Tuesday, March 6, 2018

Everything Holding Stable -- March 6, 2018

Statoil, room to run in the Bakken: from Reuters --
Statoil ASA, the Norwegian state-controlled oil producer, has plenty of growth opportunities left in North Dakota's Bakken shale formation, an executive said on Tuesday.
"We have quite a lot of running room" in North Dakota, Torgrim Reitan, head of Statoil's U.S. operations, said in an interview on the sidelines of CERAWeek in Houston, one of the world's largest gathering of energy executives.
Oil development has spiked in recent years in the Permian Basin of Texas and New Mexico. Concern has spread about a maturation of operations in North Dakota, the second-largest oil-producing U.S. state where Statoil is one of the largest producers.
The company does not see its North Dakota operations slowing down and it using new technologies and other process improvements to suck more oil from the Bakken, Reitan said.
Comment: based on what little I know about the Bakken, it appears the "big names" drilling in the Bakken have ten to fourteen years of drilling inventory left in the best of the Bakken; extending out to the better Bakken but not to the fringe, the "big names" drilling in North Dakota have fourteen to twenty years of drilling inventory. This doesn't necessarily mean anything for investors in equity, but it does mean something for those actually working in the field. The Bakken, like the Permian and the Eagle Ford, is a multi-generational play, regardless of what ....

Daily Activity Report

"Arctic rigs":

Active Rigs604435114191

Six new permits
  • Operators: WPX (4); Petro-Hunt (2)
  • Fields: South Fork (Dunn County); Charlson (McKenzie)
  • Comments:
Three permits canceled:
  • Lime Rock Resources: three Schneider permits in Dunn County
Five permits renewed:
  • Whiting (3): two P Lynch permits and one Sue permit, all in Williams County
  • EOG: one Hardscrabble permit in Williams County
  • Thunderbird Resources: one Watson permit in McKenzie County
Two producing wells (DUCs) reported as completed:
  • 32589, 1,412, Whiting, Koala 21-2TFHU, Poe, 4 sections, t2/18; cum -- (#19961, #20383, #23673, #23671, #23672)
  • 32590, 978, Whiting, Koala 21-2TFH, Poe, t2/18; cum -- (#19961, #20383, #23673, #23671, #23672)

"Holy, Ricochet, Batman, Another Huge Build" -- March 6, 2018


Later, 8:24 p.m. Central Time: this is pretty cool. I noted the API inventories soon after the data was released earlier today. Now, several hours later, the story from Bloomberg -- "oil dips as data shows biggest US crude build since January, 2018." [Since January? LOL. This is only early March. Whatever.]
Crude slipped after industry data showed U.S. crude stockpiles rose by more than expected last week.
Futures in New York fell from the settlement Tuesday after the American Petroleum Institute was said to have reported crude inventories mounted higher by 5.66 million barrels last week. That would be the largest build since January if Energy Information Administration data confirms it on Wednesday in its release.
A Bloomberg survey showed crude storage in tanks and terminals across the country likely rose 3 million barrels last week.

 Original Post

API crude oil inventories:
  • previously: a build of slightly less than one million bbls
  • forecast for today's report: a build of 2.7 million bbls
  • actual API estimate: a build of almost 6 million bbls -- 5.661 million bbls
I use EIA data to calculate re-balancing. That data will be released tomorrow at 10:30 am. Eastern Time.

WTI after the report: down about 25 cents, now at $62.33, which is fine.

And, yes, Robin really did utter "Holy, ricochet" in season 1 of the Batman television series.

EIA's Short Term Energy Outlook Is Posted -- March 6, 2018

Oil Markets:
  • In February, the average Brent crude oil price dropped by $4 to $65 per barrel. EIA’s forecast expects prices to decline gradually, averaging $60 per barrel in the second half of this year. EIA expects annual average Brent crude oil prices to remain near $62 per barrel in both 2018 and 2019, which is lower than prices in recent weeks but is higher than the average in 2017 by less than $8 per barrel.
  • EIA estimates that U.S. crude oil production averaged 10.3 million barrels per day in February, up by 230,000 from the January level, which included some well freeze-offs in the Permian and Bakken. This month, we are reporting that total U.S. crude oil production averaged 9.3 million barrels per day in 2017, ending the year with production at 9.9 million in December.
  • EIA projects that U.S. crude oil production will average 10.7 million barrels per day in 2018, which would mark the highest annual average U.S. crude oil production level, surpassing the previous record of 9.6 million barrels per day set in 1970. [Another nail in Hubbert's coffin.]
  • EIA forecasts that 2019 crude oil production will average 11.3 million barrels per day.”
  • For all of 2018, the forecast expects production to continue hitting new monthly highs—barring any significant energy disruptions. By the end of 2018, the short-term outlook is forecasting a new record average of 10.7 million barrels per day in U.S. crude oil production, and we continue to expect production to average above 11 million barrels per day in 2019.
Natural Gas:
  • Following record high gas inventory withdrawals in early 2018, the short-term outlook estimates that inventories for March 2018 will total 1,481 billion cubic feet, which represents a nearly 28% drop from March 2017. In fact, March 2015 was the last time inventories came close to that level.
  • EIA expects U.S. natural gas production to reach new records in 2018. The forecast suggests that production will near 82 billion cubic feet per day in 2018 and, as a consequence, inventory levels will fully recover from this year’s low levels by next winter.
  • The short-term outlook of utility-scale electricity generation remains relatively unchanged this month. EIA continues to expect natural gas’s share of utility-scale generation to increase from 32% in 2017 to 34% by 2019, and all indications suggest that it will continue to be the primary source for generation over the next 24 months [an incredibly easy forecast to make]
  • EIA’s forecast for U.S. retail residential electricity prices will top 13 cents per kilowatthour in March, which marks the highest price since at least 1997 for the month of March. Last year, retail residential electricity prices didn’t pass 13 cents until May, and prices remained below that all of 2016 [this is what renewable energy is doing to the lower and middle class].
  • The March short-term outlook maintains EIA’s forecast for reduced U.S. coal production, coinciding with decreased demand for exports. EIA forecasts steam coal exports will drop by 38% in 2018 and by another 10% in 2019.
  • EIA’s forecast expects solar capacity in the electric power sector to climb just above 42 gigawatts in 2019, nearly doubling the 2016 level. From 2017 to 2019, solar electricity generation in all sectors is also forecast to see a marked increase with generation forecast to increase from 211,000 megawatthours per day in 2017 to 294,000 megawatthours per day in 2019 [a 39% in nameplate capacity; actual production: trivial; cost: substantial]

The New Leftist Mexican President Will Have One Opportunity To Get This Right -- Let Us Hope He Succeeds -- March 6, 2018

A reader linked me to a SeekingAlpha article that we both thought was ludicrous, ridiculous, bizarre, and worthless. The writer suggested that if Trump stays true to his convictions, he will put tariffs on imported oil. We've heard that before. I won't include the link -- I'm foregoing links to click bait.

In response to that e-mail from the reader, I replied (not ready for prime time):
I agree (the writer is off his rocker, or jumped the rails or smoking something). I read the summary and then the first sentence or two. I have no idea if the writer knows what he is talking about.

There are two extremes right now in the global crude oil discussion:
  • shale is not going to be all it's cracked up to be (Mark Papa, others)
  • US shale could end up destroying OPEC (IEA)
Very few people talk about the heavy oil / light oil issue. The fact is that unless US refineries are reconfigured to optimize light oil, the US will need to import heavy oil. And I don't see US refiners doing much to re-do their plants; they did it once in anticipation of the Keystone XL and it turned out to be a huge mistake; they are not going to do that again.

There are too many alternatives to making money in oil for the next ten years, and new refineries are low on the list. It's headline news when a new refinery is proposed or an older refinery expands. Right now it looks like crackers and pipelines and LNG exports that has everyone's attention.
But back to the story. That SeekingAlpha story was simply clickbait.

Now, two hours later, I come across this ArgusMedia article -- and this is why I love to blog. Serious writers understand the big picture, and in this case ArgusMedia really "gets it." The article at the link:
Mexico's vision of the future of exploration and production in Latin America includes a throwback — developing extra-heavy crude oil reserves to feed US Gulf coast refineries calibrated for that grade.
While the country recently launched a tender for unconventional onshore reserves along its northern border, the country's national hydrocarbon agency director Juan Carlos Zepeda said today that the country sees its 3.1bn bl of 3P extra-heavy oil reserves as a "short-term investment opportunity."
"The margin between WTI and heavy Canadian crude is at its narrowest in several years," Zepeda said at the CERAWeek conference in Houston today. "The Gulf coast refineries were designed to process heavy oil from Mexico and Venezuela, where its production has been in decline. Heavy oil in the Gulf of Mexico is going to be in high demand."
Zepeda said about half of these reserves are in the Ayatzil field, for which state-run Pemex holds the rights. Investment there would depend on additional farm-out agreements.
Much, much more at the linked article. I would like to include it all so it's not lost to the ether but that would not be "fair." If you've read this far, I highly recommend you finish the article at the link.

My first thought: I certainly hope the new leftist president of Mexico does not screw it up. He will get one opportunity to get this right.

Two Graphics Are Worth 10,000 Words

Out And About -- March 6, 2018

Biking: talk about another incredible day for biking. A little bit on the cool side (but just barely) and with gloves and a jacket it's perfect. The only problem: starting this early in the morning the traffic is very, very heavy and a bit scary on some stretches. Compromise: I will bike to the old Starbucks I used to visit often and then once traffic dies down after the morning rush, I will bike  up to Grapevine.

More renovation: yesterday I stopped at a newly renovated McDonald's. It blew me away. Really, really nice, but the "funny" thing was this: the restaurant was markedly improved but it was "same old" menu. Don't get me wrong. I enjoy McDonald's food but somehow they need to "stretch." It will be interesting if they can (stretch).

Today, I'm visiting the Starbucks I used to visit daily for weeks on end -- maybe three years ago. I haven't been here in ages. And it has completely changed. The "bar" takes up almost the entire length of the long room. And it's a real bar. I can't tell if they serve wine or beer in the evenings -- I know Starbucks was thinking about going in that direction at some of their sites -- and this would have been one of those sites, but I can't tell for sure. And I'm not going to ask or check the menu. Either it's easy to see or it's not. Instead of library-style tables designed for six to eight people, this Starbucks now has only one large group table; meant for four, it can squeeze in six but that's it. Instead, the coffee shop now has six small round tables arranged in such a way it would be difficult for more than two people to congregate at each table. The drive-thru and the "uber" pick-up is busy, busy, busy.

Blogging: other than (barely) keeping up with the Bakken, I am not doing as much blogging as I used to. After a frenetic 18 months that began in October, 2016, I am purposely taking a break. I assume my readership will plummet. That's fine. I am still not watching CNBC (or any television for that matter, except NASCAR and some golf) and haven't looked at the stock market news in days. I saw the Drudge Report link yesterday and I heard the opening on talk radio driving Sophia to Tutor Time but that's as much as I know.

Murder rates: purely clickbait but hard to resist -- the 25 US cities, ranked, murder rate per capita.  No cities in Montana, Minnesota, or the Dakotas were on the list. But wow, East St Louis and a few others. I wonder if outliers like school shootings were excluded from the rankings.

The Literary Page

I'm still in my "Defoe phase," so I will look at Moll Flanders today.

I also will look quickly at A New Literary History of America. I really enjoyed the same in the series on "modern China." And finally, On the Origin of Stories: Evolution, Cognition, and Fiction, Brian Boyd, c. 2009 DDS: 809.3BOY.

We'll start with the latter first.

Wow, Boyd's On the Origin of Stories is a keeper. The first part is very pedantic (?) -- a word I first best understood when watching Woody Allen's Midnight in Paris and best to skim through quickly to see if the book is worth its weight in gold. It's a very thick book and very heavy. The second part uses the Homer's Odyssey and Iliad and the Dr Seuss books to expand on the first part.

Book II begins on page 209, and a huge amount of that book -- from page 209 to page 317 is devoted to Homer. Those who know Homer well, will really these 100+ pages.

Along the way, one will learn about the Sally-Anne test; false belief; and irony, just for starters.

Now, on to A New Literary History of America. I've blogged about it before, in fact, just a few months ago. If I had room on my shelves at home I would buy it and put it next to the modern Chinese literature book in the same series.

I would like to take time to comment on the review of one of four autobiographies of Linda Boreman (Lovelace) -- a review written by Ann Marlowe, the author of How To Stop Time and The Book of Trouble. Perhaps another day.

Finally, Moll Flanders. I've only read one book by Defoe: The Journal of the Plague Year. I find it hard to believe that any of his books could be better. Movies have destroyed, unfortunately, my interest in Robinson Crusoe. However, having now read much on Defoe himself I am ready to read (or at least begin reading) Moll Flanders. The full title: The Fortunes and Misfortunes of the Famous Moll Flanders Etc Who was born in Newgate, and during a life of continu'd variety for threescore years, besides her childhood, was twelve year (sic) a whore, five times a wife (whereof once to her own brother), twelve year a thief, eight year a transported felon in Virginia, at last grew rich liv'd honest and died a penitent. Written from her own memorandums ... by Daniel Defoe, written in the year 1683.

Wow, such a delight. It begins:
My true name is so well known in the records or registers at Newgate, and in the Old Bailey [prisons] ....
It is enough to tell you, that as some of my worst comrades who are out of the way of doing me harm (having gone out of the world by the steps and the string [the gallows], as I often expected to go.
Wow, two things. If you have not read Moll Flanders before but wish to, I highly recommend reading as much of the life and times of Daniel Defoe as possible before tackling Moll Flanders. It will make all the difference in the world.

Until very recently I had never heard of, much less would have understood, the concept of bourgeoisie literature, but as soon as I read the opening page of Moll Flanders, I immediately thought of bourgeoisie literature. I forget now when bourgeoisie literature first appeared, but I assume it was much later than Defoe. If so, one must argue, that along with fathering the historical novel, one might argue he fathered bourgeoisie literature, or certainly added to it.

The 30-second elevator speech as I under bourgeoisie literature: it is written and read simply for the pleasure of writing and reading. The thicker the book, the better, if the writing is good. I'm reminded of lines by the Hemingway character in Midnight in Paris.

For folks on either side of the fence regarding DACA, I would recommend the opening two pages of Moll Flanders. It might be helpful in coming to some "decision" for the "dreamers."

One last thing, and then I will quit. One biographer says that once Defoe found his niche with Robinson Crusoe, all his following novels took the same course. They were all the same. LOL. And here it is: Moll Flanders is an orphan at six months -- her mother, spared the gallows because she was pregnant, was exiled to American shortly after Moll was born and never heard of again (?). Like Robinson Crusoe, Moll Flanders is "on a deserted island," left to fend for herself, alone at three years of age in the English city of Colchester, Essex.

It will be interesting to see how Moll Flanders parallels Robinson Crusoe, based on my limited knowledge of the latter. It's hard to believe I won't finish Moll Flanders.

Peak Demand? What Peak Demand? Global Crude Oil Demand Will Rise Nearly 7 Percent In Less Than Five Years -- March 6, 2018

With regard to global oil, the current 30-second elevator speech:
  • US shale oil production will continue to surge;
  • US will take market share from OPEC;
  • OPEC is in a bind -- a strategy to manipulate the price of oil by increasing production / cutting production is full of risks;
  • Mark Papa continues to beat the drum that US shale is reaching peak production; and,
  • oil demand growth to shift to petrochemicals, away from motor vehicles
No new links. Many of these stories have been previously posted and linked, but this is the one data point that jumps out at me:
Boosted by economic growth in Asia and a resurgent U.S. petrochemicals industry, global oil demand will increase by 6.9 million bpd by 2023 to 104.7 million, according to the IEA.
2023: that's only five years from now. That's still within my investing lifetime. And Sophia will just get started.

Active Rigs Hold Steady At 61; WTI Up A Bit -- March 6, 2018

US oil pipelines pivot south: shale surges. From Financial Times. This is quite an incredible story.
In 1967 the Capline pipeline began shuttling imported and Gulf coast crude northwards from Louisiana to Illinois, where it was dispensed to Midwestern refineries. Now, its volumes drying up, Capline’s owners have proposed flipping the 1.2m b/d conduit to flow south instead of north, permitting inland crude to reach the coast.
The new BridgeTex, Permian Express and Cactus pipelines now stretch from west Texas oilfields to ports and refineries in coastal Corpus Christi and Houston. Additional pipeline systems able to handle more than 2.1m b/d are planned or under construction, according to RBN Energy, a research company. Workers are clearing a path for the Epic pipeline, which will stretch 700 miles from the booming Permian Basin to Corpus Christi. National oil companies from Asia are among the confirmed shippers on the line.Please use the sharing tools found via the email icon at the top of articles.

“If you were sitting in Riyadh or in Moscow and you were looking at some country grabbing 2m barrels a day in market share in one year, it might make you wonder about what you’re doing,” [an analyst] adds. (US exports of crude oil and petroleum products climbed more than 1.7m b/d between December 2016 and December 2017 to a record 7.3m b/d.)
Much more at the link.

Posted earlier: Saudi Arabia cuts price on its oil. Trying to re-grab market share. Good old "free markets." From Bloomberg via Rigzone:
Saudi Arabia cut pricing for Arab Light crude to Asia for the first time in eight months, a sign that the world’s largest oil exporter is fighting harder for sales in its biggest market.
State-owned Saudi Arabian Oil Co. lowered its official selling price for Arab Light crude for April shipment by 55 cents to $1.10 a barrel more than the Middle East benchmark, the company said Monday in an emailed statement. It’s the first cut since August. Aramco had raised its January pricing to the highest since 2014 and kept it there for the next two months. The producer, known as Saudi Aramco, was expected to lower pricing by 45 cents a barrel, according to a Bloomberg survey.
Back to the Bakken
"Arctic" rigs:

Active Rigs614435114191

RBN Energy: rising Canadian production, takeaway constraints and WCS price discounts, part 6.