Saturday, May 6, 2017

OPEC Runs Out Of Options -- Bid To Boost Oil Prize Fizzles -- Bloomberg -- May 6, 2017

New Poll

With regard to the stories in this post, let's see what readers think. New poll at the sidebar in which we ask whether one thinks the price of WTI will hit $50 by the end of May, 2017.


May 8, 2017: these stories are starting to remind of the Kardashians. A lot of fluff. All that matters: the numbers. The drawdown. And we see the drawdown numbers every Wednesday. Everything else is fluff.

May 8, 2017: CNBC joins in -- agrees that OPEC cuts have not succeeded; Saudi/OPEC mis-played their hand. Even another six-month extension won't help. I have no research staff and am a novice when it comes to the oil and gas sector. A few days ago I suggested that it will take 200 weeks to bring down US inventory to historical levels at the current rate of draw down. And now this:
"OPEC producers have under-estimated the volumes to be taken off the market," said Victor Shum, vice president at IHS Energy.
May 8, 2017: via Twitter --

May 7, 2017: it looks like Saudi Arabia have run the numbers and their storage terminals will still be overflowing at the end of 2017. They need to extend production cuts (wink, wink) while making up the difference with flooding the globe with oil from their storage terminals. Saudi Arabia now suggests they will need to extend production cuts beyond 2017.

May 7, 2017: having gotten caught with its siphon in its overflowing storage tanks, there are indications that Saudi Arabia is now going to actually cut crude oil exports. If so, most likely this is what happened: Saudi Arabia misjudged how much crude oil could be removed from storage based on IEA's optimistic forecast for increasing global demand. Whether they moved as much oil out of storage as they had wanted, seeing no improvement in price, and seeing that they had been caught in one big shell game, Saudi may be actually cutting exports. Ever since the Clinton administration, I've learned how important it is to closely parse announcements. When OPEC said they would cut production, OPEC did not mention anything about using the opportunity to make up the difference by shipping oil from storage. (Remember: the US is doing the same thing -- releasing oil from the SPR, but for very different reasons, and releasing oil from the SPR is of no consequence, the amount is so small that is being released over time.)

By the way, compare the graph at this post (US imported oil from Saudi Arabia) with this graph from the linked story above:

Yes, I know it takes 45 days for Saudi oil to reach the US.

May 7, 2017: less than 24 hours after the original post, Bloomberg had yet another article on the OPEC debacle. I doubt there will be anything new. The lede:
The benefits of OPEC's agreement to cut output have proved elusive. With less than three weeks to go before the group's next meeting, something is very, very wrong as far as oil producers are concerned. And they have no easy solution to put it right.
The graph at the link is pretty amazing:
  • this past week, Brent fell to within 30 cents a barrel of its price before OPEC agreed to cut production (wink, wink) but not exports from crude oil storage
  • even without that brief dip, Saudi Arabia is now earning less from its oil sales that it was before concluding a deal that was meant to kick prices up to $60/bbl
  • part of the problem: Libya back on-line; Libya is exempt from any cuts and any ceiling limits (and Saudi Arabia is exempt from flooding the world with crude oil from storage terminals)
  • the usual canard is repeated: "oil supply is still expected to lag demand by a healthy margin in the second half of the year, resulting in a significant reduction in excess inventory" (at the rate of the US crude oil drawdown last week, it will take 198 weeks to draw down the crude oil inventory in the US to historical levels)
  • unfortunately the tea leaves all suggest global crude oil demand is falling, not increasing
  • the IEA still projects annual average crude oil demand growth this year, 1.3 million bopd; the tea leaves suggest otherwise   
Original Post
Link here.

I'm only interested if there is anything new in the story -- something new that hasn't been posted on the blog in the past four weeks. Let's see:
  • a rebound in US shale output and stubbornly-high stockpiles show the world's three-year glut isn't shifting (nothing new)
  • meeting in Vienna, May 25; most likely OPEC will "keep the course"; the alternatives look even worse (nothing new)
  • if OPEC cuts more, it is likely even more shale supplies might come along (not particularly new)
  • "with OPEC already showing near-perfect compliance in delivering its pledged 1.2 million bopd production cut" -- same old tune
    • OPEC based cuts on run-up in production
    • some countries exempt from any cut and any ceiling
    • Saudi Arabia caught siphoning off crude oil in storage to more than make up any production cut (wink, wink)
  • IEA still predicts a rapid reduction in the supply glut in 2H17; in fact, at the rate of the US drawdown this past week, it will take 200 weeks for US storage to get back to historical levels
  • global fuel stockpiles have actually increased during the first quarter, the IEA estimates (is this new? maybe)
  • "in the US, crude inventories are dropping, but remain near record levels" -- the drop has been trivial; a rounding error
  • "meanwhile, American production has roared back, growing by 523,000 bopd to the highest level in almost two years" -- EIA
  • it seems like EIA and IEA are on different pages (nothing new)
Bullets #9, #10, and #11 -- most noteworthy.

Meanwhile, elsewhere Russia is "crowing" about cutting more than it agreed upon. Regardless of agreements, does this really matter:
  • Under the deal, Russia pledged to reduce its average daily production gradually by 300,000 barrels to 10.947 million bpd from the October level of 11.247 million bpd.
Cutting from 11.247 million bopd to 10.947 bopd -- even before proposed cuts there was that much variation month-to-month. But I'm sure Russia is doing the same thing Saudi Arabia is doing: making up for cuts by taking crude oil out of storage. The whole thing is a shell game.


Savage Bakken Connector, Trenton, ND, Pipeline Declares Open Season -- Two-Mile Connector Pipeline -- May 6, 2017


June 23, 2017: all connection made; flowing smoothly as of June 6, 2017; Trenton, ND

Original Post 

Data points:
  • 2-mile, 10-inch connector pipeline
  • from the Savage Services Hub in Trenton, ND (just a few miles southwest of Williston) to the DAPL, also near Trenton, ND
  • initial capacity: 60,000 bopd
  • anticipated in-service date next month: June, 2017
  • customers must be able to provide at least 10,000 bopd for a minimum contract term of 18 months
Serves as confirmation that the DAPL is operating.

Real Estate Opportunities In Boston
Back Bay:
  • 22 Cumberland St. Two-family Row-Middle, built in 1890, 4,025 square feet, 17 rooms, 7 bedrooms, 5 baths, on 2,243-square-foot lot. $3,425,000
  • 19 Arlington St. #42 Condominium Row-End, built in 1864, 1,425 square feet, 3 rooms, 2 bedrooms, 1.5 baths, on 1,425-square-foot lot. $2,025,000
  • 180 Beacon St. #10B Condominium , built in 1968, 1,293 square feet, 5 rooms, 1 bedroom, 2 baths, on 1,293-square-foot lot. $1,650,000
  • 341 Beacon St. #3A Condominium Row-Middle, built in 1900, 1,065 square feet, 5 rooms, 2 bedrooms, 2 baths, on 1,065-square-foot lot. $1,475,000
  • 261 Commonwealth Ave. #5 Condominium Row-Middle, built in 1880, 1,155 square feet, 3 rooms, 1 bedrooms, 1 bath, on 1,155-square-foot lot. $1,395,000
  • 48 Commonwealth Ave. #1C Condominium , built in 2006, 798 square feet, 4 rooms, 2 bedrooms, 1 baths, on 798-square-foot lot. $1,025,000 
  • 15 Garrison St. #1 Condominium , built in 1899, 809 square feet, 4 rooms, 1 bedroom, 1 bath, on 809-square-foot lot. $685,000
  • 167 Beacon St. #2 Condominium Mid-Rise, built in 1910, 377 square feet, 2 rooms, 1 bedroom, 1 bath, on 377-square-foot lot. $410,000

Northeast Urgently Needs More Pipelines -- IER -- May 6, 2017

At the sidebar at the right, this story from IER (dynamic link at the sidebar at the right): the northeast urgently needs more pipelines.
  • Northeast residents pay 29 percent more for their natural gas than the U.S. average, and 44 percent more for their electricity.
  • Six of the 10 states where residents pay the highest prices for electricity in the country are New England states, with Connecticut, Rhode Island, Massachusetts and New Hampshire all above 16 cents per kilowatt hour (national average is 10.42 cents per kilowatt hour)
  • Industrial users in the Northeast pay more than double for their natural gas than the U.S. average, and 62 percent more for electricity.
That's alright. Industry is moving in droves to Texas. The US is quite a country:
  • west coast: technology
  • midwest: breadbasket
  • Great Lakes: dairy
  • Texas-Louisiana: manufacturing and energy
  • southeast: manufacturing
  • Florida: retirement
  • New England: banking

Texas: Hyperdrive -- May 6, 2017

This story has been posted numerous times on the blog in the past few months: the incredible build-out of the LNG export industry along the Texas - Louisiana gulf coast. Now, a short summary, a story brought over to Investor Village:
NG export projects planned for Texas' coast could have a total economic impact of about $145 billion of dollars and create thousands of jobs if approved by federal regulators, according to an industry group courting support for the proposed ventures.

Texans for Natural Gas said in a report that seven LNG export projects proposed or under construction in the state could raise $20 billion or more in tax revenue, create more than 135,000 jobs and have a total economic impact of roughly $145 billion. In addition to regional benefits, projects like the Freeport LNG export expansion could slightly reduce the U.S. trade deficit, the group said.

Roughly a third of U.S. LNG export projects are planned for Texas, which along with Louisiana has a natural gas pipeline network that can feed liquefaction and export terminals along the Gulf Coast. Freeport LNG Development LP's Freeport and Cheniere Energy Inc.'s Corpus Christi LNG export projects are both under construction, and the Exxon Mobil Corp.-linked Golden Pass project recently received the last of its major regulatory permits. Three export projects for Brownsville, Texas, are in review at the Federal Energy Regulatory Commission, as is the Port Arthur LNG export terminal proposed to be constructed along the Sabine-Neches Waterway.
US LNG export terminals are tracked here.

ROYGBIV: Now Comes YinMN Blue


September 14, 2017: the name of the new color crayon is "bluetiful."

Original Post
Crayola will be phasing out "dandelion yellow" this year. I bought several 24-count Crayola boxes as an investment since these will probably become priceless once "dandelion yellow" is completely phased out. See image below of current 2-pack available from Amazon.

At the time of the announcement, Crayola did not say what color was going to replace "dandelion yellow." They have now made the announcement that it will be shade of blue but the actual color has not yet been named.

There were a flurry of stories yesterday about this new blue crayon. From USA Today: Crayola's newest crayon color is a shade of blue that was just discovered.
A brilliant blue color, discovered accidentally by Oregon State University chemists, will soon be the newest addition to Crayola’s box.

The crayon color, inspired by the blue pigment known as “YInMn” blue," is the replacement for the recently retired Dandelion crayon. The vibrant blue was discovered by Oregon State University chemists who were heating up chemicals in hopes of finding new materials that could be used in electronics. In what the university calls a "serendipitous discovery," one of the chemical mixes came out of the furnace a striking blue. The "YInMn” moniker comes from the elements that comprise it: yttrium, indium, manganese and oxygen.

“With the discovery of YInMn brand new pigment, who other than Crayola would be best to bring it to life?” said Leena Vadaketh, Crayola’s VP of Research & Development, North America.
Wiki, of course, has a more complete story

The new crayon will arrive just in time for Christmas, 2017. It will get its new name after September, 2017, and the crayon will be available soon thereafter.