Update On Bakken CBR And Why DAPL Is Not Needed -- RBN Energy -- September 23, 2016

Active rigs:

	9/23/2016	09/23/2015	09/23/2014	09/23/2013	09/23/2012
Active Rigs	33	69	193	187	185

RBN Energy: an update on Bakken CBR and why the DAPL doesn't matter.

For the first time since the start of the crude-by-rail (CBR) boom a few years ago, just as much crude oil is being transported by rail to PADD 5—that is, to states in the western U.S.—as to the Eastern Seaboard states in PADD 1. This primarily reflects the facts that 1) CBR deliveries from the Williston Basin/Bakken to PADD 1 continue to plummet and 2) refineries in the West remain reliable buyers of railed-in crude from the Bakken and Western Canada. Will CBR shipments to the East Coast continue to fall, or have we seen the worst of the decline? Today we take a look at recent trends in crude movements by tank car, and a look ahead.

As we’ve discussed often in the RBN blogosphere, the volumes of U.S. and Western Canadian crude oil moving out of production areas in tank cars via railroads rose sharply in 2011-12, maintained high levels through 2013-14, and declined through most of 2015 and year-to-date 2016. There are a number of reasons for both the rise and fall of crude-by-rail (CBR).

The rise was spurred in large part by the lack of sufficient pipeline infrastructure, primarily out of the Williston Basin/Bakken, and to some extent in the Permian Basin, the Denver-Julesburg and other tight-oil and shale plays where crude production was soaring. Building rail-loading terminals represented a logical, near-term fix—they could be constructed quickly and at relatively modest cost (filling a transportation-capacity gap until pipelines were developed), and using the rails gave shippers destination flexibility (allowing oil to be moved to wherever the netbacks were highest).

Railed shipments of crude within the U.S. averaged only 55 Mb/d in 2010 and 121 Mb/d in 2011, but rose to an average of 394 Mb/d in 2012, 709 Mb/d in 2013, and 867 Mb/d in 2014 before falling back to 754 Mb/d in 2015.  U.S. CBR averaged only 439 Mb/d (on average) in the first six months of 2016 and had declined to only 363 Mb/d by June 2016.

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Saudi Arabia Blinks

Saudis offer oil cut for OPEC deal if Iran freezes output. Political theater. Won't amount to a hill of beans.

Former OPEC president optimistic there will be deal in Algiers -- Bloomberg. Why would we want things to change. I think Americans like $2.00 gasoline and they also like to see Saudi struggling. But just the fact that "folks are talking" tells me how badly Saudi is being affected.

Rigzone: production freeze never likely to happen. If so, Saudi apparently doesn't mind giving away their only asset for $50/bbl.

Kingdom comedown: falling oil prices shock Saudi middle class -- WSJ. Let them eat cake.

To boost state finances, Saudi Arabia cut fuel, electricity and water subsidies in December, after posting a record budget deficit last year. It also plans to cut the amount of money it spends on public wages and raise more nonoil revenue by introducing taxes.
But in response to these moves, inflation more than doubled from last year to about 4% now, crimping consumers even more.

The government doesn’t have much choice. Saudi Arabia’s real growth in gross domestic product slowed to 1.5% in the first quarter from the year-earlier period, according to its statistics office, and Capital Economics says data suggest it may have contracted by more than 2% in the second quarter. Much of that slowdown is related to consumer-facing sectors, which have struggled since the start of 2016 as rising inflation has eroded household incomes.

The political stakes for managing this slowdown are high. Saudi Arabia survived the Arab Spring unrest that toppled several autocratic leaders across the region and forced some others to change, largely by offering cash handouts and more government jobs to placate its people. About two thirds of Saudi workers are employed by government related entities.

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The Apple Page

Yahoo says 500 million accounts were hacked back in 2014. Remember all the grief Apple got with regard to its cybersecurity -- the FBI wanting Apple's system access during the San Bernardino terrorism story?

Apple says it is stepping up plans for an Amazon Echo-style device. Looks like Apple is again playing catch-up. Amazon is very, very impressive.

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Miscellaneous

Harvard MBAs? Harvard Endowment reports a loss.

Samsung rushed to replace batteries: complaints arise over replacement batteries for Samsung Galaxy Note 7 -- overheating and quickly losing batter power.

Petrobras will sell 90% of its natural gas pipeline unit to Brookfield Asset Management.

Clinton wants estate tax increased. Any surprise here? Proposes top rate of 65% for death tax.

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The Market

Open: Dow 30 down 21 points at the open. 

Futures: down about 30 points. WTI about $46. At the bottom of the sweet spot.

Yesterday's close: up 98 points, to 18,392. Ah, yes, Bob Pisani: the real reason for the rally yesterday. LOL. It's all about the Fed. Another non-story. See graphic at this post.