Saturday, July 21, 2018

US Producers / Refiners Made History In June, 2018 -- API -- Rigzone; US Petroleum Demand Highest In Eleven Years -- All The Way Back To Bush II -- Making America Great Again

Say what you want to about Trump, this would not have happened under a Hillary or a Sanders administration After two lost decades, the Bush II decade and the Obama decade, America is making a comeback.

This should have been posted earlier this week. I kept putting it off. 

From Rigzone:
U.S. production of crude oil and natural gas liquids (NGL) hit unprecedented levels in June 2018.
According to API, crude oil production hit 10.7 million barrels per day (MMbpd) in June and NGL production reached 4.2 MMbpd during the same period.
[The API] noted that domestic oil production has supplied all of the growth in global demand so far in 2018 and has helped to compensate for production losses among some OPEC member nations. [Memo to Art Berman, Jane Nielson.]
API noted that milestones for June included:
  • U.S. petroleum demand for the year-to-date was the strongest it’s been in 11 years. -- Making America great again!
  • refinery throughput in the U.S. hit a new record of 18 MMbpd
  • thanks to that record refinery throughput, U.S. crude inventories remained steady and accumulated refinery product stocks “more than offset” the drawdown in crude oil inventories
  • “Solid economic and energy market fundamentals” are supporting the 20.6 MMbpd U.S. petroleum demand – the strongest such level since 2007
The Ledecky Page

From Swimming World:
Tickets are on sale now to see our nation’s top swimmers, including reigning and future Olympic gold medalists, at USA Swimming’s 2018 Phillips 66 National Championships, slated for July 25-29 at Irvine, California’s William Woollett Aquatics Center.
Olympians and world champions Caeleb Dressel, Chase Kalisz, Lilly King, Katie Ledecky, Simone Manuel and Ryan Murphy currently rank as top qualifiers among the 1,300-plus swimmers who have met the time standards for this summer’s Phillips 66 National Championships.
The national championships will be televised on NBCSN.

Three International Stories Of Note -- July 21, 2018


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.

North Dakota And DAPL

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?

The Word "Frivolous" Keeps Appearing When Courts Take Global Warming Cases Against Big Oil And Coal -- July 21, 2018 -- Nothing About The Bakken

US district judge in NYC tosses lawsuit against five big oil companies:

  • a U.S. district judge dismissed a lawsuit by New York City seeking to hold five of the world's biggest oil companies liable for their role in contributing to climate change
  • echoing a ruling last month that tossed out two similar California cases, the judge said problems associated with climate change should be tackled by Congress and the executive branch
Federal appeals court rules FOR coal:
A federal appeals court on Tuesday rejected environmentalists’ arguments that the Trump administration has to evaluate the climate change impact of leasing federal land for coal mining.
The three-judge panel of the Court of Appeals for the District of Columbia Circuit unanimously ruled that the Interior Department is not obligated to update its 1979 review of the environmental impact of the federal coal program, despite substantial new scientific findings about climate change and the significant role that coal plays in warming the atmosphere.
The judges said that the National Environmental Policy Act (NEPA) doesn’t compel a new environmental impact statement.
California: throws out case.
Stunned? Surprised? I don't know but here it is: remember -- this is the US District Court for the District of California -- a BusinessWire story -- the court has issued a ruling dismissing the climate change lawsuits filed against Chevron Corporation by the cities of San Francisco and Oakland. A lot of legalese, but basically a frivolous suit thrown out. 

As I Suspected: On-Line Retail Sales Tax Won't Be Enough For New Jersey -- Nothing About The Bakken -- July 21, 2018

Yesterday I wrote:
New Jersey: on July 1, 2018 -- less than three weeks ago -- it was reported that New Jersey was going to rely on internet "on-line" sales tax to make up a huge budget deficit. Hold that thought. LOL. 
Under the agreement, New Jersey’s top income-tax rate will increase to 10.75% on filers earning $5 million and above, up from 8.97%. The tax is expected to raise an additional $280 million a year in revenue, Mr. Murphy said.
The governor and lawmakers also agreed to a four-year surcharge on businesses earning more than $1 million. These companies would see their income-tax rate increase to 11.5% from 9% for the next two years, before lowering to 10.5% in the two years after that, Mr. Murphy said. The surcharge is expected to raise $425 million for the fiscal year that begins Sunday.
The deal doesn’t include a sales-tax increase, which Mr. Murphy had said was necessary—along with a millionaire’s tax—to establish “sustainable, recurring” revenue streams for the state budget. On Saturday, Mr. Murphy said the sales-tax increase was no longer needed due to a June decision by the Supreme Court allowing states to tax online sales, along with the recent repatriation of money from overseas.
The big on-line retailers -- Amazon, Walmart, Target -- already charge sales tax.  I doubt the recent court ruling making on-line sales tax mandatory will result in a huge change in state revenues. But some states, like New Jersey, are counting on that sales tax revenue to balance the state budget.

My hunch: those in the know in New Jersey know what I suspect.

More evidence? New Jersey is still looking for more revenue wherever they can find it.

Most recent? Some in New Jersey are suggesting taxing tap water.
The proposal is being floated by State Sen. Bob Smith D-Middlesex, who is trying to say it's not actually a tax but a 'user fee'.
"It is a user fee based on volume," Smith told Fox 5's Chasing New Jersey.It would add 10 cents for every 1,000 gallons of water a home uses. Smith says that will only add $32 a year to the "average" water bill.
But doesn't the state already have a "water fee"? Yes.
The state already charges a public utility franchise tax on water system operators of $0.01 per 1,000 gallons of water delivered to a consumer.
That tax, which went into effect in 1984, is supposed to "ensure clean drinking water in New Jersey."
For The Archives

Oh, by the way, with regard to the trade war, no one has been able to answer these two questions for me: what is the reason for tariffs in the first place, and do we even need them any more? This is the 21st century, not the 19th or 20th. A lot has changed. I notice China and the EU are not putting tariffs on US crude oil. At least as far as I know.

Week 29: July 15, 2018 -- July 21, 2018 - Already Getting 50% Of Taxes Collected On Tribal Trust Lands, Indians Want More

US crude oil production hits a landmark milestone: 11 million bopd  -- but something strange, and bit irritating -- it appears the EIA is now rounding to the nearest 100,000; see graphic at this post; in the big scheme of things, it doesn't matter, of course, but for folks following this closely, the change is irritating.

Wow, the week that Texas smashed electricity demand records going back to 1925; and, here, compare with California.

Texas oil industry continues to widen the gap:
The Permian - WTI spread approached $16.

This is not an "oil and gas story," but it certainly suggests something about the US industrial sector: Alcoa expects to restart a third potline at its Indiana Warrick aluminum smelter

EIA reports a huge crude oil inventory build; meanwhile, the API reports a huge gasoline build at the height of the US driving season.

CLR's Thronson wells in Alkali Creek have been updated
CLR's Pittsburgh / Uhlman Federal wells in Banks oil field have been updated
XTO's Bullberry Federal pad is updated ; and, here;
Active rigs hit 69 in North Dakota
Oasis reports a nice well using lesser amount of proppant
A BR Remington well in Blue Buttes produces 50K in one month 

Petro-Hunt acquires 130 Divide County wells from SM Energy
Keystone XL activity in Montana/North Dakota area updated
Petroshale paying "Permian prices" for Bakken acreage 

Bakken economy;
Taxable sales, 1Q18; North Dakota, re-posted, expanded

Geoff Simon's top North Dakota energy stories for the past week:
  • North Dakota "demands" that the federal government pay for DAPL protest costs; $38 million
  • Native Americans want more: on Fort Berthold the Native Americans receive 50% of the taxes collected on tribal trust lands, but leaders say that is not enough
  • Moody's Analytics: a recession sometime in the next two to three years would actually be a "PLUS" for North Dakota (we've seen this movie before and Moody's is exactly correct)
  • McKenzie County economic stats confirm growth; the monthly economic report for McKenzie County:
  • unemployment down from 2.2% to 1.5% 
  • oil production up from 12.5 million barrels to 14.1 million barrels 
  • year-to-date value of Watford City building permits up from $6.7 million to $17.9 million
  • McKenzie County first quarter taxable sales up from $41.6 million to $57.2 million

San Andres, Permian

Someone mentioned the San Andres formation in the Permian to me. I was unaware of it.

For the archives.

From the oil and gas financial journal.