lisa Feldt with the Chesapeake Bay Foundation said in a statement. Two states run by Democrats have recently used the law to sideline major projects: New York denied a certification for the Constitution Pipeline, a 124-mile natural gas pipeline that would have run from Pennsylvania to New York, crossing rivers more than 200 times. Washington state also denied certification for the Millennium Coal Terminal, a shipping port for large stocks of coal.The new policy from the Trump administration would accelerate timelines under the law, limiting what it sees as state power to keep a project in harmful limbo. The need for a 401 certification from the state will be waived if states do not respond within a year. On a call with reporters, Wheeler accused some states of abusing the law, dragging out the certification for years or denying projects for reasons not sufficiently tied to water quality, “wrapping projects in a bureaucratic Groundhog Day in the hopes that investors become frustrated and end development.” States will still be able to block certain projects, but Wheeler warned states risk having their veto power overturned if they stray beyond water quality issues when denying a certification. Climate change or concerns over water scarcity would not be enough for a state to deny certification to a project, he said.

U.S. States Just Lost Pipeline Veto Rights And That’s A Big Deal For Oil –The oil and gas industry in the United States scored a big win this week after the EPA narrowed the focus of a rule that up until now, allowed states to refuse to grant pipeline permits – or stall them indefinitely. But under the Trump Administration’s guidance, the EPA is saying no more shenanigans. The U.S. Environmental Protection Agency (EPA) has issued a final rule narrowing the scope of review for proposed oil and gas pipelines that states should consider under a section of the Clean Water Act for energy infrastructure.Up until now, states have been using Section 401 of the Clean Water Act to deny permits to oil and gas pipeline projects.But this final rule makes it clear: under the Clean Water Act Section 401, states can look at the water issues only – not larger issues such as climate change – when asked to review an energy infrastructure project.States will also be required to complete the review within one year of receiving a certification request – a rule that will surely cramp the styles of the anti-fossil fuel states.The EPA’s actions this week isn’t so much a change in policy or intent of policy, but a clarification of the spirit of the existing Clean Water Act, which the EPA contends was never designed to blanketly oppose oil pipelines on broad climate change grounds, after the FERC had given a project a green light. This keeps the assessment of the broader environmental impact in the hands of the FERC, not each state.“When states look at issues other than the impact on water quality, they go beyond the scope of the Clean Water Act,” EPA said in a statement.“EPA is returning the Clean Water Act certification process under Section 401 to its original purpose, which is to review potential impacts that discharges from federally permitted projects may have on water resources, not to indefinitely delay or block critically important infrastructure,” EPA Administrator Andrew Wheeler said.

Oil and babies don’t mix: Wells linked to low birthweight — Pregnant women in rural California who lived near active oil and gas wells were 40% more likely to give birth to low birthweight babies, according to new research published today.The study led by University of California scientists is the first to investigate what California’s constellation of oil and gas development means for babies born nearby. The finding couldgalvanize efforts in the state Legislature to require buffer zones around oil and gas activities.The researchers found that 6% of women living near rural oil and gas wells that churned out more than 100 barrels a day had low birthweight newborns, compared to 5% of women with no oil and gas production nearby. When the researchers factored in variables like the mother’s age and socioeconomic status, that translates to a 40 percent increased likelihood. Low birthweight babies, who weigh less than 5.5 pounds at birth, may be healthy but often have a higher rate of illnesses, such as respiratory diseases and difficulty fighting infections, as well as developmental delays. The researchers reviewed nearly 3 million birth certificates from 2006 to 2015 in the Sacramento Valley, San Joaquin Valley, South Central Coast and Los Angeles Basin.While the link between oil and gas production and low birthweight babies was found in rural areas, it didn’t hold up in urban areas, such as large parts of the Los Angeles region. But a well churning out oil in a city backyard is not necessarily benign. Morello-Frosch said it’s possible the link to low birthweight babies is there, but it’s just hard to spot because oil and gas might produce a smaller share of the overall pollution in urban areas. In addition, people in rural regions are exposed to pollutants – in groundwater, for instance – that might make them more vulnerable to pollution from oil and gas production. The findings, published in the journal Environmental Health Perspectives, support a handful of studies in other states, including Colorado and Pennsylvania. Those earlier studies reported increased odds of health effects among babies born near oil and gas development, including premature births, heart defects, and low birthweight.

How Should California Wind Down Its Fossil Fuel Industry? – California’s energy past is on a collision course with its future. Think of major oil-producing U.S. states, and Texas, Alaska or North Dakota probably come to mind. Although its position relative to other states has been falling for 20 years, California remains the seventh-largest oil-producing state, with 162 million barrels of crude coming up in 2018, translating to tax revenue and jobs. At the same time, California leads the nation in solar rooftops and electric vehicles on the road by a wide margin and ranking fifth in installed wind capacity. Clean energy is the state’s future. By law, California must have 100 percent carbon-free electricity by 2045, and an executive order signed by former Governor Jerry Brown calls for economywide carbon-neutrality by the same year. So how can the state reconcile its divergent energy path? How should clean-energy-minded lawmakers wind down California’s oil and gas sector in a way that aligns with the state’s long-term climate targets while providing a just transition for the industry’s workforce? Any efforts to reduce fossil fuel supply must run parallel to aggressive demand-reduction measures such as California’s push to have 5 million zero-emission vehicles on the road by 2030, said Ethan Elkind, director of Berkeley Law’s climate program. After all, if oil demand in California remains strong, crude from outside the state will simply fill the void. “If we don’t stop using it, then that supply is going to get here, even if it’s not produced in-state,” Elkind said in an interview. Lawmakers have a number of options for policies that would draw down and eventually phase out fossil fuel production in California, according to a new report from the Center for Law, Energy and the Environment at the UC Berkeley School of Law, co-authored by Elkind and Ted Lamm. They could impose a higher price on California’s oil production through a “severance” tax or carbon-based fee, with the revenue directed to measures that wean the state from fossil fuels. (California, alone among major oil-producing states, does not have an oil severance tax.) Lawmakers could establish a minimum drilling setback from schools, playgrounds, homes and other sensitive sites. They could push the state’s oil and gas regulator, the California Geologic Energy Management Division, to prioritize environmental and climate concerns. A major factor holding lawmakers back is, of course, politics. Given the state’s clean-energy ambitions, it might surprise non-Californians that the oil and gas industry is one of the Golden State’s most powerful special interest groups.

Canada is the largest source of U.S. energy imports – Canada is the largest source of U.S. energy imports and the second-largest destination for U.S. energy exports behind only Mexico. Energy is an important component of trade between Canada and the United States. In 2019, based on the latest annual Standard International Trade Classification (SITC) data from the U.S. Census Bureau, energy accounted for US $85 billion, or 27%, of the value of all U.S. imports from Canada. Crude oil and petroleum products accounted for 91% of the value of U.S. energy imports from Canada and 89% of the value of U.S. energy exports to Canada.The United States exported US $23 billion worth of crude oil, petroleum products, natural gas, and electricity to Canada in 2019, about 8% of the value of all U.S. exports to Canada and the second-highest level recorded after peaking in 2014.U.S. crude oil imports from Canada accounted for 56% of all crude oil imports to the United States in 2019, averaging 3.8 million barrels per day (b/d) – up from 3.7 million b/d in 2018. In 2019, the United States exported 459,000 b/d of crude oil to Canada, which remained the largest destination for U.S. crude oil exports. U.S. crude oil exports to Canada are typically light, sweet grades that are shipped to the eastern part of the country. U.S. crude oil imports from Canada tend to be heavy and are sourced from oil sands in Alberta (Western Canada), and most of these exports flow to U.S. Midwest refineries.Crude oil trade by rail has become more attractive because pipeline capacity in Canada has at times been insufficient to accommodate Canada’s growing crude oil production. Consequently, U.S. imports of Canada’s crude oil by rail have more than tripled from an average of 91,000 b/d in 2016 to an average of 300,000 b/d in 2019. More than half of the crude oil volume imported by rail (171,000 b/d) went to the U.S. Gulf Coast region. Petroleum product trade between the United States and Canada is relatively balanced in both volume and value. Canada is the largest source of U.S. petroleum and refined products imports. In 2019, the United States imported a record 610,000 b/d of petroleum products from Canada, or 26% of all U.S. petroleum product imports last year. These imports were valued at more than US $14 billion. Natural gas trade between the United States and Canada is dominated by pipeline shipments, which accounted for 98% of all U.S. natural gas imports in 2019. Historically, the United States has imported more natural gas than it has exported by pipeline to Canada. Natural gas imports from Canada in 2019 totaled 7.4 billion cubic feet per day (Bcf/d) and were valued at US $6 billion in 2019. Most of the natural gas the United States imported from Canada originated in Western Canada and was shipped to U.S. markets in the West and Midwest regions. U.S. natural gas exports to Canada mainly go into the eastern provinces of Canada.

Push Comes To Shove – Will Crude Shippers Soon Need To Commit To Enbridge’s Mainline System? – Up in Canada, there is finally a regulatory timeline for reviewing Enbridge’s long-standing proposal to revamp how it allocates space – and charges for service – on the company’s 2.9-MMb/d Mainline. But the plan to convert the largest crude oil pipeline system out of Western Canada from one whose space is 100% uncommitted and allocated every month to one with 90% of its capacity locked in via long-term contracts remains controversial, especially among producers. Plus, the world has changed in the past few months. Oil sands and other production in Alberta and its provincial neighbors is off sharply in response to pandemic-related demand destruction and low oil prices, and the always-full Mainline has been running at well under 90% of its capacity lately. Further, the Trans Mountain Expansion and Keystone XL projects – competitors to the Mainline in a way – have progressed this year, making shippers wonder whether to lock in capacity on the Mainline if TMX and KXL’s completion may be imminent. Today, we begin a short series on the prospective shift to a contract-carriage approach on the primary conduit for heavy and light crudes from Western Canada to U.S. crude hubs and refineries.

Unknown quantity of oil spilled from refinery into city sewers – An unknown amount of oil from the Co-op Refinery Complex (CRC) spilled into Regina’s sewers sometime last week. According to Brad DeLorey, spokesperson for the CRC, the spill was detected May 22 “late in the morning.” The amount of oil spilled was not known by DeLorey or the City of Regina as of Friday evening. “I don’t know the quantity; the situation has been resolved and they are looking at a long-term solution with the City of Regina,” said DeLorey. The preliminary investigation attributes the spill to high winds. As DeLorey explained, high wind gusts caused waves to form on outdoor ponds located at the CRC where oil is stored. The waves then kicked up sediment sitting on the bottom of the ponds, dislodging the sludge, which then caused a discharge after entering a pump. “Some of that got into the discharge to the city wastewater system,” said DeLorey, quoting an engineer that was familiar with the spill. Normally wastewater from those ponds would discharged to the city for treatment. DeLorey said that since there was no threat posed by the spill, the city and the refinery did not alert the public. An investigation into the cause of the spill and the amount of oil that was spilled is currently underway. When asked if wind has ever caused a similar spill, DeLorey said that he was not aware, saying that it could have been because of the “constant 70 km/h wind.” Wind speeds on May 22 recorded by Environment Canada registered a top speed of 48 km/h. In the days prior to the spill being detected, wind speeds reached 64 km/h on May 20 and 67 km/h on May 21. In an emailed response, a spokesperson for the city said it had been made aware of the spill and quickly contained it. “As a precaution, downstream users are being notified, but no action is required at this time,” said the spokesperson. According to the spokesperson, the city is still conducting tests on the impact of the spill, anticipating test results early this coming week. “The Water Security Agency and the Ministry of Environment indicated that there was low risk to the environment,” said a city spokesperson. The Ministry of Environment will not be investigating the spill at this time according to Wayne Wark, executive director of communications with the ministry. That’s due to an effluent agreement between the city and the refinery. “The discharge was confined to a contained system,” Wark said in an email. He added that the discharge did not affect the natural environment. “It was the City that first identified the incident/impact to its Wastewater Treatment Facility,” said Wark.

Oil spill at Regina Co-op refinery believed to be low risk – An investigation into the May 22 oil spill at the Co-op refinery in Regina is being deemed low risk downstream according to the Water Security Agency (WSA). A statement from Federated Co-op Limited (FCL) on May 30 said an unknown amount of oil spilled into city sewers, eventually showing irregularities when being analyzed by wastewater treatment plant operators. FCL further stated there was no threat to the natural environment. Unifor 594, the union that represents locked out refinery employees during the nearly six-month labour dispute with FCL, is concerned that the City of Regina did not send out a notification about the incident until it was first reported by the media a week later. Patrick Boyle, a spokesperson with the WSA, said it’s being called a spill, but it’s a little different compared to usual oil spills into the environment. When the issue was discovered at the wastewater treatment plant, workers were able to divert what was happening into one of their lagoons. “There’s a treatment system that happens and it is effectively contained within that,” explained Boyle. “What we have asked the city to do is to increase monitoring testing downstream to make sure there are no impacts.” Boyle added that they’ve notified downstream landowners about the issue.“There’s not that many users downstream, but it’s important to get that notification there so they have the same information everyone else has.”Early stages of the investigation show strong winds resulted in a discharge of sludge into the sewage system. The WSA will be working to provide a full assessment of what happened at the refinery that day. Boyle said there are still questions left unanswered at this time.

Fuel oil contaminates Langley salmon-bearing stream – An apparent fuel oil spill that contaminated Fraser Creek near the Langley airport on Saturday afternoon, May 30, may be connected to an upstream leak in Murrayville near Langley Memorial Hospital the day before, said Langley Fire Department deputy chief Bruce Ferguson.“We had a leak [there near LMH] on Friday,” Ferguson told the Langley Advance Times.Ferguson said the exact source of the contamination could not be determined when fire crews and cleanup specialists were called to the area. A company under contract with the Township is handling the cleanup, Ferguson said.Stanley Brown, who lives in the area, reported the contamination Saturday afternoon.Brown said he noticed “a very strong” odor while he was out for a walk around 2 p.m. Saturday in the Derek Doubleday Arboretum at the southwest corner of Langley Airport, near the new hangers.“I smelt it and then I looked and I saw the oil,” Brown related.“The creek was 20 to 25 per cent covered and you could see it roiling up in the current.”When he crossed the Nicomekl River at Fraser Hwy., Brown again encountered a strong smell of fuel and saw “lots of oil visible in the river.”“I could smell it from 50 feet away,” Brown recalled.He said the amount of oil appeared to be spreading Sunday, despite the deployment of containment booms.A Township of Langley Watercourse Classification map ranks Fraser Creek and the Nicomekl River as Class “A” salmon bearing streams, meaning they are inhabited year round or have the potential for a “year round fish presence upon reasonable means of access enhancements.” There have been warnings about the impact of urbanization, pollution, and spills on the salmon population, with the Langley-based Nicomekl Enhancement Society warning salmon populations in the Pacific Coast are under threat, with their numbers dwindling.

Putin orders state of emergency after huge fuel spill inside Arctic Circle – President lambasts power plant owner ‘for not reporting earlier’ incident bigger than Kerch spill. About 20,000 tonnes of diesel fuel has spilled into the Ambarnaya River outside Norilsk. Vladimir Putin has ordered a state of emergency after 20,000 tonnes of diesel fuel spilled into a river inside the Arctic Circle. The spill occurred when a fuel reservoir at a power plant near the city of Norilsk collapsed on Friday. The plant is operated by a division of Nornickel, whose factories in the area have made the city one of the most heavily polluted places on Earth. During a video conference on Wednesday that was broadcasted on television, Putin lambasted the head of the Nornickel subsidiary that owns the power plant, NTEK, after officials said the company failed to report the incident. “Why did government agencies only find out about this two days after the fact? Are we going to learn about emergency situations from social media? Are you quite healthy over there?” the Russian president told Sergei Lipin, the head of NTEK. Nornickel said NTEK had reported what happened in a “timely and proper” way. The governor of the Krasnoyarsk region, where Norilsk is located, told Putin he only learned of the real situation on Sunday after “alarming information appeared in social media”. Putin said he agreed that a national state of emergency was needed in order to call in more resources for the cleanup effort. Russia’s investigative committee, which deals with major crimes, announced it had launched three criminal investigations into the accident and detained a power plant employee. Alexei Knizhnikov of the World Wildlife Fund said the environmental group was the one who alerted cleanup specialists after confirming the accident through its sources. “These are huge volumes,” he said. “It was difficult for them to cover it up.” The volume of the spill is vastly larger than the 2007 Kerch spill, which involved 5,000 tonnes of oil, Knizhnikov said. At the time the spill in the Black Sea strait was the largest of its kind for Russia and required intervention of the military and hundreds of volunteers. Knizhnikov said diesel fuel is lighter than oil, so it was likely to evaporate rather than sink but was also “more toxic to clean up”. The Ambarnaya River that bore the brunt of the spill will be difficult to clean up because it is too shallow to use barges and the remote location has no roads, officials told Putin. Russia’s environment minister, Dmitry Kobylkin, said he thought burning the fuel, which some are suggesting, was too risky. “It’s a very difficult situation. I can’t imagine burning so much fuel in an Arctic territory … such a huge bonfire over such an area will be a big problem.”

Vladimir Putin declares state of emergency in Arctic region over Norilsk fuel spill — Russian President Vladimir Putin has declared a state of emergency in a region of Siberia after an estimated 21,000 tonnes of diesel fuel spilled from a power plant storage facility, in an accident experts say will take “decades” to clear. The spill took place last week at a power plant in an outlying section of the city of Norilsk, 2,900 kilometres north-east of Moscow. A fuel tank at a power station in the remote, industrial region lost pressure on May 29 and leaked fuel and lubricants into the Ambarnaya River, according to the Investigative Committee, Russia’s top criminal investigation body. The Ambarnaya feeds a lake from which springs another river that leads to the environmentally delicate Arctic Ocean. At a televised government meeting to discuss the spill, Mr Putin said he was shocked to find out local authorities had only learned of the incident from social media two days after it happened and scolded the region’s governor Alexander Uss on air. “Are we to learn about emergency situations from social networks? Are you alright healthwise over there?” Mr Putin said, waving his hand across his eyes. The state environment watchdog said 15,000 tonnes of oil products had seeped into the river system with another 6,000 into the subsoil. The state fisheries agency says the river will need decades to recover. An expanse of crimson water could be seen stretching from shore to shore down a river and one of its offshoots in aerial footage published by the RIA news agency this week. The environmental impact from the spill could last for “decades”, Russia’s Greenpeace climate project manager Vasily Yablokov has said. Diesel fuel removed from the river has been placed in temporary reservoirs.(Supplied: Severny Gorod)”We’re currently talking about cleaning up the initial pollution from the surface of the water, pumping out the fuel, pumping out the polluted water as far as possible, depending on the reservoirs, cleaning up the polluted ground,” he said. “However, there will be enough pollution to poison [the environment] for years to come and it will require recultivation, cleaning, which will take years.” Alexei Knizhnikov of the World Wildlife Fund’s Russia operation said the damage to fish and other resources could exceed 1 billion rubles ($20.8 million). Over 100 specialists have been dispatched to the area by the emergency services, as well as equipment and experts from Russian state oil corporations.

20,000 Ton Oil Spill in Russian Arctic Has ‘Catastrophic Consequences’ for Wildlife — Russian President Vladimir Putin declared an emergency after 20,000 tons of diesel fuel spilled into a river in the Arctic Circle.The accident is the second largest oil spill in terms of volume in modern Russian history, the Word Wildlife Fund (WWF) told AFP, as BBC News reported. The oil spread around 7.5 miles from the fuel site, turning the Ambarnaya river bright red, and contaminated a total of 135 square miles.”The incident led to catastrophic consequences and we will be seeing the repercussions for years to come,” Sergey Verkhovets, coordinator of Arctic projects for WWF Russia, said in a statement reported by CNN. “We are talking about dead fish, polluted plumage of birds, and poisoned animals.”Russia’s environmental ministry Rosprirodnadzor is already reporting contaminant levels in the water that are tens of thousands of times higher than the safe limit. “[T]here has never been such an accident in the Arctic zone, ” former deputy head of Rosprirodnadzor Oleg Mitvol told BBC News. The spill occurred last Friday when a fuel tank at a power plant near the city of Norilsk in Siberia collapsed. The plant is owned by a subsidiary of Norilsk Nickel, the world’s No. 1 producer of nickel and palladium. Its factories are also the reason why Norilsk is one of the most polluted places on Earth, The Guardian reported. The plant initially attempted to clean the spill on their own and did not tell authorities about the incident for two days, Ministry of Emergency Situations head Evgeny Zinichev said, according to CNN. “These are huge volumes,” he said. “It was difficult for them to cover it up.”The governor of the Krasnoyarsk region, where the spill took place, told Putin he only learned of it Sunday from social media posts. The Russian government has opened three criminal investigations into the incident and detained one plant employee.

Global Gas Market Still Extraordinarily Oversupplied — The specter of negative prices is hanging over energy markets more than a month after oil’s unforgettable crash below zero. While crude has staged a rapid recovery after a deal by the biggest producers to curb a surplus, the $600 billion global gas market remains extraordinarily oversupplied. Traders and analysts say the worst may be yet to come as demand falls and storage nears capacity, creating the ideal conditions for negative prices in some parts of the world. It shows just how far the global energy industry is from recovering from a pandemic-fueled slide in demand and signals more pain for producers from the shale fields of Texas to Australia’s Curtis Island. Unlike the oil market, there’s been no sign of a coordinated response to address the glut, meaning the fallout could be deeper and longer. “We are in uncharted territory with low demand levels and high storage stocks,” said Guy Smith, head of gas trading at Swedish utility Vattenfall AB. “In the shorter term there is real risk that conditions may be set to allow negative prices in Europe, but only in the very short term.” The fuel, used to generate power and heat and as a feedstock for chemicals and fertilizers, was already slated to have a terrible year after a mild winter exacerbated a glut. But things turned from bad to worse as the pandemic hammered demand, forcing major buyers to reject deliveries. Meanwhile, top sellers haven’t yet throttled back enough output as stockpiles near capacity. Like oil’s brief plunge in April below minus-$40 a barrel, the key factor is the lack of storage to absorb excess supply. Traders and analysts point to Europe as the first market likely to hit that crisis point, which could have ripple effects for buyers and sellers from the U.S. to Asia. While the oil market has a broad, if fragile, alliance of producers to manage production and rescue prices, led by Saudi Arabia and Russia, the gas market lacks a coordinated approach, allowing the current oversupply to drift unchecked.

Oil Tankers Off Chinese Coast Signal Rapid Rebound – Queues of tankers have formed off China’s busiest oil ports as the vessels wait to offload crude for refineries that are quickly ramping up production amid a rapid rebound in fuel demand. Two dozen or more crude-laden tankers are waiting to discharge at terminals on China’s east coast that supply state-owned and independent refiners in the region, according shipbrokers and vessel-tracking data. Asia’s largest economy is leading a recovery in oil consumption, with demand in May almost back to levels seen before the coronavirus triggered stay-at-home orders. Chinese refineries are increasing operations to convert more crude into gasoline and diesel after factories reopened and millions of people returned to work following the easing of restrictions. Government policy dictating that the retail price of fuels won’t be cut in line with sub-$40 a barrel oil has also boosted refining margins in the country. “China’s demand recovery and current low oil prices have prompted refiners, especially the independents, to ramp up crude runs,” said Serena Huang, a Singapore-based analyst at analytics firm Vortexa Ltd. “This crude import momentum could be rolling over to June if refiners’ appetite remain strong.” The fleet of tankers arrived in Chinese waters during the second half of May and the ships have been idling off ports in Shandong and Liaoning provinces, according to data compiled by Bloomberg. Most of the vessels are Suezmaxes and Very-Large Crude Carriers, which are estimated to be collectively carrying about 4 million tons or more of oil from countries including Russia, Colombia, Angola and Brazil. Shandong is home to the Qingdao and Rizhao terminals and China’s independent refiners — known as teapots — that have staged a v-shaped recovery. Run rates rose to a record high of about 76% at the end of May, compared with a low of 42% in February, according to industry consultant SCI99. Meanwhile, the queues might get even longer, with the highest number of supertankers since at least the start of 2017 hauling crude to China from almost everywhere across the globe.

Abu Dhabi Mulling Pipeline Stake Sale— Abu Dhabi’s state-owned energy producer is close to selling a multibillion-dollar stake in its natural gas pipelines to an investor group backed by Global Infrastructure Partners and Brookfield Asset Management Inc., in what is set to be one of the year’s biggest infrastructure deals. The buyers could sign an agreement with Abu Dhabi National Oil Co. for a 49% stake in the pipelines this month, according to people with knowledge of the matter, who asked not to be identified as discussions are private. A deal could value the pipelines at more than $15 billion, including debt, they said said. Equity financing has been arranged and the bidders are negotiating the terms of a debt package with banks, the people said. While discussions are advanced and ongoing, the timing and valuation could still change, according to the people. The GIP consortium also includes Italian infrastructure operator Snam SpA, Ontario Teachers’ Pension Plan, Singapore sovereign fund GIC Pte and South Korea’s NH Investment & Securities Co. Representatives for Adnoc, GIP, Brookfield, Ontario Teachers’, Snam and NH Investment declined to comment. Representatives for GIC did not immediately respond to requests for comment. Infrastructure investors have been defying the dealmaking downturn brought on by the coronavirus pandemic to deploy capital. The Adnoc deal could surpass KKR & Co.’s agreement in March to buy the waste-management arm of U.K. utility owner Pennon Group Plc for 4.2 billion pounds ($5.2 billion). It could also top plans by Portugal’s biggest oil company, Galp Energia SGPS SA, to sell its gas distribution assets for as much as 1.5 billion euros ($1.7 billion). Abu Dhabi has been opening up the operations of its state-owned oil producer to foreign partners as part of a push to diversify its economy and generate additional sources of funding. Adnoc has already sold shares in its distribution unit and brought in international investors to its refining and oil field services business. KKR and BlackRock Inc. agreed last year to invest $4 billion in Adnoc’s oil pipeline network. GIC bought a stake in the business later.

OPEC+ to Discuss Production Cut Extension— OPEC+ is set to discuss a short extension of its current output cuts, according to a delegate, as the cartel considers bringing forward its next meeting a few days to June 4. The cartel and its allies are considering extending the current cuts for one to three months, the delegate said. As the situation in the oil market is moving fast, the preference is to take short-term measures and not disrupt the rebalancing of the market, the delegate said. The existing deal — struck in April as energy demand and prices collapsed because of the coronavirus pandemic — calls for output curbs to ease from July. But that’s up for discussion at the next meeting. Russia wants to start easing from July, people familiar with the situation said last week. Oil prices have rallied as the output curbs coincided with a stronger-than-expected rebound in demand. But with lockdowns easing across the globe, fears that the pandemic could have a second wave make predictions of a recovery perilous. At about $35 a barrel, prices are below what most producers need for government spending. West Texas Intermediate crude and Brent, the global benchmark, edged lower in Asian trading on Monday as the protests in the U.S. damped risk sentiment. The date of the meeting, which will be held by video conference, was still to be confirmed late on Sunday, after people familiar with the situation said OPEC members were close to an agreement to bring it forward to June 4. An earlier date would give the oil cartel more flexibility to change its current production limits. OPEC members usually decide their plans for shipping oil to customers for July in the first week of June, so an earlier meeting would give them more time to react. Algerian Energy Minister Mohamed Arkab, who holds the rotating presidency, proposed June 4, instead of June 9-10. The 23-nation OPEC+ coalition led by Saudi Arabia and Russia is undertaking record oil-production cuts to prop up prices. At the meeting it will decide whether to keep the existing agreement, or extend the current curbs. The Organization of Petroleum Exporting Countries and its partners committed to lowering output by 9.7 million barrels a day, or about 10% of global supply, in May and June. In addition, Saudi Arabia, Kuwait and the United Arab Emirates made further voluntary cuts of about 1.2 million barrels a day for June, bringing the total OPEC+ curbs to almost 11 million barrels a day. Production cuts are meant to be eased to about 7.7 million barrels a day in July.Nigeria and the state oil company of Abu Dhabi, the UAE’s capital, have already announced plans to increase exports in July in line with the OPEC+ deal from April.

Oil Demand Expected to Fall 11.5 Percent – Global oil demand will decrease by 11.5 percent, or 11.4 million barrels per day (MMbpd), year on year in 2020, according to Rystad Energy’s latest demand forecast. Total oil demand is projected to fall to 88.1MMbpd this year from approximately 99.5MMbpd last year, Rystad outlined. May demand is expected to fall by 20.5 percent to 78.5MMbpd and June demand is forecasted to hit 84MMbpd. Rystad believes total global demand for road fuels will fall by 9.9 percent, or 4.7 MMbpd, year on year to 42.7MMbpd. Jet fuel demand is anticipated to decline by almost 40.8 percent, or 2.9MMbpd, year on year to 4.3MMbpd. Rystad forecasts that in 2020, total oil demand in the United States will fall 11.8 percent, or 2.4MMbpd, to 18.1MMbpd and that total oil demand in Europe will drop by 15.6 percent, or 2.2MMbpd, to 12MMbpd. Looking ahead to 2021, Rystad expects total oil demand to rebound to 96.3MMbpd. Road fuel demand is expected to average 46MMbpd and jet fuel demand is expected to average 6.2MMbpd next year. Rystad anticipates total oil demand in the U.S. to average 19.4MMbpd and total oil demand in Europe to average 13.2MMbpd in 2021. Rystad’s newest demand forecast is the latest in a line of weekly predictions that aim to calculate the effect of Covid-19 on oil demand. These are frequently updated as a result of evolving developments around the world. Rystad’s previous demand forecast saw oil demand falling by 10.8 percent, or 10.7MMbpd, in 2020. Road fuel demand was anticipated to fall by 10.8 percent, or 5.1MMbpd, year on year and jet fuel demand was projected to drop by almost 33.6 percent, or 2.4Mmbpd, year on year. There have been 5.9 million confirmed cases of Covid-19 around the world, with 367,166 deaths, as of May 31, according to the latest figures from the World Health Organization.

The Brent crude oil matrix, the linkages that make it work and implications for global markets. Do not try and refine the Brent; that’s impossible. Instead, only try to realize the truth…there is no Brent. Then you will see it is not the Brent that gets refined; it is only yourself. For those who are not fans of The Matrix, that sentence may seem a little cryptic, but it makes a point that is little understood outside the rarified world of crude oil trading. The production of North Sea Brent crude oil is down to less than a couple of hundred barrels per day. Soon it will be gone altogether. But 70% of all crude oil in the world is tied either directly or indirectly to the price of Brent. How is that possible? Well, it’s because Brent is no longer simply a grade of crude oil. Over the past two decades, it has evolved into an intricate, multi-layered matrix of trading instruments, pricing benchmarks and standard contracts that is a world unto itself. A world with a huge impact across almost everything in today’s energy markets. Unfortunately, no one can be told what Brent is. You have to see it for yourself. So that’s where we’ll go in this blog series. Warning: To read on is like taking the red pill. When the prompt futures price of West Texas Intermediate (WTI) crude oil plunged to $37.63/bbl below zero on April 20 (see One Way Out), the corresponding price for North Sea crudes, known collectively as Brent, remained positive, and never fell lower than a positive $19/bbl during the late-April meltdown. This relative stability has been touted by some as a justification for crude markets to rely even more on the Brent benchmark, or alternatively for CME WTI at Cushing to morph to a more Brent-like settlement system (more on that distinction later). But simple comparisons between the two benchmarks can be misleading. Brent and WTI are structurally quite different and serve very different markets. Furthermore, Brent has many challenges of its own, not the least of which has been the steady decline of North Sea crude oil production over the past 30 years. As we said above, to understand Brent, you have to see it for yourself. And that means that to understand where Brent is going, we need to review where Brent has been. It has been a long and winding road from the early 1970s until today.

Oil prices slip as wary traders eye upcoming OPEC+ meeting – Oil prices fell nearly 1% on Monday as traders hedged bets with the Organization of the Petroleum Exporting Countries (OPEC) considering meeting as soon as this week to discuss whether to extend record production cuts beyond end-June. Brent crude fell 34 cents to $37.50 a barrel, in the first day of trading in the contract with August as the front month. West Texas Intermediate (WTI) crude futures for July delivery were at $35.17 a barrel, down 32 cents, by 0123 GMT. The price falls come after front-month Brent and WTI prices posted their strongest monthly gains in years in May. Gains were boosted by OPEC crude production dropping to its lowest in two decades with demand is expected to recover as more nations emerge from coronavirus lockdowns. “The focus is very much on OPEC+,” OCBC economist Howie Lee said, referring to the grouping of OPEC and its allies including Russia. OPEC+ agreed in April to reduce output by an unprecedented 9.7 million barrels per day (bpd) in May and June after the coronavirus pandemic ravaged demand. “We might see a cautious pullback in (crude) prices given that downstream prices haven’t caught up … but if OPEC+ does come up with a three-month extension, there’s a possibility that prices may hit the $40 level,” Lee said. Still, tensions between the United States and China weighed on global financial markets while traders are also keeping an eye on riots over the weekend that have engulfed major U.S. cities. Saudi Arabia is proposing to extend record cuts from May and June until the end of the year, but has yet to win support from Russia, sources have told Reuters. Algeria, which currently holds the OPEC presidency, has proposed an OPEC+ meeting planned for June 9-10 be brought forward to facilitate oil sales for countries such as Saudi Arabia, Iraq and Kuwait. Russia has no objection to the meeting being brought forward to June 4. Meanwhile supply in North America is also falling as data from Baker Hughes showed that the U.S. and Canada oil and gas rigs count dropped to a record low in the week to May 29.

Oil Rally Fizzles— The historic oil-supply curbs by OPEC, Russia and other nations that helped spur May’s record price rally are hanging in the balance as the cartel and its allies dicker over when to hold their next meeting. Oil futures settled slightly lower in New York on Monday amid mixed signals from the Organization of Petroleum Exporting Countries and its confederates about the timing of their next discussions. One idea floated is to bring the meeting forward by several days to Thursday to consider prolonging production limits for as long as three months, according to a delegate. Without an extension, the existing caps begin to wind down next month — a schedule Russia so far prefers to stick to. Meanwhile, onshore oil exploration in the U.S. shrank for the 11th consecutive week to a level not seen since before the shale revolution kicked off more than a decade ago. Despite well shut-ins across North America, U.S. imports of Saudi crude have surged, swelling supplies held in storage. American stockpiles are “probably heading higher at least in the short term as more imports come in,” said Peter McNally, an analyst at Third Bridge Group Ltd. “The market is oversupplied to begin with. Everyone is looking for more signs of demand firming.” West Texas Intermediate for July delivery settled down 5 cents at $35.44 a barrel on the New York Mercantile Exchange. Brent, the international benchmark, rose 48 cents to $38.32. An earlier OPEC+ meeting would give the producer group more flexibility to change its current production limits. The group’s preference is to take short-term measures on cuts as the situation is volatile, the delegate said. The coalition — which includes OPEC’s 13 members plus another 10 exporters — has achieved 92% compliance, according to data analytics firm Kpler. Iraq and Nigeria have been laggards in meeting their pledged targets. Meanwhile, the U.S. Oil Fund ETF begins its monthly roll of futures contracts on Monday. The fund plans to sell its July holdings and buy more November and January futures over the next 10 trading sessions.

Oil Rallies Towards $40 As OPEC+ Nears Deal – Oil prices rose once again on rising odds of an OPEC+ extension. Brent is now nearing $40 per barrel, a remarkable comeback after crashing below $20 per barrel a little more than a month ago.Saudi Arabia and Russia are close to inking a two-month extension of the current oil production cuts, extending the agreement through September 1. Saudi Arabia wants an extension through the end of the year while Russia has favored easing the cuts in July. A two-month extension would be a middle-ground compromise. In the North Sea, almost a third of the oil left on the UK continental shelf is no longer economical to extract. The rig count in the Gulf of Mexico has also fallen by almost half.. After the U.S. downgraded its status with Hong Kong, following Beijing’s new national security law in the territory, China is now threatening to curtail American farm purchases. . In an effort at infrastructure stimulus, China is reviving a $20 billion petrochemical project in Shandong province. “The 400,000 barrel-per-day (bpd) refinery and 3 million tonne-per-year ethylene plant in Yantai, Shandong, the country’s hub for independent oil refineries, was proposed years ago but approval has been slowing in coming because of China’s struggle with excess refining capacity,” Reuters reported.The sharp oil production cuts have led to a decrease in the cost of shipping. Prices for chartering an oil vessel fell 77 percent from the peak in March. Occidental Petroleum cut its quarterly dividend by 91 percent, and shareholders will only receive one penny per share on July 15. In March, Oxy cut its dividend to 11 cents, from 79 cents previously. The rig count fell to 301 rigs last week, the lowest level on record since 1949.

Oil rises nearly 4% ahead of OPEC+ meeting, easing lockdowns – Oil prices were up about $1 a barrel on Tuesday on expectations that major producers will agree to extend output cuts during a video conference likely to be held this week and as countries and U.S. states begin to restart after coronavirus lockdowns. West Texas Intermediate crude climbed $1.37, or 3.87%, to settle at $36.81 per barrel. Brent crude rose 2.7%, or $1.04, to $39.36 a barrel. The Organization of the Petroleum Exporting Countries and others including Russia, a grouping known as OPEC+, are considering extending their production cuts of 9.7 million barrels per day (bpd), or about 10% of global production, into July or August, at a meeting expected to be held on June 4. “Most likely, OPEC+ could extend current cuts until Sept. 1, with a meeting set before then to decide on next steps,” said Citi’s head of commodities research Edward Morse. Under the original OPEC+ plan, the cuts were due to run through May and June, scaling back to a reduction of 7.7 million bpd from July to December. Saudi Arabia has been pushing to keep the deeper cuts in place for longer, sources said. The gradual reopening of businesses in a growing number of U.S. states and countries around the world after shelter-in-place mandates caused by the coronavirus pandemic also oil boosted prices. “As the economy opens up, there’s more and more people on the road. That’s going to be good, obviously, for crude oil,” said Bob Yawger, director of energy futures at Mizuho in New York. Steadily increasing gasoline demand in the United States and falling crude inventories at the nation’s oil storage hub in Cushing, Oklahoma, has also supported prices, Yawger said. Industry group American Petroleum Institute will release its weekly oil inventory report later in the day, with official data following on Wednesday.

Oil falls below $40 on doubts early OPEC+ meeting will go ahead this week – Oil prices erased gains on Wednesday, with Brent crude futures falling back below $40 a barrel, on doubts an early meeting of some of the world’s most powerful oil producers will go ahead as planned. OPEC and non-OPEC allies, a group of oil producers sometimes referred to as OPEC+, had been expected to hold their next meeting on Thursday. However, while OPEC kingpin Saudi Arabia and non-OPEC leader Russia were thought to have tentatively agreed on a one-month extension to production cuts, S&P Global Platts reported on Wednesday, citing unnamed sources, the date of a meeting to finalize the deal remains uncertain. OPEC member Algeria, which currently holds the rotating presidency of the group, proposed late last month that the meeting should be brought forward from the original date of June 9-10. Brent crude futures traded at $38.91 a barrel during Wednesday afternoon deals, down over 1.5%. Earlier in the session, the international benchmark had climbed above the $40-a-barrel mark for the first time since March 6. Meanwhile, U.S. West Texas Intermediate (WTI) crude futures stood at $36.26, almost 1.6% lower. The contract had also climbed to its highest level since early March earlier in the trading day, but it has since erased those gains. Oil prices have soared in recent weeks, rebounding from the lows of April amid optimism about an economic recovery in China and as other economies seek to gradually relax lockdown measures. In April, OPEC+ agreed to cut oil production by a record 9.7 million barrels per day (b/d), approximately 10% of global output. The move was designed to prop up prices as the coronavirus pandemic led to an unprecedented collapse in oil demand. The production cuts began on May 1 and are set to run through to the end of June. Under the current deal, the cuts will then be tapered back to 7.7 million b/d from July through to the end of 2020, and 5.8 million b/d from January 2021 through to April 2022.

Oil prices finish at highest in 3 months as traders await next move for OPEC+, digest U.S. supply data – Oil futures Wednesday closed higher, extending a move around the highest level since early March, as uncertainty over whether a meeting of crude producers will be held this week or next raised doubts about a willingness to substantially extend global production cuts that taper after June. Weekly declines in U.S. crude stockpiles and supplies at the Cushing, Okla. storage hub reported by the Energy Information Administration on Wednesday offered little support to oil prices, as petroleum product inventories climbed.West Texas Intermediate crude for July delivery tacked on 48 cents, or 1.3%, to settle at $37.29 a barrel on the New York Mercantile Exchange after surging 3.9% on Tuesday. Global benchmark Brent saw its August contract rise 22 cents, or 0.6%, to end at $39.79 a barrel on the ICE Futures Europe, after gaining 3.3% in the prior session.Prices for WTI and Brent crude marked their highest since March 6, according to Dow Jones Market Data. Amena Bakr, deputy bureau chief at Energy Intelligence, reported that a June 4 meeting of the Organization of the Petroleum Exporting Countries and its allies appeared “unlikely,” via Twitter on Wednesday. She said in a separate tweets that setting the date of next meeting is “contingent on all members of the group sticking to their quotas.” Member states that haven’t achieved their quotas in May will be asked to make up for that in the coming months, Bakr wrote, citing OPEC sources.Reuters reported Wednesday that Saudi Arabia and Russia have reached a preliminary agreement to extend existing cuts by one month. The reductions had been set to taper down to 7.7 million barrels starting in July.Bloomberg News, meanwhile, also reported that Russia and several other producers favor extending the group’s current cuts by one month, citing people familiar with the matter. The report said major producers are cognizant that rising prices of crude benefit U.S. shale production, which is likely to come back on line as futures react to efforts by OPEC+ to stabilize the commodity’s value.U.S. crude inventories, meanwhile, fell in the latest week.The Energy Information Administration reported Wednesday that U.S. crude inventories edged down by 2.1 million barrels for the week ended May 29. That compared with a forecast by analysts polled by S&P Global Platts for an average climb of 3.5 million barrels. The American Petroleum Institute on Tuesday reported a fall of 483,000 barrels, according to sources.A drop in imports led to the fall in crude inventories, as well as an increase in refinery runs and a 4 million-barrel shift of oil from commercial inventories into the Strategic Petroleum Reserve, said Matt Smith, director of commodity research at ClipperData. “Without this transfer, oil inventories would have reached a record high,” he told MarketWatch.

Oil Traders Ask Why U.S. Inventory Math Isn’t Adding Up – Oil traders and analysts scrutinizing U.S. inventory data for signs of a market recovery are being confronted by an odd situation: the math just doesn’t add up. Various government data sets including stockpiles, production, imports and exports are signaling that current official figures on at least some supplies are excessive. While it’s unclear where exactly the discrepancy lies, the difference could potentially signal a more bullish outlook for crude prices as they claw their way back after diving below zero in April. The excess is showing up in the U.S. Energy Information Administration’s so-called crude supply adjustment factor — the difference between stockpile numbers and those implied by production, refinery demand, imports and exports. That has averaged negative 980,000 barrels daily over the past four weeks — the largest in records going back to 2001, and equivalent to more than 27 million barrels. The adjustment factor tends to swing back and forth, depending on irregularities in various surveys the EIA pulls from for its reports. For these weekly reports, the EIA is not able to collect domestic crude oil production, instead estimating it from its short-term energy outlook model. Some investors lay the blame for the current discrepancy on U.S. oil production numbers. While daily output fell 700,000 barrels to 11.2 million in May, they believe oil’s plunge into negative territory in April should have led to a steeper decline. “This is a high frequency data series, and so there’s often some smoothening that results from it,” said John Kilduff, a partner at Again Capital, who added the discrepancy may have to do with production figures. “When the numbers are off, you just have to make sure you’re checking everything else independently, like other ways to track import and exports numbers.” Just last month, consultancy IHS Markit said that U.S. oil producers are in the process of curtailing 1.75 million barrels a day of existing output by early June due to operating cash losses, lack of demand and storage capacity and an unwillingness to sell resources at low prices. Some of that lower production is already becoming evident, according to information disclosed in various company announcements and state data.

Saudi Arabia and Russia push for an extension to output cuts, OPEC+ meeting this week still possible – Some of the world’s most powerful oil producers had been expected to convene on Thursday, with energy market participants closely monitoring whether the influential group will officially agree to extend their deepest ever round of output cuts. OPEC kingpin Saudi Arabia and non-OPEC leader Russia were thought to support a one-month extension of the current level of supply cuts, Reuters reported on Wednesday, citing unnamed OPEC sources. However, the date of a virtual meeting to finalize an agreement was still unclear on Thursday afternoon. OPEC and non-OPEC allies, sometimes referred to as OPEC+, were originally scheduled to review their production cuts on June 9-10. Late last month, Algeria, which currently holds the rotating OPEC presidency, proposed this meeting should be brought forward to Thursday. An OPEC+ meeting was still possible this week, according to Reuters, citing unnamed OPEC sources, if Iraq and other non-complying members promised to deepen their production cuts. Brent crude futures traded at $39.50 a barrel during early afternoon deals, down more than 0.6%. The international benchmark rose above $40 a barrel for the first time since March 6 in the previous session, before erasing those gains amid OPEC+ uncertainty. U.S. West Texas Intermediate (WTI) crude futures stood at $36.78 a barrel, almost 1.4% lower. The contract also climbed to its highest level since early March on Wednesday. Oil prices have marched higher in recent weeks, recovering from a dramatic fall in April which saw Brent futures hover close to 20-year lows and WTI tumble into negative territory for the first time in history. It comes amid optimism about an economic recovery in China, the world’s second-largest economy, and as other countries across the globe seek to gradually lift coronavirus lockdown measures.

Oil rises slightly as traders await clarity on output cuts – Oil prices were little changed on Thursday as investors awaited a decision from top crude producers on whether to extend record output cuts. The Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, a group known as OPEC+, are debating when to hold ministerial talks to discuss a possible extension of the existing cuts. Brent crude futures were up 6 cents, or 0.2%, at $39.85 a barrel. West Texas Intermediate crude futures gained 12 cents to settle at $37.41 per barrel. Saudi Arabia and Russia, two of the world’s biggest oil producers, want to extend cuts of 9.7 million barrels per day (bpd) that major producers agreed to in April. But a suggestion by OPEC president Algeria to meet on Thursday was delayed amid talks about poor compliance by some producers. Saudi Arabia, Kuwait and the United Arab Emirates are not planning to extend voluntary additional output cuts of 1.18 million bpd after June, indicating that crude supply could rise next month regardless of any OPEC+ decision. “OPEC appears ‘damned if they do and damned if they don’t’ with regard to extended near term production reductions,” . “Any decision to forgo any extension of current cuts would easily unleash a near term selling spree while an agreement to extend cuts beyond next month would have longer term bearish implications as upward adjustments to third quarter shale production forecasts would likely be required.” Concerns about a resurgence of U.S. shale production, which is already showing signs of revival, was one reason Moscow and Russia only backed prolonging cuts into July rather than agreeing a longer extension, sources briefed on OPEC+ talks have said. Meanwhile, U.S. government data on Wednesday showed large increases in fuel inventories as demand remains impaired due to the coronavirus pandemic. “Large oil inventory builds across the U.S., Europe and Japan last week are weighing on oil prices,” Striking a bullish note, however, Russia’s Energy Minister said the oil market in July could face a shortage of 3-5 million bpd, Interfax news agency reported.

Oil Prices Surge As OPEC+ Nears Deal – Oil prices jumped yet again on positive news from OPEC+ as well as a far better than expected jobs report. Brent surged by more than $2 per barrel while WTI approached the $40 mark. OPEC+ made a breakthrough in negotiations and the group is slated to meet on Saturday to sign off on the deal, which calls for a one-month extension of the 9.7 mb/d cuts. A sticking point had been the poor compliance rate from Iraq, but the Iraqi government agreed to strict compliance, although there could be a domestic backlash from doing so. The U.S. unemployment rateunexpectedly fell to 13.3 percent in May, with the return of 2.5 million jobs. Economists had expected the unemployment rate to jump to around 20 percent. The numbers led to a wave of optimism around economic recovery. The Libyan National Army (LNA) retreated from Tripoli, ending a 14-month assault on the capital. The civil war has also become a proxy battle between other world powers. The prime minister of the Government of National Accord (GNA) traveled to Ankara to meet with Turkish President Recep Tayyip Erdogan. In a sign of the times, investment bank Tudor, Pickering, Holt & Co., which was an important player in financing the U.S. shale industry, will begin research on clean technologies. The firm will cut back on the number of oil and gas companies it covers, and use an existing equity research team to cover clean tech. GM is developing an electric van for commercial use, a multibillion-dollar segment of the transportation sector, according to Reuters. “It’s going to be similar to what the Model 3 has done for the consumer market,” a UPS executive told Reuters. “Now all of a sudden, we’re off to the races.” The GM van is due to start production in late 2021. Vattenfall AB is going forward with a 1,500-megawatt offshore wind project in the North Sea, and the project carries no government subsidies. When it comes online in 2023, it will be the world’s largest, but won’t carry that title for long as a larger project in the UK is scheduled to come online shortly after. While many of the integrated oil majors have promised larger investments in renewable energy, Norway’s Equinor stands out. The majors are estimated to spend $18 billion combined per year by 2025 on renewables, but Equinor will account for $10 billion of that total, according to Rystad Energy. The Norwegian company will be the only one to invest a majority of its greenfield capex in clean energy.

Crude oil prices climb 5% on US jobless drop, Opec+ meeting hopes – Oil prices rose on Friday after an unexpected fall in the May US jobless rate and Opec’s decision to bring forward to Saturday discussions on whether to extend record production cuts. Brent crude futures were up $2.07, or 5.2 per cent, at $42.07 a barrel by 11:05 a.m. EST (1505 GMT). US West Texas Intermediate (WTI) crude futures rose $1.65, or 4.4 per cent, to $39.02 a barrel. The US Labor Department reported a surprise fall in the jobless rate to 13.3 per cent last month from 14.7 per cent in April. Brent has risen 17 per cent since Friday to reach a three-month high, in a range more comfortable for producers like Russia. The contract has more than doubled since crashing as low as $15.98 a barrel on April 22. WTI is up 11 per cent. Both benchmarks were headed for a sixth week of gains, lifted by the output cuts and signs of improving fuel demand as countries ease lockdowns imposed to fight the new coronavirus outbreak.

Oil jumps 5% as traders await OPEC+ meeting on extending supply cuts — Oil prices rose on Friday after OPEC decided to move up discussions on whether to extend record production cuts to Saturday, indicating that some laggard countries may have agreed to align themselves with the deal. Brent crude futures were up $2.46, or 6.2%, to trade at $43.45 per barrel, while West Texas Intermediate traded $2.06, or 5.5%, higher at $39.48 per barrel. Brent has risen 16% since Friday to reach a three-month high, settling in a range more comfortable for producers like Russia. The contract has more than doubled since it crashed to as little as $15.98 a barrel on April 22. WTI is up nearly 14% from Friday’s close, leaving benchmarks on track for a sixth week of gains, lifted by the output cuts and signs of improving fuel demand as countries ease lockdown measures imposed to prevent the spread of the new coronavirus. Russia’s energy ministry said on Friday a video conference of a group of leading oil producers, known as OPEC+, would be held on Saturday. OPEC and its allies had said they would bring forward the meeting, which had been scheduled for next week, should Iraq and others agree to boost their adherence to existing supply cuts. “Prices are up with the meeting scheduled for tomorrow. There was lots of confusion… so it looks like they found a way forward,” Olivier Jakob at Petromatrix consultancy said. Saudi Arabia and Russia, two of the world’s biggest oil producers, want to extend output cuts of 9.7 million barrels per day (bpd) into July. If OPEC+ fails to agree to roll over the current output curbs, that would mean the cut could drop back to 7.7 million bpd from July through December as previously agreed. “The growing fear is that not only will a deal to extend the deep cuts not be reached, but (some) producers may even relax their current over-compliance. This would ultimately see output rise in coming weeks,” ANZ Research said in a note. Adding support was the first tropical storm of the season in the U.S. Gulf of Mexico. Storm Cristobal is expected to enter the central Gulf this week, an area rich with offshore platforms, and could see landfall along Louisiana’s refinery row on Sunday. U.S. energy companies have already closed some production. “It’s not big, but there will be some shut-ins,” Jakob said.

Oil prices log over 11% weekly rise, with OPEC+ set to meet Saturday to discuss extension of output cuts – Crude-oil futures ended sharply higher Friday, supported by news that major oil producers will convene Saturday to discuss plans for extended productions cuts, while an unexpected monthly climb in U.S. jobs suggested a recovery in energy demand mat be at hand. The Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, said they would hold meetings via videoconference on Saturday, with the OPEC member conference set to begin at 2 p.m. Central European time, or 8 a.m. Eastern time, and an OPEC+ conference to begin two hours later. The major oil producers are expected to reach an official agreement to extend record oil production cuts of 9.7 million barrels a day through July, according to The Wall Street Journal. The group decided to move forward a meeting that had been planned for June 9-10, after a tentative plan to meet on June 4 fell apart. The weekend meeting is being viewed as a signal to crude investors that the group will deliver substantive near-term measures to stabilize oil’s value. “It’s all about the OPEC+ meeting,” wrote Bjornar Tonhaugen, Rystad Energy’s head of oil markets, in a Friday note. “As it was initially intended to happen on Thursday, when that did not materialize, prices fell because traders sensed a lack of agreement between the extended group’s producing countries.” “Now the mood has changed again and prices rose, following news that a consensus may have been reached and a meeting is across the corner,” he wrote. Meanwhile, U.S. data released Friday showing that the nation regained 2.5 million jobs in May and the unemployment rate fell to 13.3% from 14.7% in April, with that data leading to a rally in the stock market. “The oil price rally went into overdrive after a surprisingly robust U.S. labor market report,” “The economic recovery is already happening and that could do wonders for crude consumption.” West Texas Intermediate crude for July delivery rose $2.14, or 5.7%, to settle at $39.55 a barrel a barrel on the New York Mercantile Exchange. Global benchmark Brent saw its August contract BRNQ20, -0.54% climb $2.31, or 5.8%, to end at $42.30 a barrel on the ICE Futures Europe. For the week, WTI front-month U.S. oil futures were up 11.4%, while Brent climbed 11.8%m according to Dow Jones Market Data. Both benchmarks tallied their sixth consecutive weekly gain and marked a fourth session at their highest settlement since March 6.

Saudi, Russia agree oil cuts extension, raise pressure for compliance – (Reuters) – OPEC leader Saudi Arabia and non-OPEC Russia have agreed a preliminary deal to extend existing record oil output cuts by one month while raising pressure on countries with poor compliance to deepen their cuts, OPEC+ sources told Reuters. However, there was no agreement yet on whether to hold an OPEC+ output policy meeting on Thursday with the main obstacle being how to deal with countries that have failed to make the deep supply cuts required under the existing pact, the sources said. OPEC+ agreed to cut output by a record 9.7 million barrels per day, or about 10% of global output, in May and June to lift prices battered by plunging demand linked to lockdown measures aimed at stopping the spread of the coronavirus. Rather than easing output cuts in July, OPEC and its allies, a group known as OPEC+, were discussing keeping those cuts beyond June. “Saudi Arabia and Russia are aligned on the extension for one month,” one OPEC source said. “Any agreement on extending the cuts is conditional on countries who have not fully complied in May deepening their cuts in upcoming months to offset their overproduction,” the source said.

OPEC+ Extends Oil Cuts in Win for Saudi-Russian Alliance – OPEC+ agreed to a one-month extension of its record output cuts and adopted a stricter approach to ensuring members don’t break their production pledges. The deal will underpin the oil market recovery, easing the financial pain felt by resource-dependent emerging economies, shale explorers in Texas, and blue-chip companies like Royal Dutch Shell Plc. It’s a victory for Saudi Arabia and Russia, who put a destructive price war behind them to successfully cajole Iraq, Nigeria and other laggards to fulfill their promises to cut production. The two leaders of OPEC+ showed that they intend to keep a close watch on the oil market, meeting every month to assess the balance between supply and demand amid an uncertain economic recovery from the global pandemic. “Our collective efforts have borne fruit, and despite many uncertainties, there are encouraging signs that we are over the worst,” said Saudi Energy Minister Prince Abdulaziz bin Salman. “Demand is returning as big oil-consuming economies emerge from pandemic lockdown,” he added. After a video conference lasting several hours on Saturday, delegates said all nations had signed off on a new deal for a production cut of 9.6 million barrels a day next month. That’s 100,000 barrels a day lower than the reduction in June because Mexico will end its supply constraints, but a tighter limit than the 7.7 million barrels a day set for July in the group’s previous agreement. In addition, the communique states that any member that doesn’t implement 100% of its production cuts in May and June will make extra reductions from July to September to compensate for their failings. Those promises are a particular vindication for the Saudi minister, who has consistently pushed fellow members to stop cheating on their quotas since his appointment last year. But they could also add an element of risk. In theory, the entirety of the 23-nation production agreement, which runs until April 2022, is now contingent on every member making 100% of their pledged cuts, according to the communique. That’s something rarely achieved in the 3 1/2 years that OPEC+ has existed, or indeed the decades-long history of the Organization of Petroleum Exporting Countries itself.

OPEC+ keen to keep U.S. shale in check as oil prices rally – (Reuters) – When OPEC, Russia and their allies agreed in April to slash oil production, little did they expect that their initiative to prop up collapsing prices would be helped by a swift drop in U.S. output. Now that crude has rallied on the back of those cuts from below $20 a barrel to $40 or more, the group known as OPEC+ faces a fresh challenge: stopping U.S. shale production delivering another surprise by recovering equally quickly. “The plan is to stick to prices of $40-$50 per barrel because as soon as they rise any further to say $70 per barrel it encourages too much oil production, including U.S. shale,” said a Russian source familiar with OPEC+ talks on the issue. OPEC+ sources told Reuters on Wednesday that Russia and Saudi Arabia had reached a compromise to extend into July the group’s existing output cuts of 9.7 million barrels per day (bpd), the equivalent of 10% of global output. Those deep cuts had been due to be implemented in just May and June, before curbs were to be slowly eased. Concerns about a resurgence of U.S. shale, which is already showing signs of revival, was one reason Moscow and Russia only backed prolonging cuts into July rather than agreeing a longer extension, two sources briefed on OPEC+ talks said.

Trudeau government exploits pandemic to renew $14 billion arms deal with despotic Saudi regime – On April 9, just as Canada was beginning to see a dramatic surge in COVID-19 infections across the country, the Trudeau government lifted its moratorium on the issuing of new export licences for arms shipments to Saudi Arabia. The ban was originally adopted as part of a hypocritical public relations exercise, undertaken by the Trudeau government after the Saudi regime’s grisly murder of journalist Jamal Khashoggi in October 2018 had provoked international anger and revulsion. The Liberals’ “moratorium” was adopted above all to divert attention from revelations that the Saudi army used Canadian-made light armoured vehicles (LAVs) and other military equipment to suppress an uprising in the eastern part of the country in 2014. Canadian military equipment has also played a role in Riyadh’s bloody war on neighboring Yemen, which has led to the deaths of tens of thousands of civilians and left the country in ruins. The Trudeau government launched a year-long “review” of how the Saudis have used LAVs manufactured at a London, Ontario-based General Dynamics’ subsidiary under a $14 billion Canadian government-brokered arms deal. The probe was conducted by Global Affairs, the new name given to Canada’s Foreign Ministry, which plays a central role in advancing Canada’s imperialist interests and ambitions abroad. Predictably, the government review, which will not be made public, concluded that there was “no substantial risk” that the Saudi government, which beheads dozens of people every year and tortures political opponents, would use Canadian-made arms to violate human rights. It even claimed that the exports would “contribute to regional peace and security.” Amnesty International, Project Ploughshares, Oxfam and other groups have condemned the Trudeau government’s decision, which they claim will inevitably cause death and devastation in the entire region. These organizations also criticized the “hypocrisy of the Canadian government” for approving military exports to Saudi Arabia while voicing support, only days later, for a UN call for a global ceasefire during the pandemic.

.