Wednesday Morning News & Views; Oil Up Over $2; Great RBN Essay

Active rigs: 190

Wells coming off the confidential list have been posted. QEP has another gusher in the "Helis Grail." Some mineral owners should be happy that the NDIC allowed BR to put in an overlapping unit -- it gave them the first of many great wells, but of course, we will hear from some that these overlapping units are a land grab. It all depends on one's perspective. I have no dog in that fight: I own no minerals. Newfield has two nice wells. One-half of wells coming off the confidential list went to DRL status. May was a horrendous month due to weather.

Wow! Another great essay from RBN Energy. This time on hydrocrackers. A must read.

Hydrocrackers are just one of the complex upgrading units in modern refineries. They process heavy gas oils that are yielded from  vacuum distillation units.  The hydrocracker uses a mixture of hydrogen and chemical catalysts to process the gas oils into jet fuel, diesel, and gasoline. A steam methane reformer is generally used to convert natural gas to produce the necessary hydrogen. Although hydrocrackers can be designed to produce a wide range of product yields, the output of the type of hydrocracker being built by Valero and others yields much more diesel than gasoline. The use of hydrogen in the process increases the volume of the feedstock. That means you get out 20 - 30 percent more liquids out than you put in.

Why are Valero investing in new and expanded hydrocracking units? For starters diesel has attained “most favored refined product” status of late due to increases in exports and higher prices than gasoline. The chart below shows US Gulf Coast ultra low sulfur diesel (ULSD - blue line) and gasoline prices (red line) over the past three years. Diesel prices were on average $8.50/Bbl higher than gasoline over the period. Last year diesel exports from the US averaged 1MMb/d up considerably from just 138 Mb/d in 2005. Most of those exports are to Latin America where growing regional demand is combined with a lack of local refining capacity. European refining capacity has also been shrinking – with over 1 MMb/d closed or expected to close since 2008. In the circumstances US refineries have a great opportunity to max out diesel production.

Many, many story lines, including my recent post on Power Africa. 

WSJ Links

Brief today due to time constraints. Skipping to Section C (Money & Investing): oil futures rise to a 14-month high. In Section B (Marketplace), the Koch brothers are getting some attention.

This will be a great article to read later: the headline suggests exactly what I posted a couple days ago -- the headline: US backing unlikely to tip balance toward 'clean coal.' This is not a war on coal; this is a war on US utilities. King Coal will come out of this very, very nicely. This "win" by the oil companies was reported briefly yesterday; here's a longer story. Lovely.  Also, along that line, a nice obit on former Mobil CEO -- very, very interesting story.

The big story: O'BamaCare delayed. When I get time, I have a long post prepared for this story. 

Also front page: rising US oil output gives US policy makers more options. And to think, President O'Bama could have had this in his first term; it's a bit too late for him to gain much from the oil boom (in fact for him, it remains a liability; his base won't accept the oil boom). His successor will be the big winner.

And this will be fun to read: solar groups seek tea-party support.

I apologize for abbreviated posts today.

I just completed the drive from Dallas, Texas, to San Pedro (south Los Angeles), driving straight through with cat naps along the road, arriving at the neighborhood Starbucks at 7:50 a.m. -- driving through LA rush hour (an oxymoron) this morning: I-40 to I-15 to I-210 to I-605 to I-105 to I-110.

I actually pulled off the I-210 for 20 minutes to take a quick cat nap. I was starting to feel a bit tired. I never push it. I find that as soon as I feel a bit tired, a 20-minute nap is all I need sometimes.

I drove through the California desert at night to beat the heat. When I got into the valley west of  Kingman, Arizona, at 1:00 a.m. it was only 104 degrees.  The lowest it got was 94 degrees before I got to the Los Angeles metropolitan area -- then it dropped to 74 degrees (in-car thermometer).