Oil, Gas, And Fracking News Reads: 25July 2021 – Part 2

Written by rjs, MarketWatch 666

Here are some more selected news articles for the week ending 24 July 2021. Go here for Part 1.

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

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The U.S. Shale Revolution Has Surrendered to Reality – “Drill, baby, drill is gone forever.” That was the recent assessment of Saudi Prince Abdulaziz bin Salman of the American oil industry’s future potential. As Saudi Arabia’s energy minister, Prince Abdulaziz is one of the most influential voices in the global oil markets. Fortune termed it a “bold taunt,” and a warning to U.S. frackers to not increase oil production. The response by the U.S. producers – to shut up and take it – quietly confirms this reality. Shale oil’s era of growth appears to be over. The reason is that even as global oil demand and prices rise, the economics of the shale oil business model continue to not work. The U.S. shale industry has lost hundreds of billions of dollars in the past decade producing oil and selling it for less than it cost to produce.This was possible because despite the losses, investors kept giving the industry money. But now investors appear to have grown tired of losing money on U.S. shale companies and new lending to the industry has dropped dramatically.As reported this month by The Wall Street Journal, “capital markets showed little interest in funding expansive new drilling campaigns” for the U.S. shale industry. Shaia Hosseinzadeh, a partner at investment firm OnyxPoint Global Management LP, told The Journal that the problem facing fracking companies is that “they can’t access cheap capital any longer.” Without new infusions of money, the industry can’t drill for more oil, and that is why the Saudis feel confident taunting the U.S. oil industry. Prince Abdulaziz’s confidence is based in the financial realities of U.S. shale.What’s happening with the U.S. shale industry in this high price oil environment is unusual. Oil is typically a very predictable boom-and-bust business: When prices go up, oil drillers produce as much as they can, and when prices go down they stop.But for American drillers right now, the money isn’t there because investors no longer are willingto lend to frackers based on promises of future profits that have yet to materialize for the industry. In July 2020, accounting firm DeLoitte released a report stating that, “The U.S. shale industry registered net negative free cash flows of $300 billion, impaired more than $450 billion of invested capital, and saw more than 190 bankruptcies since 2010” – supporting the claim that the industry has peaked without ever making money.Investors have taken notice, including the private equity industry that has invested heavily in the fracking boom. Dan Pickering, head of energy investment firm Pickering Energy Partners, highlighted how private equity has lost interest in further investment in the shale industry in his keynote presentation at Hart Energy’s annual Energy Capital Conference in June. The U.S. shale industry has been accurately described as being composed of “capital destruction machines“. The hundreds of billions in losses the industry has accumulated in the past decade prove that it’s true. With few investors willing to provide new capital to feed the machine, the only option is not drilling, even though prices are the highest they have been in years, at nearly $75 per barrel.

Has OPEC finally won the war against shale oil? — I have maintained for the past six years that a key goal of OPEC has been to so demoralize investors in shale oil that they stop sending money to the companies that drill for it. As I’ve written previously, I believe that OPEC’s contest with the shale oil industry is “part of a broader strategy meant to maximize Saudi revenues as production in the kingdom hovers at an all-time high over the next decade before beginning a decline.” It now appears that OPEC may have finally won its war against shale. Investment in shale oil companies has finally collapsed-even as oil prices levitate. It has been a long time coming. The industry would like you to believe that it is now showing “restraint” in its capital spending. But, to use a dieting analogy, there is a big difference between watching what you eat and having your jaw wired shut. The industry has experienced the equivalent of the latter in the capital markets. What has amazed all of us who watched this battle play out is that OPEC didn’t win sooner. The relentless tolerance for losses among investors was beyond belief. And, when those investors returned in force after a brief vacation during the oil price bust in 2015, we skeptics grew concerned that rational thought had been eliminated from the universe. One estimate puts shale oil and gas industry losses at around $500 billion in the last five years. But the industry was losing money as a whole before that even when oil was above $100 per barrel early in the last decade. The problem is that shale oil is difficult and costly to extract and the technologies that enabled that extraction were never efficient enough to create widespread profitability.The problem from here forward is that most of the sweet spots in U.S. shale plays have been exploited. As the industry runs out of them and increasingly moves toward developing more difficult shale deposits, costs will rise-thus making it even more difficult to turn a profit on shale oil.There is an oil price that would certainly make shale deposits profitable. But that price is likely too high for the economy and consumers to bear without falling into a recession. That, it turns out, is the conundrum for the oil industry as a whole. The price band that is affordable to consumers in the long run no longer overlaps with the price band that will allow oil companies to exploit increasingly difficult-to-extract deposits. That may already be reflected in the fact that oil production worldwide peaked in November 2018, long before the pandemic began. Those of us who have been concerned about a near-term peak in world production are starting to believe that we’ve already passed it. It may turn out that all the hype over shale oil had people looking the wrong way when one of the most momentous developments in modern history was taking place in plain view.

Permian pipeline operators merge amid obstacles to market recovery – A pair of Permian Basin oil and gas midstream companies combined their resources in the fossil fuel basin spanning from southeast New Mexico into West Texas. Pipeline operator Plains All American and Oryx Midstream announced on July 13 that they planned to merge Permian assets to form a new joint venture Plains Oryx Permian. The deal would include all the two companies’ Permian Basin asset excluding Plains’ long-haul pipeline system and certain intra-basin terminals. More: Work continuing in New Mexico to reuse oil and gas wastewater in other sectors When finalized, Plains will own 65 percent of the joint venture with Oryx owning 35 percent, with Plains serving as operator. Oryx Chief Executive Officer Brett Wiggs said the deal would boost returns to investors while also expanding Oryx’s operations and increasing efficiency as it will combine acreage and infrastructure already operating adjacently. “This combination is a natural evolution of the Oryx growth story and perpetuates that commitment, creating the premier crude oil logistics system in the basin, increasing connectivity, enhancing reliability, and strengthening efficiencies for our customers,” Wiggs said. When the deal is complete, Plays Oryx Permian will have 5,500 miles of pipelines with a capacity of 6.8 million barrels per day, read a news release, bringing oil products to all major downstream markets. The system would sit on about 4.1 million dedicated acres in the region.

US oil, gas rig count jumps 24 to 604 amid recovery confidence from early Q2 calls – The US oil and gas rig count jumped 24 to 604 in the week ending July 23 Enverus said, as early second-quarter earnings calls from oil services framed a picture of an upturning oil industry, slightly looser 2022 upstream capital budgets and more activity to come. The Permian Basin accounted for nearly half the additions, leapfrogging 11 week on week to 259 rigs. The West Texas/Southeast New Mexico basin accounts for about 4.5 million b/d of oil production and nearly 18 Bcf/d of gas output. Analysts believe WTI oil prices at $70/b-plus since early June no doubt have helped push up the rig count, although experts always caution week-to-week gains may not necessarily mean anything. “Oil companies typically make these decisions quarter by quarter, so [the recent jump in rig counts] is likely a reaction to being in a new quarter, and we have had prices for several months that will obviously get good return rates on wells,” said James Williams, founder and president of WTRG Economics. S&P Global Platts Analytics analyst Taylor Cavey said recent price strength is no doubt playing a role in producer behavior. “We continually ask ourselves whether or not they will break from the maintenance mode mindset or not,” Cavey said. Cavey noted rig gains were slower at the start of July, when the rig count dropped 12 the first week of the month followed by a gain of four and 24 in the most recent week. “Month to date, we’re at plus 18 compared to June, which is largely in line with our forecast,” he said. While some operators may raise their spending slightly in second-half 2021, operators should largely stick to stated budgets, Cavey said. Apart from the Permian, most of the US’ other largest basins saw smalls gains or losses. The Haynesville Shale of East Texas/Northwest Louisiana gained two rigs to 55, while the SCOOP-STACK (28 rigs) play of Oklahoma, the DJ Basin (14 rigs) of Colorado, and the Utica Shale (13 rigs) of mostly Ohio were all up by one rig apiece. The Marcellus Shale, largely sited in Pennsylvania, shed a rig leaving 32, while the Bakken Shale of North Dakota/Montana and the Eagle Ford Shale in South Texas were unchanged, leaving totals of 23 and 45, respectively.

Oil and gas: Policy should not impede industry regrowth from COVID-19 -Oil and gas industry leaders from New Mexico and Texas, representing the Permian Basin, maligned efforts by the administration of President Joe Biden they said could stymie oil and gas operations throughout the U.S. Some representatives of energy companies also worried Congress could impose higher taxes on domestic fossil fuels as it considered a $1.2 trillion infrastructure package that could include such a measure.Language for the bill was not available as of Tuesday, but groups representing energy companies already began making their case for policy that supported their bottom lines.The two states’ major oil and gas trade associations collaborated with the American Petroleum Institute (API) to release an economic impact study Tuesday intended to display the importance of oil and gas revenue and argued the industry would play a key role in economic recovery both on state and national levels. The New Mexico Oil and Gas Association (NMOGA) pointed to $18.8 billion added to the state’s gross domestic product (GDP) by oil and gas in 2019, the year before the U.S. was struck by the COVID-19 pandemic.That’s 17.9 percent of the state’s economy, per the study, supporting 46,000 direct jobs.The health crisis brought on a year of sinking oil and gas prices and stymied production throughout 2020, but the markets recovered this year as vaccines became widely available.NMOGA Chairman Leland Gould said the industry was essential to New Mexico’s economy as it hoped to rebuild after COVID-19 and that public policy should support the regrowth of oil and gas production. “Oil and natural gas are a big part of New Mexico’s economy and will continue to play a leading role in driving our state from recovery to prosperity,” he said. “New Mexico has enormous oil and natural gas potential, and we should continue to make this state a magnet for capital investment and job creation by prioritizing the development of these resources right here in our own backyard.” Gould said oil and gas in New Mexico contributed to public services like education and infrastructure not only in high-producing regions like the Permian Basin in the southeast corner of the state, but throughout New Mexico.

Kansas gas well that blew 100 feet high now fixed; complaints of illnesses, smell linger – Authorities said Friday that a natural gas well outside of Lyons that exploded during maintenance the day before is now safe and repaired. Local residents had complained of an odor and a lingering haze, but a Northern Natural Gas official said there is no danger to the public. The complaints of a noxious smell began after the underground storage well blew open after 3 p.m. Thursday southeast of Lyons, causing water and natural gas to fly up into the air. Area resident Jacob Voorhies said the natural gas well shot 100 feet in the air and left a haze that descended on the city Thursday night. By Friday morning, the haze seemed to lift, but a natural morning fog did linger, he said. “There was definitely a haze over the city and it wasn’t like fog,” he said. “It was something else. I think everyone says certain things for lawyers. I live a mile away and whenever you look across the street you could clearly see there was something in the air … I guarantee you walk around town and ask 80 people, all 80 people will say, ‘Yeah, there was something different last night.'” A company spokesperson said the initial rupture caused a mixture of natural gas and water molecules to rupture into the air, causing a haze that would have been visible from town. The amount of gas lost would be calculated during the company’s roughly three-week investigation into the leak, spokesperson Mike Loeffler said. Kansas Corporation Commission spokesperson Linda Berry said the multi-state operation would be investigated by the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration. The organization did not reply to The Eagle, but Berry said she was told the organization is investigating. Loeffler said measurements taken near the edge of Lyons didn’t detect any levels of sulfur or natural gas. About people’s complaints of a smell, Loeffler said it is likely sulfur that forms in the Arbuckle Formation, where the well is located.

City, county leaders join calls to stop Enbridge pipeline projects in Minnesota, Wisconsin – Local leaders are drafting resolutions in support of people working to stop the expansion of Enbridge Energy pipelines that transport Canadian oil across Minnesota and Wisconsin. The Madison City Council is expected to vote on a resolution Tuesday in support of Indigenous sovereignty and calling on local, state and federal leaders to stop the reroute of Line 5 in northern Wisconsin and construction of Enbridge’s $2.9 billion Line 3 replacement in Minnesota. The resolution, which has 13 sponsors, notes that each of the lines crosses dozens of rivers, streams and wetlands, including the Mississippi River, and cites spills in 1991 and 2010 that leaked millions of gallons of oil into rivers. Dane County Board member Heidi Wegleitner said she plans to introduce a similar resolution later this week. Speaking at a send-off event Monday for several protestors heading to camps along the Line 3 pipeline route through northern Minnesota, Madison City Council President Syed Abbas said people in the United States are fortunate to have clean water. “We are blessed and we have to say thanks to the Indigenous community for that,” Abbas said. “We need to stand with them. We might tomorrow get to a similar situation where we don’t have clean water because of contamination.” Abbas added that extracting and burning the tar sands oil Enbridge transports through the lines is especially carbon-intensive and not in line with the city’s commitment to eliminating greenhouse gas emissions.

White House adviser Susan Rice divests from company building Midwest pipeline – The director of President Joe Biden’s Domestic Policy Council, Susan Rice, has divested herself of millions of dollars’ worth of holdings in a company that’s leading a contentious pipeline project supported by the Biden administration.According to newly released financial disclosure reports and a White House official, Rice has liquidated nearly $2.7 million worth of shares she and her husband owned in Enbridge, a Canadian company building the Line 3 pipeline, which would carry hundreds of thousands of barrels of Canadian oil through Minnesota and Wisconsin. Last month, the Biden administration gave a public boost to the Trump-era pipeline project, calling for the dismissal of a court challenge brought by environmental groups seeking to protect Minnesota watershed and tribal lands from the pipeline.A certificate of divestiture issued by the Office of Government Ethics last week shows Rice’s plans to sell holdings in more than three dozen companies and several investment funds that she and her family own — assets currently worth a total of more than $30 million.Enbridge’s stock price has been on an upward trend since November, and the value of Rice’s holdings in the company has increased from roughly $2.4 million when she joined the Biden administration earlier this year to nearly $2.7 million as of Friday. It’s unclear if Rice netted any capital gains from the sale of her Enbridge shares, but those who divest assets under a certificate of divestiture are allowed to defer taxes on capital gains.

Line 3 opponents seek restraining order against sheriff – Activists opposed to the Line 3 Pipeline project in northern Minnesota are asking a judge to issue a restraining order against Hubbard County, Sheriff Cory Aukes, and the local land commissioner.Winona LaDuke and Tara Houska claim that the sheriff has unlawfully blockaded access to a camp serving as a convergence space and home for Indigenous-led activities by water protectors. The activists say law enforcement formed riot lines and blockaded the only means of entry and exit to the camp.LaDuke and Houska say the actions are “an escalation of a months-long unlawful campaign of harassment, arrests, disruption, surveillance and baseless pullovers of Indigenous water protectors and land defenders and their allies who oppose the Line 3 pipeline expansion.” The lawsuit argues that the blockade is a violation of private property rights, including an easement covering the driveway to the property.

Water Activist Winona LaDuke And Others Arrested Near Park Rapids, MN – – Environmental activist Winona LaDuke is among a small group of people arrested at Shell River near Park Rapids. They were protesting work on the river for the Line 3 replacement project by Enbridge. Honor the Earth, of which LaDuke is executive director, says a total of seven women were zip-tied and taken into custody. Enbridge says work on the final portion of the pipeline in Minnesota is 70% complete. They are adjusting work plans to comply with a DNR order to suspend the use of some water sources due to low levels from the drought.

Winona LaDuke released from jail after three days amid Enbridge Line 3 protests – Ojibwe activist and former Green Party vice presidential candidate Winona LaDuke was released from jail Thursday after her arrest Monday while protesting construction of an oil pipeline in northern Minnesota.She and six other women were sitting together praying on an easement and protesting construction of the Enbridge Line 3 oil pipeline near Park Rapids at the Shell River – which the pipeline will cross in five places – when they were arrested for trespassing. She was transferred late Wednesday to the Aitkin County jail, while the other women were released from the Wadena County jail that day.”I think this is what you call the Enbridge way – make sure that hundreds of Minnesota citizens are put in jail so that they can steal 5 billion gallons of water and put the last tar sands pipeline in,” LaDuke said in an Instagram post after her release. Enbridge released a statement to the Reformer saying in part that “Police are responsible for public safety. Officers decide when protesters are breaking the law. Our first priority is the safety of all involved – our workers, men and women in law enforcement and the protestors themselves.” The protests that led to the arrests are just the latest direct action seeking to stop construction of the pipeline, which will replace an existing pipeline the company says is needed for safe transport of oil and rising demand. Local communities and construction trade unions say the 337-mile, $2.9 billion crude oil pipeline is a key source of economic vitality in struggling communities.So far, more than 500 people have been arrested during protests led by Ojibwe tribes and environmentalists, the activists say. LaDuke is charged with trespassing, harassment, two unlawful assembly misdemeanors and public nuisance and posted a $6,000 bond, according to court documents.

Minnesota Cop: Oil Pipeline Budget Boost Means New Guns – A FEW WEEKS before a controversial oil pipeline was approved for construction in his area, Aitkin County, Minnesota, Sheriff’s Deputy Aaron Cook bought a new assault rifle that cost $725. The purchase was part of an effort to standardize police weaponry, said Cook’s boss, the local sheriff, and was unrelated to the Line 3 pipeline being built by Enbridge. Cook himself, however, told the gun seller that Enbridge could play a role in boosting the agency’s arsenal. “Our budget took a hit last week, so that’s all we will be ordering for now,” the deputy said in a November 2020 email about his purchase. “I’m hoping the pipeline will give us an extra boost to next year’s budget, which should make it easy for me to propose an upgrade/trade to your rifles rather than a rebuild of our 8 Bushmasters” – a reference to another make of assault rifles. The email suggests that at least some law enforcement officers anticipate new policing resources if the pipeline, Enbridge’s Line 3, is completed. The document, obtained through a public records request, provides an elegant example of how everyday oil and gas investments make it all the harder for local economies to transition away from the fossil fuel industry. The deputy appeared to be describing a banal but lucrative benefit aligning local police interests with the oil pipeline: property taxes. “They clearly have a belief or awareness that there is a pot of gold should they succeed in stopping the water protectors from being able to stop Line 3,” said Mara Verheyden-Hilliard, director of the Partnership for Civil Justice Fund’s Center for Protest Law and Litigation and an attorney representing water protectors. “This deputy is obviously looking to line the county sheriff’s armory with this money.”

MDU Resources Subsidiary Begins Construction on ND Natural Gas Pipeline Project – WBI Energy, Inc., a subsidiary of MDU Resources Group, Inc. (NYSE: MDU), began construction this week on the North Bakken Expansion project in northwestern North Dakota. This natural gas pipeline expansion will have capacity to transport 250 million cubic feet of natural gas per day from the Bakken Formation. WBI Energy received a notice to proceed on July 8 from the Federal Energy Regulatory Commission, allowing construction to commence. “WBI Energy transports more than 50% of the natural gas produced from the Bakken. This project will bring WBI’s total pipeline system capacity to more than 2.4 billion cubic feet per day while reducing natural gas flaring in the region by allowing producers to move more gas to market. Producers have reinforced their need for this additional capacity by committing to long-term transportation contracts with WBI,” The North Bakken Expansion project includes construction of approximately 63 miles of 24-inch natural gas pipeline and 30 miles of 12-inch natural gas pipeline, as well as a new compressor station and additional associated infrastructure. It is estimated to cost $260 million and, during peak construction, is expected to employ up to 450 people. WBI Energy expects to have the pipeline in service by the end of the year.

Oil production flat in North Dakota due to worker shortage (AP) – Oil production is flat in North Dakota due to a workforce shortage as the industry recovers from the coronavirus pandemic. Companies say they are in need of workers to inject water, sand and chemicals down wells to crack open rock and release oil, a process known as hydraulic fracking. State Mineral Resources Director Lynn Helms said eight crews are currently working in North Dakota, down from at least 20 which would typically be working in the state at today’s oil prices. “Most of these folks went to Texas where activity was still significantly higher than it was here, where they didn’t have winter and where there were jobs in their industry,” Helms tells the Bismarck Tribune. “It’s going to take higher pay and housing incentives and that sort of thing to get them here.” North Dakota’s oil production rose 4,000 barrels per day in May, a negligible increase. The state produced about 1 million barrels of oil per day in May, the latest month for which data is available. The fracking side of the industry is also experimenting with new techniques to reduce costs. One company is using saltwater to replace some of the freshwater used in the fracking process. The fluid is being transported several miles through a flat line hose tucked inside another hose to prevent leaks until it reaches a fracking site, Helms said.

Pipeline break spews 41,000 gallons of oilfield wastewater (AP) – Nearly 41,000 gallons of oilfield wastewater has spilled from a broken pipeline in western North Dakota, impacting an unknown amount of land, state regulators said Wednesday.The North Dakota Department of Environmental quality said Kansas-based Tallgrass Energy reported the produced water spill on Monday. The break occured about 6 1/2 miles south of Watford City.It was not immediately known what caused the leak to the 4-inch plastic composite pipeline. Agency officials were on scene Wednesday to oversee the cleanup and investigate the spill, said Karl Rockman, director of the department’s division of water quality.Rockman said the wastewater migrated at least a half-mile from the break in the pipeline and “varied in width along its path.” Some of the water spilled in a dry drainage ditch that connects to Spring Creek, a tributary to the Little Missouri River.”There is no indication that drinking water sources were threatened,” Rockman said. “There are still questions about the full extent of (the spill).” Rockman said cleanup will involve excavating contaminated soil.Produced water is a mixture of saltwater and oil that can contain drilling chemicals. It’s a byproduct of oil and gas development. Brine is an unwanted byproduct of oil production and is considered an environmental hazard by the state. It is many times saltier than sea water and can easily kill vegetation exposed to it.

US regulator issues notice to Dakota Access pipeline over safety concerns (Reuters) – The U.S. Department of Transportation’s pipeline regulator on Thursday put the operator of the Dakota Access Pipeline (DAPL), Energy Transfer LP (ET.N), on notice for probable violations of safety regulations and proposed a civil penalty against it.The U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA) notice listed probable violations ranging from the location of storm water drainage at six pipeline facilities and failure to follow assessment guidelines relating to possible incidents in sensitive areas where the pipeline operates.The PHMSA recommended a civil penalty of $93,200 against the company for the violations and said failure to correct the issues may result in further enforcement action.In June, a U.S. district court closed a long-running case against the DAPL, a 570,000-barrel-per-day pipeline out of North Dakota that travels under a Missouri River reservoir, but allowed for Native American tribes and other opponents of the line to file additional actions against it. read moreEnergy Transfer was not immediately available to comment.”An oil spill from this pipeline would be devastating to our drinking water supply and that of millions of people downstream, placing us all in harm’s way. That’s why we have opposed DAPL from the very beginning and fought its continued operation at every turn,” Standing Rock Sioux Tribe’s vice chairman, Ira Taken Alive, said in a statement issued on Thursday by Earthjustice group, which represents the tribe in the lawsuit.

Saltwater spills reported in McKenzie County Two saltwater spills occurred in McKenzie County this week, according to the North Dakota Department of Environmental Quality.Tallgrass Energy reported a spill from one of its pipelines on Monday. The company estimated 850 barrels or 35,700 gallons spilled, affecting private property about 7 miles south of Watford City, according to a report it filed with the state.Saltwater is known as produced water or brine in the oil fields, and it can render land infertile when it spills. It’s a byproduct of oil production, typically transported by truck or pipeline from an oil well to a disposal site.Tallgrass has not determined what caused its spill. A lightning strike is to blame for a separate incident that caused a fire and 820 barrels or 34,440 gallons of saltwater to spill at a disposal site about 5 miles south of Keene on Tuesday, according to a report the site operator, Bullrock, made with the state.Both companies are working to clean up the spills. State investigators will continue to monitor those efforts.

Pipeline break and lightning strike cause brine spills – A brine spill occurred during a pipeline break about six and a half miles south of Watford City. Most recent estimates indicate 35,700 gallons of brine were released on private property. Operated by Tallgrass Energy, the company first discovered the spill on Monday. Brine or produced water is a byproduct of oil production. It is typically carried from an oil well by pipeline or truck to a disposal site where it is injected back into the ground for permanent storage. A brine spill also occurred Tuesday, resulting from a lightning strike at the Alfred Brown Saltwater Disposal owned by Bullrock, LLC, about five miles south of Keene. The North Dakota Department of Environmental Quality was notified of both incidents. Initial estimates indicate 34,440 gallons of brine were released at the Keene area site. The spill occurred on private agricultural property. At this time, no surface water was impacted. Personnel from the Environmental Quality Department will be on site to monitor the investigations and remediations.

Pad Fire North Of Keene, ND — July 24, 2021 –Because I did not want to incorrectly identify a pad fire at the wrong location (and the operator by association), I pulled the original post regarding that pad fire off the blog. A reader had sent me a note saying the rig in the photo is a workover rig and would not show up on the NDIC map as a drilling rig. I thought it was a workover rig at the time I posted the original note and should have not gone further with trying to locate the pad based on that error. So, the original post has been pulled. [To complete the story, a reader went by the pad I identified in the original post and said there was no fire and there had been no fire at that site. The reader suggested where the pad was likely to be, but I won’t post that until / unless confirmed by other sources..] Here are the photos again taken “north of Keene” and posted on Facebook. Apparently the photos were taken about 10:37 p.m., Thursday night, July 22, 2021.I searched the local newspapers for any oil fires in this area. I couldn’t find the story Thursday night. But Friday night, via twitter, I found the story. The link is to The Bismarck Tribune (https://bismarcktribune.com/news/state-and-regional/crews-respond-to-fire-at-mckenzie-county-oil-well-site/article_c1f9e4be-5ec4-58c3-8a02-19f52622f290.html): The US Forest Service is monitroing an active fire on an oil well site just south of Lake Sakakawea in McKenzie County (and north of Keene, ND).No injuries had been reported, according to a news release from the Dakota Prairie Grasslands office. The fire was contained to the well pad and no surface grassland or groundwater resources were affected Friday evening. Response teams are working to manage the incident.The cause of the fire is under investigation. More at the link. So, we’re at square one. The pad fire could be at any number of locations north of Keene, ND, and south of the lake.

Chevron fails to hit targets with giant CCS scheme at Gorgon LNG – Chevron is receiving heavy flak and potential fines for failing to meet emissions reduction targets at its troubled carbon capture and storage (CCS) scheme that forms a crucial element of the Gorgon liquefied natural gas (LNG) export project in Australia. Its partners include Shell and ExxonMobil. Yesterday, Chevron admitted that its CCS project, described by the US giant as the world’s largest, has failed to meet a five-year target for burying carbon dioxide (CO2) under Barrow Island off Western Australia. The Gorgon joint venture, which also includes Osaka Gas, Tokyo Gas and JERA, shipped its first LNG cargo in 2016. The $3 billion CCS project, which started operating in 2019 and about three years late, has been beset by technical difficulties. Peter Milne, a Perth-based industry analyst at Boiling Cold, wrote that “Gorgon has been in production for 5.5 years, but there has not been a single day when all elements of Gorgon’s CO2 injection system have worked at the same time.” Significantly, it is the world’s largest CCS project dedicated to cutting greenhouse gas emissions, not enhancing oil recovery. Worryingly, if Chevron, backed by Shell and ExxonMobil, cannot get CCS right more than a decade after the project was approved, then expectations of a massive global CCS rollout before 2050 look doubtful, warned Milne. Chevron, which operates the Gorgon LNG development, has not met the official requirement to capture and store at least 80% of the emissions generated over the first five years of the project, or around 4 million tonnes per year. The emissions reduction target formed a key part of the environmental approval process. The Western Australian environmental minister, Amber-Jade Sanderson, is now seeking an “explanation of how the company intends to address the issue.” An analysis last year suggested Chevron could face a bill of more than A$100 million ($73 million) if it is required to offset all emissions that breached its approval requirements. Chevron’s managing director in Australia, Mark Hatfield, said the company is working with the regulator on “making up the shortfall”, which he did not quantify. He added the company would release a public report on the issue later this year. Analysts believe that the report will likely find that the project only captured 30% of what it was supposed to.

Quebec Quashes Energie Saguenay LNG Terminal on Environmental Grounds – Quebec upheld its reputation as no-go territory for fossil fuel projects Wednesday by denying environmental approval for a US$10.6 billion liquefied natural gas (LNG) export plan. GNL Quebec’s proposed Energie Saguenay terminal and Gazoduq pipeline failed to prove it would cut global greenhouse gas emissions, provincial Environment Minister Benoit Charette said in announcing the rejection. The decision ended hope for LNG exports of Western Canadian gas from Canada’s Atlantic seaboard. Pieridae Energy Ltd. earlier this month shelved the only other active East Coast proposal – the US$10 billion Goldboro LNG project in Nova Scotia. The Quebec decision did not surprise the Alberta-based Canadian oil and gas industry, where the LNG plan’s fate is seen as just the latest example of a well-established pattern. Since 2016 Quebec banned hydraulic fracturing to tap Utica Shale gas and led opposition that aborted TC Energy Corp.’s C$16 billion (US$12.8 billion) Energy East plan for a cross-Canada oil pipeline. Charette said flaws in the GNL Quebec proposal emerged from a prolonged and hotly contested examination of potential project effects by the provincial Bureau d’audiences publiques sur l’environnement (BAPE). The case drew a protest avalanche from urban academics and environmental groups, leaving the LNG project supported only by small centers at the proposed terminal site 277 miles east of Montreal at the junction of the St. Lawrence and Saguenay Rivers. Only a week before the rejection decision GNL president Tony Le Verger indicated Energie Saguenay and Gazoduq were still live economic propositions. The Covid-19 pandemic inflicted a two-year construction delay. But GNL had a connection deal with TC’s national natural gas pipeline and an agreement with a European LNG import project, and was negotiating for supplies from Alberta and British Columbia. The French Canadian LNG plan’s sponsors in the United States – the Ruby Capital team of California entrepreneurs Jim Illich and Jim Breyer – launched GNL Quebec in 2014, well before all the province’s political parties turned cold on fossil fuel projects. The prevailing mood in Quebec shows in Charette’s full official title. He is ministere de l’Environnement et de la Lutte contre les changements climatiques – Minister of the Environment and the Struggle Against Climate Change. While fossil-fuel foes celebrated Charette’s announcement as a victory for global energy transition and climate change policies, the pro-development Montreal Economic Institute mourned the LNG project’s end as a loss for Quebec investment and employment.

US won’t block completion of Russia’s Nord Stream 2 pipeline – The Biden administration won’t block the completion of Russia’s Nord Stream 2 pipeline and will announce an agreement with Germany on the natural gas line’s construction in the coming days, according to top officials. Reuters first reported Monday that the U.S. and Germany were close to reaching a deal following discussions among officials from both countries over continued U.S. concerns that the nearly complete pipeline would make Europe too heavily dependent on Russia for gas. The U.S. has also warned the pipeline could rid Ukraine of the transit fees on gas currently pumped in a pipeline through the country. President Biden and German Chancellor Angela Merkel were not able to reach a deal on the pipeline during their meeting at the White House last week in what was likely the outgoing German leader’s last official visit to D.C. The Wall Street Journal reported Tuesday that one source familiar with the discussions among top officials said a deal was expected to be unveiled in the coming days, with another person saying the announcement could come as early as Wednesday. When asked about the reports on Tuesday, White House press secretary Jen Psaki said that she expected “the State Department and others will have more on this soon.” Psaki told reporters in the White House press briefing that the administration following Biden’s meeting with Merkel “made clear that this was a point of discussion, and that the president was planning to have a discussion about the fact that we have ongoing concerns about how the project threatens European energy security, undermines Ukraine security and the security of our eastern flank NATO allies and partners.” “He had directed his team to work with her team to see how we can address those concerns, even as the pipeline was 90 percent finished when this administration took office,” she added. The pipeline, which is now roughly 98 percent complete, had been opposed by U.S. officials under the two previous presidential administrations.

U.S., Germany strike a deal to allow completion of controversial Russian Nord Stream 2 pipeline – The United States and Germany reached an agreement to allow completion of the $11 billion Nord Stream 2 pipeline, a thorny, long-standing point of contention between the otherwise stalwart allies. The agreement reached between Washington and Berlin, which was announced Wednesday, aims to invest more than 200 million euros in energy security in Ukraine as well as sustainable energy across Europe. “Should Russia attempt to use energy as a weapon or commit further aggressive acts against Ukraine, Germany will take action at the national level and press for effective measures at the European level, including sanctions to limit Russian export capabilities to Europe in the energy sector,” a senior State Department official said on a call with reporters on Wednesday. The senior State Department official, who requested anonymity in order to discuss the agreement candidly, added the U.S. will also retain the prerogative of levying sanctions in case Russia uses energy as a tool of coercion. The official said the United States and Germany are “resolutely committed to the sovereignty and territorial integrity” of Ukraine and therefore, consulted closely with Kyiv on this matter. The unease surrounding the nearly complete Nord Stream 2 project, a sprawling undersea pipeline that will pump Russian gas directly into Germany, stems from Moscow’s history of using the energy sector to gain leverage over Russia’s neighbors, namely Ukraine. When completed, the undersea pipeline will span 764 miles from R ussia to Germany, making it one of the longest offshore gas pipelines in the world. Last month, the Kremlin said that only 62 miles of Nord Stream 2 were left to build.In May, the United States waived sanctions on the Swiss-based company Nord Stream 2 AG, which is running the pipeline project, and its German chief executive. The waiver gave Berlin and Washington three more months to reach an agreement on Nord Stream 2.. The agreement comes on the back of German Chancellor Angela Merkel’s visit to the White House, the first by a European leader since Biden took office and likely her last trip to Washington after nearly 16 years at the helm of Europe’s largest economy. Merkel, the first woman to lead Germany, has previously said she will step down after the September national elections. During a joint press conference at the White House, Merkel pledged to take a tough stance against Russia if Moscow misused the energy sector for political gains.

Estonian seaport hit by oil spill – In north-eastern Estonia, an oil spill has been found near the Baltic Sea Port of Sillamae, Estonian public broadcaster ERR reports. On Sunday, July 18, the Estonian Police and Border Guard Board’s Maritime Surveillance Centre was notified of 20 or more litres of oil spilled into the Baltic Sea. The responsible services accessed the site with a drone and estimated the spill to have an area of 500×200 metres. The pollution is thought to have leaked from a tanker in the Port of Sillamae. From Tallinn the anti-pollution ship General Kurvits with its crew has been sent to collect the oil and continues to work in the area on Monday, July 19. In a joint emergency operation, the Estonian Rescue Board, the Environment Board and the Estonian Police and Border Guard Board are working to clear the pollution from the Baltic Sea, ERR reports. Oil prices briefly reached $75 a barrel in 2018 but haven’t been consistently higher than that since 2014.According to the shale oil industry, these prices are well above what is needed to make a profit. But the industry isn’t drilling, and in areas like the Bakken shale play in North Dakota, production is actually falling.And yet, with prices above $70 a barrel, Bakken production is not increasing. The current rate of just above one million barrels a day is down 26 percent from the 2019 peak of almost 1.5 million barrels per day.As DeSmog has recently documented, the challenges facing this region’s oil producers mean that “Bakken’s best days are a thing of the past.”

Halliburton Wins 7-Year Oman Contract – A large international oil company (IOC) in Oman has awarded Halliburton Co. (NYSE: HAL) a seven-year contract to provide production chemicals and associated services, Halliburton reported Wednesday.Without identifying the customer, Halliburton noted in a written statement that it will supply the IOC with customized products and specialized services to support in-field chemical treatments. “This collaboration aims to improve operational efficiencies and reliability by applying tailored solutions and close alignment between parties.” Halliburton stated that its facilities in Oman will support the project. The service company added that it will manufacture key raw materials for the contract’s portfolio at its new Halliburton Saudi Chemical Reaction Plant. The facility, which opens late this year, will boast capabilities to manufacture various chemicals for stimulation, production, midstream, and downstream engineered treatment programs, the firm explained. Halliburton also pointed out that it expects to hire and develop local personnel to deliver the Oman contract’s scope of work.

Halliburton Readies for Years of Expansion — For the first time in seven years, Halliburton Co., the biggest provider of fracking services, is expanding in both U.S. and foreign markets as spending recovers in the global energy industry. “The economy feels more than 2% shut in, so the demand growth is there,” Chief Executive Officer Jeff Miller said Tuesday in an interview on Bloomberg TV. Drillers are “going to require a lot of services as we meet global demand for oil and gas.” Exploration customers are profitable at current oil prices in the $60-to-$70 range, he said. Their spending could increase by percentages in the double digits over the next couple of years as a result. The Houston-based contractor rose 5.8% Tuesday after reporting better-than-expected second-quarter earnings. The bullish outlook from the world’s No. 3 oil-services provider follows comments last month from its rival, Schlumberger, which said the global economic recovery will trigger an energy-industry “supercycle” that should lead to wider margins. That represents a dramatic rebound for the sector, which was laid low last year by the pandemic and forced to lay off tens of thousands of workers. The three biggest companies — Halliburton, Schlumberger and Baker Hughes Inc. — all report earnings this week and are expected to boost profits by at least 20% compared with the first three months of the year, according to an average of analysts’ estimates compiled by Bloomberg. Oil-services providers haven’t seen three straight quarters of share appreciation since the days of $100-a-barrel crude back in 2014. Now, as drilling accelerates around the world, the Philadelphia Oil Service Index is showing just that. Halliburton reported second-quarter earnings per share excluding one-time items of 26 cents, exceeding the 23-cent average of analysts’ estimates, while revenue of $3.7 billion trailed the $3.75 billion average. Halliburton reported its largest North American quarterly sales since the onset of the pandemic last year. Miller, who slashed more than $1 billion in costs during the downturn, reaffirmed an outlook for double-digit year-on-year growth in international orders during the second half of this year.

State company defends UAE pipeline deal, says oil spill risks ‘negligible’ | The Times of Israel -The state-owned Europe Asia Pipeline Company on Monday dismissed concerns of opponents of its deal to pipe Gulf oil through Israel on the way to European markets, telling the High Court that a petition filed by green groups to declare the agreement invalid had “no factual foundation” and that a risk survey found the threat of environmental damage to be “negligible.”In the petition, submitted in May, three green organizations charged that the Memorandum of Understanding signed by the EAPC with the United Arab Emirates in October should be made null and void given that it was neither discussed nor approved by the government, nor opened for consultation with experts and the public.The accord provides for the EAPC to transfer crude oil and oil-related products from its Red Sea terminal in Eilat to its terminal in Ashkelon on the southern Mediterranean coast via a land-based pipeline that connects the two.It is opposed by the former and current environmental protection ministers, the Israel Nature and Parks Authority, the local coastal authorities, a forum of some 20 environmental organizations, scores of scientists and Eilat residents.The opposition is due in large part to the EAPC’s shoddy environmental record and numerous past leaks – it was responsible, seven years ago, for the largest environmental disaster in Israel’s history when one of its pipelines ruptured, sending some 1.3 million gallons of crude oil into the Evrona Nature Reserve in southern IsraelThere are also real fears for Eilat’s coral reefs, with impacts not only to the city’s tourism and employment sectors but also globally.In its response to the petition, the EAPC said it had commissioned a risk survey, which had shown that “severe damage leading to full loss of the entire content of a tanker or external damage to a tanker and significant loss of content” would only occur once every 366,300 years.The likelihood of leakage in a pipe carrying fuel to a ship was determined to be so low it would only occur once every 1,111 years, the company went on. “An insignificant spill,” which was not quantified, was likely to take place once every 24 years. If such a spill happened, said the EAPC, the leak would be pooled and “no environmental damage or marine pollution would be caused at all.”

Environmental Groups in Israel Rise in Opposition to the Eilat – Ashkelon Oil Pipeline -Several ‘green’ groups in Israel have banded together to oppose further development of the Eilat – Ashkelon pipeline, transporting Gulf oil through Israel on its way to European markets.In their petition before the Court, submitted this May, three green organizations charged that the Memorandum of Understanding signed by the European Asian Pipeline Company (EAPC) with the United Arab Emirates in October should be made null and void given that it was neither discussed nor approved by the government, nor opened for consultation with experts and the public.The accord provides for the EAPC to transfer crude oil and oil-related products from its Red Sea terminal in Eilat to its terminal in Ashkelon on the southern Mediterranean coast via a land-based pipeline that connects the two.Opposition is widespread among environmental organizations, scientists and residents of Eilat itself, as they recall EAPC’s recent operational performance where one of its pipelines burst, sending 1.3 million gallons of crude into the Evrona Nature Reserve in southern Israel.The EAPC has set up an oil boom in Eilat, designed to catch any potential oil spill before it leaks more broadly into the sea. The company has also spent around $10 million on the purchase of vapor combustion units for its ports in Eilat and in Ashkelon to treat the vapors emitted from ships during loading, and is pouring an additional more-than-$10 million into upgrading the pipeline system in a project that will be completed this year. During the year, it will send a special robot through the pipes to pinpoint where local repairs might be needed.Every tanker that called at Eilat was insured for $100 million per event, it said. The company has maintained throughout the legal contest that any prospective oil spill, particularly in light of the preventive measures the company has been taken around Eilat, would be small and negligible.

Sleep-deprived workers at Shell’s Prelude FLNG make official complaint – Workers onboard Shell’s Prelude floating liquefied natural gas (FLNG) facility offshore Western Australia are complaining about occupational health and safety (OHS) breaches after being forced to work on only two to three hours of sleep.

New Report Reveals Top Retail Shipping Polluters – The coronavirus pandemic has left U.S. customers ever more reliant on retail goods shipped around the world to their doorsteps, but what does all of this fossil-fuel-fueled transportation cost the environment?In a new report released Tuesday, nonprofits Pacific Environment and Stand.earth have uncovered the 15 retail giants that contribute the most both to the climate crisis and air pollution by shipping goods to the U.S. from overseas.”These findings reveal new environmental and public health impacts of retail companies’ manufacturing and transport choices – and they are damning,” the report authors wrote.By shipping goods, these 15 companies emitted the same amount of greenhouse gases as 1.5 million U.S. homes in 2019 alone. The same year, they also released two-billion vehicles worth of sulfur oxide pollution, 65.7 million vehicles worth of particulate matter pollution and 27.4 million vehicles worth of nitrous oxide pollution. Walmart topped the list in terms of overall shipping emissions, followed by other familiar names Ashley, Target, Dole, Home Depot, Chiquita, Ikea, Amazon, Samsung, Nike, LG, Redbull, Family Dollar, Williams-Sonoma and Lowes. The report notes that high shipping emissions are built into the retail business model that has been in place for decades, in which manufacturing is outsourced to other countries and shipped to the U.S. using fossil fuels. As a result, the world’s shipping fleet has quadrupled since the 1980s. Shipping now releases one billion metric tons of greenhouse gas emissions, causes 6.4 million childhood asthma cases and contributes to 260,000 early deaths every year.All of this pollution has a major environmental justice component. “Working class communities disproportionately of color bear the brunt of the toxic pollution from ocean shipping,” report primary author and Climate Campaign Director for Pacific Environment Madeline Rose said in a Stand.earth press release.

Assam: Oil leak from ONGC pipeline spills into farmland in Sivasagar — Crude oil leaking from an underground pipeline of Oil and Natural Gas Corporation (ONGC) at Nazira in upper Assam’s Sivasagar district has spilled over vast swathes of farmland affecting scores of farmers in the area. The breach occured in a pipeline at Borpathar which is located between two adjacent villages – Mesagarh and Molagaon – in the Nazira sub-division. Technical teams from the ONGC Nazira office has rushed to the area to locate and plug the leak. Huge quanity of crude oil has already spilled over and it has a risk of catching fire. So far, 20 bighas of paddy fields have been affected by the oil spill. Nazira sub-divisional officer (SDO) Sabyasachi Kashyap said the leakage was first spotted by farmers on Thursday evening and was brought to the notice of the administration on Friday.”We were informed about the oil leakage at around 10.30am. Immediately, we contacted the ONGC office and asked them to cut off the supply of crude oil through that pipeline. But already a huge quantity of crude oil had gushed out and spilled into the surrounding paddy fields. The pipeline passes under a vast 1,000-bigha field and out of that around 20 bighas have been affected. A thick and blackish layer of oil has formed above the paddy fields. We have been told that the pipeline was quite old. The leak may have occured due to regular wear and tear but we are not ruling out the possibility of sabotage by oil thieves,” Kashyap on Friday said.

Shell’s Niger Delta oil-spill case to be heard in UK courts – Anglo-Dutch supermajor Shell has run out of time to appeal a UK court ruling earlier this year which found that a five-year-old case on environmental pollution in the Niger Delta should be heard in the UK and not Nigeria. In February, Shell’s lawyers failed to convince the High Court in London over the jurisdictional argument that the trial would be better decided in Nigeria, although Shell was given leave to appeal but declined to so. Leigh Day, the London-based law firm representing the Ogale and Bille communities in the Niger Delta, said last week: “Unprecedented oil pollution claims against Royal Dutch Shell and its Nigerian subsidiary, Shell Petroleum Development Company (SPDC), will finally be heard in the High Court in London after the oil giant dropped its attempts to avoid English jurisdiction.” By including the subsidiary in the UK proceedings, more documents about Shell’s work in Nigeria are likely to be made public, the law firm said. The High Court’s February 2021 decision was grounded on the plaintiffs establishing an arguable case that the parent company should be treated as the anchor defendant, enabling the case to proceed to a judgment on civil law in the UK. The claimants have yet to demonstrate that Shell should be held responsible for events that took place in Nigeria, on the merits of the case, while they still need to prove that the supermajor owes a duty of care and that, critically, this was breached, according to a source with knowledge of the legal proceedings.

OPEC and allies target full end to oil production cuts by September 2022, increase supply as prices climb – – The Organization of Petroleum Exporting Countries (OPEC) and its non-OPEC allies reached a deal Sunday to phase out 5.8 million barrels per day of oil production cuts by September 2022 as prices of the commodity hit their highest levels in more than two years. Coordinated increases in oil supply from the group, known as OPEC+, will begin in August, OPEC announced in a statement. Overall production will increase by 400,000 barrels per day on a monthly basis from that point onward. The International Energy Agency estimates a 1.5 million barrel per day shortfall for the second half of this year, indicating a tight market despite the gradual OPEC supply boost. OPEC+ agreed in the spring of 2020 to cumulatively cut a historic nearly 10 million barrels per day of crude production as it faced a pandemic-induced crash in oil prices. The alliance gradually whittled down the cuts to about 5.8 million barrels per day. The 19th OPEC and non-OPEC ministerial meeting noted that worldwide oil demand showed “clear signs of improvement and OECD stocks falling, as the economic recovery continued in most parts of the world” thanks to accelerating vaccination programs. International benchmark Brent crude is up 43% year-to-date and up more than 60% from this time last year, with many forecasters expecting to see oil trading at $80 a barrel in the second half of 2021. Brent closed at $73.59 a barrel at the end of the trading day on Friday. The agreement followed a temporary but unprecedented gridlock that began in early July and saw the United Arab Emirates reject a coordinated oil production plan for the group spearheaded by its kingpin, Saudi Arabia. While the 13-member organization has seen disagreements before, this was the first public rift between the UAE and Saudi Arabia, which are close allies. Abu Dhabi had demanded that its own “baseline” for crude production – the maximum volume it’s recognized by OPEC as being able to produce – be raised because this figure then determines the size of production cuts and quotas it must follow as per the group’s output agreements. Members cut the same percentage from their baseline, so having a higher baseline would allow the UAE a greater production quota. Sunday’s agreement revealed baseline increases for four of OPEC’s member states and one non-OPEC state beginning in May of 2022: the UAE, Saudi Arabia, Iraq, Kuwait, and Russia, the last of which is not an OPEC member but a leader of OPEC+. The UAE’s baseline for oil production will be raised from 3.16 million barrels per day to 3.5 million barrels per day, though short of the 3.8 million it reportedly initially requested. Saudi Arabia’s baseline will be increased from 11 million to 11.5 million barrels per day.

Riyadh and Moscow claim biggest wins from OPEC+ deal – — Saudi Arabia and Russia clinched a deal for an OPEC+ production increase by partly submitting to the United Arab Emirates’ demands for a more generous quota. But the compromise still leaves Riyadh and Moscow on top. Of all the adjustments agreed on Sunday to the cartel’s baselines — the level from which each member’s cuts are measured — the two largest OPEC+ members awarded themselves the biggest increases. While the UAE’s baseline will rise by about 330,000 barrels a day to 3.5 million in May 2022 — a 10% increase — Moscow and Riyadh’s will jump by 500,000 barrels a day to 11.5 million That may seem academic. Saudi Arabia has pumped that much only on the rarest of occasions, and the International Energy Agency sees Russia’s true capacity at 10.4 million barrels a day. Yet the generous headroom offered by these large numbers means the two countries will get back to pre-Covid output levels more quickly than fellow members, and keep going even higher if they are able. As early as November, Saudi Arabia is on track to restore production to March 2020 levels — before the worst effects of the Covid-19 pandemic and before the price war that briefly pushed the kingdom’s output to a record. Russia will pass that milestone in April 2022, assuming the 400,000 barrel-a-day monthly production increases are shared out proportionally between the Organization of Petroleum Exporting Countries and its allies. By September 2022, when OPEC+ expects to have revived all of the oil production halted because of the pandemic, the UAE’s quota limit may still be pumping less than it did before the Covid-19 crisis. 2021 Bloomberg L.P.

U.S. oil drops 7% to below $70 as OPEC prepares to boost production, Covid concerns weigh – West Texas Intermediate crude futures fell below the key $70 level Monday for the first time in more than a month as OPEC and its allies agreed to raise output, and as the delta Covid variant threatens global demand. U.S. oil dropped more than 7% to hit a session low of $66.35 for its biggest one-day decline since September 2020. The contract is now 13% below its recent high of $76.98 from July 6, which was the highest level in more than six years. International benchmark Brent crude slipped 6.7% to trade at $68.71 per barrel. The group of 23 nations, known as OPEC+, agreed Sunday to increase production by 400,000 barrels each month beginning in August. The output hike will continue through September 2022, at which point the entirety of the nearly 6 million barrels per day the group is still withholding will be back on the market. The announcement came after the group’s initial meeting July 1 fell apart amid a disagreement between Saudi Arabia and the United Arab Emirates over the latter’s baseline production quota. “We view [Sunday’s] deal as supportive to our constructive oil price view with supply increasingly becoming the source of the bullish impulse and evidence of non-OPEC supply shortfalls likely in the coming months,” Goldman Sachs said in a note to clients. The firm pointed to discipline among U.S. producers as providing a floor for oil prices, although it noted that the delta variant could lead to price gyrations in the coming weeks. OPEC+’s July meeting ending without an agreement sent the oil market into turmoil because it opened the door for the group to potentially disband, with each nation pursuing an independent production policy. “This was a renewal of OPEC+ vows,” RBC’s Helima Croft said Monday on CNBC’s “Worldwide Exchange.” “We think the market can absolutely absorb the additional 400,000 barrels per month…this is a constructive agreement.” Despite Monday’s downturn some Wall Street firms believe a tight market will continue to support prices. Credit Suisse raised its forecasts Sunday night and now sees Brent averaging $70 per barrel in 2021, up from a prior estimate of $66.50. The firm raised its WTI forecast to $67 for the year, up from $62. Citi, meanwhile, sees Brent and WTI climbing to $85 or higher this year. “The summer season for petroleum markets should be stronger than usual this year on pent-up leisure demand,” the firm said in a note to clients. Even with Monday’s drop, WTI is still up 38% for the year amid a recovery in demand as worldwide economies reopened, and as producers kept supply in check. In April 2020 OPEC+ implemented historic cuts of nearly 10 million barrels per day in an effort to support prices as demand for petroleum products plunged. WTI briefly traded in negative territory for the first time on record.

Just a speed bump? Oil has taken a dive, but Goldman is still bullish – A panic-induced sell-off in the oil market triggered by virus concerns has thrown the commodity’s upward march into question – but energy experts at Goldman Sachs don’t appear to be rattled. Fears over the surging delta coronavirus variant and a fresh supply boost agreement from OPEC+ sent oil prices tumbling down more than 7% as the trading week opened Monday. The drop was the steepest since March, a rude awakening for oil bulls who’d been enjoying the commodities’ highest prices in 21/2 years. International benchmark Brent crude was trading at $68.42 a barrel at 2:15 p.m. in London on Tuesday, down just over 7% from its Friday close of $73.59 a barrel. Oil analysts were quick to stress the uncertain road ahead for demand as new waves of Covid-19 infections ― many among communities that have high vaccination rates ― threaten the recent months of economic recovery. “The market is clearly unsettled about the demand outlook. And rightly so. The rise in delta variant cases is raising questions about the sustainability of demand,” S But analysts at Goldman Sachs led by Senior Commodity Strategist Damien Courvalin see the current setback as merely a speedbump, with little concrete reason for oil bulls to be worried. Oil balances globally are tighter than they were before, despite the agreement between OPEC and its allies over the weekend to cumulatively increase crude production by 400,000 barrels a day on a monthly basis beginning in August. The International Energy Agency estimated a 1.5 million barrel per day shortfall for the second half of this year compared to its demand predictions in the absence of an OPEC supply deal. And Goldman predicts the impact from delta to be in the neighborhood of “a potential 1 mb/d (million barrels per day) hit for only a couple months, and even less if vaccines prove effective at lowering hospitalizations in DMs (developing markets), the origin of most summer demand improvements,” as per its latest report. Goldman’s call is in line with its previously bullish stance, which saw it forecasting Brent hitting $80 per barrel in the second half of this year.

Oil futures bounced back on Tuesday – Perhaps a little bit overdone to the downside, oil futures bounced back on Tuesday, erasing some of the panic selling seen on Monday after OPEC+ agreed to boost supplies, and as concern over the surging delta coronavirus variant increased. Despite today’s modest bounce, oil investors remain cautious about buying the commodity given the demand picture has quickly turned cold as inflation hits economic growth and the coronavirus Delta variant becomes a bigger concern in the US and globally. The expiring August WTI contract added $1.00, or 1.5%, to settle at $67.42 a barrel, while the September contract tacked on 84 cents, or 1.3%, to settle at $67.20 a barrel. Brent for September delivery settled at $69.35 a barrel, up .73 cents, or 1.1%. August RBOB added 1% to $2.13 a gallon and August heating oil added 1.4% to $2.01 a gallon. Oil balances globally are tighter than they were before despite the agreement between OPEC and its allies over the weekend to cumulatively increase crude production by 400,000 barrels per day on a monthly basis beginning in August. This has worked to cool concerns tied to the spread of the delta variant of the coronavirus that causes COVID-19. The near future of this market will be closely tied to the spread of the virus, and unless it spreads like wildfire, prices should be able to gain momentum to the upside. At this point, this market may be lacking a support base and therefore, any rally may be short lived. Goldman Sachs expects Brent prices in the third quarter to average $75/barrel, down $5 from a previous estimate and $80/barrel in the fourth quarter, up from a previous forecast of $75/barrel. It forecast an oil deficit of 1.5 million bpd in the third quarter compared with a previous estimate of 1.9 million bpd and a deficit of 1.7 million bpd in the fourth quarter. The bank said oil prices may continue to gyrate in the coming weeks given the Delta variant uncertainties and the slow velocity of supply developments. It said the bottom-up estimate of the impact that a Delta wave could have on global oil demand points to a potential 1 million bpd hit for only a couple of months. It also stated that non-OPEC+ production outside of North America will surprise consensus to the downside in the coming months. Goldman Sachs also said that progress on a U.S.-Iran nuclear deal has stalled leading to increased risks that the potential increase in Iranian exports is later than its October base-case. RBC analysts said the timing of the OPEC meeting is a coincidence rather than a cause as prices fell 8% amid concerns about the COVID-19 delta variant.

WTI Tumbles After Surprise Crude Build –Oil prices rebounded modestly today but were far from able to reverse yesterday’s bloodbathery as delta variant (demand) scares combined with OPEC+’s production deal (supply) dominated any equity-exuberance spillover affect with WTI unable to get back above $68.Behind the burst of volatility is a realization that vaccines won’t prevent episodic flare-ups in infection and the introduction of measures to control new variants, according to Marwan Younes, chief investment officer at Massar Capital Management, a commodities-focused hedge fund.And the next driver of that vol will be tonight’s inventory dataAPI

• Crude +806k (-5.4mm exp)
• Cushing -3.57mm
• Gasoline +3.31mm
• Distillates

Analysts expected a 9th straight weekly crude draw but were disappointed when API reported a 806k barrel build. Gasoline stocks also saw a decent build. WTI traded around $67.50 ahead of the print, and dived lower to a $66 handle after the surprise crude build…

WTI Shrugs Off Unexpectedly Large Crude Inventory Build –After the initial tumble last night – after API reported an unexpected build in crude inventories (and big build in gasoline stocks) – oil prices have surged higher overnight and across the US equity market open as all those Monday fears appear to be evaporating once again.“Risk-on is the main driver,” “I still believe oil fundamentals themselves are supportive, but the last 72 hours were primarily driven by shifts in investors’ attitude to risk.”Maybe this morning’s official data will reignote some sense of fundamentals in the energy complex… however fleeting.DOE

• Crude +2.11mm (-3.7mm exp)
• Cushing -1.347mm
• Gasoline -121k (-1.0mm exp)
• Distillates -1.349mm

Analysts expected a 9th straight weekly draw in crude stocks, even after API reported an unexpected build, but were wrong when the official data showed an even bigger 2.11mm barrel increase. Gasoline stocks dropped very marginally, but not the build we saw in API data…Some have suggested the lack of a continued drop in gasoline demand is responsible for the market’s refusal to drop on the crude build but the rise in demand is de minimus …

U.S. oil prices up over 4% as inventories at Cushing decline to 18 month low – Oil futures posted a more than 4% gain on Wednesday, as a decline in crude stocks at the Cushing, Okla. storage hub to the lowest level since early 2020 provided support, outweighing any pressure from the first weekly U.S. crude inventory rise since mid-May.The Energy Information Administration reported on Wednesday that U.S. crude inventories rose by 2.1 million barrels for the week ended July 16, marking the first weekly rise in nine weeks. At 439.7 million barrels, crude supplies are about 7% below the five-year average for this time of year, the EIA said.On average, analysts polled by S&P Global Platts forecast a decline of 6.7 million barrels for crude stocks, while the American Petroleum Institute on Tuesday reported an 806,000 barrel increase.The EIA data also showed crude stocks at the Cushing, Okla., storage hub declined by 1.4 million barrels for the week to 36.7 million barrels. Stocks at the storage hub haven’t been this low since January 2020, EIA data show. .”We did see a big surprise surge of imports and that kept the market somewhat at bay but if you look at the draw in Cushing, Oklahoma, we’re getting to a dangerously low level,” “We’re almost out of oil at the Cushing delivery point if we continue to draw at this rate.”The market has been “draining” crude stocks in storage at Cushing at an “incredible pace – it’s unbelievable,” said Flynn. Stocks may fall “below the minimum operating levels for that storage point pretty soon.”West Texas Intermediate crude for September delivery rose $3.10, or 4.6%, to settle at $70.30 a barrel on the New York Mercantile Exchange, extending a 1.3% rise from Tuesday.September Brent crude, the global benchmark, gained $2.88, or nearly 4.2%, to settle at $72.23 a barrel on ICE Futures Europe.The EIA also reported that gasoline supplies edged down by 100,000 barrels, while distillate stockpiles fell by 1.3 million barrels for the week. The S&P Global Platts survey forecast a supply decrease of 1.1 million barrels for gasoline and 600,000 barrels for distillates.

Oil gains as demand recovery seen tightening supply -Oil prices inched up on Thursday, extending gains made in previous sessions on expectations of tighter supplies through 2021 as economies recover from the coronavirus crisis. Brent crude advanced $1.56, or 2.2%, to settle at $73.79 per barrel, after rising 4.2% in the previous session. U.S. West Texas Intermediate (WTI) crude added $1.61, or 2.3%, to settle at $71.91 per barrel, after gaining 4.6% on Wednesday. “Some soft spots have emerged in the oil demand recovery, but this is unlikely to change the outlook fundamentally,” Morgan Stanley said in a note. Members of the Organization of the Petroleum Exporting Countries and other producers including Russia, collectively known as OPEC+, agreed this week on a deal to boost oil supply by 400,000 barrels per day from August to December to cool prices and meet growing demand. But as demand was still set to outstrip supply in the second half of the year, Morgan Stanley forecast that global benchmark Brent will trade in the mid to high-$70s per barrel for the remainder of 2021. “In the end, the global GDP (gross domestic product) recovery will likely remain on track, inventory data continues to be encouraging, our balances show tightness in H2 and we expect OPEC to remain cohesive,” it said. Crude inventories in the United States, the world’s top oil consumer, rose unexpectedly by 2.1 million barrels last week to 439.7 million barrels, up for the first time since May, U.S. Energy Information Administration data showed. Inventories at the Cushing, Oklahoma crude storage hub and delivery point for WTI, however, has plunged for six continuous weeks, and hit their lowest since January 2020 last week. “Supplies fell further by 1.3 million barrels to lowest level since early last year, theoretically offering support to the WTI curve,” said Jim Ritterbusch of Ritterbusch and Associates. Barclays analysts also expected a faster-than-expected draw in global oil inventories to pre-pandemic levels, prompting the bank to raise its 2021 oil price forecast by $3 to $5 to average $69 a barrel. “Notwithstanding the tail risks, supply-demand dynamics point to a slow grind higher in prices over the next few months,” Barclays said in a report.

Oil prices move up to end the volatile week with a modest gain – -Oil futures moved up on Friday, with gains for a fourth-straight session allowing prices to rebound from the lowest settlements since May after a sharp drop on Monday.”Traders were uncertain as to whether the OPEC+ agreement was bullish, representing continued cohesion, or bearish, signaling more oil on the market,” Michael Lynch, president at Strategic Energy & Economic Research, told MarketWatch. The Organization of the Petroleum Exporting Countries and their allies, together known as OPEC+, decided on Sunday to gradually increase production levels each month starting in August.Meanwhile, the spread of coronavirus delta variant is “seemingly bearish, but the demand data, at least for the U.S., remains bullish,” said Lynch. That “gives you a price on the seesaw.”West Texas Intermediate crude for September delivery rose 16 cents, or 0.2%, to settle at $72.07 a barrel on the New York Mercantile Exchange. That led the U.S. benchmark up by 0.7% for the week, based on the front-month contract, according to Dow Jones Market Data.September Brent crude , the global benchmark, added 31 cents, or 0.4%, at $74.10 a barrel on ICE Futures Europe, leaving it with a 0.7% climb for the week.Oil prices had plunged in the early part of the week on “concerns that rising global delta variant infection rates could undermine the economic rebound,” or slow it down, said Michael Hewson, chief market analyst at CMC Markets UK.These worries haven’t gone away, but even with the new OPEC+ agreement, there are still “residual concerns” that the market “could see supply struggle to keep up with demand, hence the recovery in prices heading into the weekend,” he said in a market update.Crude plunged Monday, with WTI dropping more than 7%, in a broad selloff (link) that was attributed in part to worries about the spread of the delta variant of the coronavirus and it’s impact on energy demand. Crude and other assets, including equities, subsequently bounced back as investors proved eager to buy the dip.The market’s rebound “confirms our hypothesis that the selloff was ultimately sparked by external factors,” said Eugen Weinberg, commodity analyst at Commerzbank, in a note.Weinberg said it also backs up the expectation that the OPEC+ agreement to add 400,000 barrels a day each month to output as it unwinds production curbs will prevent a repeat of last year’s breakdown in the cartel.”The supply situation remains tight, while the agreement underlines the unity of OPEC+, and the response of non-OPEC+ producers so far to the significantly higher prices leaves much to be desired,” he wrote. “This suggests that OPEC+ will maintain its ‘pricing power,’ which will lead to high prices.”Data from the Energy Information Administration released Wednesday revealed (link) a weekly increase in U.S. crude supplies, following eight-straight weeks of declines, but stocks at the nation’s storage hub at Cushing, Okla. fell to their lowest since January 2020.Baker Hughes (BKR), meanwhile, reported on Friday that the number of active U.S. rigs drilling for oil (link) climbed for a fourth week in a row, implying an production increase ahead.

Oil Prices Edge Upward for the Week –– Oil squeezed out its first weekly gain in three on signs that global demand is holding up despite concerns that the renewed spread of the virus could stall the recovery. Futures in New York rose 0.2% this week, completely recouping a selloff on Monday that was stoked by the rapidly spreading delta variant. Fuel demand and road traffic from the U.S. to Asia and Europe remains resilient, underscoring expectations that the recovery hasn’t been derailed and global inventories will continue to shrink. “The fact of the matter is that we’re not going to see, at least in the U.S. and in Europe, a massive return to strict lockdown,” said Ed Moya, senior market analyst at Oanda Corp. Crude has rallied nearly 50% this year as ongoing vaccination campaigns have propelled reopenings. Data this week showed gasoline demand is essentially back to normal in many of the biggest consuming countries. Meanwhile, OPEC+ and U.S. shale producers have shown discipline in returning shuttered supplies to the market. The 7.5% price slump on Monday came just a day after the Organization of Petroleum Exporting Countries and its allies led by Saudi Arabia and Russia finalized an agreement to gradually restore production they halted during the pandemic. OPEC+’s modest increase eased fears around concerns of oversupply. “Everybody thinks they are going to flood the market, and then they take a step back and realize that, hey, they’re adding because the supply is being burned off,” said Phil Streible, chief market strategist at Blue Line Futures LLC in Chicago. The recent dip in prices is a buying opportunity and Brent prices should hit $100 per barrel next year, said a group of analysts at Bank of America Corp. in a recent note to clients. West Texas Intermediate crude for September delivery added 16 cents to settle at $72.07 a barrel in New York. Brent for the same month rose 31 cents to end session at $74.10 a barrel. This week, Schlumberger and Baker Hughes Inc. suggested the rebound in the U.S. shale patch will likely slow this year as companies keep a lid on spending. Despite a strong recovery in crude prices in 2021, the shale industry is largely resisting adding new supply.

Iran opens new oil terminal in bid to bypass crucial Strait of Hormuz for exports– Iran on Thursday opened its first oil terminal in the Gulf of Oman, a move aimed at making Iranian President Hassan Rouhani’s regime less dependent on the Strait of Hormuz, often a source of international tension. The location of the new oil terminal – a project that began in 2019 and will cost some $2 billion – will also reduce transportation and insurance expenses for oil tankers. “This is a strategic move and an important step for Iran. It will secure the continuation of our oil exports,” Rouhani said in a televised speech, according to state-run media. The Strait of Hormuz, a crucial channel located between the Persian Gulf and the Gulf of Oman, is used by oil producers to transport crude from the Middle East. Approximately 20% of the world’s crude oil passes through the waterway. The new terminal gives Iran more space to operate. The Strait of Hormuz is a narrow strip of water between Iran and the United Arab Emirates that connects the Persian Gulf to more open waters. The new terminal is to the east on the wider Gulf of Oman, which opens into the vast Arabian Sea. Iran has previously threatened to close the strait in response to Trump administration’s decision to reimpose sanctions. “This new crude export terminal shows the failure of Washington’s sanctions on Iran,” Rouhani said, adding that Iran plans to export 1 million barrels per day of oil. Washington placed sanctions on Tehran after former then-President Donald Trump withdrew from the Joint Comprehensive Plan of Action, or JCPOA, nuclear agreement in 2018. The JCPOA, brokered by the Obama administration in 2015, lifted sanctions on Iran that had hampered its economy and cut its oil exports roughly in half. In exchange for billions of dollars in sanctions relief, Iran agreed to dismantle some of its nuclear programs and open its facilities to more extensive international inspections.

Pentagon carries out first air strike in Somalia under Biden – The U.S. military on Tuesday conducted an air strike against an al-Qaeda-affiliated group in Somalia, the first such strike in the country since President Biden took office, multiple outlets have reported.The strike on the al-Shabaab militant group, first reported by Agence France-Presse, took place “in the vicinity of Galkayo, Somalia,” about 430 miles northeast of Mogadishu, Pentagon spokeswoman Cindi King said in a statement to the outlet.U.S. Africa Command (AFRICOM) carried out the single air strike in coordination with the Somali government.”A battle-damage assessment is still pending due to the ongoing engagement between al-Shabaab and Somali forces, however, the command’s initial assessment is that no civilians were injured or killed as a result of this strike,” King added.The Somali government also confirmed the strike in a statement, noting that it occurred at 11:05 a.m. local time in the Galmudug State of the country “to protect the brave commandos of the Somali National Army.”The government did not say who carried out the action.The Pentagon did not respond to a request for comment from The Hill.”The last U.S. air strike in Somalia took place on Jan. 19, one day before President Biden entered the White HouseFollowing Biden’s inauguration, he initiated a review of the policy on drone strikes and commando raids outside of conventional war zones and imposed temporary limits on such strikes.The move came after former President Donald Trump had loosened the rules for drone strikes when he was in office.Pentagon s pokesman John Kirby then told reporters in March that any planned strikes outside Afghanistan, Syria and Iraq had to be submitted to the White House “to ensure that the president has full visibility on proposed significant actions.”

US launches airstrikes against Taliban as Afghan forces crumble – US warplanes carried out at least four sets of airstrikes in Afghanistan this week in support of Afghan government troops who have ceded ever-growing swathes of the country to the Taliban Islamist insurgency. The Pentagon acknowledged the bombing raids, which took place on Wednesday and Thursday, but refused to provide any details as to the aircraft or munitions involved. The targets struck were in southern Kandahar province, the historic stronghold of the Taliban, and in Kunduz in the north. Among the targets were materiel captured by the Taliban from government forces, including at least one piece of artillery and armored vehicles, Pentagon officials said. In both Kunduz and Kandahar, the security forces of Afghanistan’s puppet government are facing increasing pressure from Taliban on their respective provincial capitals. In a Pentagon press conference on Wednesday, the chairman of the Joint Chiefs of Staff, Gen. Mark Milley, provided a confirmation of the breadth and speed of the Taliban’s advances, acknowledging that the insurgency had seized about half of the country’s 419 district centers. Just last month, he told Congress that the Taliban held only 81 centers. This official count is no doubt a significant underestimate. And, in many cases, district centers still held by the government forces are islands surrounded by Taliban-controlled countryside. “Strategic momentum appears to be sort of with the Taliban,” Milley said, in what constitutes one of the understatements of the year. Insisting that “a negative outcome, a Taliban automatic military takeover, is not a forgone conclusion,” Milley added, “We will continue to monitor the situation closely and make adjustments as necessary.” Spelling out what such “adjustments” would entail, the Joint Chiefs chairman stated that a “package of long-range bombers, additional fighter-bombers and troop formations are postured to quickly respond if necessary and directed.”

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