Wednesday, June 14, 2017

More Saudi Smoke And Mirrors -- June 14, 2017

Updates

June 15, 2017: OPEC stumbles: from WSJ -- production cuts aren’t drawing oil out of storage and are helping U.S. shale producers.
Oil stockpiles in the Organization for Economic Cooperation and Development—a club of 35 countries with industrialized economies—rose by 18.6 million barrels in April and were higher than they were when OPEC agreed to its cut late last year, said the International Energy Agency, a Paris-based group that advises governments on energy trends.
How long will it take to re-balance? 63 weeks.

A re-posting of a most important graph:



Original Post

Reposting:
Saudi to target US shale? Saudi Arabia and other producers are frustrated that growing U.S. production is hurting the oil market. Saudi Arabia is said to be considering holding back exports into the U.S. Link at CNBC. Reduced exports would show up in weekly US government data and send a bullish signal to the market.
Wow -- Saudi should have done that from the beginning instead of flooding the US with crude oil from their "storage tanks." By the way, this may be more smoke and mirrors: during the summer, Saudi exports less oil because domestic demand is greater during the hot summer months.
One can see Saudi's track record at this post.

********************************
Meanwhile, A Random Look At Historical "Price" Of Ethanol

From TradingEconomics:


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And, A Random Look At Historical "Price" Of Gasoline

From TradingEconomics:


At 55 Rigs -- June 14, 2017; With Six New Permits, Whiting With Permits For Another 6-Well Pad

Active rigs:


$4.716/14/201706/14/201606/14/201506/14/201406/14/2013
Active Rigs552875187184

Six new permits:
  • Operator: Whiting
  • Fields: Stockyard Creek (Williams); Epping (Williams)
  • Comments: all six permits will be sited on same pad, section 5 -154-99; see graphic below
One well released from confidential list:
  • 29299, 988, EOG, Parshall 97-3332H, Parshall, 23 stages, 7 million lbs, t12/16; cum 56K 4/17;
One producing well (DUC) reported as completed:
  • 28802, 190, CLR, Florida Federal 5-11H, Camp, 4 sections, t3/17; cum -- 
See new permits (above):


The other wells in this graphic:

The Energy And Market Page, T+145 -- June 14, 2017

Baked in: "Fed" "raised rates" a quarter point.

Dow: if the Dow set an all-time high yesterday, then another 46 points today, suggests the Dow set another new all-time high today.

Nasdaq: down 25 points.

Big loser: oil. down almost 4%; below $45.

Making America great again. It's possible a big Taiwanese Apple supplier/manufacturer will build factory in Wisconsin or Michigan.  

EPA: Trump will postpone industry compliance with an Obama-era rule limiting methane emissions from oil and gas wells on federal lands. An effort by Congressional Republicans to repeal the methane rule failed in the Senate by one vote on May 10, 2017.

Worst Indicator Today? Gasoline Demand -- Latest GDP Forecast, 2Q17 -- 3.2% -- June 14, 2017

Updates

June 15, 2017: see comments below. A reader suggests why gasoline demand is lower this year compared to last year. I don't buy the reader's explanation, nor does Reuters: at the link, posted back in April, 2017, Reuters makes three points:
  • last year's gasoline demand set an all-time record;
  • the weather this year might explain the decrease in gasoline demand; and,
  • most analysts expect gasoline demand to recover
Original Post
 
Latest forecast: 3.2 percent — June 14, 2017:
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2017 is 3.2 percent on June 14, up from 3.0 percent on June 9.
The forecast for second-quarter real consumer spending growth increased from 3.0 percent to 3.2 percent after this morning's retail sales report from the U.S. Census Bureau and this morning's Consumer Price Index release from the U.S. Bureau of Labor Statistics.
On CNBC today, in passing, Rick Santelli says he doesn't believe these numbers, specifically when it was pointed out that retail sales fell this past month; he suggested "if you dig deep enough you can always find a nugget of gold" but he thought the 3.2% GDP forecast based on new data was BS.

Others agree: see comments.

******************************** 
Gasoline Demand

One wonders if this is a most bearish sign -- and then note that the Fed "raised rates" today.


I've said often that if I had to pick only one economic indicator to reflect the health of the US economy, I would pick gasoline demand. If so, the above graph is very, very concerning. Not only is gasoline very inexpensive as we enter the height of US summer driving, but it comes at a time when an oil glut appears to be with us as far as the eye can see.

Note: current gasoline demand is less than it was a year ago today, but even worse, it has turned "downward."

WTI Drops Below $45 -- June 14, 2017

Scroll down for several posts and updates today to see why WTI dropped below $45.

What a doofus

The Political Page, T+145 -- June 14, 2016: Most Startling Statistic Today: North Korea's Petroleum Consumption

Balti-moreviolence: just give them a bit more room. Baltimore officers put on 12-hour shifts as violence esclates.

Retail: US retail sales report biggest drop in 16 months. Congress dawdles. August recess almost here, and at that point, the year is over, legislatively, for all practical matters.

Auto: GM schedules additional plat downtime amid soft sales, inventory glut. Congress dawdles. August recess almost here, and at that point, the year is over, legislatively, for all practical matters. Oh, I already said that.

North Korea: how bad are things, really? From twitter: North Korea's oil consumption dropped from 76,000 barrels per day (b/d) in 1991 to an estimated 15,000 b/d in 2016. https://go.usa.gov/xXHAx.

Sucking all the oxygen out of the room. But at least Drudge buries the headline at the bottom of his page. Hillary compares herself to "Wonder Woman." Will she ever go away?
Clinton thanked Women in Film for supporting women in the industry, then quickly shifted the focus to herself.
“Now I haven’t seen Wonder Woman yet, but I’m going to, in part because it’s directed by the fabulous Patty Jenkins,” Clinton said. “But something tells me that a movie about a strong, powerful woman fighting to save the world from a massive international disaster is right up my alley.”

At This Rate, 63 Weeks To Re-Balance -- June 14, 2017

US crude oil inventories dropped 1.7 million bbls to 511.5 million bbls.

Average drawdown over past seven weeks: 2.6 million bbls/week.

At this rate, to get to "historical" average of 350 million bbls / 21 days of supply, it will take 63 weeks to "re-balance." (Update: methodology was wrong in some parts of this table; it has been updated and corrected at this post):

Week
Date
Drawdown
Storage
Weeks to RB
Week 0
Apr 26, 2017

529
180
Week 1
May 3, 2017
0.9
528
178
Week 2
May 10, 2017
6
522
29
Week 3
May 17, 2017
1.8
520.2
95
Week 4
May 24, 2017
4.4
515.8
38
Week 5
May 31, 2017
6.4
509.9
41
Week 6
June 7, 2017
-3.3
513.2
60
Week 7
June 14, 2017
1.7
511.5
63


Reminder: the drawdown is a positive number (column 3). If there was a build, then that will show as a negative number. In week 6, there was an unexpected build of 3.3 million bbls of US crude oil inventories. 

What's Going On Over At Squaw Creek? -- June 14, 2017

It was noted that production in Squaw Creek increased 141% month-over-month, March-to-April, 2017, in most recent production update. Squaw Creek data has been updated.

Wells Coming Off Confidential List Through Friday -- June 14, 2017

Wednesday, June 14, 2017:
  • 29299, see below, EOG, Parshall 97-3332H, Parshall, producing,  (#17621 - no jump in production)
Thursday, June 15, 2017:
  • 26732, SI/NC, QEP, MHA 8-27-34H-148-92, Heart Butte, no production data,
  • 29298, 1,744, EOG, Parshall 96-3332H, Parshall, 27 stages; 8 million lbs, t12/16; cum 60K 4/17; (#17621 - no jump in production)
Friday, June 16, 2017:
  • None
****************************************

29298, see above, EOG, Parshall 96-3332H, Parshall:

DateOil RunsMCF Sold
4-201798765633
3-2017105626926
2-201780403738
1-2017155671875
12-2016154371947

29299, see above, EOG, Parshall 97-3332H, Parshall:

DateOil RunsMCF Sold
4-201784955585
3-201778525795
2-201774505230
1-2017192663644
12-2016124191669

"Whatever It Takes" Isn't Working -- CNN -- June 14, 207

Active rigs:

$46.046/14/201706/14/201606/14/201506/14/201406/14/2013
Active Rigs552875187184

RBN Energy: an update of the gas supply-demand balance and storage.

Cuts not cutting it! -- Rigzone, June 19, 2017
The sustained fall in oil prices over the past week is indicative of the consensus view that the 1.8 million barrel per day coordinated output cut among the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC is not deep enough to rebalance global oil markets in 2017, or even in 2018.
Also contributing to this bearish outlook are serious concerns around U.S. gasoline demand. In its Weekly Petroleum Status Report on Wednesday, the U.S. Energy Information Agency (EIA) showed a surprise build to gasoline stocks for the week ending June 9.
NY Times: OPEC took aim at US oil producers but hurt themselves, also.
This week oil traders were shaken by a report by the International Energy Agency that global supplies rose by 585,000 barrels a day in May as both OPEC countries and non-OPEC countries increased production. Oil stocks for the 35 industrialized economies, the agency noted, are not only well above the historical average but higher than when OPEC decided late last year to cut output.
United States oil production, which averaged 8.9 million barrels a day in 2016, will rise to 9.3 million barrels a day this year. The [government] is projecting production of 10 million barrels a day in 2018, exceeding the record set in 1970. Last week domestic crude inventories eased a bit, but gasoline stockpiles rose by 2.1 million barrels.
OPEC set the latest market cycle in motion in late 2014, when the Saudis and their allies decided to swing cartel policy in an unexpected direction. Instead of cutting production to support prices, as it had done so often in the past, OPEC decided to let market forces loose and then even raised production.
Snarky: IEA to Saudi. From Bloomberg. Only one "new" data point that interested me:
By the end of 2018, demand for crude oil should top 100 million barrels a day for the first time ever.
OPEC stumbles: from WSJ -- production cuts aren’t drawing oil out of storage and are helping U.S. shale producers.
Oil stockpiles in the Organization for Economic Cooperation and Development—a club of 35 countries with industrialized economies—rose by 18.6 million barrels in April and were higher than they were when OPEC agreed to its cut late last year, said the International Energy Agency, a Paris-based group that advises governments on energy trends.
Saudi to target US shale? Saudi Arabia and other producers are frustrated that growing U.S. production is hurting the oil market. Saudi Arabia is said to be considering holding back exports into the U.S. Link at CNBC. Reduced exports would show up in weekly US government data and send a bullish signal to the market. Wow -- Saudi should have done that from the beginning instead of flooding the US with crude oil from their "storage tanks." By the way, this may be more smoke and mirrors: during the summer, Saudi exports less oil because domestic demand is greater during the hot summer months. 

Bad news for OPEC: that was the teaser from CNN Money this morning. Unfortunately nothing new:
OPEC has been trying for months to eliminate a glut of excess supply that has kept prices from rising. The cartel has pledged to do "whatever it takes."
But its efforts have been blunted by a massive boom in production by U.S. shale operators. The IEA said Wednesday that the trend is likely to continue into next year, with production by non-OPEC nations growing more quickly than global demand.
Graphic: the source.  IEA forecasts non-OPEC oil supply will rise by 1.5 million bopd in 2018, faster than expected increase in demand. The entire report is bad news for OPEC. I love this observation with regard to the OPEC cut (wink, wink):
Global oil supply rose by 585 kb/d in May to 96.69 mb/d as both OPEC and non-OPEC countries produced more. Output stood 1.25 mb/d above a year ago, the highest annual increase since February 2016. Gains were dominated by non-OPEC, particularly the US.
Dire analysis: from John Kemp over at Reuters -- some data points:
  • the speed and scale at which U.S. shale production has bounced back from the slump in 2015/16 has confounded OPEC and all the other major forecasters
  • the increase in U.S. production is now threatening to overwhelm the market, in a re-run of the situation in 2014 that led to the price collapse
  • the U.S. Energy Information Administration projects U.S. production will rise by a further 680,000 bpd in 2018. The International Energy Agency is predicting an even larger increase
  • many U.S. shale producers insist they can drill wells profitably at prices well below $50 per barrel and in some cases below $40.Many U.S. shale producers insist they can drill wells profitably at prices well below $50 per barrel and in some cases below $40
  • the International Energy Agency (IEA) projects non-OPEC output will increase by 1.5 million barrels per day (bpd) in 2018
  • if that proves correct, non-OPEC suppliers will capture all the increase in demand next year, because the IEA predicts consumption will increase by only 1.4 million bpd
  • in effect, OPEC will be restricting its own output only to see rival producers step in to meet growing demand from refiners
Iraq eating Saudi's lunch: from Bloomberg --  Iraq is driving up crude oil exports to the U.S., the world’s second-biggest import market, just as there are signs Saudi Arabia is honoring a pledge to restrict such deliveries, according to tanker-tracking data. See EIA data here.


Deep doo-doo: unless there is some geo-political event in Saudis' favor, the kingdom is in great trouble. Canada, too, with regard to strength of its dollar, and, Mexico with regard to strength of its peso. At least that's what I think. Disclaimer: this is not an investment site.

Oil flirts with $40. Bloomberg.

More: from PennEnergy -- US oil production seen thwarting OPEC effort to boost prices. My hunch: every Arab for himself by the end of the year.

Even more: from Bloomberg. America can spin the oil world on its axis. The government can provide incentives, as oil and natural gas production is not just a matter of economics, but of national security as well. Say what? What incentives? This is such an incredible (ridiculous) article, it may be re-posted as a stand-along post. Really? The US oil industry needs government's help? From the linked article:
For OPEC, Russia and others that have lived off oil (and little else) for decades, the worst-case scenario is about to become the present-tense scenario. America has discovered the magic beanstalk, and it is named “shale oil production.” The U.S. now has the ability to not only be energy self-dependent but to become a major exporter of oil and natural gas and spin the world on its axis. America now owns the magic beans, and all it needs to do is plant them and water them with care.
OPEC can’t quite believe it, and the cartel is in denial. The markets can’t quite believe it, either, as OPEC spews the nonsense that we have listened to, and believed in, for far too long -- that it can control supply and, therefore, prices.
Iraq: taking on Saudi Arabia. From Bloomberg via Rigzone:
Iraq is gaining the edge over Saudi Arabia in the world’s fastest-growing oil consumer amid an intensifying race among producers to retain their most-prized markets.
Iraq was the top crude supplier to India for a third month in May, shipping 1 million barrels a day. Iraqi supplies accounted for 23 percent of India’s purchases last month, up from an average 19 percent in the previous four months, while Saudi Arabia’s share fell by 1 percentage point to 17 percent, the data showed.
Oil producers are facing increasing competition in major markets like China and India as OPEC and its partners continue efforts to curb output to clear a global glut. India’s $2-trillion economy imports more than 80 percent of its crude requirement and the International Energy Agency expects it to be the fastest-growing consumer through 2040.
“Saudis used to be the king when it comes to crude supply, but now it’s becoming a prince,” said R. Ramachandran, the head of refineries at Bharat Petroleum Corp., India’s second-biggest state-run refiner. “Preference for Iraqi crude will continue as Indian refiners continue with refinery upgrades.”

North American Heavyweights Go Mano A Mano -- June 14, 2017

Permian vs Marcellus  natural gas production.

This is a very interesting note from Bloomberg. Data points:
  • it's the Permian vs Marcellus
  • the Marcellus producers did not count on the Permian
  • "everyone can't grow; everyone can't win"; the glut is getting too big
  • Marcellus gas output: will rise 0.5 percent to 19.4 billion cf/d, month-over-month, July from June
  • Permian gas output, same time period: will rise 1.9 percent to 8.5 billion cf/d
  • all-time high for both shale deposits
Projections for these two:
  • Marcellus may climb by 11 billion cf/d by the end of 2019 from the end of 2016
  • this is well below the forecast of a gain of 14.5 billion during the same period
No mention was made why forecast for the Marcellus has changed so much.

The Permian has four advantages over the Marcellus:
  • only one state (maybe two, if one includes New Mexico) to deal with
  • Texas with a much more friendly business environment in which to operate
  • closer to export terminals
  • much of the infrastructure is already in place
*************************************

Not mentioned in the article: natural gas production in the Bakken also hit an all-time record in most recent reporting month (April, 2017):
  • natural gas production (North Dakota): jumped 6% to more than 1.8 billion cubic feet / day -- a new record; a pittance compared to the Marcellus/Permian but still significant
  • note jump in production as a percent
    • Bakken: 6% growth
    • Permian: almost 2% growth
    • Marcellus: 0.5% growth 
************************* 
The Katie Ledecky Page

Known for her distance races, Katie Ledecky now swims the fasted 200 freestle in the world. From
teamusa:
Katie Ledecky swam her last race before the national championships in typical Ledecky fashion, posting the fastest time in the world this year in the 200-meter freestyle on Sunday to win her second event at the Arena Pro Swim Series in Santa Clara, California.
Ledecky’s time of 1 minute, 55.34 seconds was the fastest this year by three-tenths of a second and also set a new meet record, beating the previous mark of 1:55.68 set by Femke Heemskerk in 2015.
The win comes two nights after Ledecky posted the sixth-fastest time in history in the 1,500 freestyle. Her next appearance will be at the Phillips 66 National Championships, part of the Team USA Summer Champions Series, presented by Comcast, which begin June 27 in Indianapolis.
Ledecky, a Stanford freshman who is in the midst of writing her final papers of the semester, was pleased with the result.
Siobhan Haughey, a 2016 Olympian for Hong Kong, was second with a time of 1:58.14.

Production In Top Bakken Oil Fields, April, 2017, Data -- Greatest Increase On A Percentage Basis In Field Production Month-Over-Month

Disclaimer: in a spreadsheet done manually there are likely to be typographical and factual errors. If this information is important to you, go to the source. Do not quote me on this data.

March, 2017, and April, 2017, data for top producing oil fields in the Bakken. Ranked by greatest increase in field production, by percentage, month-over-month, column 10.

Field
March 2017 Prod
March Wells
Mar Oil / Well / Month
Percent Change Feb-to-Mar
Change in # of wells
April 2017 Prod
April Wells
Apr Oil / Well / Month
Percent Change Mar-to-Apr
Change in # of wells
Squaw Creek
61,177
38
1,610
22.29%
0
148,012
41
3,610
141.94%
3
Elm Tree
256,205
44
5,823
62.67%
0
403,894
54
7,480
57.64%
10
Pembroke
122,829
57
2,155
74.19%
2
175,332
57
3,076
42.74%
0
Corral Creek
701,657
160
4,385
21.04%
2
864,050
164
5,269
23.14%
4
Hawkeye
312,405
108
2,893
20.17%
1
378,870
112
3,383
21.28%
4
Heart Butte
584,046
196
2,980
37.67%
10
688,388
200
3,442
17.87%
4
Banks
828,193
201
4,120
32.27%
2
972,372
201
4,838
17.41%
0
Spotted Horn
508,738
97
5,245
37.61%
9
596,376
98
6,085
17.23%
1
McGregor
68,769
41
1,677
-6.08%
0
79,161
41
1,931
15.11%
0
Mandaree
328,652
87
3,778
25.54%
1
373,920
86
4,348
13.77%
-1
Chimney Butte
157,600
81
1,946
9.00%
5
178,854
81
2,208
13.49%
0
Ray
56,818
54
1,052
-7.16%
0
63,153
54
1,170
11.15%
0
Camp
439,809
145
3,033
17.70%
3
480,549
145
3,314
9.26%
0
South Fork
74,718
29
2,576
-2.34%
0
81,465
29
2,809
9.03%
0
Keene
124,036
45
2,756
10.12%
0
134,295
45
2,984
8.27%
0
East Fork
416,611
119
3,501
12.61%
0
449,876
119
3,780
7.98%
0
Parshall
1,337,466
483
2,769
21.15%
15
1,428,200
495
2,885
6.78%
12
Alger 
652,291
326
2,001
0.73%
0
690,764
327
2,112
5.90%
1
Park
48,106
36
1,336
8.13%
0
50,937
36
1,415
5.88%
0
Elidah
206,321
58
3,557
6.69%
0
216,725
58
3,737
5.04%
0