Tuesday, July 12, 2016

Saudi Arabian Minister Of Energy Has Reason To Worry -- July 12, 2016


July 13, 2016: COP's break-even price is $45, over at SeekingAlpha --
The price of oil is expected to rise going forward on the back of a conducive demand-supply environment. This will help ConocoPhillips achieve positive cash flow since the company had forecasted neutral cash flow at a Brent price of $45/barrel on the back of its capital budget reduction and dividend cut. In comparison, Conoco's earlier cash flow neutrality point was at a Brent oil price of $60 a barrel.
July 13, 2016: Reuters is reporting Saudi Arabia starting to talk the talk to drive up prices; no evidence of any action however. 
OPEC delegates say comments from top exporter Saudi Arabia, which two years ago led the group to drop its historic role of supporting oil prices, are a change in tone and a sign the kingdom is looking - verbally for now - to prop up the market.
Khalid al-Falih, who took over this year from longserving Saudi oil minister Ali al-Naimi, told German newspaper Handelsblatt that an oil price higher than $50 is needed to achieve a balance in oil markets in the long term
There is certainly no sign yet of an actual policy shift by Saudi Arabia, or of the kingdom cutting supplies to support prices. Indeed, Riyadh told OPEC it raised its output in June to within a whisker of a record high reached a year ago. 
But OPEC insiders say Falih's comments, and a remark he made last month raising the possibility Saudi Arabia may return to its role of balancing oil supply and demand, contrasted with previous statements from Saudi oil officials. 
"This a change in the Saudi position," an OPEC delegate from a major Middle East producer said of Falih's remarks. "Before, they did not mention a range of prices they were looking for."
It seems Saudi Arabia's sense of "balance in the oil market" is different than my sense of "balance in the oil market."

Original Post
Earlier today there was a news report that suggested the Saudi Arabian Minister of Energy was "worried." He felt oil needed to be priced above $50, somewhere between $50 and $100. Good luck.

Three hours ago it was reported that WTI tumbled (in price) due to a smaller draw than expected:
The latest American Petroleum Institute (API) report on Tuesday showed crude oil supplies rose to their highest point in ten weeks despite expectations of a 3 million barrel draw.
The API said crude oil defied the anticipated draw, recording a 2.2 million barrel build instead. Gasoline and distillates also reported major builds of 1.5 million barrels and 2.6 million barrels, respectively.
Investors had expected a 900,000-barrel draw for supplies at the Cushing Oil Hub in Oklahoma. However the API said it was a much smaller figure at 166,000 barrels.
Yes, I would say the Saudi Arabian Minister of Energy has a lot to be worried about. It looks like American producers are making money on $40 oil.

Whiting With Three New Permits -- July 12, 2016


November 5, 2016: see note below regarding #20336. This well has been re-fracked and is updated here.
Original Post
Active rigs:

Active Rigs2873190186212

Wells coming off confidential list Wednesday:
  • 30918, SI/NC, WPX, North Segment 6-5-4HA, Van Hook, no production data,
  • 32376, SI/NC, SM Energy, M Haugen 14B-24HN, Smoky Butte, no production data,
Three new permits:
  • Operator: Whiting
  • Field: Cow Creek (Williams)
  • Comments:
Six permits renewed:
  • CLR (4), two Charleston permits, two Olympia permits, all in Williams County
  • HRC, a Fort Berthold permit, in Dunn County
  • Hunt Oil, an Oakland permit in Mountrail County
One producing well completed:
  • 20336, 1,162, BR, Sun Notch 43-32H-R, Sand Creek, t9/11; cum 41K 5/16; permit for Three Forks, 1280-acre spacing; to start on/about 2/15/11; spud 3/13/11; reached TD 4/24/11; stimulated 8/8/11 with 20 stages, 2.1 million lbs; IP of 1,162; sundry form received 10/9/15, a request to redrill the lateral of this well; and amend the name of the well to Sun Notch 43-32H-R; frack data for re-drilling not available; API: 33-053-03451; FracFocus shows only the 2011 frack;

Production profile of #20336:

PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

30234, 1,844, BR, Sun Notch 43-32TFH, t11/15; cum 99K 5/16, production profile:

PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

22914, 2,954, BR, Sun Notch 44-32TFH, Sand Creek, 4 sections, t5/13; cum 194K 5/16; original frack plan 20-stage sliding sleeves with swell packers; permit says 1280-acre spacing; spud 2/18/13; TD reached 3/13/13; stimulated 5/11/13 with 5 stages, 400K lbs with IP of 2,954; no other frack data provided; production profile:

PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

Incredible Hailstorm In Western North Dakota, Eastern Montana -- July 12, 2016

In addition to the photos and the video, some interesting comments about hailstorms at this Weather Channel link. Some of the worst damage was in/near Killdeer, North Dakota.

Saudi Energy Minister Is Worried


Later, 8:40 p.m. Central Time: Saudi Arabia Minister of Energy has reason to be concerned: American operators apparently making money on $40-oil.
Original Post
I didn't watch the video. I only read the headline and the caption. The caption says the Saudi Arabian minister of energy thinks oil needs to be between $50 and $100. He says $50 oil is too low. Comments:
  • that's a pretty wide range
  • the tea leaves suggest we are stuck in a trading range of $45 to $49 in current US dollars
  • Saudi will hemorrhage cash reserves at anything less than $90, and below $60 their losses are unsustainable
  • there is no evidence that Saudi Arabia will/can significantly increase crude oil exports
I just saw the video -- don't waste your time.

Active Rigs Back Down To 28

Active Rigs2873190186212

Market At Late Afternoon

NYSE, new highs: 277
  • Cabela's
  • Chevron (a big whoop)
  • Cliffs Natural Resources
  • XOM (a huge whoop)
  • Medtronic
  • Murphy USA
  • Newfield Exploration (NFX) (who wudda thought?)
    ONEOK Partners (OKS)
  • Winnebago Industries
NYSE, new lows: 2
  • Humana
GOP Hypocrite

Paul Ryan defends the wall around his own home, but won't put up a "wall" to protect America.  He says he put up the wall around his own home to protect his three children. The ranchers in Arizona and Texas along the Mexican border know exactly what we're talking about.

The Road To New England: Pipeline Phobia -- Bloomberg -- July 12, 2016

This is a cool story from Bloomberg. Again, I would not have known about this story had it not been for the blog and readers who alerted it to me sometime ago.

I've actually blogged about the Mystic River (once) before. See these other posts regarding the linked Bloomberg story above:
Here's the most recent article, titled "Pipeline Phobia Keeps New England's Unlikely Trade Route Open" -- reminds me of the rum and molasses trade during the Revolutionary War:
Thanks to the shale revolution, the U.S. has plenty of natural gas of its own. All along the eastern seaboard, a chain of import terminals -- built when the country expected to get its fuel from abroad -- now lie idle.

Except one.

For reasons that have to do with environmental politics and geology, New England is bucking the trend. Three or four times a month, a police helicopter escorts giant ships through Boston Harbor, as they deliver liquefied natural gas from Trinidad to a terminal on the Mystic River. [And spewing all that CO2.]
Why buy from the Caribbean, when so much cheap gas is pumped out of Pennsylvania and Ohio? One objection is the new pipelines needed to bring it to New England. The Northeast is famously cold in winter, and it sits on beds of granite that make underground fuel storage a problem, so gas and power prices typically spike way above the rest of the country when there’s a freeze. But using shale gas to cut the bills means a longer-term commitment to fossil fuels, and any proposed pipeline route triggers local objections: it will leave a scar along the Catskill Mountains, or pose a safety risk to residential neighborhoods. That’s the dilemma that has given Engie SA’s import facility near Boston, unlike all its peers, a new lease on life.

“We’ve been competing with pipelines since we opened,” Carol Churchill, a spokeswoman for the French utility in Massachusetts, said by phone. Once the gas arrives in Boston, some of it goes straight to an adjacent Exelon Corp. power station and the rest is transported via existing pipes or by truck. “It doesn’t make sense to build a pipeline to satisfy demand for 30 to 40 days a year,” Churchill says.

That argument has seen off a few potential rivals. Kinder Morgan Inc. scrapped its proposed $3.3 billion Northeast Energy Direct project in April, after failing to sign up enough customers. The Constitution Pipeline, intended to bring Marcellus gas from Pennsylvania, has been held up because New York denied a water permit, amid concern about contamination of the city’s supply.

Solution or Stopgap?

Instead, New England relies on tankers like the BW GDF Suez Everett, a regular visitor, whose logbook reflects the surge in Yankee demand. It used to roam the world’s seas, putting in at places like Singapore, Nigeria and Yemen; this year, it’s been plying a straight shuttle between Trinidad, where it loads up with LNG, and Boston.

Engie’s terminal there looked like it was sliding into disuse a couple of years ago, but now it’s taking in more cargoes than at any time since 2012. It supplied 11 percent of New England’s gas in January.

To pipeline-builders, that’s a stopgap not a solution. They point out that New England, like other parts of the U.S., has a growing appetite for natural gas in homes and power plants, as dirtier fossil fuels like coal and oil are phased out. Gas-fired plants are providing more than half of the Northeast’s power supply this month, up from 15 percent in 2000.
Wow, I did not know it was a French utility. Now, it finally all makes sense. LOL. This is how the 13 colonies continue to thank France for their help in the Revolutionary War.

Much, much more at the link.

Hamilton, The Revolution

Speaking of the American Revolution, Lin-Manuel Miranda and Jeremy McCarter have just published their book on the Broadway play, Hamilton: The Revolution. It's a very high-quality book and I think anyone who is thinking about buying it sight-unseen will not be disappointed.

The Drunken Botanist

Another great little book is The Drunken Botanist: The Plants That Create The World's Great Drinks, Amy Stewart, c. 2013.  I had not seen this book before. It's pretty clever. It's a very, very good book on botany but also includes some great cocktail recipes.

Whenever I visit a new "Mexican" restaurant, I always order chile relleno. By ordering the same thing in each new restaurant I get a feeling for how "good" the restaurant is, if that makes sense.

Likewise, now that I understand the "classic martini" -- which I think is a misnomer (a martini is a martini; everything else with martini in its name is simply flavored vodka or gin) -- when looking at a book on cocktails, I immediately look up the author's recipe or comments on martinis. That tells me a lot about the author. In this case, Amy Stewart has it exactly right. It is interesting that she got it so "right," because her bio says she is from California (a state not exactly not known for martinis) and there is nothing in her bio about her having any experience with cocktails. But despite that, she got the martini exactly right.

Remember: Hillary Wants To Ban Fracking -- July 12, 2016

From the Obama administration, over at Twitter: "Shale oil and condensate production in Ohio reached a high of almost 22 million bbls in 2015."

In addition, according to the Obama administration, Ohio had the 2nd highest year-over-year increase in natural gas production in 2015. The increase is from 1,300 fracked wells.  In Ohio, 1,075 Utica wells have been fracked and 29 Marcellus wells have been fracked, something Hillary does not support. She has been very, very clear on this.

The EIA says "we've" issued over 5,231 Utica wells to be fracked. I'm not exactly sure what he (Scott Kell, EIA) means by "we." But again, these are fracked wells which Hillary does not support.

Scott Kell, EIA, does note that fracking does NOT cause earthquakes (seismicity, as they call it), but rather seismicity, according to the EIA, is associated with salt water disposal: "Ohio was the first state to promulgate rules regarding seismicity caused by brine injection." But then this -- a bit of "hedging": "we've had about 90,000 stimulations with only three wells producing seismicity from hydraulic fracturing in Ohio."

US Natural Gas Glut Is Disappearing -- Reuters -- July 12, 2016

I did not read the article, but the John Kemp does not support that headline that says "US gas glut is disappearing." If anything the natural gas glut has increased slightly in most recent report. The amount of injection might be decreasing compared to historical norms, but the graph by John Kemp at Twitter shows natural gas working storage as high as ever for this time of year.

In fact, here's the story -- I went over and looked at it:
  • U.S. natural gas prices have risen by a third since hitting a two-decade low in the first quarter, amid signs supply and demand are rebalancing and excess stocks left over from an unusually warm winter are being worked down.
  • The volume of gas in working storage hit a record 4.01 trillion cubic feet in November 2015 and is still at 3.18 trillion cubic feet, according to the U.S. Energy Information Administration.
  • Gas stocks are 513 billion cubic feet (19 percent) higher than in the same week in 2015. But the build has shrunk steadily from a record 1.014 trillion cubic feet (69 percent) in March.
So, natural stocks are down, but still at record levels for this time of year according to the John Kemp graphic at Twitter. So, perhaps the "glut is disappearing" -- but it's all relative.

Also at Twitter, Steve Kean at EIA says "natural gas exports to Mexico are booming at a record level of about 3.6 bcf/day.

Also at Twitter from the EIA: global energy intensity continues to decline. "Intensity" is defined as "BTUs/trillion dollars GDP." The graphic:
  • World average: from 8.1 quadrillion BTUs/$1 trillion GDP in 1990 to 5.8 in 2015 (a 28% drop)
  • OECD countries: from 7.2 quadrillion BTUs/$1 trillion GDP in 1990 to 5.2 in 2015 (a 28% drop)
  • non-OECD countries: from 9.8 quadrillion BTUs/$1 trillion GDP in 1990 to 5.9 in 2015 (a 40% drop)

Monday's NDIC Daily Activity Report Has Just Been Posted -- July 12, 2016

Yesterday's daily activity report has just been posted: https://www.dmr.nd.gov/oilgas/dailyindex.asp.

The report included the results of eleven (11) producing wells completed by SM Energy. From this report, it appears we know how to determine formation targeted based on legal names used by SM Energy.

In this report, also note that Halcon used 57 stages in most recent frack reported, and 4.9 million lbs of proppant.

Filloon: Rig Counts In The Bakken Matter Little In Predicting Production -- July 12, 2016

This is great to see. I have opined out loud many times, asking when we would see some serious analysis of this issue -- rig counts matter little in the Bakken.

Today, a Mike Filloon update: rig counts matter little, as horizontal wells have changed how we predict future production.

  • Given the large differences in oil and natural gas production depending on geography and well design, rig counts do little to predict future production.
  • Rigs specific to horizontal drilling in the Permian, Eagle Ford, Bakken, and STACK are under the greatest demand
  • Rigs have moved to the best core areas, and now operators have switched from exploration to development mode, drastically improving production per rig
  • Higher tech rigs and better techniques have decreased the time needed per well, so more wells can be drilled per rig
The article will be archived. 

Starting The Day With 29 Active Rigs; Venezuela -- Tic, Tic, Tic -- July 12, 2016

Active rigs:

Active Rigs2973190186212

RBN Energy: if all trades were index deals, what would the index be?

Yesterday, I gave four reasons why the tea leaves suggested the worse may not be over for the Bakken. One of the four reasons included the global economy. Just two hours ago, Platts reported that Chinese oil demand fell 2.7% in May, year-over-year.

Meanwhile, this Bloomberg headline: OPEC sees rising crude demand in 2017 as Saudis pump near record. Data points:
  • Saudis produced 10.6 million bopd in June to meet summer demand (not only did it not seta record, the number itself is unremarkable; Saudi domestic demand is soaring)
  • Saudi production increased by 280,000 bopd to 10.55 million; close to the record 10.564 million pumped last June
  • OPEC said it will have to produce 33 million bopd next year to meet demand; 142,000 bopd more than its June output
  • OPEC production in June increased by 264,100 bopd to 32.858 million
  • global oil demand will increase by 1.2 million bopd to reach an average of 95.3 million
  • growth will be concentrated in emerging economies such as India and China
  • oil production outside OPEC will fall by 100,000 bopd (incredibly insignificant) to 55.9 million 
  • non-OPEC decline is smaller than the contraction of 900,000 bopd expected this year 
Reuters reports that price of oil rose during recent "brief" Iraqi loading halt. Data points:
  • brief halt due to pipeline leak, not terrorist or conflict-related
  • although loadings resumed overnight, Iraq plans to cut crude oil exports from its southern ports to 2.79 million bopd in August from 2.99 million bopd planned for July
  • story raises more questions than it answers
Newsweek has a nice piece on Jeff Bezos (Amazon).

Reuters reports that Citibank will close the Venezuelan government's foreign currency accounts within a month. According to the report, due to strict currency controls in place since 2003, the government relies on Citibank for foreign currency transactions.

AP's big story today: in Venezuela, the "line" takes precedent over everything else -- including stopping a murderer.

Closing Out One Poll, Posting A New Poll -- July 12, 2016

Closing out the poll in which we asked, what percent of automobiles in Germany are EVs, rounded to nearest full percent? The answer was 0%.

New poll: today, President Obama will visit Dallas to eulogize the five slain police officers. The slaughter of these police officers created great soul-searching among some in the "Black Lives Movement." Will President Obama give BLM a shout-out; encourage them to "continue the course"?

The poll at the sidebar at the right will be up for a very short period of time.

Later: after posting the poll and the short note above, I happened across this op-ed while reading today's WSJ print edition.  Google healing after dallas without Obama wsj.

Later: this is also the topic of talk radio in Dallas-Ft Worth today -- just announced (8:16 a.m. Central Time).