Three International Stories Of Note -- July 21, 2018

Updates

July 22, 2018: a reader, with more "experience" with Saudi Arabia than most have and who follows the oil industry much closer than I do, agrees with me that Saudi Arabia doesn't have much ability to export that "spare capacity."

The reader wrote: Twenty years ago when I left Saudi Arabia, I thought that Aramco production would be in decline in about 20 years, i.e., 2017.

The reader suggests that Aramco has an aggressive Saudization program, replacing Americans who are willing to take risks with Saudis who cannot take risk. Apparently the Saudi Aramco "reward" system is based on "not making mistakes." [Which suggests to me that a lot of senior Saudi Aramco folks paid a huge price for their "trillion-dollar mistake, 2014 - 2017.] Under the Saudi way of doing things, the safest management scheme is to do nothing: have meetings and drink tea. But don't take risks.

 

The reader concludes: the Saudis are producing every drop they can.

Original Post

Iraq: huge protests. Government "blocks" internet access to its citizens in an attempt to quell protests.

As southern Iraq reels from snowballing protests that threaten oil facilities at a critical political weak point, the outgoing prime minister is taking dangerous measures to stop them, including aggressive use of security forces and cutting internet access that could cost the country $40 million a day.

Italy: needs US oil to make up for Libyan shortfall. More evidence that Libya no longer matters.

Libya’s oil disruptions would normally wreak havoc in Italy—one of Libya’s top oil consumers—but the United States is serving as a pinch hitter in the wake of civil unrest in the troubled African nation.

Italy’s imports of US crude spiked as Libya struggled to ship oil under force majeure in recent months.

In June, Italy imported a record 4.93 million barrels of crude oil from the United States, or 165,000 barrels per day. That represents a noteworthy increase to the 3.3 million barrels shipped from the US to Italy in May and 1.9 million barrels in April. [One analyst] predicts that 2.14 million barrels are set to ship from the US to Italy in July.

On the flip side, Libya’s shipments to Italy were 9.73 million barrels in May, followed by a drastic decrease in June to 3.45 million barrels.

Saudi Arabia: hits "pause button" on higher oil output. For newbies, "everyone" talks about Saudi's production, not their exports. This is another article: emphasizes "production." Four points:

• I've never thought much of Saudi's ability to significantly increase production
• Saudi Arabia always increases production in summer to meet summer domestic consumption needs (a/c demand; electricity from oil in the Saudi Arabia)
• Prince Salman is now adding refinery capacity in his country which increased the country's domestic consumption 
• President Trump has asked Saudi Arabia to increase production, with a threat to release oil from the US SPR if the price of gasoline does not come down

Now, this:

Oil prices held steady on Thursday and in early trading on Friday after a top Saudi official said that oil production would remain flat in July compared to June and that Saudi Arabia does not want to oversupply the market. Previous comments suggested that Saudi Arabia would ramp up to 10.8 million barrels per day (mb/d) in July, but instead the Saudis will keep output at 10.5 mb/d.

I find it interesting that at a point in time when Saudi Arabia should be increasing production, the country is actually cutting back. I think there's more to the story we are not hearing. Drones over Riyadh can't be comforting.

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North Dakota And DAPL
 

Updates

July 22, 2018: Native American protesters enter plea agreements to avoid long prison terms. They're lucky they live in a country that allows plea agreements. In Iraq, ....

Original Post 

Same link as above.

Bakken crude enjoys higher prices.

The completion of the Dakota Access pipeline in 2017 has provided a boost to the Bakken, which used to trade at a steep discount to WTI because of a shortage of midstream capacity.

Bakken Clearbrook, a hub in Minnesota, traded at a $16-per-barrel discount to WTI in 2013, but last month it sold for a $2-per-barrel premium.

“That is enormous when you are looking at what is happening in Midland, Texas, where they are selling at a $9-$19/bl discount,” said Lynn Helms, director of the North Dakota Department of Mineral Resources.

Comment: Helms was nice to avoid reminding us how much the Native Americans at Standing Rock cost the state and the industry. What? Was it four years that the DAPL was delayed or just a year or so?