Morning Note; RBN Energy On The Bakken -- A Must Read -- October 24, 2018

Mideast correspondent's report:

PSA:

Weather report: another day of rain in north Texas.

Ship-building report: the DFW "ark" -- christened the USS Cruiz -- is about 75% complete.

Bomb report: 

Weekly petroleum report: EIA weekly report;

• API yesterday -- huge, huge draw; almost 10 million bbls; one expects to see a swing of no more than 2 million bbls; rarely a swing of 6 million bbls; but 10 million bbls -- wow; so let's see what the EIA weekly report says -- up next; and here it is ..
• US crude oil inventories, EIA data -- increased by 6.3 million bbls; supports API data yesterday
• US crude oil inventories at a whopping 423 million bbls; my threshold is 400 million bbls; up from a personal threshold of 350 million bbls (Bush II and Obama decades);
• US crude oil inventories: 2% above the 5-year average for this time of the year; 
• refineries operating capacity not much more than last week, at 89%
• gasoline and distillate production right at threshold, even to first decimal: 10.0 million bbls and 5.0 million bbls, respectively
• imports seem to be leveling off, finally (rate of growth in imports leveling off, to be more specific)
• look at this: gasoline production right at "threshold"; but, total gasoline inventories are 6% above the 5-year average; despite the inventory dropping by 5 million bbls last week; as noted last week, expect fairies on flying pigs to lower the price of gasoline on those big electric price signs -- that should happen tonight while you are sleeping; LOL; 
• but Americans are flying more than ever; jet fuel supplied was up 1% compared with same four-week period last year -- so why are airlines telling us their fuel costs are increasing -- a glut of oil, and an increase in jet fuel, and yet they say their prices are rising? Sure.
• years ago I said that one regional airline was an "oil company," not an airline; it made more money hedging jet fuel / oil prices
• heating oil? good news? distillate fuel supplied was up by 7% form same period last year
• gasoline demand graph will be released later today

Upstream: planning more spending. Link here. 

• 2014: $750 billion (peak)
• 2016: $460 billion ("a low")
• 2017: a 2% increase, year-over-year
• 2018: 5% increase, year-over-year
• early 2020's projected: $500 billion 
• nice article; more at the link
• note: the headline to this suggested that a significant increase in CAPEX was needed; and likely; but look at the actual forecast. 2016 was a low for CAPEX investment at $460 billion vs a high of 750 billion in 2014; new forecast; $500 billion in early 2020's -- now, maybe it's just me, but $500 billion is .... well, let me put it this way, $460 billion (a "low") rounds to $500 billion; and $500 billion is a whole lot close to the "low" of $460 vs the high of $750 only four years ago
• color me: not impressed; not worried -- that would be neon carrot, #FF9933; at this link;

Disclaimer: this is not an investment site. Do not make any investment, financial, job, travel, or relationship decisions based on what you read here or what you think you may have read here.

Energy investing: if you are invested in energy today and you need your cash, you are probably not a happy camper. I haven't look at the market today (and have no plans to) but I suspect ... whatever.... now, two things come to mind. First, buying opportunity, if one has a long horizon. Greater than six months. Second, the major oil companies are drowning in cash. What do CEOs and directors do when their companies are doing great but their stocks are not doing so great? Generally, they like to reward shareholders. As in dividend increases. So, we'll see. Whistling past the graveyard as they say.

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Back to the Bakken

Wells coming off confidential list today -- Wednesday, October 24, 2018:

• 33556, 1,556, CLR, Mountain Gap 2-10H1, Rattlesnake Point, a nice well: Mountain Gap wells are tracked here; t7/18; cum 47K 8/18;
• 34666, SI/NC, MRO, Northrop 34-16H, Jim Creek, no production data, see this post.
• 34449, SI/NC, MRO, Grant USA 21-18 TFH, Van Hook, no production data,

Active rigs:

$66.39😟	10/24/2018	10/24/2017	10/24/2016	10/24/2015	10/24/2014
Active Rigs	68	53	35	68	194

RBN Energy: what's going on with Bakken prices? And are constraints on the horizon? Archived.

The discount for Bakken crude prices at Clearbrook to WTI at Cushing has been on a rollercoaster in recent weeks, widening from $1.30/bbl at the beginning of September 2018 to over $10/bbl in mid-October and narrowing again most recently.

There are several factors at play here. Canadian production has overwhelmed area pipelines and prices are being heavily discounted.

These cheap Canadian barrels are creating oversupply issues at markets that Bakken barrels also trade into.

On the demand side, Midwestern refiners are in the middle of seasonal turnarounds, reducing the demand for both Bakken and Canadian grades.

Meanwhile, Bakken production growth continues to steadily chug along, increasing by over 150 Mb/d since the beginning of the year. And while this recent Bakken price angst is cause for concern, there is a looming bottleneck for pipeline space that could really shake things up sometime next year. Today, we examine the recent price phenomenon, the relationship between Canadian crude differentials and Bakken prices, and why producers should be concerned about future pipeline shortages.