Biggest story of the week not being reported: Prince Salman was supposed to be crowned king this week; haven't heard a thing.
WTI: if it holds, we could have a huge day in the oil sector. WTI briefly hits $58/bbl -- something not seen since 2015. This "jump" in the price of oil may be function of lack of heavy oil for refiners: Keystone's northern leg is shut down due to leak in South Dakota; Venezuela may cut deliveries to US.
OPEC challenge: wild swings in Iraq oil production. From Bloomberg via Rigzone:
OPEC has an Iraq problem: the group’s second-biggest exporter is lurching between quota busting and production-crimping crisis, clouding the policy-making picture as ministers decide how long they need to extend output curbs.
Exports from Iraq’s northern fields plunged by about 40 percent in the first half of November after clashes between the federal army and fighters from the semi-autonomous Kurdish region disrupted fields in the disputed Kirkuk province. After consistently exceeding its output quota all year, Iraqi production dropped in October when the fighting started.
The Organization of Petroleum Exporting Countries, due to meet next week in Vienna, is already grappling with volatile production in Nigeria and Libya, and Iraq adds another layer of unpredictability. For policy makers, the short-term disruption risks masking a longer-term truth: Iraq, which only got a production quota last year after decades of exemptions, has never felt comfortable with constraints and wants to maximize the country’s potential output.Newcomer's guide to oil and gas; a new series being introduced at Rigzone.
Jobless claims: huge drop
- down 13,000 to 239,000 (forecast: 240,000)
- previous: 252,000 (revised upward from 249,000)
- NASDAQ and Russell 2000 both hit new highs
- Deere surges
- P&G: childish (I'm boycotting P&G products)
- DE and CAT leading indices higher
- truck manufacturing: on west coast, a huge truck manufacturing company has now gone to mandatory Saturdays to keep up with orders
- Apple introduces a new $750 - $1,000 iPhone every year and people stand in line to buy one
- GE microwave ovens last at least ten years before folks find a reason to buy a new one
Back to the Bakken
Coming off confidential list today:
- 33180, conf, Hess, BL-A Iverson-155-96-1312H-5, Beaver Lodge, no production data
RBN Energy: the changing economics of power generation in Texas.
Market forces are driving an overhaul of power generation capacity in Texas — the largest electricity-consumer in the U.S. Oversupply and low power prices have increased competition for the state’s power generators, forcing them to shut down older or less efficient plants or plants burning more expensive fuels. Just last month, Vistra Energy — the state’s largest provider of coal-fired generation — announced plans to shut down more than 4.0 GW of coal-fired generation capacity by early 2018, the equivalent of nearly one-fifth of the state’s total coal-fired generation capacity as of August (2017). At the same time, generation capacity for natural gas, wind and solar-sourced power are on the rise. Today, we look at the latest power generation trends in Texas and their potential effects on gas demand.
Market economics, and to some degree federal environmental rules, have been forcing U.S. power generators to rejigger their fleet of generation plants for some time now. It’s not unusual for utilities to retire older, less efficient plants and bring on new, more efficient and economical plants as better technologies becomes available. But in the past decade, that turnover kicked into overdrive as the Shale Revolution dramatically increased the availability and reduced cost of one of the primary fuels used to generate power — natural gas. Lower-48 gas production has surged from around 50 Bcf/d 10 years ago to more than 70 Bcf/d now, while national average spot gas prices have dropped from upwards of $5.00/MMBtu prior to 2010 to $2-3/MMBtu in recent years. This has happened at the expense of another major generation fuel — coal.
That’s because utilities practice economic dispatch — firing up the least expensive units first and the most expensive units last — with the economics being highly sensitive to the variable cost of the resource required to run the plant. We’ve discussed this in previous blogs on the topic -- but, in short, baseload generation — the minimum required by the grid around the clock — is served by the consistently least expensive, most reliable generators, which is usually nuclear plants. Traditionally, the next-cheapest power after nukes has come from coal-fired plants, followed by natural gas. But as gas supply surged and gas prices fell, economics began to favor gas over coal and prompted utilities to use a lot more of their existing gas-fired power generating units as well as to build more gas-fired generation capacity. Coal prices fell too, in response to the stiffer competition from gas. But because of regulatory pressures to burn lower-emission fuels, lower coal prices were not enough to prevent a lot of coal-to-gas switching in the power sector. Moreover, the lower price environment in some cases led to coal producers either temporarily or permanently shutting down mining operations and further reducing coal supply, and coal-fired power plants followed suit.Without the blog, I never would have thought about "dispatchable generation" -- a reader alerted me to that some years ago. Solar and wind energy are not dispatchable.
Coincidentally, a reader sent me a link to this article overnight: can the gas glut kill the Permian.
Notes For The Granddaughters
What my son-in-law brought home for Christmas, a Western Star.