Not Getting Any Better For Saudis -- October 17, 2016

Food. This was a surprise. Maybe I just haven't read the print edition of The WSJ in a long time, or there really is something new: a "meaty" journal report, fourth section, on Monday. Hmmm.

In the fourth section today, The WSJ  has a number of incredibly good articles on "Food." The one that caught my attention was the interview with Perdue Farms CEO. I don't know if you are hearing the ads in your area, but the issue of antibiotics in chicken seems to have become the biggest story in Texas, after football and Houston.

First, a link to a WSJ article published about ten days ago regard the Perdue Farms story: http://www.wsj.com/articles/perdue-farms-eliminated-all-antibiotics-from-its-chicken-supply-1475775456.

And then the interview: http://www.wsj.com/articles/jim-perdue-talks-about-change-in-chickensand-the-market-1476669781.

Absolutely fascinating.

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By The Way

I am preparing myself for a huge Hillary Clinton win in November.

All one has to do is read wikileaks and the WSJ to know that she is the right Machiavellian princess for the US at this point in time.

Source for graph below: http://graphics.latimes.com/usc-presidential-poll-dashboard/.

For investors, a Hillary win will be a short-term bonanza. Whether that will last past two years is hard to say. I think a Hillary win will widen the gap between the investor class and the non-investor class, which, of course, is good for America.

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Back to the Bakken

Active rigs:

	10/17/2016	10/17/2015	10/17/2014	10/17/2013	10/17/2012
Active Rigs	32	67	190	185	186

RBN Energy: natural gas exports, flows across Texas and intrastate pipelines. The series continues.

Handling the flood of Marcellus/Utica gas headed to Gulf Coast LNG export terminals and to Mexico will require pipeline reversals and expansions, new pipe and a coordination of interstate and intrastate pipeline capacity. That’s a tall order in itself, but there’s more: Texas’s intrastate pipelines operate under an entirely different set of regulations than their interstate counterparts––different rules on pipeline tariff rates, pipeline rules, permitting, eminent domain, you name it. In today’s blog we continue our look at developmental history of the Lone Star State’s two gas pipeline systems––one regulated in Washington, DC and the other in Austin––and how it may affect the transformation of the overall natural gas transportation grid.

Certainly the most significant region for both intrastate and interstate pipelines is the Gulf Coast Industrial Corridor, the largest single natural gas industrial market in the U.S.

Most interstate pipelines traversing the region were originally built in the 1940s, ’50 and ‘60s to move Texas Gulf Coast natural gas production on long-line transmission systems running from Texas through other producing states (Louisiana, Oklahoma) and finally delivering gas to weather-sensitive markets in the Northeast and Midwest.

In contrast, most intrastate systems were built in the 1960s and ‘70s to deliver Texas production to Gulf Coast industrial consumers during the period of federal price controls described above. Gas supplies for the intrastate pipes moved in from the West (Permian Basin), south from East Texas, and into the system from Texas producing regions along the Gulf Coast. Following market decontrol in the 1980s, intrastate and interstate pipelines expanded commerce between the systems, allowing supplies gathered on the interstates to move to intrastates, and vice versa. Small volumes of production, mostly sourced in South Texas, moved on both intrastate and interstate pipelines to Mexico.

Growing US industrial natural gas demand. Link at Forbes.

Saudi bank stress builds as kingdom's cash injection falls short. Link at Bloomberg. I track the Salman Plan at the sidebar at the right.

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Natural Gas

Growing US industrial natural gas demand. Data points at Forbes. The article seems to be poorly written, skipping around a lot, but there are some interesting data points, and even some notes on winter temperature projections this year.

• three rapidly growing baseload natural gas demand markets
• domestic power generatin
• LNG exports globally
• pipeline exports to Mexico and eastern Canada
• the industrial sector is second after power generation
• accounts for 28% of US gas demand, compared to 40% two decades ago
• some feel US industrial gas demand has peaked; author not so sure
• global demand for plastics and other chemicals will increase by more than 4% this year, double the demand growth rate for energy
• EIA has industrial and electric power sectors at 49% and 34% of growth in natural gas and renewables, respectively
• the market could be short natural gas this winter if projections are correct and it's 12% colder than last year; could push total US gas demand to a record 92.3 Bcf/d

Much more at the link.

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Not Getting Any Better For Saudis

Data points at Bloomberg:

• central bank pledge of $5.3 billion failed to ease liquidity crunch
• the interest rate banks charge one another for loans rose by the most since August over the weekend for the KSA; extending a trend that's slowing earnings and corporate borrowing for Saudi Arabia
• the rate for Saudi Arabia grew much faster than Gulf peers
• rates for KSA would only go down if there's a much larger cash injection; $5 billion won't cut it
• loans-to-deposit ratio among Saudi banks, a key measure of liquidity, rose to 91% in August, the worst since 2008

Much more at the link.

The linked Bloomberg article, and the post at this link, go hand-in-hand.

By the way, with regard to Saudi Arabia's $1 trillion mistake they made in 2014, they should have quietly been building refining plants and natural gas processing plants around the world. They had the cash and the product to feed these plants. Saudi has one of the biggest, if not the biggest refinery in the US and that guarantees them around a million bopd of their own product to refine. I suggested that to another reader who suggested that Saudi should have started that five years ago -- building refineries for their crude oil. I can't disagree. But had they made the choice even two years ago, instead of "talking" the price down to $26/bbl, they would be in a much better spot today. As it is, they are now doing that, but they have a lot less cash with which to do, much stronger headwinds, and many more competitors.

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Autumn Photos

Meanwhile, back at the ranch, Ms Veeder continues to post some of the nicest home photos on the internet. 

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The Market

Another dismal day for the market, Dow 30 down about 60 points in mid-afternoon trading. NYSE:

• new highs: 45 -- RSP Permian;
  new lows: 32