Wednesday, August 29, 2018

Missed It By A Day; I Thought WTI Would Hit $69/Bbl Yesterday; Hit That Mark This A.M. -- August 29, 2018

GDP, link here:
  • consensus: 3.8% to 4.2%
  • prior: 4.1%
  • today, the second estimate: 4.2% -- wow, at the high end of consensus
  • Dow: had been positive in pre-market trading; now drops 13 points; I assume this number makes it more likely the Fed will raise rates at least one more time this year (pretty much baked in) but could the Fed actually squeeze in a second rate hike before the end of the year?
WTI: $69.11

France: more on the resignation of the country's environment minister; sour grapes; in fact --
Despite Hulot’s public denouncement of France’s climate change efforts, electricity generation from renewable and nuclear power sources in France jumped in June, squeezing out fossil fuels such as coal, oil, and gas.
In what many considered a toothless grand gesture, French legislature passed a law late last year that prohibited all oil and gas exploration and production within its borders and territories by 2040, which is when some are expecting oil to reach its peak demand. The law called for no new licenses to be issued or renewed for the exploration of oil and gas.
France: leaving oil in the ground -- in 2010, the Paris Basin was estimated to have nearly 100 billion bbls of oil; with new technology and the right price, could that now be as much as 250 billion bbls? If so, would compare with the Bakken.

India: if France doesn't want fossil fuel, India will. And India will be a bigger player in the international fossil fuel market going forward than even China. Link here.
India will pass China as the country with the largest demand for oil by 2024, accounting for about 30 percent of total global oil demand growth.
The report added that if India can't find ways to produce its own gasoline, it will have to look to more imports. Countries with spare capacity are in the EU or the U.S., though Wood Mackenzie said the trade distances could create concerns for a growing India.
US refinery update: this is pretty cool. I noted this for about the last six weeks on the blog. Now, oilprice is picking up on it --
This summer, United States refineries operated just shy of record highs, running close to 100 percent utilization rates. Refineries reached a new record-high gross input value of 18.243 million bpd for the week ending August 10. The record-high run rate pushed utilization to 98.1 percent, the highest recorded since 2005, according to the U.S. Energy Information Administration (EIA) Weekly Petroleum Status Report. These peak run rates are a function of high summer demand and low crude oil pricing as midstream capacity constraints widen regional crude oil differentials. 
Iran: some in the US want sanctions to push Iran exports to zero.
Regardless, it appears sanctions have resulted in a loss of about one million bbls crude oil / day export for Iran. The deadline doesn't begin until November 4, 2018, and exports are already plunging. At $50/bbl that's about $20 billion of loss revenue. What's Iran's annual budget? Apparently around $350 billion but that includes taxes, etc. According to the article, Iran will have sold $50 billion of oil from March, 2017, to March, 2018, (their fiscal year runs March to March). If that is revenue, there was some cost involved in production and shipping. If Iran loses one million bbls/day in export, that could be as much as $20 billion -- out of the $50 billion. And based on the linked article from Forbes, it looks like Iran's only "real" income comes from oil.
Bakken buy illustrates trend: from The Williston Herald -- a pleasant news story suggesting recent deals in the Bakken (all previously reported at the blog) portend good oil economy going forward.

No wells come off the confidential list today: there was no February 29 six months ago. Having said that, three "fun" stories posted overnight:
Active rigs:

Active Rigs60533076194

RBN Energy: the Northeast's changing role as US natural gas supplier.
The U.S. Northeast’s reign on natural gas supply growth has factored heavily into broader U.S. gas supply-demand dynamics ever since the Marcellus/Utica shales burst onto the production scene.
This year is no different.
Lower-48 gas production in 2018 to date has averaged 8 Bcf/d higher year-on-year.
Nearly 50% of that growth has come from the Northeast, and, what's more, the bulk of that incremental supply has flowed out of that region, flooding markets in neighboring areas.
Now, the Marcellus/Utica is in the midst of yet another major inflection point.
After years of perpetual pipeline constraints, pipeline utilization data indicates that some Northeast takeaway pipelines have a little bit of capacity to spare — a trend that has major implications for regional pricing relative to downstream markets. At the same time, more pipeline expansions are on the horizon that promise to bring on even more gas supply from Marcellus/Utica producers. (Just last Thursday, Energy Transfer’s Rover Pipeline was approved to begin service on its final two laterals — Majorsville and Burgettstown — and Williams’s Atlantic Sunrise expansion of Transco Pipeline is due for completion within weeks.)
What does this new reality look like and what does it mean for the broader U.S. gas market? Today, we begin a short series providing our latest analysis of the Northeast gas market, starting with how it fits into the current U.S. supply-demand picture.

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