Futures -- August 6, 2017

Futures mean squat, but right now, 10:20 p.m. Central Time, Sunday --

• S&P 500: + 4.50
• Nasdaq: +20.50
• Dow 30: + 55

Let's hope no presidential tweet changes anything. Just saying. LOL.

By Ending The War On Coal, Trump Has Ensured The Success Of Coal-Powered Cars Worldwide -- August 6, 2017

Stateside -- Oh, Oh

Michigan, August 7, 2017: from Michigan Peninsula News --

A report from the Michigan Public Service Commission (MPSC) last week pointed out that Michigan’s electricity needs are secure for the next five years, but proved wary of the Lower Peninsula’s capability beyond that.

Of particular concern to the commission was the increasing retirement of older, coal-fired plants due federal environmental requirements, age and economic considerations. The commission noted that Michigan will have to import power from out-of-state producers to keep up with supply demands, and capacity requirements are increasing each year. Retirement of more resources increases the burden.

Europe Becoming More Dependent On Coal, Not Less

 This is an interesting analysis by Vera Eckert over at notalotofpeopleknowthat.com. Archived.

**********************************

An Update 

A reader sent me a fascinating New York Times article: "Under Trump, coal mining gets new life on US lands."

I thought I had already posted a similar story at an earlier post. I will update that post and bring it here -- it's that fascinating to me. There are some important "things" converging:

• first, the switch to global EVs cannot occur without coal; at the end of the day, EVs are coal-powered cars. Period. Dot
• second, a third Obama term (aka the Hillary debacle) would have stopped the coal resurgence in its tracks
• third, Trump has been in office ... T+196 days
• fourth, the press is fascinate with presidential tweets -- the really big stories are happening in his departments -- like the Department of Interior; Department of Energy; Department of Homeland Security

From The New York Times' article:

The Obama administration, he said, had become intent on killing the coal industry, and had used federal lands as a cudgel to restrict exports. The only avenues of growth currently, given the shutdown of so many coal-burning power plants in the United States, are markets overseas.

“Their goal, in collusion with the environmentalists, was to drive us out of the export business,” Mr. Reavey said.

Even with the moves so far, the prospect of coal companies operating in a big way on federal land — and for any major job growth — is dim, in part because environmentalists have blocked construction of a coal export terminal, and there is limited capacity at the port the companies use in Vancouver.
Competition from other global suppliers offering coal to Asian power plants is also intense.

But at least for now, coal production and exports are rising in the Powder River Basin after a major decline last year.

There's plenty of coal in non-federal land for now. 

This will be added to a previous post and the whole thing will be posted here.

********************************

Originally Posted: July 29, 2017

When you  -- or rather, if you -- read the previous two posts on coal, just think how much has changed.

First, the links to the previous two posts (over time, things will get lost):

• did anyone see this coming?
• EU caught in bold-faced lie?

Now, back to the original thought -- just think how much has changed.

First, President Trump sees the hypocrisy of the "Paris accords" and does the right thing by letting the world know that the US will no longer participate in such nonsense.

Second, the Obama war on coal has been reversed, in less than six months. I find that absolutely incredible. And it's just getting started.

Third, it is becoming clear that European reliance on coal (or natural gas) is going to increase rather than decrease as forecast ... and it appears it's going to happen much faster than we expected.

Fourth, and this is really interesting ... does anyone remember this post:

• France plans to close a significant number of nuclear plants, saying it doesn't want to become overly dependent on nuclear energy (German and US engineers hold that card) and, apparently, would rather become overly dependent on Qatar natural gas instead

" ... France plans to close a significant number of nuclear plants, saying it doesn't want to become overly dependent on nuclear energy..."

That was buried in a very long note. I honestly did not understand that. It made no sense. "Overly dependent on nuclear energy"? What was that all about? Nuclear energy was France's "only hope." If they shut down nuclear plants, they have only two choices: CO2-emitting natural gas or huge CO2-emitting coal. Wow.

Now, it becomes clear. In that first linked article, this little gem on which Reuters did not elaborate:

France had suffered a series of nuclear power plant outages that required it and regional neighbors to rely more heavily on coal. 

Yes, that was in the Reuters article.

Of course, it begs the question: what caused the series of nuclear power plant outages in France? Russian hacking? Homer Simpsons (plural)? Aging plants and no money (or political will) to modernize? 

And note that the nuclear power plant outages didn't affect only France but also the neighboring countries that rely on that energy.

So, when France cuts back on nuclear energy, they also cut back on the surplus electricity being sold to other countries, and .... well, it doesn't take a nuclear scientist to connect the next dots.

Six months into the Trump presidency.

We've only just begun.

Don't forget this: EVs run on coal. Period. Dot. Or maybe natural gas where natural gas is in abundance, but in most of the world (and in most of the US) EVs run on coal. Connect these dots:

• England is a net energy importer (or very nearly; some winters England has come within 48 hours of running out of coal; January 13, 2017: Europe close to running out of coal, natural gas, energy due to cold snap caused by global warming)
• France had to increase coal imports because of a series of nuclear power plant outages
• neither England nor Europe has plans for any expected change in home-grown energy production (France bans fracking; I can't foresee a fracking revolution in Yorkshire)
• EVs run on coal (not crude oil)
• France and Britain have both said they will ban gasoline cars by 2040
• if they don't have enough coal to power their countries now, imagine what happens when they go to coal-powered cars

Even forgetting about the electrical grid and charging infrastructure that will be required, it appears that no one has really thought any of this through.

And finally, just so we don't forget, the UK plans to phase out all coal by 2025. From the Torvald Klaveness post:

The biggest looser (sic) this year in terms of negative growth in coal imports is without doubt the UK.

Total coal imports in first half-2016 of 4.9Mt is down a massive 71% from the 16.9Mt imported in the same period last year. The U.K.’s taxation system is disfavoring coal compared to gas and the UK government has committed themselves to phase out coal by 2025. We therefore expect the UK volumes to continue to be very low going forward. There are seven remaining coal-fired power plants in the UK today.

That was written less than a year ago (the writer only had data through first half of 2016). What happened since then:

United Kingdom (aka Great Britain, includes England): 175% increase in US coal shipments  

Torvald finished his October 29, 2016, post with this:

However, the positive news from a seaborne trade perspective is that the majority of import cuts are already behind us. The current low base means that any further fall in import will only have a marginal negative impact on global trade.

Wow, not only "kinda wrong" but really, really wrong. 

I track "Europe at a tipping point" as one of "The Big Stories."

This Will Compete For Top Story Of The Month -- Bakken Traded Higher Than WTI This Past Week -- First Time Since 2015 -- DAPL -- August 6, 2017

Before I get to the linked story, for the mineral rights owners -- this is what the DAPL protests cost "us."

Now the linked story from Platts:

Bakken shale crude in Guernsey, Wyoming, traded this week at a premium to the front-month WTI calendar-month average for the first time since 2015. Traders said that the spike in value is the result of shifting crude flows in the region since the startup of the 520,000 b/d Dakota Access Pipeline.

How long was the DAPL delayed? Two years of senselessness?

And more from the linked article:

"I think it will go stronger," one Bakken crude trader said. "Traders need an incentive to ship there."

Differentials for Bakken in Guernsey have been narrowing steadily since Dakota Access began commercial deliveries in June. The average for Bakken ex-Guernsey in July was WTI CMA minus 42 cents/b, compared to a pre-Dakota Access average of minus $1.31/b in May.

A huge "thank you" to the reader for sending me the link.

*****************************

A Note To The Granddaughters

Modern Life

1. My son-in-law had a leak in his lawn irrigation system. He was out of town so I had the opportunity to work with Atlas Plumbing out of Dallas who fixed the problem. It was a huge success story. Maybe more later. Spaceholder for now. All I can say is this: if you have a big plumbing problem, and live in/near Dallas, call Atlas Plumbing. Something else that should go without saying: working "side-by-side" with a contractor really pays off. Let them run the show but help in any way one can to make their life easier and things seem to go more smoothly.

2. I've lost full use of my right arm. I was on my way to the swimming pool with Sophia when I saw a husband/wife duo struggling with a new sofa, trying to get if from their vehicle into their apartment. I offered to help; we succeeded but in the process I tore part of the distal end of my right biceps. Incredibly painful; I assume it will take several weeks to heal, and when it does, the bad news: it will be scar tissue which is less elastic than muscle/tendon and more prone to re-injury.

3. Middle granddaughter Olivia's soccer team won the weekend North Texas Classic Tournament. Her medal was a very impressive medal, and the team's trophy was the biggest she had ever seen. She is one of the star players on the team and a year younger than the rest of the team.

4. Sophia, just turned three is turning into quite a swimmer. 

5. Son-in-law #2 out in Portland is building a garage -- for permit reasons, he calls it an "accessory building." He and our daughter have been anxiously/eagerly awaiting the concrete folks to come by and pour the cement. They did that this past week and did a tremendous job. The cement pad looks great. I'll upload a photo eventually.

6. My favorite show: As Time Goes By. I think I've watched the series eighteen times. At least. In a place far away and long ago ...

7. Back to the biceps. I wonder if bi-ceps was at one time bi-cephalus: two heads -- the two heads that originate at the scapula. Which leads me to Bocephalus -- the name of Alexander the Great's horse, apparently -- kephalos is Greek for head. Which, of course, leads to one of my favorite songs, Hank Williams, Jr, Bocephus, which probably had nothing to do with a horse, but a ventriloquist's dummy.

Bocephus, Hank Williams, Jr
The things I do to post a song. LOL.

From adweek:

The Staggering Bakken -- It Never Quits -- August 6, 2017

Updates

September 3, 2017: this well has been updated at this post; includes the full production profile up to this date.

Original Post 

From a reader, another example of a jump in production after being shut-in for quite some time. I am too busy to complete this post so will come back to it later.

The well:

• 21786, 1,494, XTO, Rink 12-4ESH, Garden, t4/12; cum 162K 7/17;

For now, the note from a reader (much, much appreciated for this example):

Another example: the Rink SE (#21786) was shut-in for about two years while other wells were drilled from this pad. The original frack zone had a chance to re-charge in addition to the recent fracking halo of nearby wells. In June, this well produced over 24,000 barrels of oil. It’s best month when completed in 2012 was less than half this volume. This is a Three-Forks 1st bench well in the Garden Field north of Watford City. 

The graphic:

There are a number of stories here; when I come back to this post, hopefully I will remember those thoughts.

• This well was originally fracked in 2012; considered uneconomic in 2015 and shut in. All indications this well was not re-fracked: the reader suggests that it was not re-fracked;
• the sundry forms suggest this well was not re-fracked; and,
• no data at FracFocus to suggest any re-frac.

If this production holds (not a mistake, due to commingling reporting), this is quite remarkable.

For now, I only have time to post the production profile for the index well (#21786) since February, 2015 (production profile for other wells in the graphic at this post):

Monthly Production Data, #21786:

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	6-2017	30	24207	25920	32714	55514	36037	19356
BAKKEN	5-2017	13	3718	1936	10639	13269	11438	1695
BAKKEN	4-2017	0	0	0	0	0	0	0
BAKKEN	3-2017	0	0	0	0	0	0	0
BAKKEN	2-2017	0	0	0	0	0	0	0
BAKKEN	1-2017	0	0	0	0	0	0	0
BAKKEN	12-2016	0	0	0	0	0	0	0
BAKKEN	11-2016	0	0	0	0	0	0	0
BAKKEN	10-2016	0	0	0	0	0	0	0
BAKKEN	9-2016	0	0	0	0	0	0	0
BAKKEN	8-2016	0	0	0	0	0	0	0
BAKKEN	7-2016	0	0	0	0	0	0	0
BAKKEN	6-2016	0	0	0	0	0	0	0
BAKKEN	5-2016	0	0	0	0	0	0	0
BAKKEN	4-2016	0	0	0	0	0	0	0
BAKKEN	3-2016	0	0	0	0	0	0	0
BAKKEN	2-2016	0	0	0	0	0	0	0
BAKKEN	1-2016	0	0	0	0	0	0	0
BAKKEN	12-2015	0	0	0	0	0	0	0
BAKKEN	11-2015	0	0	0	0	0	0	0
BAKKEN	10-2015	0	0	0	0	0	0	0
BAKKEN	9-2015	0	0	0	0	0	0	0
BAKKEN	8-2015	0	0	0	0	0	0	0
BAKKEN	7-2015	0	0	0	0	0	0	0
BAKKEN	6-2015	0	0	0	0	0	0	0
BAKKEN	5-2015	0	0	0	0	0	0	0
BAKKEN	4-2015	8	552	1235	735	1788	1718	0
BAKKEN	3-2015	31	3283	3144	2443	7742	7087	254
BAKKEN	2-2015	28	2552	2105	2322	4629	3878	420

Initial production following the original frack:

BAKKEN	9-2012	30	5661	5719	3469	14113	14107	6
BAKKEN	8-2012	31	6497	6397	3813	15402	15385	17
BAKKEN	7-2012	31	6444	6618	3839	15897	2645	13252
BAKKEN	6-2012	30	8003	7612	4201	21458	0	21458
BAKKEN	5-2012	31	11393	11654	7001	30865	0	30865
BAKKEN	4-2012	17	7430	6802	10775	15236	0	15236

US Hitting On All Cylinders -- 3Q17 GDP Forecast Near 4% -- GDP Now -- August 6, 2017

Latest forecast: 3.7 percent — August 4, 2017

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2017 is 3.7 percent on August 4, down from 4.0 percent on August 3.

The forecasts of third-quarter real consumer spending growth and real fixed investment growth declined from 3.0 percent and 5.2 percent to 2.8 percent and 4.1 percent, respectively, after this morning's employment report from the U.S. Bureau of Labor Statistics.

The model's estimate of the dynamic factor for July—normalized to have mean 0 and standard deviation 1 and used to forecast yet-to-be released monthly GDP source data—decreased from 0.64 to 0.27 after the report.

QEP Will Report A Couple Of Nice Foreman Wells Later This Week -- August 6, 2017

The QEP Foreman wells are tracked here.

Flashback, two years ago -- The Atlantic Monthly article at this link: https://www.theatlantic.com/business/archive/2015/06/north-dakota-oil-boom-bust/396620/.

Friday, August 11, 2017
31475, conf, MRO, Lacey USA 11-5H, Van Hook, no production data,
31531, see below, QEP, Foreman 3-2-1TH, Spotted Horn, producing,
31536, see below, QEP, Foreman 3-2-1BHR, Spotted Horn, producing,

Thursday, August 10, 2017

• 31476, SI/NC, MRO, Moline 14-32H, Big Bend, no production data,
• 31529, SI/NC, Hess, EN-Skabo Trust-155-93-0631H-7, Alger, no production data, 

Wednesday, August 9, 2017
None.

Tuesday, August 8, 2017

• 26835, 1,993, WPX, Wolf Chief 27-34HW, Mandaree, Three Forks, 41 stages, 6.1 million lbs, t5/17; cum 81K 7/17;

Monday, August 7, 2017

• 26839, 2,253, WPX, Wolf Chief 27-34HD, Mandaree, 41 stages, 6.1 million lbs, t4/17; cum 97K 6/17;
• 33290, SI/NC, MRO, Lena USA 14-22H, Antelope, no production data, 

Sunday, August 6, 2017
None.

Saturday, August 5, 2017
None.

*************************************************

31531, see above, QEP, Foreman 3-2-1TH, Spotted Horn:

Date	Oil Runs	MCF Sold
6-2017	11803	16798
5-2017	14405	19447
4-2017	10045	13470
3-2017	21156	24321
2-2017	17557	20196

 31536, see above, QEP, Foreman 3-2-1BHR, Spotted Horn:

Date	Oil Runs	MCF Sold
6-2017	11420	27771
5-2017	15213	34264
4-2017	17407	27371
3-2017	25789	32364
2-2017	18123	17143

26835, see above, WPX, Wolf Chief 27-34HW, Mandaree:

Date	Oil Runs	MCF Sold
6-2017	27570	25839
5-2017	38718	29478
4-2017	14626	7837

 26839, see above, WPX, Wolf Chief 27-34HD, Mandaree:

Date	Oil Runs	MCF Sold
6-2017	35589	24755
5-2017	46392	19016
4-2017	14339	3277

The Crude Oil Market Still Needs Another 18 Months To Re-Balance -- August 6, 2017

I'm not going to look for the posts, but I've always suggested that the prices operators paid to get into the Permian were a bit excessive, to put it mildly. The data seems to bear that out -- see this Bloomberg story at Rigzone. The story was not particularly noteworthy, but the last line of the article is in line with my own calculations regarding time to "re-balance." From the linked article:

"The market still needs about another year and a half for demand to catch up."

There may be subtle differences between "re-balancing" and the phrase "for demand to catch up." I don't know. It seems they are saying about the same thing.

I define "re-balancing" based on historical "days of crude oil supply." For the longest time, 22 days of US crude oil supply seemed to be the "norm." We last saw 22 days of US crude oil supply back in 2014. See graph below. It's hard to believe: we actually hit16.5 days on January 23, 2004.

I believe the high is 34.2 days (February, 2017 -- just a few months ago). Currently the number is around 28 days of supply, during the heavy summer driving season.

It will be interesting to see the figure in October when the driving season is over. By the way, here is another post that is interesting to read in hindsight.

Smoke And Mirrors -- August 6, 2017

Updates

August 11, 2017: OPEC compliance is estimated to be 75%.

August 6, 2017: see comments. Link brought up here for easier access: https://www.platts.com/news-feature/2017/oil/opec-guide/prod_targets. 

Original Post 

If I recall correctly, and I probably don't, OPEC set "the cut" at 1.2 million bopd. [Later: I did not: the article says OPEC and non-OPEC partners agreed to cut 1.8 million bopd.]

Headline from Platts: OPEC July oil outputs hits high of 32.82 million bopd on Libya recover. OPEC is about 1 million bopd above ceiling.

Now the smoke and mirrors: Platts says "not including Libya and Nigeria, compliance among OPEC's 12 members ...remains robust at 114%, down slightly from 116% in June, based on an average of January through July output."

Compliance is 114% but yet OPEC production "hits high of 32.82 million bopd." Wow. 

If that's accurate, that the compliance rate is 114% based on a six-month average, it appears that more recent data suggests some members are increasing production. Let's see. From the linked article:

• Libya: exempt from OPEC cuts, averaged 990,000 bopd in July; up 180,000 bopd from June
• Nigeria: exempt, averaged 1.8a million bopd, up 30,000 bopd
• Saudi Arabia: averaged 10.05 million bopd in July; June data not provided
• Iraq: second largest OPEC producer; production grew to 4.48 million bopd; quota is 4.35 million
• Iran: third largest OPEC producer: production grew to 3.82 million bopd; quota is 3.80 million
• UAE: production rose to 2.89 million bopd; above its quota of 2.87 million bopd
• Ecuador: openly defied OPEC; discontinued goal to cut production; production rose to 530,000 bopd, also above its quota of 520,000 bopd

More: look again at the bottom line number -- 32.82 million bopd. Then look where that falls on the graph posted in May, 2017.  Prior to the "Saudi Surge," OPEC was producing just slightly above 30 million bopd. Now, after the surge, OPEC is producing above 32 million bodp. I assume most folks thought OPEC was going to cut below their pre-surge production. Nope, OPEC surged production to almost 34 million bopd and then agreed to a 2-million bopd cut, which would put them at 32 million bopd, or 2 million bopd above their pre-surge production.

One can see how global crude oil flows were sustained at robust levels even during the cuts with the graph at this post.

Having said that, if the numbers are accurate, Saudi Arabia is taking the brunt of the cut. The linked Platts article said Saudi's production in July was at 10.05 million bopd. If accurate, that is about what Saudi produced back in 2009. An old graphic, frequently posted: