Monday, June 6, 2016

On US Petroleum Exports -- Al Troner's Article In Oil & Gas Journal On Light Ends -- June 6, 2016

From Al Troner's June 6, 2016, article in Oil & Gas Journal:
Almost unheralded, the US has emerged as the largest exporter of oil products, based on Gulf Coast refiners' use of relatively inexpensive, domestically produced tight oil. The product-export flood has been paralleled by large-volume NGL sales, with LPG (liquid petroleum gas) leading the way, in particular propane.

US sales have not only saturated the Atlantic Basin market but also become important to Asia Pacific supply. At mid-2015 China was the biggest single customer for US propane. And the opening of a revamped and enlarged Panama Canal by yearend will likely increase westbound LPG exports from the Gulf Coast even further. By 2018 US exports of LPG exports will likely equal or exceed those of the United Arab Emirates and Qatar combined.

Canada remains the top condensate US export market. APEC expects US supply to dominate Canadian diluent use until at least end-decade. Yet domestic condensate output has been growing rapidly in Canada, based on tight oil and shale gas development, in a trend APEC expects will gradually back out US sales in the coming decade. A steadier though smaller market emerged for slightly refined condensate in Europe, where refiners use the material regularly to fill out crude slates. By 2018 US condensate exports will exceed overseas sales by Saudi Arabia, and possibly by the kingdom and Qatar combined.

Ethane exports have begun as US sellers pioneered waterborne ethane shipments to buyers in the UK, Norway (Ineos and Sabic), and Sweden (Borealis). This has been followed by sales to India (Reliance) and China (Orient Energy).

The emergence of the light-ends space has not been solely a western market phenomenon. It has had East of Suez impacts as well, much of it centered on the Persian Gulf.
That opening line: Almost unheralded, the US has emerged as the largest exporter of oil products,.... occurred during the Obama administration.

Things to think about:
  • Saudi's challenges
  • US shale oil revolution
  • 90% of tankers carrying petroleum products will be able to transit the Panama Canal starting next year
  • Asian countries want to diversify their source of petroleum products; do not want to depend on Mideast as sole supplier
  • Poland diversifying petroleum sources; doesn't want to rely solely on Russia
  • India's growing demand for transportation fuel
  • the global demand for naphtha
  • "friendly" regulatory environment along the US gulf coast
  • QUALITY -- the US sets the standards
  • outside the US, instability seems to be the by-word; I can't say the global environment is any worse, but if Nigeria and Iraq are any examples, I would say the global environment is as bad as it's ever been
  • US oil exports rise 7-fold in three months
  • it never seems to quit

Al Troner's Article In Oil & Gas Journal On Light Ends -- June 6, 2016

Link here: It begins:
While many analysts agree that oversupply, rather than weak demand, led to the current slump in the price of crude oil, few have looked closely at the nature of that supply overhang.

In a new study, Asia Pacific Energy Consulting (APEC) has examined in depth the role of NGLs, in particular condensate, in creating the current surplus, as well as the impact of tight oil and its light derivatives.1 The condensate, other NGLs (LPG and ethane), light products, and tight oil yielding much of the new light-product supply all occupy the same light segment of the hydrocarbon spectrum.

The shale revolution has spurred a ballooning of NGL output, paralleled by dizzying growth in tight oil production. Almost all of this incremental liquids production has been light and sweet. The growing volume of this material, with incremental supply in the millions of barrels per day, has begun to shift pricing, trade, marketing, and supply-demand balances for crude-light-heavy vs. sweet-sour-and in products, with notable supply gains in LPG, gasoline, and naphtha in contrast to middle-barrel and heavy products.

A "light-ends space" is emerging, not only in the US and the Atlantic Basin but also globally, as markets attempt to adjust to this surge in light, low-sulfur hydrocarbon supply.
Archived; great article. Lots of implications for the Bakken, for export. 

Monday Evening -- June 6, 2016

Hot Market

142 new highs, including:
  • Allete
  • Altria
  • Becton Dickinson
  • CenterPoint Energy
  • MDU
  • Medtronic
  • Raytheon
  • Ritchie Bros Auctioneers
  • TransCanada -- the Keystone folks
  • UnitedHeath Group -- the folks bailing out of ObamaCare
Only ten (10) companies hitting 52-week lows.

Dow: 18,132 -- about the all-time high; today, the Dow closed up 113 points at 17,920. 

Salman's Plan Is Approved (Apparently)

The Wall Street Journal is reporting:
Saudi Arabia unveiled plans to more than triple its nonoil revenue by 2020 while cutting state handouts, in a broad bid to reshape the kingdom’s economy amid falling energy prices.
The initiative, called the National Transformation Program, offers details on how the ruling monarchy plans to achieve long-term economic change in an era of cheap oil.
The overall target is ambitious: Riyadh expects nonoil revenue to more than triple by 2020 to 530 billion Saudi riyals ($141.33 billion).
Developing sectors like mining and tourism and increasing the exports of commodities other than oil are part of the plan. The plan, for instance, sees an increase in tourism investment to 171.5 billion riyals from 145 billion riyals in that span.
But so are more painful measures, such as the reduction of subsidies on water and electricity, which the government said could provide savings of as much as 200 billion riyals by 2020.
The government said it expects the nation’s ratio of debt to gross domestic product to widen to 30% by 2020 from 7% today.
As part of the plan, Saudi Arabia aims to boost its credit rating to Aa2 by 2020, after several rating agencies downgraded the kingdom in recent months.
Tourism, huh? Iranians need not apply.

Daimler Benz Announces Truck Layoffs

The Wall Street Journal is reporting:
Daimler AG will lay off more than 1,200 workers at three plants in the U.S. and one in Mexico, the second such cut this year in response to falling demand for commercial trucks.
Similar to a previous round of cuts announced in February, the bulk of the jobs eliminated will be in North Carolina, with 600 workers slated to be laid off by July 1 at its Mount Holly plant and 200 workers in Gastonia by June 24. The cuts amount to about 41% and 15%, respectively, at the North Carolina plants.
In February, Daimler eliminated another 700 jobs at the Mount Holly plant, which builds medium-duty trucks.
Another 170 workers, or nearly 24% of workers in Portland, Ore., are slated to be laid off along with 270 workers, or nearly 11% of its Santiago, Mexico, workforce.
Freightliner, Daimler’s U.S. truck subsidiary, is the market leader in sales of heavy-duty commercial trucks in North America.

Whiting WIth Three Nice Bakken Wells; Halcon With One -- June 6, 2016; "Iowa" Approves Construction Of Dakota Access Pipeline

A reader writes to tell me that "Iowa" has approved construction of the Dakota Access  Pipeline. Apparently that was late this afternoon.

Active rigs:

Active Rigs2682194189215

Five wells coming off confidential list Tuesday:
  • 30421, drl, Hess, HA-Sanford-152-96-1819H-6, Westberg, no production data,
  • 30846, 3,017, Whiting, P Lynch 155-99-14-33-28-2H, Epping, 40 stages, 6.9 million lbs, t12/15; cum 111K 4/16;
  • 30848, 2,249, Whiting, P Lynch 155-99-14-33-28-3H, Epping, 40 stages, 6.8 million lbs, t12/15; cum 126K 4/16;
  • 30850, 2,015, Whiting, Marty 31-4H, Stockyard Creek, 40 stages, 6.6 million lbs, t12/15; cum 104K 4/16;
  • 31078, 1,905, HRC, Fort Berthold 147-94-2B-11-8H, McGregory Buttes, 33 stages, 4. 9 million lbs, t12/15; cum 122K 4/16;
The P Lynch wells are tracked here, but the page needs to be updated.

One (1) new permit --
  • Operator: CLR
  • Field: Rattlesnake Point (Dunn)
  • Comments:
Slawson canceled nine (9) permits: two Serpent permits; three Pike Federal permits, two Osprey Federal permits, a Mauser Federal, and a Periscope Federal; all in Mountrail County

QEP canceled on (1) permit: a TAT permit in McKenzie County

Seven (7) producing wells completed:
  • 31539, 373, Hess, Russell Smith-155-96-2425H-1, Capa, t5/16; cum --
  • 31540, 304, Hess, Russell Smith-155-96-2425H-2, Capa, t5/16; cum --
  • 31543, 592, Hess, Russell Smith-155-96-2425H-5, Capa, t5/16; cum --
  • 31656, 1,167, Hess, BB-Budahn-150-95-0506H-6, Blue Buttes, t5/16; cum --
  • 31679, 472, SM Energy, Mo Farms 15-21HS, Musta, t5/16; cum --
  • 31680, 630, SM Energy, Mo Farms 15-21HN, Musta, t5/16; cum --
  • 32096, 888, Hess, EN-Cvancara-LE-155-93-1523H-2, Alger, 4 sections, t5/16; cum --

30846, see above, Whiting, P Lynch 155-99-14-33-28-2H, Epping:

DateOil RunsMCF Sold

30848,  see above, Whiting, P Lynch 155-99-14-33-28-3H, Epping:

DateOil RunsMCF Sold

 30850, see above, Whiting, Marty 31-4H, Stockyard Creek:

DateOil RunsMCF Sold

 31078, see above, HRC, Fort Berthold 147-94-2B-11-8H, McGregory Buttes:

DateOil RunsMCF Sold

2Q16 GDP Forecast: Unchanged At 2.5% -- June 6, 2016

June 3, 2016: latest forecast (a dynamic link) -- 
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2016 is 2.5 percent on June 3, unchanged from June 1. Following this morning’s economic releases, the second-quarter forecast for real gross private domestic investment growth increased from –1.8 percent to –1.0 percent. Offsetting this increase was a decline in the forecast of the contribution of net exports to real GDP growth from 0.32 percentage points to 0.23 percentage points after this morning's international trade release from the U.S. Census Bureau.

Another D-Day Invasion? Only This Time, It's Crude Oil -- June 6, 2016


November 2, 2016: embedded chart. From 1 million bopd in 2008 to almost 6 million bopd now. 
Original Post
Over at "the big stories" I have added "soaring US oil exports," which can be found just under "soaring US gasoline, diesel exports" which was posted some time ago.

US oil exports rise 7-fold in first three months -- CNN. This story is being reported in various places across the net.
The 40-year ban on exporting U.S. crude was lifted last December. Since then, there's been a sevenfold increase in America's oil exports to destinations other than Canada, which was excluded from the ban.
The frenzy of export activity, while still relatively small, is noteworthy given the depressed environment in the oil patch these days. Not only is the U.S. pumping less oil, but there remains a lingering glut of oil around that world that earlier this year caused crude to crash to 13-year lows.
"Exports should pick up. The reason we're not surging now is the world is still oversupplied with crude," said Anthony Starkey, energy analysis manager at Platts Analytics.
Yet U.S. oil exports hit an important milestone in March, the latest month that statistics are available for. For the first time since 2000, the majority of U.S. crude exports were to destinations other than Canada, according to JBC Energy.

Monday, June 6, 2016

Before getting started today, perhaps this is the most important story for the traders on Wall Street: Scotland's court will rule soon on whether the "state" can set a floor on the price of alcohol. There is a  push to increase the price of alcohol in Scotland to decrease the amount of alcohol being drunk. I assume Scotch in Scotland could be as cheap as water. I don't know. All I know is that some day I hope to taste test a $19.95 bottle of Speyside scotch vs a $600 bottle of Scotch. If it happens, it may be when our younger daughter finally decides to "put me" in a nursing home.

By the way -- continuing to procrastinate -- for those who missed it -- the Cleveland Cavaliers (James LeBron's team) was/were "schooled" in the "new" NBA way of playing basketball by the Golden State Warriors. For the moment, the only team playing the "new" NBA style of basketball is/are ... the Golden State Warriors. It would have been a huge shame had they faltered against OKC Thunder. I'm not taking anything away from OKC -- they almost did it -- but it's fun to see the Warriors play. Their starters are incredible; their bench may be better? Probably not, but I don't think they have have player that isn't astounding. 

In the past 72 hours there have either been a number of stories on India's growth / energy demand, or I'm much more cognizant of the story based on Al Troner's articles.

I mention "STACK" in one of the notes below. I track the "STACK" here (at the sidebar at the right). 

Devon will sell oil and gas assets for almost $1 billion. The oil fields are in Texas and Oklahoma and a royalty interest in northern Midland Basin, to undisclosed buyers. The largest transaction was for reserves in East Texas for $525 million. It will also sell its position in the Anadarko Basin's Granite Wash are for $310 million. Devon is also apparently ready to sell its half stake in the Access Pipeline. East Texas assets: producing 22,000 boepd, but only 5% of that was crude; sales generated $10 billion in cash. Proved reserves are about 87 million boe. Even with that the compnay ays it would need to make progress on asset sales before considering an increase in production.

From Finance!Yahoo:
  • the Dow up almost 100 points, slightly over 17,900; "energy leads as oil rises"
  • crude oil up 1.8%, at $49.50
  • top story: US stock market is getting closer to a "melt up" -- HSBC
  • global governments boosting spending at fastest rate since 2009
  • after a story last week that Saudi Aramco lowered prices in Europe, today the report is that SA raised prices in Asia
From Google Finance: incredible -- nothing of interest

Yahoo!Finance In-Play:
  • WPX Energy upsizes & prices 49.5 mln shares of its common stock for total gross proceeds of ~$485 mln (WPX)
Now, The Bakken

Active rigs:

Active Rigs2682194189215

RBN Energy: worth reading today. This is how the economics work for US crude oil exports on VLCCs to Asia. Archived. From the article:
A number of European refiners, like their U.S. counterparts, have invested in using heavier, sour (higher-sulfur) grades because these tend to be cheaper.  These refineries are not interested in paying a premium for the light, sweet barrels coming from the U.S.  Where there is an appetite for the lighter, sweeter crude is in Asia.  India is a big importer of Nigerian grades, which are similar to the U.S. ones.  In China, the government is facing rising social pressure to do something about heavy pollution in the big cities.
Cleaner transportation fuels are a priority, but producing those at many of the unsophisticated local refineries is difficult - unless you are using light, sweet crude.
Taking U.S. crude to these markets is a good fit, except for one problem: distance.  
The fact that it takes two months to sail around South Africa's Cape of Good Hope and on to China, in itself, is not an impediment. After all, it takes five weeks to get from the Middle East Gulf to the Gulf of Mexico, and there is about one Very Large Crude Carrier (VLCC)--a ship that can carry 2,000,000 barrels (2 MMbbl)-- completing that journey every 18 hours or so.  The problem is that such long journeys make economic sense only when the shipper is using a VLCC or the even larger Ultra Large Crude Carrier (ULCC).
The larger the ship, the lower the cost per barrel.  VLCCs are around 1,500 feet long. When fully loaded, the bottom of the ship is about 66 feet below the waterline. There is no port on the U.S. Gulf Coast that can handle ships this size, except for the Louisiana Oil Offshore Port. This port, called LOOP for short, was specifically built to offload VLCCs, and that is all it can do: offload.
The RBN article also helps explain how Harold Hamm can make money on $45 oil -- remember, he has suggested he may have a deal with South Korea.
America’s oil and gas producers are still finding places where they can prosper even at today’s lower prices.
Companies are refocusing their drilling efforts on the Permian Basin in Texas and New Mexico and rushing into a part of Oklahoma known as the Stack where they can claim solid returns. While small in terms of overall production, the move is gathering steam, even as drilling in places like North Dakota and Pennsylvania remains sluggish.
Wells in the Permian and the STACK—which stands for Sooner Trend, Anadarko basin, and Canadian and Kingfisher counties—are racking up between 10% and 30% returns based on oil priced at $45 a barrel, operators say; premium wells are generating greater profit.
In part, returns benefit from access to established pipeline, storage and other infrastructure. Drillers in both areas have been able to find energy stacked in layers underground. Some producers also are tapping holdings that were acquired long ago, when acquisition costs were lower.
Continental Resources Inc., which helped spark the North Dakota boom, says its best wells today are in the Stack—a well-trod part of Oklahoma near Cushing, OK, a major oil storage and trading hub. The company says its drilling there can yield a 75% return with oil at $45 a barrel. The company recently announced a gusher of a well in the field.
The graph at this site is incredible -- it shows just how inefficient "Cadillac" is at selling cars. It may take a page from MuskMelon's playbook. If the link is broken it has to do with Cadillac considering "carless" dealerships.