Tuesday, January 9, 2018

API Announces "Unprecedented" Drawdown In US Crude Oil Reserves -- January 9, 2018

Wow! API weekly crude oil drawdown --
  • previous week: - 4.992 million
  • forecast for this week: -3.90 million
  • actual: -11.190 million
  • comment: in the past 36 weeks of tracking this data, an EIA drawdown has never exceeded 8 million bbls, and the average is almost exactly 3 million bbls/week; if the EIA data comes anywhere close to a drawdown of 9 million bbls, "Katie, bar the door"
  • comment: look at the price of WTI  after this data was announced 
  • for re-balancing, I use EIA data, not API data; EIA data always seems to come in under API data
Active rigs:

Active Rigs533758167193

Five new permits:
  • Operator: Whiting
  • Field: Banks (McKenzie)
  • Comments: Whiting has permits for a 5-well Wold pad on Lot 1, section 5-153-97; see graphic below;
Eight permits renewed:
  • Nine Point Energy (2): two Little Muddy permits in Williams County
  • NP Resources (2): two Mosser Federal permits in Billings County
  • BR: one Manchester permit in Dunn County
  • Enduro: one MRPSU permit in Renville County
  • MRO: one Stillwell permit in Dunn County
Amazing: no report of any DUCs completed -- again

From Above -- The Whiting Graphic

Another Example Of The Bakken Phenomenon

Note production profile for this well, pay attention to 11/16:
  • 25802, 1,944, Whiting/KOG, Koala Wold 153-97-1-5-9-15H, Banks, 4 sections, t3/14; cum 219K 2/18;
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

What happened in late 2016? Yup, you guessed it. A neighboring well was fracked. In this case:
  •  32559, 1,416, Whiting, Flatland 43-9HU, Banks, 4 sections, t10/16; cum 160K 11/17;

EIA's Short-Term Energy Outlook -- January 9, 2018

Oil markets:
  • EIA estimates that OPEC countries cut crude oil production output in 2017, but those cuts were offset by increased production in non-OPEC countries, especially the United States and Canada
  • EIA forecasts U.S. crude oil production to grow by 980,000 barrels per day in 2018, and we expect most of that growth to come from tight rock formations in Texas and North Dakota
  • led by U.S. production, particularly in the Permian Basin, and new oil sands projects in Canada, non-OPEC production is forecast to continue growing through the end of 2019. We expect to see growth near 2.0 million barrels per day in 2018 and 1.3 million barrels per day in 2019
  • EIA expects Brent crude oil prices to remain near $60 per barrel over the next two years
  • EIA estimates that U.S. crude oil production averaged 9.9 million barrels per day in December, which would be the fourth-highest level of monthly production on record, behind only the final three months of 1970
  • EIA raised its estimate for December production from its previous estimate as reported survey data on October production came in significantly higher than expected. The incoming data contributed to a reassessment of our previous views on well productivity, particularly in the Eagle Ford, Bakken, and Permian regions.
Gasoline/refined products:
  • EIA forecasts U.S. motor gasoline consumption in 2018 to total about 9.3 million barrels per day, which would top the record for highest annual consumption set in 2016 [making America great again]
  • EIA is expecting a strong increase in the use of ethane in 2018 and 2019 as several new petrochemical facilities on the U.S. Gulf Coast that use ethane as a feedstock open
Natural gas:
  • EIA forecasts LNG exports to increase to 3 billion cubic feet per day in 2018. The sharp increase from 2017’s level of 1.9 billion cubic feet per day is the result of infrastructure projects in several states, including Maryland, Georgia, and Texas, coming online in 2018
  • the forecast for natural gas exports to Mexico anticipates that growth will continue in the wake their reforms to the energy market and our increased capacity from new export infrastructure in the United States
  • the electric power sector reduced its use of natural gas in 2017. EIA attributes that shift to competitive coal prices and higher-than-average hydroelectric generation, which was part of increased competition from renewables as a whole 
Coal [Hillary will see a lot of miners laid off in Appalachia]:
  • EIA is forecasting reduced U.S. coal production in 2018, retreating by 2% following a 6% increase in 2017. We expect to see the biggest production decreases in the Appalachia region, which is currently forecast to dip by 25 million short tons
  • EIA is forecasting 2019 to be the first year wind overtakes hydropower as the leading source of renewable electricity generation, due to a combination of hydro’s cyclical nature and the continued growth in wind capacity

If They Are Not Reading The Prairie Blog, They Are Reading This Blog -- January 9, 2018

This is pretty cool. See this post from January 7, 2018, which links the story at The Prairie Blog. Today, of all things, up-front on the on-line edition of The Wall Street Journal, the story and headline: agriculture firms warn of unintended impact of tax law. Lawyers and accountants say the tax bill gives cooperatives a significant edge over competitors.

Wow, has a tax law ever done that before?

From the Journal:
The new U.S. tax law has placed Rick Tronson, a North Dakota grain-company operator, in a precarious position by unexpectedly bestowing big benefits on his main competitors.

A provision inserted into the tax code during Senate and House negotiations in December gave farmers more lucrative deductions when they sell agricultural products directly to the farm cooperatives he competes against rather than to businesses like his own.

Mr. Tronson, whose four storage facilities handle 17 million bushels of grain a year, said the competition could spell the end of his 76-year-old family-owned business.

“We’ve made a big investment. And this law, if they don’t change it, the scenario is that we’ll go broke,” he said.

Farm groups and agricultural cooperatives battled last year to preserve a deduction on domestic U.S. production, which manufacturers also received. That deduction went away in the tax rewrite, but lawmakers including Sen. John Hoeven (R., N.D.) won the inclusion of a new deduction.
My thoughts and comments at the original post linked above.

For The Archives -- The Road To Connecticut

From The Hartford Courant: business leaders say state economy is in crisis.
Jim Loree, CEO of Stanley, Black & Decker, opened the meeting with a sprawling diagnosis of Connecticut’s fiscal ills. In 2001, Loree said, Connecticut was ranked the eighth-most competitive state in the country by the Beacon Hill Institute, “competitiveness” being a measure of fiscal policy, quality of life, labor supply and infrastructure. By 2016, he said, Connecticut had slipped to 43rd by the same index.
Outmigration is a well-documented phenomenon in Connecticut, but Loree singled out a telling statistic: On average, a family that moves into Connecticut has a household income of $93,000. The average income of a family moving out is $123,000. With such a fluctuating tax base, Connecticut’s income stream is “incredibly volatile,” Loree said, rendering the state “very vulnerable to market downturns.”
A disproportionate amount of tax revenues flow from a handful of well-heeled enclaves, he added. Thirty-six [percent] of the state’s personal income tax revenue comes from 10 towns, including West Hartford, Glastonbury and Fairfield County towns. Twelve percent of all personal income tax comes from 357 families alone, Loree said.
All Alone Am I, Brenda Lee

The Market And Energy Page, T+353 -- January 9, 2018

US market soars: on news that Donald Trump is still president.

Synchronized global economy poised to take off: on news that Germany has scrapped "global warming insanity."

Not A Good Quarter For Musk Melon -- January 9, 2018

ISO New England: customers getting a bit of relief, if one can say that $230/MWh is "relief." Heating oil surged 50% in price during this most recent cold snap Now that it is warming up, less heating oil is needed, and natural gas as percentage of energy mix has surged:

Billion-dollar satellite fails to gain orbit: first SpaceX launch. Story everywhere. CNBC link -- so you know it's true.

Telstar, The Tornados

Tesla Drive-Through: This is almost bizarre. Maybe it is beyond bizarre. I don't know. But now with everything else, Musk Melon has another idea: a Tesla Supercharger drive-in restaurant. He must have been watching The Founder --- LOL --- I just watched that movie for the first time (on Netflix) two nights ago. I've ordered my own Blu-Ray copy.
Filloon: Apache improves oil production per foot.

Active rigs:

Active Rigs543758167193

RBN Energy: big changes coming to the condensate market.

The Permian

Back to the Filloon story linked above. Some of these Permian wells are absolutely incredible.
Apache has excellent leasehold in the Permian, and continues to focus the bulk of investment there. Egypt and the North Sea have better cash margins, but it has become a more unconventionally focused company. We pulled the data on 80 APA horizontal locations in Texas completed after January 1st of 2016. Twelve locations had laterals between 7,500 and 9,200 feet. It continues to develop short laterals. It had a recent successful location in Loving County that produced 305 MBO in 9 months. It is a 5,100 ft lateral. It used 7.5 million lbs of sand.