US Crude Oil Imports Remain Persistently High -- September 15, 2016

Biggest energy story of the day: Brits okay huge nuclear power plant at huge price. Story below. 

AAPL: It's been a wild week for the world's biggest stock. Apple shares surged 3.5 percent Wednesday — after rising 2.4 percent Tuesday — and climbing 2.2 percent on Monday. Over the past three sessions, the company has added some $50 billion in market capitalization. The reason: their iPhones do not explode.

Active rigs:

	9/15/2016	09/15/2015	09/15/2014	09/15/2013	09/15/2012
Active Rigs	34	71	199	178	193

RBN Energy: US crude oil imports continue to rise.

Net crude oil imports to the U.S. Gulf Coast in 2016 have been running well above the pace set last year, the increase driven by a combination of lower U.S. crude oil production, rising import levels and relatively flat export volumes. The trend toward higher net imports –– an outgrowth of the end of the ban on U.S. crude exports –– is significant in that it affects oil inventories and oil prices. What’s driving this trend, and how soon might net imports peak? Today, we survey recent developments on the crude oil import/export front, with a focus on the Gulf Coast.

Crude oil traders and the audience at the U.S. Open in Flushing Meadows, NY had one thing in common recently: their heads have been whirling, side to side and up and down. In the case of crude oil traders this was due to a sharp drop in imports in the week ending September 2, followed by a sharp rise the following week. The rollercoaster was caused primarily by the coincidence of three factors: a hurricane preventing discharges at Chevron's Pascagoula, MS refinery and disrupting offloading at the Louisiana Offshore Oil Port; the Labor Day holiday slowing operations elsewhere; and the decision by importers in Texas to reduce their intake of imported barrels ahead of the ad valorem tax assessment on September 1. Soon after tax day, the crude came flooding back in. 

Refiners typically would be expected to take in less crude oil in September ahead of maintenance season in the fall. So far, this is not panning out. Waterborne imports in the first 12 days of September are at 3.24 MMb/d, compared to 3.22 MMb/d in August. Based on the number of vessels currently sailing toward the U.S. Gulf Coast, we expect the week ending September 16 to see a dip in imports, followed by a rebound in the week ending September 23, and an equally strong showing in the final week of September. Looking at the entire month, we expect September to show imports about 500 Mb/d higher than in the same month of 2015. This is a wider gap than the 300-Mb/d excess of August 2016 over August 2015. So, if there is to be an inflection point suggesting lower imports, it doesn’t appear likely to happen in September. 

The most important short-term driver for the swings in import levels is shipments from the Middle East Gulf. (Latin American deliveries can swing widely over a few days but quickly revert to a mean.) Middle East producers prize the U.S. market, in part because it remains the largest consumer of oil in the world, and they have kept their prices for U.S. buyers low. Flows from the Middle East have stayed correspondingly high. Looking beyond September, there appears to be enough Middle Eastern oil on the water expected to arrive along the U.S. Gulf Coast in October to hold imports near 1.1 MMb/d for that month. This is in line with August and September levels. So again, there’s no inflection point on the horizon.

Two comments:

• nothing mentioned about overall US gasoline demand (in other words, we saw the numerator, but not the denominator
• no comment about fact that Saudi Aramco has a huge refinery on the Gulf Coast 

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Job watch: here's the spin for the day -- "applications for US jobless benefits rise less than forecast." Applications edged up 1,000 to 260,000; four-week average dropped to 260,750. 

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UK Approves Huge Nuclear Power Plant

Updates

September 16, 2016: Bloomberg Gadfly weighs in on this. 

Original Post 

Really? Approval for UK's first nuclear-power plant in 20 years announced today. Could be most expensive object ever built: $24 billion. Data points:

• two new reactors
• to be built by French utility along with China General Nuclear Power Corp
• Hinkley Point C, Somerset County, southwest England near two existing plants, one of which has been decommissioned
• huge project; from wiki: 3,200 MW nuclear power plant: $24 billion / 3,200 MW = $7.5 million / MW
• equivalent to three large coal-fired stations
• UK pledges to pay the French utility twice the current market price for electricity for the next 35 years
• French utility gets 9% return on investment
• Brits could pay $48 billion above the market rate over the lifetime of the project
• NOTE: not pay $48 billion BUT pay $48 billion ABOVE the market rate for the project
• would satisfy 7% of UK's power demand
• this is before cost over-runs
• will take a decade before it comes on-line 
• EIA's estimate for new power plant costs
• this speaks volumes about state of global energy

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US retail sales in US decline August by more than forecast, falling 0.3% vs expected 0.1% drop.

Maybe there wasn't enough to buy: manufacturing output in US fell in August. 

New York manufacturing remained weak in September. 

Mexico: Ford moving all small-auto production in the US to Mexico. Toyota moving Tacoma pick-up production from US to Mexico.

Benghazi: Colin Powell says, in e-mail to Condi Rice, that the Benghazi congressional hearings were a witch hunt. Rice said she agreed.

IRS. House GOP won't push for vote on impeachment of IRS chief.

Richard Dawkins: oldest fossils in Greenland (stromatolites) pushes origin of life on earth back to 3.7 billion years ago. Previously, origin of life was estimated to be between about 2 billion and 1 billion years ago (John Hands, CosmoSapiens, c. 2015, p. 286).

AAPL: shares are soaring -- CNBC yesterday.

Energy: Zacks highlights: Spectra Energy, Enbridge, Apache, EOG, and Tesoro.

Crazy: US consumes about 10 million bbls of gasoline daily. India? one-half million bbls of gasoline daily.

Crazier: Venezuela where eggs now cots $150/dozen. 

Most valuable sports franchise: Dallas Cowboys, $4 billion. In 1989, the current owner paid $140 million for the franchise.

Grisly. Water runs red. I was witness to similar "atrocities" when stationed in Turkey.

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Lost Decade

The story in today's WSJ graphically shows how bad things have gotten under the Obama administration.

The Journal looked at income gains/losses among states, comparing 2015 income with income in 2008. It's hard to say whether the 2008 figures were pre-recession / post-recession. The recession hit full-force in 2009.

The Journal looked at 13 states -- chosen because they are politically important this year. Of the thirteen only three showed any income increase over the past decade, and the gains were minimal:

• Colorado: 1.9%
• Iowa; 1.5%
• New Hampshire: 0.2%

My hunch: expenses over the past decade grew a lot faster than 2% for those folks.
Now the really bad news, the ten states who saw their incomes actually decrease:

• Nevada: -15.5%
• Georgia: -8.5%
• Arizona: -8.2%
• North Carolina: -6.7%
• Florida: -6.0%
• Michigan: -4.5%
• Ohio: 3.3%
• Wisconsin: -3.0%
• Virginia:-1.7%
• Pennsylvania: -0.2% 

Earlier in the week, the Journal reported equally bad news with an upbeat headline:

• Median household incomes stood 1.6% shy of the 2007 level, before the last recession took its toll, and 2.4% below the all-time high reached in 1999.

So, everyone is excited that US household income is surging -- and yet it is 2.4% below that of 1999.

Two lost decades. The first under George Bush. The second under Barack Obama.

However, that wasn't the big story. The big story was the "haves" vs the "have-nots." Some states are doing well; others are in deep, deep trouble.

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Valiant Ambition: George Washington, Benedict Arnold, and the Fate of the American Revolution

Nathaniel Philbrick

c. 2016

DDS: 973.4 PHI

Chapter 4

The Year of the Hangman

1777

Recap: 1775 - 1776

• Benedict Arnold, successful in holding Fort Ticonderoga; prevented British forces from the north connecting with Howe on the Hudson; HQ is Morristown, NJ
• Geo Washington: a series of failures; retreats; crossed the Delaware twice; finally takes Trenton, NJ; his HQ across the Delaware in Newton, PA

This chapter:

• Benedict Arnold in Morristown; wants to rid his hometown, New Haven, CT, of the Brits
• both Geo Washington and Arnold upset with Continental Congress
• Geo Washington handles it better than Arnold
• Benedict sees action in Connecticut; Brits perhaps won, but at great cost, and not much to show for it
• Washington moves HQ to Morristown, NW, where Benedict had been
• Benedict promoted to major general based on actions in CT, but still not give seniority; he submits letter of resignation 
• "year of the hangman": so-called because the Brits planned to hang several turncoats/rebels (not sure if that ever happened)

Key takeaway: 

• Geo Washington finally switches tactics that will allow him to win the war; quit fighting the British offensively; fight a defensive war; guerilla war; war of attrition

Now: 

• the chapter is important for continuity, but not much happened in the big scheme of things