Thursday, February 18, 2016

My Thoughts Exactly: The Build Was Unexpected, And Other Thoughts; Say What You Want: I Dare You To Find Any Data Points That Reflect US Economy Better Than These Two Data Points -- February 18, 2016

The "teaser": crude oil / petroleum products / gasoline much greater than expected. Wow. My sentiments exactly. Platts is reporting:
  • Imports surged 795,000 barrels per day (b/d), driving stocks higher
  • Crude runs rose 338,000 b/d to 15.848 million b/d
  • Gasoline, distillate stocks each showed surprise build
  U.S. commercial crude oil stocks rose 2.147 million barrels in the week that ended Friday, Energy Information Administration data showed Thursday.

Stocks have risen nearly 22 million barrels over the last six reporting periods, pushing inventories into record-high territory. At 504.105 million barrels, crude stocks sit 36.3% above the five-year average for this time of year.

Analysts surveyed Tuesday by Platts expected a slightly larger build of 3.3 million barrels last week.

Crude runs increased 338,000 b/d to 15.848 million b/d, helping offset the size of last week's build. It was the first time the amount of crude processed by refiners rose on a week-on-week basis since late December, raising the possibility that facilities have returned from performing seasonal maintenance.

Refinery utilization rose 2.2 percentage points to 88.3% of operable capacity. Analysts expected a decrease of 0.5 percentage point.

On the U.S. Gulf Coast, home to more than half of U.S. operable crude distillation capacity, refinery utilization increased 3.1 percentage points to 87.8%.
This is quite incredible. There had been expectations that the global crude oil glut could be "burned off" within this calendar year and things would turn a bit "better" by the end of the year. This has to be particularly bad news for everyone but perhaps Saudi Arabia has to be most concerned.

Venezuela would be concerned but that country appears to be as bad off as Puerto Rico, if not worse. And, Puerto Rico has no oil.

Bad, bad news. Very, very surprising

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Some Good News, However

I still think this is the most important data point for tracking health of the US economy:


The second most important data point is diesel fuel demand, and that is simply very, very concerning. Janet Yellen might understand this, but not only does President Obama not understand this, he is not interested, he is not briefed on it, and he has more important things to do than listen to diesel fuel demand.



Perhaps there won't be a recession in the US within the next year, but those folks who work in the world of diesel fuel are already in a recession, if not a depression. The third most important data point to reflect the health of the US economy might be the sales of cheap beer.

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Zika and Global Warming

I am surprised that we haven't seen any reports that Zika may be related to global warming. My hunch: just a matter of time. 

[Update, February 19, 2016, 7:01 a.m. Central Time: that didn't take long. In the New York Times:
The global public health emergency involving deformed babies emerged in 2015, the hottest year in the historical record, with an outbreak in Brazil of a disease transmitted by heat-loving mosquitoes. Can that be a coincidence?
Scientists say it will take them years to figure that out, and pointed to other factors that may have played a larger role in starting the crisis. But these same experts added that the Zika epidemic, as well as the related spread of a disease called dengue that is sickening as many as 100 million people a year and killing thousands, should be interpreted as warnings.
Over the coming decades, global warming is likely to increase the range and speed the life cycle of the particular mosquitoes carrying these viruses, encouraging their spread deeper into temperate countries like the United States.]
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Yellow Legal Pads

Right Side
  • Presidents don't do funerals; vice presidents do funerals
  • I won't be the center of attention; a dead judge will be front and center
  • This guy did more to scuttle my vision for America than any other single individual
  • He's a Republican; I'm not
  • He's a Catholic; I'm not
  • He's white; I'm not
  • The mainstream media won't care or notice
  • Only Drudge nuts will notice
  • The security detail will be less onerous / less expensive if I'm not there (yes, that's what the White House actually said)
  • Golfing with donors has already been scheduled
  • Saturday Democratic caucus in Nevada; I'll be needed for telephoning voters
  • My speech writers refuse to write an eulogy for this nut-job
  • Michelle told me not to go
  • I would have to sit next to Joe
  • I might have to set next to Roberts
  • Farrakhan would be furious 
  • Reagan was a great actor; I'm not; I couldn't fake a sad face for three hours
  • I can watch it on CNN and have better hors d'oeuvres anyway
  • I don't want to shake hands with Roberts
  • What if Ginsburg dies during the service; then there would be two folks getting more attention than I would be getting
  • I wasn't invited in the first place; the family doesn't want me there
Left Side
  • It would be the right thing to do

Two (2) New Permits -- February 18, 2016

Two (2) new permits --
  • Operator: Crescent Point
  • Field: Ellisville (Williams)
  • Comments: 
Wells coming off the confidential list Friday:
  • 30235, drl, Slawson, Jugard Federal 5-26-35TFH, Big Bend, no production data,
  • 30613, SI/NC, Sinclair, Sinclair State 4-36H, Robinson Lake, no production data,
  • 30637, 96 (no typo), WPX, Juniper 15-22HE, Van Hook, 40 stages, 7.75 million lbs, t11/15; cum 16K 12/15;
  • 31397, SI/NC, Newfield, Larsen Federal 152-96-9-4-12H, Westberg, no production data,
  • 31488, SI/NC, XTO, Cheryl Federal 24X-12AXB, Grinnell, no production data,
Note: I've put #30637 on my list of things to follow up on; I am curious about the geologist's narrative yet to be filed; I'm curious to see how this well does over time; and I need to compare it other wells in the immediate area. 

*************************************

Active rigs:


2/18/201602/18/201502/18/201402/18/201302/18/2012
Active Rigs38130185180199


30637, see below, WPX, Juniper 15-22HE, Van Hook:

DateOil RunsMCF Sold
12-201579262824
11-201582394956
10-2015248139

Going Golfing -- February 18, 2016; The Charade Of The Hillary-Bernie "Close Race"

For those not paying attention, when the president's schedule:
  • is "free";
  • has no scheduled events; and,
  • his press secretary says he is unaware of any plans the president might have
... that is "Washington speak" for the president is going golfing.

When there is no photo op of the president over any given weekend, that is pretty much proof that he was golfing both Saturday and Sunday.

Keep that in mind when looking back on this article next Monday, posted in Politico today.
White House Press Secretary Josh Earnest revealed the president’s plans during the daily briefing, saying Obama and first lady Michelle Obama will go to the Supreme Court on Friday “to pay their respects to Justice Scalia” while the justice lies in repose in the Great Hall. Vice President Joe Biden and his wife Jill Biden, who share Scalia’s Catholic faith, will be at the services instead.
Earnest refused to be drawn out about why the president would not attend the funeral, saying he didn’t know what the president plans to do on Saturday, and Scalia’s son, Eugene, did not immediately respond to a question about whether the family requested that Obama not attend the funeral.
There are two other remote explanations why the president won't be attending the funeral. One explanation might be legitimate; the other explanation is beyond the pale, as they say in Ireland.

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The Charade of the Hillary-Bernie "Close Race"

Hillary leads Bernie in delegates: 481 - 55. George Pucker of The New Yorker actually believes the myth.

Jobless Claims Plunge; Happy Days Are Here Again -- February 18, 2016

From Bloomberg:
Initial jobless claims dropped by 7,000 to 262,000 in the week ended February 13, 2016, the lowest since November 21, 2015, a report from the Labor Department showed on Thursday.  
Bloomberg notes how wonderful this is:
The labor market has exhibited persistent strength despite softer foreign sales, a sign domestic demand is helping the U.S. weather a global slowdown. More hiring and fewer firings that lead to enhanced feelings of job security have the potential to encourage an acceleration in consumer spending.
We'll get a different number next week:
The median forecast in a Bloomberg survey called for 275,000 claims after 269,000 a week earlier. Estimates ranged from 255,000 to 285,000.
While there was nothing unusual in the data, claims were estimated for Pennsylvania, Virginia and Puerto Rico, according to the Labor Department.
An agency spokesman said officials in Pennsylvania had issues with their computer system that tabulates the number of applications, while Virginia was delayed in submitting its claims. On an unadjusted basis, Pennsylvania’s filings fell an estimated 3,899 last week, the largest drop of any state or territory.
Virginia was delayed, but without explanation. 

And more:
The four-week average of claims, a less volatile measure than the weekly figures, decreased to 273,250, the lowest since Dec. 19, from 281,250. The latest figure compares with an average of 285,250 during the comparable employment survey period for January. 
Let's bury this:
The economy added 151,000 workers in January, the fewest in four months.

Oh-Oh -- February 18, 2016

Bakken oil was selling for $16 / bbl yesterday.

The oil producers are adding as much as three million bopd of excess crude oil, globally.

Iran has yet to hit its stride.

Russia says that even if the "production freeze" is agreed to, by the rules laid out, Russia would be allowed to increase output.

It was just reported today that the crude oil output from the federal Gulf of Mexico will hit a record high in 2017.

And today the EIA provides us this graphic (via John Kemp over at Twitter):

Energy Tweets Today -- February 18, 2016

John Kemp tweets that North Dakota's oil production is finally starting to fall in response to sharply lower oil prices and less drilling. He did not note, nor did anyone else, that Bakken oil was selling for $16/bbl yesterday.

This is why OPEC / Russia will not agree on a crude oil production "freeze": John Kemp tweets that the Russian deputy foreign minister says that a "production freeze" would still allow Russia to increase output in 2016. I guess it depends what the definition of "freeze" is.

This is why OPEC / Russia will not agree on a crude oil production "freeze": Stuart Wallace tweets that Iran is "cool" to the idea of a production freeze.

EIA tweets that oil production in the federal Gulf of Mexico is projected to reach a record high in 2017. A reader alerted me to that in an e-mail yesterday. These projects were begun some time ago, and couldn't be stopped.

It appears even the refiners are getting bored with all the crude oil and refined products sloshing around; refiners reported only 88% utilization, according to the EIA.

Tic, tic, tic: Javier Blas provides a startling graph of Venezuela's history of devaluing its currency since 1998. In 1998, the graph suggests a Venezuelan housewife needs to pony up a 10-bolivar bill for something that would have cost her four bolivars as recently as 2012, and only a fourth of a bolivar back in 1998. I suppose the analogy is that a 25-cent gumball in the US back in 1998 would now cost my granddaughter $10. I could be wrong. I don't follow currency devaluations. If this is important to you, ask George Soros. 

Now, for John Kemp's weekly US energy tweets:
  • the graph for US natural gas stocks needs to be re-set; the current line is so high it distorts history, and that despite a huge drawdown (158 bcf) last week
That was the only one so far; more to follow, I'm sure.

But this gives me a chance to check on "gasoline demand" as reported by the US EIA. Not yet reported, and it's already 11:30 a.m. back in Washington, DC.

Ah, but now the John Kemp weekly US energy tweets are coming, fast and furious:
  • US gasoline consumption continued to rise; it averaged 8.9 million bopd over the past four weeks, up by 263,000 bopd (3%) from 2015
  • wow, wow, wow -- the graph for US commercial gasoline stocks needs to be re-set; the current line is so far off the chart it distorts the past (I'll post a screen shot)
  • US gasoline stocks are running at highest level for more than a decade even after adjusting for higher consumption
  • commercial oil stocks are so far above historical levels, this graph also needs to be reset
  • ditto for US total crude and products stocks; these graphs are simply incredible; if you haven't seen these graphs, you need to follow John Kemp over at twitter
  • US refineries processed a seasonal record 15.8 million bopd; 
  • US distillate stocks rose 1.4 million bbls last week and are now 35 million bbls (27%) higher than in 2015
  • US distillate consumption averaged just 3.5 million bopd over the last four weeks, down 650,000 bopd from 2015:

Enbridge Sandpiper Pipeline Dead? -- February 18, 2016

Updates

 February 21, 2016: The Park Rapids Enterprise has the same story, that the project will be delayed to 2019.
The company originally planned for startup early this year, then pushed it to 2017 after Minnesota regulators ordered a state environmental review that would examine alternate routes for that state's portion of the project.
U.S. refiner Marathon Petroleum Corp in 2013 agreed to pay 37.5 percent of Sandpiper's construction costs in exchange for a 27 percent interest in Enbridge's North Dakota pipeline system.
The Line 3 replacement involves swapping 1,031 miles of 34-inch pipeline with new 36-inch pipeline that would push capacity to 760,000 bpd from an average of 390,000 bpd. The North Dakota-Minnesota-Wisconsin portion of the $7.5 billion that connects Edmonton, Alberta, to Superior, Wis. was estimated to be $2.6 billion.
Enbridge said Minnesota regulators require that final environmental reviews be finished for each project before the company can move on to seek other permits.
Perhaps CBR is not dead as RBN Energy suggests.

Original Post 

The Bismarck Tribune is reporting that the Enbridge Sandpiper Pipeline has hit a sandbar:
Another delay on the time table of two oil pipeline projects in northern Minnesota has opponents of the projects declaring victory.
Enbridge Energy, the company behind the proposed Sandpiper and Line 3 projects, announced this week both pipelines won’t be ready until early 2019.
December’s decision by the Minnesota Public Utilities Commission to require a fully completed environmental impact statement to be done by state agencies before either project gets approved is likely to drive the cost of both projects higher, according to an Enbridge press release. Spokeswoman Lorraine Little confirmed costs were likely to rise, although the release nor she were able to state exactly what the new price tags would be.
The Sandpiper project was originally scheduled to come online this spring. The 616-mile pipeline from the North Dakota Oil Patch to Superior, WI, and was expected to cost $2.6 billion. The Line 3 replacement would run from northern Alberta to Superior.
The 1,031-mile project was estimated to cost $7.5 billion, with the American portion costing $2.6 billion.
In the big scheme of things, the Sandpiper is no longer needed.

This is how the Keystone XL was killed.

And this is not good news for the Dakota Access Pipeline which is likely to face a similar outcome in Iowa. It doesn't take a rocket scientist to think that the Iowa regulators aren't looking at what the Minnesota regulators just did. 

38 Active Rigs In North Dakota -- February 18, 2106

Active rigs (I track "active rigs" here), "North Dakota Oil History" recaps Baker Hughes count of active rigs in the Bakken:


2/18/201602/18/201502/18/201402/18/201302/18/2012
Active Rigs38130185180199

RBN Energy: New Export Supply from Down Under and the U.S. The series continues (archived).
Demand for liquefied natural gas has been flat recently, but liquefaction/LNG export capacity is on the rise. The resulting supply/demand imbalance along with the crash in crude oil prices has sent LNG prices to unexpectedly low levels, and raises questions about the competitiveness of all the new Australian and U.S. projects coming online in 2016-20. Today, we continue our examination of the fast-changing international market for LNG with a look at the new capacity being added to an already saturated LNG market, and how U.S. LNG exporters might fare in a hyper-competitive world.
This is Episode 3 in our series about recent developments in the international LNG market. The series’ aim is to describe the market’s changing supply/demand dynamics, and how they are likely to affect U.S. natural gas producers and LNG exporters in particular. In Episode 1, we recapped how the decisions to convert four U.S. LNG import terminals to liquefaction/LNG export terminals (and to build a greenfield liquefaction/export terminal in Corpus Christi, TX) were spurred by expectations that gas from the Marcellus, the Eagle Ford and other prolific shale plays would be so plentiful (and so inexpensive) that the U.S. could help meet a significant share of what was then seen as fast-growing worldwide LNG demand.
We also laid out several factors that will help determine how U.S. players—gas producers, midstream companies and LNG exporters—will fare in the very different market (low oil and LNG prices, flat LNG demand, too much liquefaction capacity) that emerged instead.
Then, in Episode 2, we delved into the LNG demand side of things, noting that in 2015, imports of LNG by Japan, South Korea and others inched up only 2% (one-third the pace once expected), to about 250 million metric tons per annum (MTPA), the equivalent of 32 Bcf/d of natural gas. We also explained why 2016 is likely to shape up as another flat year (weak demand in Japan, South Korea and China), and why—longer term at least—there’s reason to believe that LNG demand may rise more quickly (India, Europe and Latin America, to name three potential bright spots).
Continuing this story, today The Wall Street Journal reports: Cheniere Readies First LNG Shipment, Facing Challenging Market. U.S. natural-gas exports start as overseas demand for LNG is slowing --
The first ship carrying natural gas from the Gulf Coast is expected to depart soon, marking the emergence of the U.S. as a major exporter and the globalization of the once highly regionalized gas trade.
But the debut of a shale-fueled gas-export industry is raising questions about whether too many sellers are chasing too few buyers, deepening another boom-and-bust cycle. The price of liquefied natural gas has dropped 50% over the past year in Asia, the world’s largest and traditionally most lucrative market for LNG.
The destination of the Gulf Coast gas is likely to be South America, with PetrĂ³leo Brasileiro SA (Petrobras) in negotiations to buy the cargo—which could depart the Louisiana bayou as early as next week, according to people familiar with the transaction.
It also comes as the company behind the effort, Cheniere Energy Inc., tries to right itself after a messy boardroom drama that led to the firing of Chief Executive Charif Souki in December.
Since then, Cheniere—under the leadership of its board of directors—has scaled back the company’s ambitions set by Mr. Souki, laying off an oil-trading team that he had recruited to expand the business and filing a lawsuit earlier this month to claw back $46 million of company funds he invested in what people familiar with the suit say was his friend’s firm.