Wednesday, July 6, 2016

Natural Gas Shortage This Winter? -- July 6, 2016

Bloomberg is reporting:
A blistering start to summer is helping put U.S. natural gas futures on course for the biggest gain in eight years.
Gas has surged 17 percent this year, rebounding from a 17-year low. Drillers, burned by earlier declines, are refilling storage at half last year’s pace as extreme heat boosts the use of air conditioners, increasing gas demand from power plants.
By November, supplies will probably drop below the five-year average, the benchmark for normal levels, for the first time in 13 months, based on storage rates.
Just four months ago, gas plunged after the warmest winter on record left the market with a glut large enough to last through the year. Instead, hot weather and a slowdown in shale production are eating into the surplus, signaling an era of higher prices as gas exports rise and electricity generation cuts into excess supply.
“We’re moving toward a potentially serious deficit in the supply-demand balance for this coming winter,” said one analyst.
Gas inventories were 25 percent above the five-year average in late June, down from 54 percent in April. An extended slide in production would erase the surplus by the end of the year, leaving stockpiles at a deficit to normal levels for the first time since May 2015 and pushing prices to $3 this month.

Oil Demand Might Peak By 2030 -- McKinsey -- July 6, 2016

As you go through the highlights of the McKinsey analysis, recall the proposal to build a petrochemical plant in North Dakota. These are the highlights of a recent McKinsey study as reported by the Oil & Gas Journal:
  • The energy demand growth rate worldwide will slow to 0.7%/year through 2050—30% slower than the firm originally forecast. Energy demand will grow in emerging and developing countries and decline in Europe and North America.
  • Chemicals will grow twice as fast as energy demand while demand for light vehicles peaks around 2023.
  • Demand for electricity will grow at twice the rate of nonelectric energy. Solar and wind will account for almost 80% of net added capacity and 34% of generation by 2050.
  • The fossil-fuel share of total energy will decline to 74% in 2050 from 82% at present. Gas will grow at almost twice the rate of total energy demand, while coal peaks by 2025. Oil demand growth will slow to 0.4%/year.
  • Carbon dioxide emissions related to energy will flatten and start to subside about 2035 as efficiency of combustion engines improves, electric vehicles increase in number, and power generation shifts to wind and solar.
  • Through 2035, the analysts say, 70% of growth in demand for liquid hydrocarbons will be for petrochemical feedstock.
  • But global demand growth for petrochemicals soon will fall to 1.2 times the increase in gross domestic product from the traditional 1.3-1.4 times GDP as mature plastics markets become saturated.
  • Increased plastics recycling and improved plastic-packaging efficiency can slow the rate further.
  • By 2030, meanwhile, electric vehicles might represent nearly half the new cars sold in China, the European Union, and the US and almost 30% globally, according to a business-as-usual case that for the first time includes adoption of autonomous vehicles and car-sharing.
  • “If the market penetration of electric, autonomous, and shared vehicles accelerates oil demand driven by light vehicles could be approximately 3 million b/d lower in 2035 than assumed in the business-as-usual case,” the analysts say. Accelerated adoption of light-vehicle technologies and changing plastics demand together might lower oil demand in 2035 by nearly 6 million b/d.
  • “An important result is that oil demand will peak around 2030 at fewer than 100 million b/d in this scenario,” the analysts say.

Three New Permits -- July 6, 2016

Active rigs:

Active Rigs3176191188213

Two wells coming off confidential list Thursday:
  • 26907, 1,716, HRC, Fort Berthold 152-93-19D-18-6H, Four Bears, 33 stages, 4.9 million lbs, t1/16; cum 76K 5/16; only 13 days in 5/16;
  • 31977, drl, Statoil, Lougheed 2-11 3H, Todd, no production data,
Three new permits:
  • Operators: Whiting (2), Crescent Point Energy
  • Fields: Banks (McKenzie), Blue Ridge (Williams)
  • Comments:
Five permits renewed:
  • EOG (2), two Burke permits in Mountrail County
  • Slawson (2), two Periscope Federal permits in Mountrail County
  • Whiting, a Pronghorn State Federal permit in Billings County
Two producing wells completed:
  • 30611, 347, XTO, Odegaard State 31X-16DXA, Midway, 4 sections, t4/16; cum 24K 5/15;
  • 31147, 454, XTO, Ryan 14X-9F2, Siversto, t3/16; cum 3K over 12 days;

26907, see above, HRC, Fort Berthold 152-93-19D-18-6H, Four Bears:

DateOil RunsMCF Sold

The Market At Midday -- July 6, 2016

The US Fed given "cover": the Fed probably won't raise rates until Brexit impact clearer. It could take several years for the Great Britain / EU relationship to unwind.


Even with a struggling market, we have 180 NYSE issues hitting new 52-week highs, including:
  • AEP (a big whoop)
  • Duke Energy
  • MDU (a big whoop)
  • NextEra Energy (so, what's with NextEra Energy -- day-after-day of new highs)
  • SRE (wow, another big whoop)
  • TransCanada (the Keystone folks)
  • UnitedHealth Group (the folks who dumped ObamaCare)
New lows: 46 -- a bit more than the last few days.

GDP Now -- 2Q16

Link here, July 6, 2016:
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2016 is 2.4 percent on July 6, down from 2.6 percent on July 1. The forecast for second-quarter real consumer spending growth ticked down from 4.4 percent to 4.3 percent after yesterday's light vehicle sales release from the U.S. Bureau of Economic Analysis. The forecast of the contribution of net exports to second-quarter real GDP growth declined from 0.25 percentage points to 0.15 percentage points after this morning's international trade report from the U.S. Census Bureau.
And didn't Janet Yellen suggest there's a 60% chance of rain a recession? Oh, I'm sorry, it was Deutsche Bank but there was a big picture of Ms Yellen at the story/link. The 60% chance for a recession is for the next 12 months.

Cape Cod and Rising Sea Levels 

From The New York Times, byline Provincetown:
It is a simple pleasure in a classic summertime locale: Pull a car between the stripes on the parking lot here, a ribbon of asphalt parallel to the water atop a sloped wall in the sand, and look right out over the beach, where one can see Cape Cod Bay meeting the Atlantic Ocean.
Here amid the unearthly dunes, Herring Cove Beach — and especially its north parking lot — draws locals from just down the road and travelers from hundreds of miles away, who might arrive in camper vans studded with American flags. Some come for a quick swim, others to watch the sublime sunsets, famous in New England because the beach faces west, not east.
But there is a problem, evident in the chunks of asphalt lying on the sand and the deep fissures in the lot, parts of which are so damaged that they are off limits to parking: The beach is eroding, and parts of this beloved spot, built in front of the dunes, not behind them, are slowly crumbling into the ocean.
The result here at the Cape Cod National Seashore raises a practical dilemma in a setting meant to be a place to escape: how to react to rising seas and eroding coastlines as climate change looms for coastal communities across the nation. The decision here was to demolish the parking lot and construct a new one 125 feet behind it, allowing for a restored shoreline in front of it.
If I had "all the money in the world" or better said, if "money was not an issue," I would have a home in Provincetown. 

Sharp Decline In Bakken Production In April, 2016, Due To Temporary Conditions -- Rystad Energy; Gasoline Stocks Along The East Coast Soaring -- July 6, 2016

From the Director's Cut for April, 2016, data and my comment:
Crude oil production:
  • April, 2016: 1,041,007 bopd
  • March, 2016: 1,111,421 bopd
  • Month-over-month change: a decrease of 70,414 bopd.
  • Month-over-month change: a decrease of 6%.
  • Comment: that's as big a decrease as I can remember.
I don't know if folks were surprised by that or not. I took it in stride but did not think much about it. I missed the analysis by Rystad Energy which was posted June 23, 2016:
Rystad Energy expects horizontal oil completion activity in the US Shale to outpace drilling operations by 30% in 2H16, resulting in the contraction of DUC inventory by 800 wells.
These additional completions will support total US oil output by providing an additional 300,000 -350,000 bopd to the exit-2016 rate.
The additional output will be more than sufficient to balance the base production decline. The inventory of 4,000 drilled but uncompleted oil wells (DUCs) is estimated to hold close to 2 billion barrels of oil reserves.
“Research shows that operators are now starting to complete wells that have previously been put on hold deliberately. This comes as more than 90% of the accumulated oil DUC inventory can be commercially completed at a WTI of 50 USD/bbl,” says Artem Abramov, Senior Analyst and product manager at Rystad Energy.
The recent extreme production decline - among the key crude producing states, North Dakota suffered from an all-time high historical decline rate of 70,000 bopd in April 2016 - fell far outside a natural 10,000 - 20,000 bopd range, which one would expect as a result of current completion activity and mature base production.
The significant decline acceleration appears to have come from older “low decline” wells brought on-line before 2016.
“It is not the first time such temporary shifts in base decline are observed, and they were caused by road restrictions imposed by the state over the month. This trend is unlikely to persist and should not be extrapolated to the US Shale industry in general,” says Abramov.
Where Is All This Gasoline Going To Go? 

Someone Is Going To Wake-Up To A Half-Billion Dollar Surprise -- KFYR-TV -- July 6, 2016

Someone will be surprised when they find that the project is not one-half million dollars but one-half billion dollars.

It looks like the project is already costing more than originally estimated.

But first the news that will shock someone when they find out how much this is really going to cost.

KFYR-TV is reporting:
The July 3 storm destroyed a big part of a half million dollar project (sic): the start of a fertilizer plant for farmers and ranchers at Dakota Gasification Company, near Beulah.
That's what was reported on the news or in the transcription: one-half million dollars.

In fact, it's a half-billion dollar project: $500,000,000 with a "b" and eight (8) zeroes, not $500,000 with an "m" and only five (5) zeroes.

But at least the headline writer got it right. The screenshot of the on-line story:

The project was initially estimated to be a $402 million project but they're now calling it a $500 million project (at least in the headlines).

Two comments:
  • possibly the headline writers simply rounded the number, something I often do; even at $402 million, I might round to $500 million 
  • I'll give the reporter a break; I make many, many typographical errors -- some I catch, some I don't
A much bigger question, seriously, though, is how much this will set the project back. It was supposed to be completed by next spring. 

We Start The Day At 31 Active Rigs In North Dakota -- Wednesday, July 6, 2016

Active rigs:

Active Rigs3176191188213

RBN Energy: update on natural gas pricing, being driven by supply/demand.

The Food Page

"Sorted Food" (or "SORTEDfood"/ was recently featured in The Wall Street Journal. I've only seen a few episodes so I can't say for sure whether I will subscribe or continue to follow but if you are a foodie or interested in recipes, this might be something you want to try.

Here's an example:

Ultimate Grilled Cheese Sandwich Recipe
  • 4 cups flour
  • yeast
  • salt, tsp
  • 1.5 hour to rise
  • punch down, in bread pan for another 1 hour
  • in oven with tray of water on bottom of stove 
  • 15 minutes at 425; 25 minutes at 350
Grilled cheese
  • a bit of mustard inside (fiery English)
  • Gruyere/cheddar
  • oregano -- a pinch
  • black pepper -- a bit
  • butter on outside (do not pan fry in oil or butter)
  • low heat to allow cheese to ooze before bread finishes
  • for last minute, cover pan -- will make it crispier

Average 2016 Crude Oil Price Well Below What OPEC Nations Need To Meet National Budgets -- July 6, 2016

OPEC countries need oil to average"around $100/bbl" for the year to meet their national budgets. Some countries may need slightly less than $100-oil; many need significantly more. Saudi Arabia is said to require an annual average of about $100/bbl.

The prices for oil this year are noted below. At the end of each month, I update the price for the most recent month -- just a rough number of what seemed to be the "average" price of WTI for that month.

There is nothing new here or unexpected. I started this little exercise at the beginning of the year, coming up with different "scenarios" just to see how the year plays out. At the beginning of the year I put an estimate in for each month (that's why one sees $45-oil for July) under five different scenarios. The scenario below is the one that now seems most likely.

For the first six months the number is the approximate price for WTI that I posted at the end of the indicated month. The last six months of the year, obviously, are estimates based on what's being forecast by different agencies, different bloggers.

I haven't seen anything to suggest we will get much above $50/bbl for the rest of the year, though some optimistically say we should see $60-oil this autumn.

But right now, the average for the 2016 calendar year looks like it is going to come in at about $45, way below what Saudi Arabia and the rest of OPEC need to maintain their budgets.

2016 Average

Atmospheric CO2 Data For June, 2016, Posted -- July 6, 2016

Down a bit from last month, 407.70 in May:

Atmospheric CO2 is tracked here, CO2 Now.

Atmospheric CO2 varies seasonally, so one cannot necessarily compare month-after-month. It is best to compare year-over-year. Atmospheric CO2 tends to peak in the spring (May) and then fall steadily through the summer, reaching its low point for the year around September, at which time it starts to rise again, rising during the winter months (northern hemisphere) and peaking around May, where the cycle starts all over again.

One can follow daily atmospheric CO2 readings here. For example, the most recent data available is from July 4, 2016, just a couple of days ago, an the reading was 405.70. The monthly average for July, 2015, last year, was about 402; for June, last year, about 403.