Why US Drilling Won't Stop Any Time Soon; Continuation Of Series On Canadian Diluent Requirements -- RBN Energy -- November 6, 2014

Active rigs:

	11/7/2014	11/07/2013	11/07/2012	11/07/2011	11/07/2010
Active Rigs	193	181	188	199	155

Feeling the pain: some time ago, I posted my list of those "entities" that would feel the pain of the oil-price slump the soonest and the mostest. Venezuela led my list. Coming second or near the top were the deep-see drillers. Folks may find the news on RIG interesting today. I think OPEC is in better shape than most of us realize (except for Venezuela). Among the nations, Russia is perhaps in the worse situation. I always thought pushing a bear into a corner was very, very dangerous (another Obama misstep) and today we see the outcome. China? Looking good.

RBN Energy: why US drilling is not going to stop overnight. I think I sent a note to Don suggesting the same thing a couple of days ago. It's another great RBN Energy post:

CME Nymex West Texas Intermediate (WTI) crude prices were down 28 percent from their June high of $107/Bbl to $77/Bbl on November 4, 2014.

This price fall to three year lows has been prompted by a perceived oversupply of crude in world markets versus demand.

Driven by new technology and oil extracted from tight shale formations, U.S. crude production has risen by 1 MMb/d during each of the past three years – pushing out imports into the world market. With more barrels chasing lower demand for oil, prices have fallen. The pricing weakness is compounded by a perceived lack of discipline to reduce output by the traditional swing producers within OPEC – including Saudi Arabia. As we discussed in a recent blog, the actions of that nation appear to indicate a strategy to retain market share at the expense of higher prices, at least for the moment.

RBN Energy: the series on Canada's need for diluent continues --

The Edmonton region in Alberta is home to a growing crude gathering hub that brings in bitumen crude from the oil sands region 250 miles to the north. I

n order to get that crude to Edmonton and to markets in the U.S., producers must first blend it with diluent range materials so that it can flow in pipelines. In the early days much of the diluent required in the oil sands was delivered by rail and truck but now a growing “parallel” pipeline network is developing to source and distribute supplies as new production comes online. Today we look at the Edmonton diluent distribution system.

This series details infrastructure delivering increasing quantities of diluent to production locations in Western Canada. The first episode provided an overview of current and expected demand for diluent range materials for use by oil producers in the Western Canadian Sedimentary Basin (WCSB).

Total Canadian demand for diluent in 2014 is expected to average 380 Mb/d – meaning that with 160 Mb/d of local supply about 220 Mb/d will be imported – mostly from the U.S. By 2019 that import requirement number could more than double to 485 Mb/d (assuming that Canadian domestic production doesn’t increase dramatically – which it might.). Episode Two covered the Southern Lights and Cochin pipeline diluent routes from the U.S. to Western Canada. Diluent distributed to the oil sands production regions comes from the two regional oil gathering storage and distribution hubs at Hardisty and Edmonton, Alberta. We will look at Hardisty – where producer Husky blends the Western Canadian Select crude blend, later in the series.

This time -- at the link -- we take a deeper dive into the diluent distribution network in Edmonton with a look at Enbridge and Keyera.

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JOBS

Happy days are here again. Unemployment plummets to 5.8% for the month of October. The economy churned out a firm 214,000 net new jobs, less than the 235,000 expected. I am actually very, very impressed. Prior to the recent "Great Recession," full employment was said to be 4%. With all the technology coming on line, that alone would suggest that 6% is the new 4%. I consider 6% unemployment in the US full employment. Underemployment is another story. With regard to unemployment, the economy keeps showing improvement (albeit slowly, perhaps) and yet the number of folks who have dropped out of the workforce is at an all-time time, and yet I see help-needed signs everywhere. The safety net (unemployment benefits; spouse working; ObamaCare providing really cheap health care; Social Security [particularly disability]; seems to be working. Speaking of which, I understand President Obama made a speech yesterday saying he "heard" the 2/3rds of Americans who didn't vote. I don't recall but I think it was said that President Nixon was hearing voices near the end of his presidency, also.

By the way, speaking to a worker at a major US truck factory: the factory will be going to mandatory overtime. They have so many truck orders they have to go to mandatory overtime. It may start in December; it's still unclear when. The second part of the story: this particular international truck company, with manufacturing facilities in the US, accounts for 60% of current new truck building. I'm talking the big semi's, specialty trucks, not pickup trucks.

It's quite a story.