Wednesday, June 24, 2015

Wednesday -- June 24, 2015; New Federal Fracking Rules That Were To Take Effect TODAY -- US District Judge Scott Skavdahl, Casper, WY, Put Them On Ice

UPDATE on federal fracking rules: see this note

North Dakota rig count appears to have hit bottom -- Reuters is reporting:
The drilling rig count in North Dakota's oil patch, a closely watched metric through which many attempt to divine future crude production, appears to have hit a bottom.
For the past three weeks the count has hovered between 76 and 79, after sliding only slightly from 80 at the end of May. On June 12, the count hit 76, the lowest level since 2009. The count bobbed slightly in the ensuing days, hitting 77 on Tuesday.
It has, in short, been the longest period since oil prices started to slide last fall that the rig count has stayed in the same range, offering many in and near the No. 2 U.S. crude-producing state's energy industry a bit of solace that a nadir has been reached. In early March, for example, the count was at 113.
The apparent stabilization has produced a palpable sigh of relief around North Dakota's western oilfields, where newspapers [and the MillionDollarway blog] print the number daily.
Now, on to President Obama's "war on fracking." Bloomberg is reporting
The U.S. government says it can set standards for more than 100,000 wells that make up 11 percent of the nation’s natural gas output and 5 percent of its oil. The states argue they’re doing plenty to make sure fracking is done safely, so oversight should be left to them.
With the new rules set to take effect Wednesday, U.S. District Judge Scott Skavdahl in Casper, Wyoming, may decide in court who is right. Producers say they can’t afford the increased costs and lengthy delays they fear will accompany the new federal rules. Drillers are already struggling because of falling oil prices, which has led to a spate of bankruptcies and missed bond payments. Oil dropped from more than $100 a barrel to as low as $44 in March, undercutting the “shale gale” that drove U.S. production to near record levels.
 Active rigs:

Active Rigs77194185210170

RBN Energy: Why Are WTI Prices Stuck at $60/Bbl? (Archived)
Prices for prompt delivery of West Texas Intermediate (WTI) crude as quoted on the CME/NYMEX futures exchange fell by 60% from their high over $107/Bbl in June 2014 to a low under $44/Bbl on March 17, 2015. After recovering about 37% in April and May WTI prices have remained stuck close to $60/Bbl ever since - closing yesterday (June 23, 2015) at $61.01/Bbl.
With market contango narrowing, inventory levels falling, and refinery throughputs rising – why aren’t prices moving higher faster?
Today we review the fundamental data.
For the past year oil market analysts have been busier than shrinks after Thanksgiving – trying to explain what happened and what comes next - since crude prices started falling in June 2014. As we explained last fall the root cause for the price meltdown was a worldwide increase in crude supplies coupled with a downturn in demand.
Crude from U.S. shale based production has been increasing at the rate of 1 MMb/d a year for the past three years - pushing out imports into the world market and creating increased competition between producers to retain their market share and placing downward pressure on prices. When producer group OPEC failed to signal any intent to try and prop up prices at their Thanksgiving meeting the rout gathered pace.
With too much crude and too few buyers the market condition known as contango developed where future prices are expected to be higher than spot prices today – encouraging the use of storage to “save” cheap crude today for use when prices recover.
Without new sources of demand or supply interruptions, a contango market keeps downward pressure on today’s market prices as storage fills up and becomes more difficult and expensive to find – increasing the contango spread required to cover storage costs.
In March of 2015 we described how sky-high inventory levels were still keeping up the downward pressure on crude prices. More recently we posted a blog at the beginning of June (2015) suggesting that low crude prices were here to stay in a new era of abundance.
Other analysts contend that the narrowing contango, falling inventory levels and increased refinery demand seen recently – coupled with a slow down in crude production – are signs that prices should recover further this year. In this two part blog series we look at the impact of evolving fundamental signals on prices.
This Is How Wal-Mart Will Pay Higher Wages

Reuters is reporting: Wal-Mart to impose charges on suppliers as its costs mount --
"It is not the way Walmart has done business in the past," Jetta said. "This approach suggests that they are seeking areas to offset their increased investment in wages, as well as offset their lack of organic revenue growth."
Netflix To Split 7 -1 

In soaring almost 100 percent this year, Netflix shares have reached nearly $700. As of last week, Netflix was the third-most expensive stock in the S&P 500.
I've talked about Netflix for quite some time. 


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The Greek deal has collapsed. Creditors refuse new terms. The new terms:
a) more bailout money for Greece
b) more promises from Greece

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