Oil, Gas, And Fracking News Reads: 26July 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 25 July 2020. Go here for Part 1.

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

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Kinder Morgan posts $637 million loss in second quarter – Houston pipeline operator Kinder Morgan saw its second-quarter bottom line take a billion dollar swing from a profit to a loss as it wrote down $1 billion in assets.The company lost $637 million in the three months ended in June compared with a profit of $518 million in the same period a year earlier. The company’s results translated into a loss per share of 28 cents, compared with an earnings per share of 23 cents one year earlier. Facing a significant reduction in energy demand during the second quarter, Kinder Morgan’s second quarter revenue declined by 20 percent to nearly $2.6 billion from $3.2 billion in the same period a year earlier. Kinder Morgan wrote down the value of $1 billion worth of intrastate and gathering pipelines that move natural gas in states such as North Dakota, Oklahoma and Texas. Without that non-cash impairment, the company would have made a $363 million profit in the second quarter.The write down follows first quarter move where the company marked down the value of equipment from its carbon dioxide business and its oil production operations in the Permian Basin of West Texas by $950 million. Despite the second quarter loss, the company is keeping its dividend for stockholders at 26.5 cents per share. As part of a plan to maintain that dividend, the company is cutting $660 million of a $2.4 billion budget that was marked for expansion projects this year.

Oil and gas experts believe more layoffs could happen soon due to pandemic – (KTRK) — Industry experts said with the recent spike in COVID-19 cases, and as the pandemic continues to ravage the oil and gas industry, there will be more job cuts. Ramanan Krishnamoorti is a professor at the University of Houston Department of Chemical and Biomolecular Engineering. He said with people traveling less, the demand for fuel took an immediate hit as soon as the lockdowns started. Demand picked up some when the reopening phases began, but with the resurgence of the virus in many states, the tide has turned again. “The industry is in big trouble,” Krishnamoorti said. “You’re going to see a lot of bankruptcies, a lot of furloughs, more than furloughs. You’re going to see layoffs. You’re going to see people leave this entire industry because there aren’t going to be jobs.” Along with even more job losses on the horizon, Krishnamoorti said to expect consolidation from big companies taking over smaller ones, like Chevron’s buyout of Noble Energy. In a call with the Texas Oil and Gas Association, Chevron CEO Michael Wirth spoke about the acquisition of Noble Energy, saying the companies are a good fit. He also addressed the grim situation the industry’s facing. “Gasoline demand has come back significantly, and aviation fuel not so much, because there’s still a reluctance on the part of many people to get on airplanes,” Wirth said. Wirth remained more optimistic about the longer term outlook. “The demand for energy is going to grow,” he said.

New Emails Show How Energy Industry Moved Fast to Undo Curbs – The New York Times – Not long after President Trump’s inauguration, the head of a fossil fuels industry group requested a call with the president’s transition team. The subject: Barack Obama’s requirement that oil and gas companies begin collecting data on their releases of methane.That outreach, by Kathleen Sgamma, president of the Western Energy Alliance, appeared to quickly yield the desired results.“Looks like this will be easier than we thought,” David Kreutzer, an economist who was helping to organize the new president’s Environmental Protection Agency, wrote of canceling the methane reporting requirement in an email to another member of the transition team on Feb. 10, 2017.Three weeks after that email, the E.P.A. officially withdrew the reporting requirement – and effectively blocked the compilation of data that would allow for new regulations to control methane, a powerful climate-warming gas. The emails are included in hundreds of pages of E.P.A. staff correspondence and interviews recently made public in a lawsuit that 15 states have brought against the agency over the regulation of methane. Led by Massachusetts and New York, the states say the documents prove that fossil fuel industry players, working with allies in the early days of Mr. Trump’s E.P.A., engineered the repeal of the methane reporting requirements with no internal analysis, then created the rationale for the decision after the fact.That repeal, the states assert, illegally delayed the development of additional regulations to reduce methane emissions that the administration did not want.If the states succeed, a judge could, as early as this summer, order the federal government to impose restrictions on thousands of oil and gas wells, storage facilities and pipelines across the United States. Just last week, a federal court, restoring an Obama-era regulation, struck down a Bureau of Land Management effort to weaken restrictions on methane gas releases from drilling on public lands.In that case, Judge Yvonne Gonzalez Rogers ruled that the Trump administration, in its “haste” and “zeal,” failed to properly justify its rollback.“In the early days they did very little justification,” said Richard Revesz, a professor of environmental law at New York University and director of the Institute for Policy Integrity, the university’s nonpartisan think tank. So far, only about 10 percent of the Trump administration’s deregulatory efforts have held up in court, according to the institute, compared to an average of 70 percent for other administrations, both Republican and Democratic.“They justify their policies on analytically flimsy or sometimes nonexistent grounds, thinking, I guess, that they will get away with it,” Mr. Revesz said. “But time and again, the courts say no.”Methane, which leaks from oil and gas wells, accounts for about 10 percent of greenhouse gas emissions from human activity in the United States, according to E.P.A. data. But it is about 30 times more potent over the course of a century than carbon dioxide in altering the Earth’s climate and is responsible for about a quarter of man-made global warming..”

Now that half of Oklahoma is officially Indian land, oil industry could face new costs and environmental hurdles – On top of all the turmoil Oklahoma oil producers have had to deal with since the start of the coronavirus pandemic, the Supreme Court has added another item to that list: a landmark decision declaring nearly half of eastern Oklahoma to be Native American land.With the high court’s ruling, oil and gas drillers in the nation’s fourth largest oil-producing state suddenly find themselves operating within the Muscogee (Creek) Nation and four other tribal reservations.About a quarter of Oklahoma’s recent oil and gas wells and around 60 percent of its refinery capacity now lie within the territory of five tribes – the Cherokee, Chickasaw, Choctaw, Creek and Seminole. Perhaps more importantly, the network of pipelines pumping crude to and from Cushing, Okla. – a crucial oil terminal for the Keystone XL – spider-web across the redrawn reservation borders. Instead of dealing with business-friendly regulators from the state of Oklahoma, oil producers may soon have to contend with both tribes and the federal government, which often manages land for Native Americans. “The reality is that there’s something potentially that could be very detrimental to the oil and gas industry,” With Americans driving and flying less during the viral outbreak, U.S. oil prices have dropped by a third since the start of the year. Oklahoma’s shale fields, where extraction costs are relatively high, are among the hardest hit during the pandemic. One of the state’s biggest energy firms, the fracking pioneer Chesapeake Energy, has already declared bankruptcy. The 5-to-4 decision, written by Justice Neil M. Gorsuch and joined by the court’s liberals, ostensibly deals with criminal law for the ancestors of those forced to march the 19th century Trail of Tears into present-day Oklahoma. But the majority opinion writers acknowledge the ruling raises big questions over taxation and the enforcement of environmental rules across those 3 million acres – ones that may take years to settle.

What factors influence the likelihood of fracking-related seismicity in Oklahoma? – The depth of a hydraulic fracturing well in Oklahoma, among other factors, increases the probability that fracking will lead to earthquake activity, according to a new report in the Bulletin of the Seismological Society of America.The researchers hope their findings, published as part of an upcoming BSSA special issue on observations, mechanisms and hazards of induced seismicity, will help oil and gas operators and regulators in the state refine drilling strategies to avoid damaging earthquakes.During hydraulic fracturing, well operators inject a pressurized liquid into a rock layer after drilling vertically and often horizontally through the rock. The liquid breaks apart – fractures – the rock layer and allows natural gas or petroleum to flow more freely. A growing number of studies suggest that this process can induce seismic activity large enough for people to feel, possibly by increasing fluid pressures within the rock that relieve stress on faults and allow them to slip.In one rock layer examined in the BSSA study, the likelihood that hydraulic fracturing triggered seismic activity increased from 5 to 50 percent as well operations moved from 1.5 to 5.5 kilometers (0.9 to 3.4 miles) deep, the researchers found.Although the exact mechanisms linking well depth and seismic probability are still being examined, Michael Brudzinski and colleagues suggest that the overpressure of fluids trapped inside the rock may be important.”The deeper the rock layers are, the more rock that is sitting on top of a well, and that is going to potentially increase the fluid pressures at depth,” said Brudzinski, the study’s corresponding author from Miami University in Ohio.Oklahoma has been at the center of a dramatic increase in earthquake activity over the past decade, mostly caused by oil and gas companies injecting wastewater produced by drilling back into deeper rock layers. However, a 2018 study identified places in the state where significant amounts of seismic activity were linked to nearly 300 hydraulic fracture wells.Hydraulic fracturing is associated with a magnitude 4.6earthquake in Canada and a magnitude 5.7 earthquake in China, although fracking-induced earthquakes tend to be smaller in magnitude than those caused by wastewater disposal. As a result, oil and gas operators and regulators would like to know more about why some wells trigger seismic activity, and how to adjust their operations to prevent damaging earthquakes.

Treaty rights at center of tribal opposition to Line 5 pipeline, tunnel –An oil spill in the Straits of Mackinac would not only be an environmental disaster, but also it would threaten the economic livelihoods of tribes who fish the area while devastating a vital cultural site.The five tribes composing the Chippewa Ottawa Resource Authority (CORA) say the the threat of a pipeline spill from Line 5 endangers their rights to hunt and fish in the area included under the 1836 Treaty of Washington, which effectively gives them property rights across a wide swath of the Lower Peninsula and the eastern half of the Upper Peninsula – all of which Line 5 runs through. While tribes say a plan finalized under the administration of former Gov. Rick Snyder to build a tunnel under the Great Lakes bottomlands also jeopardizes their treaty rights, CORA’s goal is to decommission the pipeline as it exists today.“The pipeline itself and any future tunnel project still present risk to the natural resources in the Straits,” said Whitney Gravelle, tribal attorney for the Brimley-based Bay Mills Indian Community. “Though the focus has been on the Straits of Mackinac … we feel Enbridge is specifically painting this picture of just a couple miles of pipeline. But if there was a rupture anywhere along the pipeline, it would threaten and diminish those treaty rights of the five tribes.” The CORA member tribes are the Bay Mills Indian Community, Grand Traverse Band of Ottawa and Chippewa Indians, Little River Band of Ottawa Indians, Little Traverse Bay Bands of Odawa Indiansand the Sault Ste. Marie Tribe of Chippewa Indians.Until now, the tribes haven’t been formally involved in Attorney General Dana Nessel’s two lawsuits challenging Enbridge Energy and the tunnel plan. However, they are seeking to formally intervene in proceedings before the Michigan Public Service Commission involving tunnel construction. The CORA tribes – along with environmental groups – also submitted written comments to the Army Corps of Engineers this month requesting a public hearing on the tunnel proposal.

Enbridge-contracted vessels among those suspected in Line 5 damage – Enbridge-contracted vessels may be to blame for recent damage to the east leg of the Line 5 pipeline in the Straits of Mackinac, according to a report written by the Canadian pipeline giant. Based on vessel tracking and marine experts, Enbridge narrowed down to five the list of “small to moderately-sized” vessels that could have dragged a cable in a north and south direction over Line 5. The cable scraped the east leg and damaging an anchor support holding up the segment. Four of the five boats are Enbridge-contracted vessels. Enbridge interviewed the operators of its contracted vessels, which were in the water to perform maintenance and activities related to the Great Lakes Tunnel Project, and obtained their logs, procedures and plans, according to a report submitted Wednesday to the state and the Pipeline and Hazardous Materials Safety Administration. In interviews, the vessel operators weren’t aware of an incident that would have created the damage, according to the report. “As of now we can’t rule out their involvement,” Enbridge spokesman Ryan Duffy said Thursday. “Enbridge will continue to investigate, but it may not be possible to definitively identify the specific vessel that caused the incident.” Line 5, which transports up to 540,000 barrels a day of light crude oil, light synthetic crude and natural gas liquids, has been the subject of a years-long dispute over a possible rupture of the 67-year-old pipeline in the Great Lakes. Enbridge is in the process of constructing a tunnel to hold the pipeline, but has encountered headwinds from state regulators and leaders worried about the line’s continued presence in the Straits. The state still is reviewing the 45-page report that summarizes the company’s investigation into four separate areas of potential impact found in May and June inspections, all of which the company believes to have been caused by at least two “small to moderately-sized” ships dragging some sort of cable. The company maintains the damage done to the pipeline was not enough to threaten the safe operation of either segment. Under court order, Enbridge currently is only able to operate the west segment until federal regulators deem the east leg safe.

State calls for Enbridge to prove it can cover costs of potential Line 5 pipeline spill – The director of the Michigan Department of Natural Resources wants the owner of a controversial pipeline to promise to cover any losses related to the line.The Line 5 pipeline carries crude oil and natural gas liquids under the Straits of Mackinac.“As recent events have reminded us, we must get these pipelines that transport crude oil out of the Great Lakes as soon as possible,” said DNR Director Dan Eichinger in a statement. “In the meantime, Enbridge must provide full financial assurance to the people of Michigan that the company will meet its obligations in the event there is a spill or some other disastrous damage to the Great Lakes.”Eichinger said the state currently has a deal with Enbridge Inc., a subsidiary of Enbridge Energy Company Inc. to compensate the state for any damages and losses that come from the operation of Line 5, like a spill. But he said the subsidiary does not have the resources to cover the cost of a spill. The state wants the following, in writing, from the parent company, Enbridge Inc.:

• Enbridge Inc., the parent company, agrees to assume the indemnity obligations of Enbridge Energy Company, Inc.
• Enbridge Inc. agrees to a minimum of $900 million in liability insurance.
• Enbridge Inc. names the State of Michigan as an additional insured party on the identified policies so that Michigan’s right of recovery is not derivative.
• Enbridge Inc. will directly pledge its own assets for the remainder of the financial assurance requirements (to meet or exceed $1.878 billion, annually adjusted for inflation).

Whitmer: Enbridge dodging responsibility for potential spill – Gov. Gretchen Whitmer criticized Enbridge Inc. on Wednesday for what she described as the company’s refusal to make an airtight pledge to pay for damages caused by a potential oil spill from its pipeline beneath a Great Lakes channel.The Democratic governor’s administration is pressuring the Canadian pipeline company for an explicit acknowledgment of financial responsibility for any release from its Line 5 into the Straits of Mackinac. Enbridge insists it already made such an assurance under a 2018 agreement with former Republican Gov. Rick Snyder to construct an underground pipeline tunnel beneath the straits.“I’m shocked at Enbridge Inc.’s refusal so far to sign a written agreement promising to cover the costs of an oil spill in the Great Lakes if this unthinkable event were to happen,” Whitmer said in a statement.“When I was a kid, my parents taught me: ‘You break it, you pay for it.’ It seems that’s the bare minimum Enbridge owes every Michigander so long as the company continues to pump crude oil through the Straits of Mackinac.Line 5 carries oil and liquids used in propane from Superior, Wisconsin, to Sarnia, Ontario. A nearly 4-mile-long (6.4-kilometers-long) segment, laid in 1953 beneath the Straits of Mackinac, is divided into two pipes.The straits connects Lake Huron and Lake Michigan. It is a popular tourist draw and has cultural and economic importance to native tribes that operate commercial fishing vessels in the area.The state is asking Enbridge to carry $900 million of liability insurance and have about $1.88 billion in additional assets available for a worst-case rupture in the straits. Enbridge says it’s doing so under the 2018 tunnel agreement with Snyder.

20 states sue over Trump rule limiting states from blocking pipeline projects – A coalition of 20 states is suing the Environmental Protection Agency (EPA) over a rule that weakens states’ ability to block pipelines and other controversial projects that cross their waterways. The Clean Water Act previously allowed states to halt projects that risk hurting their water quality, but that power was scaled back by the EPA, a move Administrator Andrew Wheeler said would “curb abuses of the Clean Water Act that have held our nation’s energy infrastructure projects hostage.” The suit from California and others asks the courts to throw out the rule, which was finalized in June. “Let’s be clear, this Trump administration rule is not about water quality. This is about pushing forward fossil fuel energy infrastructure,” said California Attorney General Xavier Becerra (D), calling the Clean Water Act “the only way to prove that these projects comply with state law.” The Clean Water Act essentially gave states veto authority over projects by requiring projects to gain state certification under Section 401 of the law. It applies to a wide variety of projects that could range from power plants to waste water treatment plants to industrial development. But that portion of the law has been eyed by the Trump administration after 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 EPA would not comment on the litigation directly but said that “prior to issuing this final rule, EPA’s water quality certification regulations were nearly 50 years old.” “The agency’s recent action reflects the first comprehensive analysis of the text, structure and legislative history of Clean Water Act Section 401. As a result, the agency’s final rule increases the transparency and efficiency of the Section 401 certification process in order to promote the timely review of infrastructure projects while continuing to ensure that Americans have clean water for drinking and recreation,” the agency said. The new policy from the Trump administration accelerates timelines under the law, limiting what it sees as state power to keep a project in harmful limbo. The need for a Section 401 certification from the state will be waived if states do not respond within a year. But states argue the new rule won’t give them the time necessary to conduct thorough environmental reviews of massive projects. Read more about the lawsuit here.

Standing Rock seeks to keep Dakota Access shutdown order in place – The Standing Rock Sioux Tribe is asking a panel of federal judges to keep in place a lower court’s ruling ordering the Dakota Access Pipeline to shut down while the decision is appealed, saying the pipeline’s continued operation exposes the tribe to “catastrophic risks.” Standing Rock, along with other Sioux tribes that are part of the lawsuit over the pipeline, filed a brief Monday in response to a plea by developer Energy Transfer and the U.S. Army Corps of Engineers to put the shutdown order on hold while they seek to overturn the ruling. “The operation of the pipeline, on unceded lands yards upstream of the Standing Rock Sioux Reservation, compounds historical trauma and subjects the Tribes and their members to the stress of living under an existential catastrophe,” the tribes said in the brief. The Standing Rock Sioux Reservation lies just south of the pipeline’s Missouri River crossing. Tribal members fear an oil spill at that site could devastate their water supply and affect their hunting, fishing and spiritual practices. U.S. District Judge James Boasberg earlier this month revoked a key permit for the pipeline and ordered that the line be shut down and emptied of oil by Aug. 5. The pipeline would have to remain unused for the duration of a lengthy environmental review that he ordered this past spring. The study is expected to take at least 13 months. Energy Transfer and the Corps, which permitted the pipeline’s water crossings, are appealing his recent rulings to the U.S. Court of Appeals for the District of Columbia Circuit, where a panel of three judges last week immediately put a temporary “administrative” hold on the shutdown order until they could hear arguments from both sides. The tribes say the risks imposed by the pipeline “have never been properly examined as the law requires, and compounds a history of government-sponsored dispossession of Tribal lands and resources.” A formal response from Energy Transfer and the Corps is expected later this week. Energy Transfer has said it anticipates taking a revenue hit of at least $2.8 million every day the line sits idle during a shutdown. It expects additional costs associated with emptying the pipeline of oil and filling it with a gas such as nitrogen to prevent it from corroding.

Second Bakken pipeline shutdown further threatens shale recovery –Earlier this month, a federal judge stunned the U.S. energy sector with an order to shut down the Dakota Access pipeline. Environmentalists hailed it as the first time a fully operating system had been forced to close by a legal challenge. As it turns out, it was actually the second time an oil pipeline was ordered shut in a matter of four days. On July 2, a lesser-known conduit called Tesoro High Plains was ordered shut for the first time in its 67 years of operation. Together, the two pipelines ship more than one-third of crude from America’s prolific Bakken shale formation to market. Their travails signal the ebbing of the oil industry’s sway in the U.S. heartland and underscore the growing heft and savvy of challengers who’ve become emboldened to demand higher compensation and safeguards. “In the past, it was a shotgun approach of challenging pipelines,” said Brandon Barnes, an analyst for Bloomberg Intelligence. “Now, the resources are more plentiful and the challengers are far more nuanced and sophisticated in their approach.” The stakes are high. If the shutdown of both pipelines proceeds, it would force the region’s drillers to turn to more expensive options to ship their oil — or shut in production altogether, just as the entire oil industry is reeling from depressed prices that have pushed a steady stream of producers into bankruptcy. The outlook for the U.S. pipeline industry has perhaps never been more uncertain. Earlier this month, Dominion Energy Inc. and its partner Duke Energy Corp. announced they were no longer moving forward with their $8 billion Atlantic Coast natural gas pipeline after years of delays and ballooning costs. In the ensuing 24 hours, the Supreme Court left in force a lower court order blocking the start of construction on TC Energy Corp’s Keystone XL pipeline, while a district court ordered the shutdown of Dakota Access (although that project scored temporary relief last week). In the case of High Plains, which delivers oil to Marathon Petroleum Corp.’s 74,000 barrel-a-day Mandan refinery, the U.S. Interior Department’s Bureau of Indian Affairs ordered it shut after determining the pipeline was trespassing on Native American land. The ruling also found the company responsible for $187 million in damages and gave it 30 days to appeal.

Uncertainty, concerns surround potential oil train resurgence – While lawyers fight over a federal judge’s order to temporarily shut down the Dakota Access Pipeline, the oil industry is grappling with uncertainty as it ponders how to keep shipping Bakken crude to market. The questions on everyone’s mind: Will the pipeline actually be forced to halt operations, and when? Many observers anticipate a shutdown could result in a resurgence of trains carrying Bakken crude, a prospect that has rail safety advocates and farmers concerned. Whether more oil trains hit the tracks depends on the outcome of the latest legal maneuvering over the pipeline. At the moment, the order to shut down the line is on an “administrative” hold as the case moves to a panel of judges on a federal appeals court. The shutdown order came July 6 from U.S. District Judge James Boasberg, who for four years has overseen a lawsuit launched by the Standing Rock Sioux Tribe. The tribe’s reservation lies just south of the pipeline’s Missouri River crossing in North Dakota, and tribal members worry a potential oil spill could devastate their water supply. Boasberg ordered pipeline developer Energy Transfer to idle the line for the duration of a lengthy environmental review expected to last at least 13 months, and for the company to drain it of oil by Aug. 5. In the days ahead, the appellate judges will consider arguments on whether the pipeline must halt operations while the U.S. Army Corps of Engineers and Energy Transfer appeal Boasberg’s shutdown order and his earlier ruling requiring the environmental study. The short-term hold buys the oil industry a little more time to prepare for a potential shutdown of Dakota Access, which has been operating for three years and can transport up to 570,000 barrels per day of oil from North Dakota to Illinois. That amount equaled 40% of North Dakota’s daily oil output before the coronavirus pandemic hit, sending oil demand, prices and production plummeting.Several experts anticipate that a shutdown of Dakota Access would eventually prompt oil companies to ship another 200,000 barrels per day of Bakken crude via rail, the equivalent of about three more oil trains leaving the region each day. The shift would not happen overnight but likely would occur gradually over the course of the next year, assuming oil production slowly ticks back up as prices rise,

North Dakota has ample rail capacity for oil -A judge ordered the Dakota Access pipeline (DAPL) to shut down because permitting laws were not followed. The reactionary response from our elected officials and oil barons is that if the pipeline shuts down “the sky will fall.”Wayne Stenehjem, our attorney general, and some guy from Douglas named Real Mercier both plied for farmer support by claiming that shutting down the pipeline could hurt farmers because added oil trains will crowd out grain that needs to be shipped to market.The opposite is true.Shutting down the pipeline would add only eight oil trains a day to our state’s rail system. I was a locomotive engineer for 30 years in North Dakota and there were times when we had 125 trains a day passing through Fargo. Now that city has only about 50 trains a day and hundreds of North Dakota railroad workers have been laid off because of this drop in traffic.In the 1960s and 70s North Dakota’s rail lines were in shambles because of the building of the interstate highway system and the diversion of freight from the rails to the highways. Then along came Powder River Basin coal and container trains from Asia. This pass through freight rebuilt our rail lines to the tremendous benefit of North Dakota farmers. Shipping oil by rail doesn’t just benefit rail workers and our state’s railroads, revenue from shipping oil helps pay for the maintenance of our entire rail system and that benefits other shippers like farmers who depend on good rail lines to get their crops to market. The Dakota Access Pipeline … well it ships oil.In the last dozen years, 21 oil train loading facilities were built in our state with the capacity to load 100 oil trains a day. Those facilities cost almost $1 billion to construct, BNSF alone spent more than $1 billion upgrading track in North Dakota to accommodate the new oil traffic and old unsafe tank cars were replaced with newer safer cars. Building the DAPL created hundreds of millions of dollars in stranded assets and lost opportunities for our state. Shutting down the DAPL will not cause the “sky to fall.” We have ample rail capacity to haul all of North Dakota’s crude oil safely by rail with newer and safer rail cars. It will put a bunch of railroad workers back to work and provide needed revenue to help maintain our rail infrastructure.

Radioactive oil waste study recommends uniform permitting; slurry wells a hot topic – Oil patch counties, state officials and others should work together toward a uniform permitting process for radioactive oilfield waste disposal facilities, concluded the author of a new study commissioned by the Western Dakota Energy Association. No landfills in North Dakota have received the necessary permits to accept radioactive material from the oil fields despite a change in state rules several years ago raising the acceptable radiation level. As a result, the waste is trucked to disposal sites in other states. Many proposals to establish facilities in North Dakota have received pushback from local landowners concerned about their safety and traffic, and county leaders often have numerous questions themselves.The waste is known as Technologically Enhanced Naturally Occurring Radioactive Material or TENORM. Low levels of radiation occur naturally in soil, water and rocks. When those materials are removed from the ground, like in oil and gas production, they become known as TENORM. It’s found in drill cuttings and wastewater, but it can be more concentrated in tank sludge, pipe scale and filter socks used to strain oilfield fluids, according to Bogar.“We are, as far as I was able to find, the only oil-producing state that does not have TENORM disposal within it,” he said. Bogar envisions consistent zoning rules for the landfills across the Bakken or a single permitting process at the state level that relies heavily on county input, instead of separate permits needed from the county and the North Dakota Department of Environmental Quality.Environmental Quality has an extensive permitting process already, requiring that landfills receive both a solid waste permit and radioactive materials license to dispose of the material. Bogar suggests that a group of legislators, county commissioners, state officials and other stakeholders form to discuss how the permitting process ought to look.

$1.6 million settlement reached in 2016 Ventura oil spill – An oil pipeline company and associated contractor will pay a $1.6 million settlement regarding a 2016 crude oil spill in Ventura, the Ventura County District Attorney’s Office said Tuesday.The owner of the pipeline, Crimson Pipeline L.P., agreed to pay $1.3 million in civil penalties, costs and natural resources damages as part of the settlement. The contractor working on the pipeline, identified as CD Lyon Construction Inc., has agreed to pay $300,000 in civil penalties and outstanding costs.The spill was reported on June 23, 2016, in the Hall Canyon area of Ventura. It was caused by a pipeline owned by Crimson after a faulty valve-replacement operation. When the pipeline began to operate after the replacement, it began to leak because new valve flanges had not been properly tightened by CD Lyon workers. In total, more than 44,000 gallons of crude oil were released into the Hall Canyon area, officials said. The spill was stopped by first responders and pipeline personnel before reaching the Pacific Ocean, but the spill area required months of cleanup. Some nearby residents left their homes because of the overwhelming odor of petroleum after the spill. Thomas Cullen, administrator of the California Department of Fish and Wildlife’s Office of Spill Prevention and Response, noted the significance of the settlement in a statement.“With this settlement, Crimson and their contractor will pay a significant penalty, improve its oil spill preparedness and response operations, and compensate the public for natural resource damages,” Cullen said. “The public should know that when an oil spill happens in California, we will hold those responsible accountable and require a thorough and rapid cleanup and restoration.”The disbursement of the settlement includes $900,000 in civil penalties from Crimson, with $600,000 being paid to the District Attorney’s Office and the California Department of Fish and Wildlife. The penalties also include $387,700 for reimbursement of investigation and attorney costs; $20,000 to pay for damages to natural resources; and required compliance with the Lempert-Keene-Seastrand Oil Spill Prevention and Response Act, as well as improved oil spill prevention and response measures. CD Lyon’s settlement will require reimbursing the District Attorney’s Office with $115,000 in investigation and attorney costs, in addition to $185,000 to the California Department of Fish and Wildlife.

EIA forecasts U.S. petroleum demand will remain below 2019 levels for several more months — Consumption of U.S. liquid fuels fell in March and April 2020 as a result of reduced travel related to COVID-19 and its mitigation measures. The U.S. Energy Information Administration’s (EIA) July Short-Term Energy Outlook (STEO) forecasts that U.S. consumption of total petroleum and other liquid fuels will continue increasing in the second half of 2020 as economic activity increases, but levels will remain lower than the 2019 average until August 2021.In April, consumption of liquid fuels in the United States (as measured by product supplied) reached its all-time monthly low since the early 1980s at an average of 14.7 million barrels per day (b/d). Weekly data show consumption of petroleum products has increased as states have relaxed restrictions. Volumetrically, almost half of the decrease in U.S. consumption of liquid fuels in 2020 has come from reduced motor gasoline use. EIA expects motor gasoline consumption will average 8.3 million b/d in 2020, down 1.0 million b/d (10%) from 2019. In the second half of 2020, a forecast increase in employment leads to an increase in gasoline consumption. EIA assumes employment levels will continue to grow in 2021, and gasoline consumption will increase to 9.1 million b/d, or to about 2% less than its 2019 average. EIA expects U.S. jet fuel consumption in 2020 to be 31% lower than its 2019 average, a much larger percentage change than gasoline (down 10%) and distillate (also down 10%). U.S. jet fuel consumption fell to an estimated 660,000 b/d in the second quarter of 2020, and EIA expects it to rise to 1.4 million b/d in the fourth quarter of this year. EIA expects jet fuel consumption to continue rising in 2021 and average 1.5 million b/d, or about 12% lower than its 2019 average. During peak stay-at-home orders, distillate consumption was relatively less affected by COVID-19 mitigation efforts than gasoline or jet fuel consumption. Distillate consumption in the United States is driven by economic activity and is more likely affected by slowing economic growth than by travel restrictions. Distillate fuel is also used in activities that are not as directly affected by restrictions, such as by diesel engines in heavy construction equipment and as heating oil both for space heating in buildings and industrial heating.

INSIGHT-Bounceback in U.S. shale oil output is unlikely to last the summer – (Reuters) – A reopening of some majoreconomies locked down due to the coronavirus has lifted global oil prices and encouraged U.S. shale producers to return at least a third of the 2 million barrels per day (bpd) curtailed since April. But that bump in output is unlikely to be sustained as shale wells lose up to half their initial output after the first year, and require constant drilling to maintain and increase production.With most new drilling halted and OPEC relaxing curbs that have underpinned the oil-price recovery, shale output will slide again in autumn, said oil executives and analysts.Shale output falls off faster than at conventional oil wells, a factor that will lead to output declining by September.Average U.S. daily oil output will fall below 2019’s record 12.2 million barrels per day (bpd) for the next two to three years, analysts said.The decline means further economic damage from an industry that contributed nearly 1 percentage point to U.S. GDP early last decade. U.S. pipeline and oil export-terminal projects have been delayed or canceled as shale production forecasts have been cut.”You shut down like this, reduce activity like this, and it is going to be felt for a while,” David Dell’Osso, chief operating officer of shale producer Parsley Energy PE.N said in an interview. Parsley Energy’s plans mirror that of many shale rivals that have begun reopening existing wells but tightly restricting new activity. It had planned to operate 15 drilling rigs this year, but halted work in the spring as oil demand shrank on pandemic-related business closings.This month, the company restarted drilling with two rigs, not enough to maintain existing production levels. Diamondback Energy FANG.O, one of the top U.S. shale producers, reopened most of its curtailed wells this month. It expects to pump about 180,000 bpd this year, down from 188,000 bpd last year. The reason: its rig count fell from 20 at the end of March to just seven by mid July, and is expected to be six by the end of the month.Much of the shale production curtailments came from shale wells that were choked back but not shut-in completely, several shale company executives said.

Top Shale Boss Warns US Production Won’t Revisit 2019 Levels “In My Lifetime” – America’s energy dominance could be coming to an end as the country’s shale industry is experiencing steep production declines. Rarely do we hear President Trump these days touting shale jobs and production output, mostly because the industry has entered a bust cycle. Matt Gallagher, CEO of Parsley Energy, a top 20 producer in Texas, spoke recently with the Financial Times and said crude output of 12 or 13 million barrels per day is over: “I don’t think I’ll see 13m [barrels a day] again in my lifetime. “It is really dejecting, because drilling our first well in 2009 we saw the wave of energy independence at our fingertips for the US, and it was very rewarding . . . to be a part of it,” Gallagher,37, said. The shale bust of 2020 is an ominous sign of America’s energy dominance is over. Crude output will continue to wane this year and likely into next. The lack of shale profitability, mainly due to West Texas Intermediate (WTI) prices sub-$40 per barrel won’t be enough for highly indebted shale companies to survive. We’ve pointed out the shale industry could be on the verge of destruction due to the sharp decline in demand and plummeting energy prices brought on by coronavirus pandemic. So far, bankruptcies in the shale patch are accelerating to levels not seen since the first half of 2016. Another significant driver of lower production levels is a halving of rig counts due to collapsing price and demand; rigs dropped from 539 in mid-March to 258 last week.”Tight oil production will decline by 50% by this time next year. As a result, US oil production will fall from to less than eight mmb/d by mid-2021,” we noted via Arthur Berman via OilPrice.com.The combination of the Saudi-Russia oil price war and the virus pandemic has been nothing but disastrous for shale companies. These two factors forced Gallagher earlier this year to shut down wells and slash spending. He said the recent oil-price crash was “hands down” the worst ever. In April, WTI prices dove below the zero mark for the first time in history due to oversupplied conditions triggered by virus-related lockdowns.

Halliburton’s $1.7B loss paves way for more bruising results – With a massive second-quarter loss, Halliburton, one of the world’s largest oil-field services companies, on Monday set the stage for a string of brutal energy company earnings reports. The company lost $1.7 billion in the second quarter compared with a $75 million profit during the second quarter of 2019. Revenue for the quarter declined 46 percent to $3.2 billion from $5.9 billion in the same period a year ago. The bulk of Halliburton’s loss was attributed to a $2.1 billion write down on the value of its assets as the price of oil collapsed during the quarter, including a dive to negative territory in April. Halliburton took a $1.1 billion write-down in the first quarter. The second quarter was the first full three-month period affected by shutdown orders across the country that wiped out demand, forced industrywide production cuts, and reduced drilling and well-completion activity. Halliburton’s rivals also post second-quarter results this week. Baker Hughes, which lost $10.2 billion in the first quarter, reports Wednesday, and Schlumberger, which lost $7.4 billion in the first quarter, is to report results Friday. Minus the write-downs and other charges, Halliburton reported $456 million of free cash flow compared with $12 million during the first quarter. “Halliburton’s second-quarter performance in a tough market shows we can execute quickly and aggressively to deliver solid financial results and free cash flow despite a severe drop in global activity,” Halliburton CEO Jeff Miller said. “Our results demonstrate a significant and sustainable reset to the power of our business to generate positive earnings and free cash flow.”

Frackers Are in Crisis, Endangering America’s Energy Renaissance – Twenty years ago brothers Dan and Farris Wilks started Frac Tech Services LLC in tiny Cisco, Texas. The company provided equipment for hydraulic fracturing, aka fracking, the breaking up of tight sedimentary rock by blasting water, sand, and assorted chemicals through horizontal bores at fantastically high pressure. Frac Tech grew into one of the most successful pressure pumpers as the U.S. experienced a boom first in shale gas, then in shale oil. The Wilks brothers became billionaires when they sold Frac Tech in 2011, just as shale oil was transforming the U.S. into one of the world’s biggest producers of crude. The big oil explorers and producers are household names: Chevron and BP, Exxon Mobil and Royal Dutch Shell. But the U.S. oil renaissance has ridden heavily on the backs of little-known pressure pumpers that figured out how to extract oil from the stubborn shale of Colorado, New Mexico, North Dakota, Texas, and Wyoming. Today the Wilks brothers’ former company, now publicly traded and named FTS International Inc., is fighting to stay alive. Since early March, FTS has slashed executive pay, idled almost its entire fleet of pumping gear, and laid off two-thirds of its employees. It has more debt than cash. Its stock fell to about 30¢ a share before a 20-for-1 reverse stock split in May. Other pressure pumpers are suffering, too, with thousands of workers laid off. With pressure to move away from fossil fuels rising, the bigger question may be whether the shale phenomenon itself can endure. Already this year, more than three dozen North American explorers, fracking service companies, and pipeline operators – including shale pioneer Chesapeake Energy Corp. – have sought bankruptcy protection. Production is down about 2 million barrels a day from a peak of almost 13 million early this year, and Morgan Stanley says prices must go higher than the current $40 a barrel to prevent further production declines in 2021. Shale’s woes are connected to pandemic shutdowns eviscerating demand and the Saudi-Russia price war that briefly pushed oil prices below zero. But the shale industry’s own shortcomings had gotten it into trouble before Covid-19, as a look at FTS’s winding journey through twin booms and busts makes clear. Now a crucial link in the U.S. oil supply chain is facing mass extinction.

Marathon Petroleum Takes Bailout Tax Breaks During Pandemic — Fossil fuel companies have reaped millions of dollars in benefits from a stimulus package intended to help struggling Americans and the economy. Among these is Marathon Petroleum, the largest oil refiner in the country, which has a history of air pollution violations impacting low-income and Black and Brown communities. The CARES Act included several provisions to support businesses, one of which allowed companies to claim an immediate tax refund by deducting current operating losses from income taxes paid in the past five years. As a result of changes to allow the “carryback” of net operating losses, Marathon received $411 million in tax benefits, a sum even greater than their recent $334 million penalty for environmental violations. The Federal Reserve also included Marathon Petroleum in its recent purchase of energy bonds.Oil and gas companies, like Marathon, are not violating any rules by claiming this tax benefit, but there are significant downsides to using public resources to prop up dirty companies with a history of air pollution violations in the midst of a pandemic that targets the respiratory system. As part of the paycheck protection program, a separate program under the CARES Act, at least $3 billion in taxpayer dollars intended for small businesses have gone to over 5,600 U.S. fossil fuel companies and are being used to save an antiquated industry, rather than investing in a sustainable future that will benefit all Americans. Democratic lawmakers have warned that this oil bailout is not only taking the funds meant for smaller businesses, but is also forcing taxpayers to pay for the industry’s past mistakes. Senators Brian Schatz and Sheldon Whitehouse wrote that the pandemic “was not the source of the oil and gas industry’s dire financial condition,” and that this bailout “poses both a credit risk and a more profound climate transition risk to taxpayers.” Marathon Petroleum is just one example of an oil company that was already struggling prior to the COVID-19 outbreak, partly due to their expensive 2018 acquisition of rival refiner Andeavor. Oil companies have been pursuing suchmergers in an attempt to generate investor excitement and make up for the structural weaknesses of the oil sector. More specifically, upstream companies have spent billions more on drilling than they receive from selling the produced oil and gas, which creates a condition known as negative free cash flow. Investing in oil stock has had a similarly negative trajectory, as the average U.S. oil producer over the past three years has produced a total return of negative 17%.

Chevron Deal for Oil and Gas Fields May Set Off New Wave of Mergers – The New York Times – In the first big deal since oil prices crashed four months ago, Chevron agreed on Monday to buy Noble Energy for roughly $5 billion in what many experts consider the beginning of a sweeping consolidation in the U.S. oil industry.The coronavirus pandemic has caused a sharp decline in oil demand, putting intense pressure on oil companies with large debts. This includes Noble, which is based in Houston and has operations in Colorado, Texas, the eastern Mediterranean and West Africa.But it has also created an opportunity for oil giants to gobble up smaller fish and extend their acreage in places like the Permian Basin, which straddles Texas and New Mexico. Chevron, for one, already has a large presence in the basin and easy access to large pipeline networks, which should help the company put Noble’s assets to good use. “In a downturn like this, the strong get stronger and the weaker players try to survive as best they can, and some will be bought,” . “There will be some bankruptcies and mergers and acquisitions like you saw today and I would expect that will continue and potentially pick up speed.” Like all oil companies, Noble has struggled to make a profit with oil prices at around $40 a barrel. The price has recovered somewhat in recent months, but the pandemic’s persistence and the recent surge of infections and hospitalizations in Texas and other states have led some executives to conclude that the price of oil may not climb much more anytime soon. Even before the pandemic, the shale drilling boom helped produce so much oil that a growing number of wells were unprofitable. More than 20 North American producers have filed for bankruptcy this year, including Chesapeake Energy. The oil service giant Halliburton on Monday reported a $1.7 billion loss for the second quarter and said it had written down its assets by $2.1 billion. This is the first major acquisition by Chevron since the company was outbid by Occidental Petroleum for Anadarko Petroleum last year. That $38 billion deal has left Occidental heavily in debt, while Chevron walked away with a $1 billion termination fee. If the deal goes through, Chevron would pick up 92,000 acres of shale oil near or adjacent to its own fields. While that is far less than it would have picked up from Anadarko, Chevron is getting these fields at a far better price per acre. It will also acquire assets in the Eagle Ford field of South Texas, the DJ Basin in Colorado, and Equatorial Guinea. The deal will also give Chevron a presence in Israeli waters where Noble has discovered large natural gas deposits in recent years.

Trans Mountain Pipeline’s Lead Insurer Zurich Drops Coverage -A spokesperson for the Trans Mountain pipeline, which is planning a controversial expansion opposed by environmental groups and some Indigenous communities, said that Zurich would not renew its insurance coverage, Reuters reported Wednesday. Zurich’s decision comes as environmental groups have put pressure on insurers to abandon the pipeline and other fossil fuel projects over their contribution to the climate crisis.“This project is never getting built,” advocacy group Stand.earth tweeted in response to the news. Stand.earth is one of 32 environmental groups behind a petition urging Trans Mountain’s 26 insurers to cease covering the project by Aug. 31, according to Burnaby Now. Zurich is the third insurer to do so in the last two months, Stand.earth said. The Trans Mountain pipeline expansion would nearly triple the oil flowing along its 715-mile route from Alberta’s tar sands to the coast of British Columbia from 300,000 barrels a day to 890,000. Its opponents have faced legal setbacks in recent months. In February, the Canadian Federal Court of Appeals ruled that the government had adequately consulted with First Nations groups when approving the project. Then, in July, the Supreme Court of Canada opted not to hear an appeal of that decision from the Tsleil-Waututh Nation, the Squamish Nation and the Coldwater Indian Band, according to Burnaby Now.Indigenous groups oppose the pipeline expansion over concerns it will spill oil in their communities and erode their sovereignty.”What is happening is about more than just a risky pipeline and tanker project. We see this as a major setback for reconciliation,” Chief Leah George-Wilson of the Tsleil-Waututh Nation told CBC News following the Supreme Court’s decision not to hear the appeal. Pressuring the project’s financial backers is another means of blocking it.Trans Mountain’s current insurance contract runs out in August of this year, according to Reuters. For now, the company says it still has enough insurers to cover its regular operations and the expansion.”There remains adequate capacity in the market to meet Trans Mountain’s insurance needs and our renewal,” a pipeline spokesperson told Reuters in an email.Zurich did not comment on its reasons for abandoning the project.Other insurers who covered the project this year include Munich Re, Lloyd’s of London, Liberty Mutual and Chubb. Munich Re said it would review the contract based on its new policies on covering oil sands. The others declined to comment. One insurer who dropped out in July, Talanx, based its decision on climate concerns.

Shell’s big bet on floating LNG may not pan out – It was the last of the large LNG projects that put Australia in the lead for global LNG exports. It was the biggest jewel in Shell’s LNG crown. But this jewel hasn’t produced any LNG since February, and its future is unclear. The Prelude floating liquefied natural gas project, with an annual capacity of 3.6 million tons, began shipping LNG last June. The first cargo shipped more than eight years after the final investment decision was made, and two years after the FLNG vessel arrived at the site, one Wood Mac analyst pointed out at the time. In February this year, production was stopped following a technical problem. Production at the world’s largest FLNG installation still hasn’t been restored, and it remains unclear when this will happen. Building it and putting it into operation cost between $12 and $17 billion, according to external estimates. Now, there are concerns that it may flop. The gas market situation is difficult enough. Just like in oil, there is a substantial glut in natural gas, and demand is lagging far behind. According to Rystad Energy, global natural gas output is set for a 2.6-percent decline this year because of the coronavirus pandemic. Next year, demand should begin to improve, driven by the low prices currently plaguing the sector. But that’s only if the pandemic goes away for good and without a fight, which at the moment is not happening. In this situation, it may not be that bad that Prelude is not operating at the moment. There is an oversupply of LNG, prices are low, and Shell said in a recent update that it will take a hit because its 2019 term sales contracts for LNG were tied to oil prices. That hit may be nothing compared to what Prelude may need to break even, at least according to analysts from Goldman Sachs quoted by Tim Treadgold in an article for Forbes. According to them, the commercial breakeven price for gas produced at Prelude is as much as $20 per thousand cubic feet. This compares with prices between $2 and $3 per thousand cubic feet in April in the United States. The difference is impressive, and it certainly would explain why, as Treadgold notes, Shell is in no hurry to restart operations at Prelude. Prelude is an impressive achievement, regardless of its problems. As the largest floating LNG facility in the world, it has a total capacity of 5.3 million tons of hydrocarbon liquids annually, including, besides the LNG, 1.3 million tons of gas condensate and 400,000 tons of liquefied petroleum gas. Floating LNG was to be a game-changer: boosting the efficiency of gas production by adding the processing to the place of extraction. But now it has to prove it is cost-competitive with other, more traditional approaches to LNG production.

Brazil boosts oil exports to Asia as global rivals make record cuts – (Reuters) – Brazil increased crude exports to Asia in the first half of the year, stealing a slice of a coveted developing market from global rivals who made record cuts to shipments to match the unprecedented fall in demand caused by the coronavirus pandemic. The rise reflects Brazil’s growing clout among global oil producers as its massive offshore projects come online. Brazil is expected to deliver one of the biggest increases to global supply in the next five years from nations outside of the Organization of the Petroleum Exporting Countries, according to the International Energy Agency. State oil firm Petrobras (PETR4.SA) offered Asian refiners competitive deals on relatively high-quality oil just as China and other countries in the region reopened their economies and as Western nations went into lockdowns to curb the spread of coronavirus, traders said. China also took advantage of the lowest oil prices in decades to fill up strategic storage.”If we had more oil available, China would buy it,” Petrobras Chief Executive Roberto Castello Branco told Reuters in a written response to questions. Castello Branco said there was no more to sell to further boost exports, because demand in Brazil has been recovering. China is now the destination for 70% of the country’s exports, Petrobras said in a statement to Reuters. Asia imported an average of 1.07 million barrels per day of oil from Brazil in the first half of the year, 30% year-on-year hike, according to Refinitiv Eikon’s trade flows data. A record 1.62 million bpd of Brazilian crude arrived in Asian ports in June, almost triple the volume in June 2019, according to the data. (Graphic showing Asia’s oil imports from Latin America: here) Asian refiners were keen for the low-sulfur oil that Brazil sells, as they sought to comply with new maritime regulations to supply ships with cleaner fuel. The oil is from Brazil’s prolific offshore deposits known as pre-salt fields, which Petrobras and oil majors are spending hundreds of billions of dollars to develop.

PetroChina to sell major pipeline assets to PipeChina for $38 bln (Reuters) – PetroChina, China’s state-owned oil and gas firm, said on Thursday it would sell its major oil and gas pipelines and storage facilities to the newly launched China Oil and Gas Pipeline Network (PipeChina) for 268.7 billion yuan ($38.36 billion). The sale excludes the assets of Kunlun Energy 0135.HK, in which PetroChina 601857.SS, 0857.HK has a 54.4% stake, it said in a statement. Separately, China Petroleum & Chemical Corp 600028.SS, 0386.HK (Sinopec) on Thursday announced plans to sell some of its oil and gas pipeline assets for 47.11 billion yuan to PipeChina, of which 22.89 billion yuan will be injected into PipeChina for an equity interest. Launched in December last year as part of a sector-wide reform, PipeChina had not been allocated any asset until this week, despite signing agreements with the national oil majors. The deals come as a part of Beijing’s plans to boost investment in oil and gas production and provide a fair market access to small, non-state owned oil and gas producers and distributors. The deal will give PetroChina a stake of about 30% in PipeChina. The stake is worth 149.5 billion yuan, PetroChina said. The remainder will be paid in cash. Upon completion of the transactions, PipeChina will become an associate company of PetroChina, a listed arm of CNPC. PetroChina expects to book a gain of 45.82 billion yuan from the disposal of its assets, which it will use to pay dividend and for capital expenditure, it said in a statement.

Aging oil tanker in Yemen raises concern about catastrophe in the Red Sea – The FSO Safer, an oil tanker moored in the Red Sea near Yemen’s port city of Hodeida, holds more than 1 million barrels of oil. The ship was operated by Yemen’s government-run oil company until 2015, when Houthi rebels seized control of Hodeida and limited access to the FSO Safer. The ship’s condition is deteriorating, and volatile gases are building up inside. Experts say it could soon spring a leak or explode. An oil spill would worsen war-racked Yemen’s humanitarian disaster by poisoning fisheries and possibly releasing toxic gas. Drinking water is also a concern. Neighboring countries would have to shutter desalination plants if there was a spill. Yemen’s government has asked the United Nations to remove the ship’s oil. The Houthis say they would allow access to the ship only as part of a broader agreement, which appears unlikely to happen soon.

Iran Could Flood Oil Markets If Biden Becomes US President – If presumptive Democratic candidate Joe Biden wins the presidential election in November, Iran could suddenly turn from a bullish driver for oil prices into a bearish factor if it resumes up to 2 million barrels per day (bpd) of oil exports. Currently, there is a consensus among analysts and international agencies that the oil market is tightening and will continue to tighten, lifting oil prices through next year. Oil demand is expected to rise next year by between 5 million bpd and 7 million bpd compared to this year’s lows, according to OPEC and the International Energy Agency (IEA) – in the absence of a mass return to lockdowns. The OPEC+ group is set to further ease its collective production cuts. In theory, the current expectations of supply and demand in 2021 are bullish for oil prices. Yet, the market shouldn’t discount one political and geopolitical factor that could upend current oil price forecasts for next year. The U.S. presidential election in November could install a new administration in the White House – of a President Biden – that would be inclined to renegotiate the Iran nuclear deal and potentially ease the current sanctions on Tehran’s oil exports. The return of 1-2 million bpd of Iranian oil on the global market would cap oil price gains next year, a leading oil analyst said last week.“If you have Joe Biden as president he could basically take the US back into the [Iranian] Nuclear deal and you could see a million plus Iranian barrels hit the market. These are the kind of things I think will be very important into the trajectory of oil into 2021,” Helima Croft, head of commodity strategy at RBC Capital Markets, told Business Insider in an interview last week. If Biden wins the November election, he could be inclined to revisit and renegotiate the Iran nuclear deal, potentially easing some sanctions in exchange for Tehran returning to compliance under some revised form of the Joint Comprehensive Plan of Action (JCPOA). Iran’s oil will not return overnight to the market if Biden becomes president. But the prospect of renegotiation of the nuclear deal will likely keep oil prices depressed, making Iran a bearish factor for the market. This would be in contrast with the bullish factor that Iran has been for oil prices during the Trump Administration so far, with the renewed sanctions on its oil and the occasional flare-up of Iran-U.S. and Iran-Saudi tensions in the most important oil shipping lane in the world, the Strait of Hormuz.

Oil falls as worsening pandemic threatens recovery – Oil prices dipped on Monday, weighed down by the prospect that a rise in the pace of coronavirus infections could derail a recovery in fuel demand. Brent crude was down 10 cents, or 0.2%, at $43.04 a barrel by 0047 GMT, after dropping slightly last week. U.S. oil was off by 6 cents, or 0.2%, at $40.53 a barrel, after gaining 4 cents last week. “With global daily COVID-19 case counts still rising and the U.S. Sunbelt most populous states showing little success in bending and containing the (epidemic’s) curve, concerns about the post-COVID recovery pace are limiting the upside for oil,” said Stephen Innes, chief global markets strategist at Axicorp. More than 14 million people have been infected by the novel coronavirus globally and nearly 602,000 have died, according to a Reuters tally. While fuel demand has recovered from a 30% drop in April after countries around the world imposed strict lockdowns, usage is still below pre-pandemic levels. U.S. retail gasoline demand is falling again as infections rise. Japan’s oil imports fell 14.7 percent in June from the same month a year earlier, official figures showed on Monday. The drop was not as pronounced as in May when they fell 25%, year on year. Still, exports from the world’s third-largest economy slumped by a double-digit decline for the fourth month in a row as the coronavirus pandemic took a heavy toll on global demand. In the U.S., energy drillers cut the number of oil and natural gas rigs operating to a record for an 11th week in a row, data showed on Friday.

Oil Rebounds on Covid Vaccine Hopes, But Anchored at $40 –Oil prices recouped Monday’s early losses to trade a notch higher, after talk of safe human clinical trials for a Covid-19 vaccine licensed to AstraZeneca (NYSE:AZN). But fear of coronavirus cases raging anew in the United States kept the crude market anchored at just above $40 per barrel. The AZD1222, a vaccine developed by Oxford university and licensed to AstraZeneca, was put into large-scale, late-stage trials that included 1,077 healthy adults aged 18 to 55 years with no history of Covid-19. The vaccine’s marketers have already signed deals to produce and supply over 2 billion doses, once the shot proves successful. News on the AZD1222’s progress came as 31 of the 50 U.S. states saw more new cases of the virus this past week, with some cities overwhelmed by new hospitalizations or deaths. Los Angeles Mayor Eric Garcetti said he was on the “brink” of making another stay-at-home order, saying things “reopened too quickly” in the most economically-vibrant city in California, which had a record daily hospitalization of 2,216 people as of Sunday. In Florida, at least 49 hospitals had no more ICU space available while Arizona reported its highest number of Covid-19 deaths in one day — 147. Crude prices, which fell more than 1% earlier on Monday during the Asian and European sessions, returned to positive territory by the lunch hour in New York. The rebound came as traders went with the progress on the vaccine development despite indications that it could take at least until the year-end or longer for a successful shot to reach the market. Meanwhile, immediate risk from the virus to both people and the economy is real and needs to be contained. New York-traded West Texas Intermediate, the benchmark for U.S. crude futures, was up 2 cents at $40.77 per barrel by 12:40 PM ET (1640 GMT). It dipped to a session low of $39.98 earlier.

Oil jumps nearly 3% to highest level since March on vaccine hopes, EU deal – Oil rose on Tuesday, helped by positive news about vaccine trials and an EU stimulus deal, taking prices to levels last seen when an oil price war erupted in early March between Russia and Saudi Arabia. Benchmark Brent crude was up $1.37, or 3.17%, at $44.65, on track for its biggest daily rise since mid-June. West Texas Intermediate crude gained 2.82%, or $1.15, to settle at $41.96 per barrel, the highest level since March. Prices were buoyed by an agreement among European Union leaders on a 750 billion euro ($859 billion) fund to prop up their coronavirus-hit economies, lifting prospects for fuel demand. In other financial markets, world shares and the euro also hit their highest in several months on Tuesday. The dollar, in which most oil contracts are priced, fell to its lowest since March against a basket of currencies. The EU deal allows the European Commission to raise billions of euros on capital markets on behalf of all 27 states, an unprecedented act of solidarity in almost seven decades of European integration. Oil prices were also supported by promising coronavirus vaccine data released on Monday, raising confidence that a vaccine may be created even if a global rollout will take time. In China, some cinemas reopened on Monday after a six-month closure, another sign of recovery in the world’s second-largest economy. Countries from the United States to India are reporting record numbers of coronavirus infections, while others such as Spain and Australia are battling new outbreaks. In the first big energy deal since the coronavirus crushed fuel demand, Chevron Corp said it would buy Noble Energy Inc for about $5 billion in stock. U.S. crude oil stockpiles were seen falling last week, while inventories of refined products are also likely to have dropped, a preliminary Reuters poll showed on Monday.

WTI Holds Losses As US Distillates Stocks Reach 38-Year Highs -Oil prices are lower overnight after a surprisingly large crude inventory build reported by API. The energy complex was not helped by comments by President Trump that the COVID-19 outbreak in the U.S. will probably worsen before improving.“Everything seemed to rise in the commodity world yesterday as part of the reflation trade,” said Giovanni Staunovo, an analyst at UBS Group AG in Zurich.“But today oil fundamentals are taking control again, and a likely crude inventory build in the U.S. doesn’t fit in the story of an undersupplied market.”And so all eyes are on the official data for signs of this reversal in recovery…API

• Crude +7.54mm (-2.1mm exp)
• Cushing +716k (+800k exp)
• Gasoline -2.019mm (-1.4mm exp)
• Distillates -1.357mm (-600k exp)

After API reported a 7.54mm build in US crude stocks, oil bulls are focused intently on the official data expecting a 2.1mm draw still. However, while not as large as the API build, DOE reports a 4.892mm build in crude, another build at Cushing, a surprise build in distillates, and a slowing drawin gasoline… Additionally, as Bloomberg’s Sheela Tobben reports, U.S. crude oil exports may be under downward pressure as China is now facing new troubles that might curb its interest for American. The Asian nation was struggling with bulging inventories and port jams after a recent crude binge, while battling a new wave of the Covid-19 pandemic. This month, heavy rains have resulted in severe floods, threatening run cuts at the country’s top refiner. Total US distillates inventory has soared to its highest since 1982…

Oil declines slightly after surprise build in U.S. inventories – Oil prices moved lower on Wednesday as U.S. government data showed a surprise rise in U.S. crude inventories, and as tensions escalated between the United States and China. Brent crude fell 3 cents to settle at $44.29 per barrel. West Texas Intermediate crude settled 2 cents lower at $41.90 per barrel. U.S. crude and distillate inventories rose unexpectedly and fuel demand slipped in the most recent week, the Energy Information Administration said on Wednesday, as the sharp outbreak in coronavirus cases has started to hit U.S. consumption. Crude inventories rose by 4.9 million barrels in the week to July 17 to 536.6 million barrels, compared with expectations in a Reuters poll for a 2.1 million-barrel drop. Production rose to 11.1 million bpd, up 100,000 bpd. “Overall this would suggest that the demand recovery we’ve seen from the bottom seems to be stalling,” said Phil Flynn, senior analyst at Price Futures group in Chicago. U.S. President Donald Trump said on Tuesday that the outbreak would probably worsen before it got better, a shift from his previously robust emphasis on reopening the economy. Bjornar Tonhaugen, Rystad Energy’s head of oil markets, said Trump’s comments might be welcomed by investors because they are among the most measured by him or his administration so far. “This could be a positive for oil demand prospects. Instead of an uncontrolled, disruptive second wave of lockdowns, maybe chances have now increased that the United States will eventually get the spread under control,” Tonhaugen said. However, a fresh dispute between Washington and Beijing put pressure on prices after the United States told the Chinese consulate in Houston to shut and a source said China was considering closing the U.S. consulate in Wuhan. Adding to pressure were signs that Iraq, the second-largest producer in the Organization of the Petroleum Exporting Countries, was still not meeting its target under an OPEC-led pact to cut supplies.

Oil settles lower as worries remain over rising U.S. inventories and coronavirus cases – Oil futures settled lower Thursday, extending a decline seen the previous session after data showed an unexpected rise in U.S. crude inventories, as alarming growth in the number of U.S. cases of coronavirus point to the potential for further business shutdowns, dulling the prospects for energy demand. “Virtually all demand categories” showed a week-on-week decline in the report from the Energy Information Administration Wednesday, said Robbie Fraser, senior commodity analyst at Schneider Electric. The report showed a weekly fall of 98,000 barrels per day in implied demand for finished motor gasoline to 8.55 million barrels a day. Implied demand for distillate fuel oil fell 470,000 barrels per day to 3.22 million barrels a day. “That fall will tie into broader concerns around a rise in COVID cases in the U.S. and the potential economic headwinds that could bring moving forward,” Fraser said in a daily note. West Texas Intermediate crude for September delivery on the New York Mercantile Exchange fell 83 cents, or 2%, to settle at $41.07 a barrel, while September Brent crude BRN.1, +0.18% lost 98 cents, or 2.2%, at $43.31 a barrel on ICE Futures Europe. Crude prices finished slightly lower Wednesday, pulling back a day after settling at their highest since March, pressured by an unexpected weekly climb in U.S. crude stockpiles. The EIA reported Wednesday that U.S. crude inventories rose by 4.9 million barrels for the week ended July 17. That compared with an average forecast by analysts polled by S&P Global Platts for a decline of 1.9 million barrels.Natural-gas futures, meanwhile, rallied as traders eyed storm activity in the Gulf of Mexico. “Aa tropical depression is building off the coast of Texas and may develop into Tropical Storm Hanna before reaching land” said Christin Redmond, commodity analyst at Schneider Electric, in a note. “The storm is likely to hit an area with offshore oil and gas production assets, which may temporarily reduce gas production in the near-term.”

Oil falls on coronavirus demand concerns, weak U.S. jobs numbers (Reuters) – Oil prices fell 2% on Thursday as investors worried the U.S. Congress may not agree on a stimulus package and as jobless numbers rose, while analysts prepared to cut energy demand forecasts as the number of coronavirus cases surges higher. That price decline came despite the benefit of a drop in the dollar to a near 22-month low. Brent LCOc1 futures fell 98 cents, or 2.2%, to settle at $43.31 a barrel, while U.S. West Texas Intermediate (WTI) crude CLc1 fell 83 cents, or 2.0%, to settle at $41.07. The U.S. dollar was trading at its lowest against a basket of currencies .DXY since September 2018. A weaker dollar usually spurs buying of dollar-priced commodities, like oil, because they become cheaper for holders of other currencies. But weak U.S. jobless numbers and a surge in coronavirus cases weighed on oil prices and stock markets. The number of Americans filing for unemployment benefits unexpectedly rose last week for the first time in nearly four months. U.S. Senate Republican leaders and White House officials tried to hammer out a proposal for a fresh round of coronavirus aid on Thursday. Democratic leaders, meanwhile, rejected the idea of passing a piecemeal bill. U.S. coronavirus cases approached 4 million on Thursday, with more than 2,600 new cases every hour on average – the highest rate in the world, a Reuters tally showed. “The trend for COVID-19 cases will likely result in downwards revisions in demand growth forecast from key market observers soon, including ourselves and the agencies, especially for the fourth quarter,” Adding to the market uncertainty, U.S.-China relations deteriorated as Washington gave Beijing 72 hours to close its consulate in Houston after spying allegations. The Chinese foreign ministry said the U.S. move had “severely harmed” relations and that China would be forced to respond.

Oil up on strong economic data, U.S.-China tensions cap gains – (Reuters) – Oil prices rose on Friday, lifted by some supportive economic data, but tensions between the United States and China limited gains. Brent crude futures LCOc1 rose 3 cents to settle at $43.34 a barrel. U.S. West Texas Intermediate (WTI) crude CLc1 futures rose 22 cents to settle at $41.29 a barrel. For the week, Brent rose 0.5%, while U.S. crude rose 1.7%. Ahead of the weekend, market participants had their eye on Tropical Storm Hanna, forecast to cross to Baffin Bay, 46 miles (74 km) south of Corpus Christi, Texas, on Saturday afternoon or evening. So far, energy companies said there have been no evacuations of workers or shutdowns of production from offshore platforms in the northern Gulf of Mexico. Lifting market sentiment, Euro zone business activity grew in July for the first time since the coronavirus pandemic hit, according to IHS Markit’s flash Composite Purchasing Managers’ Index (PMI). The index is seen as a good indicator of the bloc’s economic health. “The economic data in Europe was much better than anticipated, which would suggest that demand destruction in recent months because of COVID-19 may not have been as bad as people thought,” said Phil Flynn, senior analyst at Price Futures group in Chicago. Meanwhile, U.S. business activity increased to a six-month high in July. U.S. companies, however, reported a drop in new orders as new COVID-19 cases spiked. The resurgent pandemic has darkened the U.S. economic outlook. Some states have reinstated restrictions, which should reduce fuel consumption. The U.S. oil and gas rig count, a indicator of future output, fell by two to an all-time low of 251 in the week to July 24, according to data from energy services firm Baker Hughes Co (BKR.N). However, energy firms added one oil rig in the first weekly increase since March. Meanwhile, money managers raised their net long U.S. crude futures and options positions in the week to July 21 by 5,430 contracts to 375,193, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday..

Oil posts third positive week in four on demand recovery hopes – Oil prices moved slightly higher on Friday supported by economic data from Europe, but gains were limited as tensions between the United States and China flared. Brent crude futures settled 3 cents higher at $43.34 per barrel. West Texas Intermediate crude futures gained 22 cents to settle at $41.29 a barrel. China ordered the United States to close its consulate in the city of Chengdu on Friday, responding to a U.S. demand this week that China close its Houston consulate. The renewed tensions between the world’s top two oil consumers stoked worries about oil demand, which already faces headwinds including rising coronavirus cases in the United States. The resurgent pandemic has darkened the U.S. economic outlook. Some states have reinstated restrictions to curb the latest outbreak, which is expected to decrease fuel consumption. The number of Americans filing for unemployment benefits hit 1.416 million last week, unexpectedly rising for the first time in nearly four months. Oil prices could see a near-term correction if a recovery in fuel demand slows further, especially in the United States, Barclays Commodities Research said. Still, the bank lowered its oil market surplus forecast for 2020 to an average of 2.5 million barrels per day (bpd) from 3.5 million bpd previously. In the United States, the oil and gas rig count, an early indicator of future output, fell by two to an all-time low of 251 in the week to July 24, according to data on Friday from energy services firm Baker Hughes Co. However, energy firms added one oil rig in the first weekly increase since March. Softening Friday’s market losses, Euro zone business activity grew in July for the first time since the coronavirus pandemic hit, according to IHS Markit’s flash Composite Purchasing Managers’ Index (PMI). The index is seen as a good indicator of the bloc’s economic health. “The economic data in Europe was much better than anticipated, which would suggest that demand destruction in recent months because of COVID-19 may not have been as bad as people thought,”

Saudis Stuck Home for Summer Burn More Oil for Air Conditioners –– As the Middle East enters the hottest days of summer, Saudi Arabia is set to burn potentially record amounts of crude oil to run its power plants and keep its citizens comfortably air-conditioned. Electricity consumption always soars around July and August, when temperatures in the kingdom can rise above 122 degrees Fahrenheit (50 degrees celsius). That compels the government to use crude or fuel oil in addition to the much cleaner natural gas that normally fires the plants. But this year the urge to drain oil is even stronger because of higher demand, with the coronavirus pandemic forcing many Saudis to cancel their summer holidays abroad. Another difference is that record cuts to Saudi Arabia’s oil production since April — part of a push by OPEC members to prop up prices in the face of the virus — have reduced its supplies of gas, most of which come from the same wells as crude. The extra oil going toward power may limit the price impact of OPEC’s plan to taper output restrictions from next month. The kingdom pumped 7.5 million barrels a day in June, the fewest since 2002, according to data compiled by Bloomberg. Of those, it exported 5.7 million barrels daily, while keeping most of the rest for domestic refineries. “They can simply import more gas or burn more crude in power generation,” said Carole Nakhle, chief executive officer of London-based consulting firm Crystol Energy. “The second option is more likely and easier since the region has been doing this for years and decades and there is plenty of oil around today.” Each August, Saudi Arabia uses 726,000 barrels of crude daily for power generation, according to average numbers over the past decade from the Riyadh-based Joint Organisations Data Initiative, which collates statistics among energy producers. That’s more than double the amount for the cooler months of January and February. The record came in July 2014, when the Saudis burned 899,000 barrels a day. Saudi Arabia has already unwound some crude-production curbs. At the end of June, it ended voluntary cuts of 1 million barrels a day below its OPEC quota, saying it would need most of the additional oil for domestic use. “Our consumption is going to increase,” Saudi Energy Minister Prince Abdulaziz bin Salman said in early June. “A good chunk of what we will produce in July will go to domestic consumption — crude burning or fuel oil, not refining.” Nearing 1 million barrels a day for power generation would be a setback for Saudi Arabia’s plans to reduce its own use of the dirtiest fossil fuels. Before the virus stuck, the government looked on track to achieve that, especially after increasing capacity at local gas-processing plants,

Egypt’s Parliament Approves Ground Troop Deployment To Back Haftar In Libya –Libya’s proxy war just grew hotter, with outside powers supporting opposite sides of the conflict finding themselves more directly intervening on Libyan soil.Though Turkey, which supports Tripoli’s UN-backed Government of National Accord (GNA) has sent troops and weapons since last year to help fend off Haftar’s (now failed) advance on the capital, Egypt just made a huge and unprecedented move.On Monday Egypt’s parliament voted to approve sending its armed forces to fight “criminal militias” and “foreign terrorist groups” on a “Western front”. Previously Egypt has only flown sorties over neighboring Libya, however, this would mark the first ever direct ground intervention.Though the parliamentary vote didn’t name Libya directly, it’s widely known that “Western front” is a clear reference to the growing chaos along Egypt’s border with Libya. Cairo continues to see Haftar as a necessary ‘stabilizer’ for the country which has remained in a state of chaos and bloodshet since the US-NATO toppling of Gaddafi in 2011.The parliament unanimously voted for “the deployment of members of the Egyptian armed forces on combat missions outside Egypt’s borders to defend Egyptian national security… against criminal armed militias and foreign terrorist elements,” according to a statement.Reuters underscores that the vote is a big deal and somewhat unprecedented:Egyptian state TV later ran banners on the screen saying: “Egypt and Libya, one people, one fate.”The last time Egypt sent ground troops abroad for combat was in 1991 in Kuwait as part of a U.S.-led coalition to drive out Iraqi troops.

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