CLR Announces $220 Million Minerals Divestiture And Formation Of A Strategic Relationship With Franco-Nevada -- August 6, 2018

Press release. I don't always follow these announcements, but it appears that:

• Franco-Nevada apparently bought mineral rights owned by CLR for $220 million
• in the agreement, the two companies (Franco-Nevada and CLR) will set up a jointly funded venture
• the parties will spend up to a combined $125 million over the next three years to acquire additional minerals
• CLR will fund 20% of future mineral acquisitions
• will acquire minerals in SCOOP and STACK, primarily in areas already owned by CLR
• the existing mineral rights and future minerals will be jointly held through a newly-formed company (name yet to be announced, apparently) 

Franco-Nevada website. Franco-Nevada's history in Oklahoma.

Oil and Gas Investor story here.

Business Insider story here.

So, I guess, if I understand this correctly, CLR monetizes a bit of its acreage, while sharing the risk with another energy company for future acquisitions.

What little I know about this suggests Harold Hamm would like to "borrow" a bit more money to drill more wells, but didn't want to go to the "capital" markets to raise more cash (acquire more debt on its balance sheets) but this is far beyond my headlights.

Feel free to weigh in with your thoughts.

Doesn't appear to affect the Bakken.

************************

Death Spiral

MoviePass.

Promised: as many movies as you wanted for a monthly subscription.

Now: three films a month.

******************************

At Least She Stopped Driving 
To Take The Call

Twelve New Permits -- Nice Locations Among The Big Three -- August 6, 2018

Active rigs:

$69.05↑	8/6/2018	08/06/2017	08/06/2016	08/06/2015	08/06/2014
Active Rigs	64	58	34	75	191

Twelve new permits:

• Operators: Whiting (6); Enerplus (4); CLR (2)
• Fields: Truax (Williams), Mandaree (Dunn), Oakdale (Dunn)
• Comments: Enerplus has permits for a 4-well "bush" pad in section 20-149-93; Whiting has permits for a 6-well Vance Federal pad in NENE 17-154-97; and, CLR has permits for a 2-well Carson Peak pad in SESW 26-147-96; regular readers will note the names of the wells; fields names; etc.
• Carson Peak wells are tracked here;
• the P Vance, Vance, and Vance Federal wells are tracked here;
• the Enerplus "bush" wells -- see below

****************************

The Enerplus "Bush" Wells

The graphics:

The wells:

• 35280, 409, Enerplus Marigold 149-93-21B-22H-LL, Mandaree, 43 stages; 12.6 million lbs; t4/19; cum 156K 9/20; 182K 7/21; cum 222K 12/22;
• 35281, 1,401, Enerplus Boxwood 149-93-21B-22H-TF, Mandaree, t4/19; cum 167K 9/20; offline as of 1/20; back on line 3/20; cum 198K 7/21; cum 241K 12/22;
  
• 35282, 1,515, Enerplus Blackberry 149-93-21B-22H, Mandaree, t4/19; cum 202K 7/20;  offline as of 8/20; remains off line 9/20; back on line 10/20; cum 245K 7/21; ucm 284K 12/22;
  
• 35283, 1,234, Enerplus Mulberry 149-93-21B-22H-TF, Mandaree, huge production since 5/19; t4/19; cum 191K 9/20; cum 228K 7/21; cum 260K 12/22;
  
• 22748, 729, Enerplus, Chokecherry 149-93-21-22H, Mandaree, t11/12; cum 266K 9/20; off line as of 2/20; back on line as of 5/20; cum 285K 7/21; cum 313K 12/22;
  
• 22747, 696, Enerplus, Arnica 149-93-21B-22H TF, Mandaree, t4/19; cum 137K 9/20; only 15 days 2/20; cum 169K 7/21; cum 217K 12/22;
  

The Market, Energy, And Political Page, T+67, Page 2 -- August 6, 2018

It's interesting to see where companies put their television ads.

Blue Apron, I see, is advertising on CNBC. Not one person watching CNBC is likely to order meals-to-prepare through the mail.

Where would Blue Apron customers be?

On the food channels, and probably "Channel 13" -- your local PBS station. I have never seen a Blue Apron ad on PBS. I never watch food channels but something tells me it would be unlikely they would advertise there. Counter-intuitive.

But why CNBC? Desperately trying to remind investors the company is still around and relevant, even in light of plummeting sales and share price. What's "Little Blue" doing today (compared to "Big Blue"):

• APRN is down another 4% and could soon go under $2/share
• IMB: down a little over a percent, trading at $146/share

Best time to for Blue Apron to advertise: during the late afternoon soap operas. Sure, that order today won't reach the cook's home tonight, but the cook at the house, struggling to keep meals interesting 365 days/year will be a prime candidate to say, "Alexi, order Blue Apron."

By the way, the cook cannot lose: if the family hates Blue Apron, it makes the cook's home cooking all that much better in the minds of her/his family; and if the family loves Blue Apron, the cook is going to look forward to some days off from cooking.That's what we call a "win-win" when eating at home.

Off The Net For Awhile -- Biking To The Library -- Shouldn't Be Long -- August 6, 2018

Good luck to all.

I think I could devote an entire blog to Goldman Sachs opinions. Now this one, which will probably change by the end of the day. Same arguments as always. Note to newbies before reading the article: when it comes to global oil --

• Libya does not matter
• Iran does not matter
• Venezuela does not matter

Only three producers matter:

• Saudi Arabia
• Russia
• Texas

From the linked article (nothing new here):

Oil demand continues to be strong and the oil market is “eating very quickly” through OPEC’s spare capacity, so we are going into a “very, very tight oil market,” Michele Della Vigna, head of energy industry research at Goldman Sachs.
There is no doubt that we are heading to slowing supply growth, according to Goldman’s expert. Venezuela’s oil production continues to decline, the heat on Iran could remove up to 1 million bpd off the market depending on how some countries like China react, Libya remains in a constant state of unpredictability, and U.S. supply growth is constrained by infrastructure—taken all together, Vigna sees those factors as “a substantial risk to supply.”

Not just a tight market,

Not just a very tight market.

But, a very, very tight market. 

******************************
The Book Page

My book of "consequence" this week, well, actually two. The first:

Darwin's Fossils: The Collection That Shaped the Theory of Evolution, Adrian Lister, c. 2018 -- a simple, what-appears-to-be, a fun little monograph. Light reading, a nice beach book.

The second:  

She Has her Mother's Laugh: The Powers, Perversions, and Potential of Heredity, Carl Zimmer, c. 2018. Paging through it suggests it's the kind of book I generally don't like -- a great thesis, but veering off in all directions, but it's thick at 574 pages and will keep me occupied for the week. In addition to the 574 pages of text:

• glossary: 2 pages (which will give me an idea of the "complexity" of the book
• notes: 22 pages
• bibliography: 44 pages (something tells me the author didn't actually read much of any of these sources)
• index: 12 pages

***********************************

Morphed

It seems I posted how celebrities from the past morph into celebrities of the future. I can't find that post now.

Whatever.

It does not seem a stretch to guess which modern day celebrity Wayne Cochran morphed into.

There are rumors he shared a hairdresser with Tammy Wynnette and Loretta Lynn back in the day.

Fifteen Wells Should Be Coming Off Confidential List; The Whistler Pipeline Project -- August 6, 2018

If you get bored waiting for the market to open, you can always check out screeching tires and busting glass: defining the teen-tragedy song in 60 minute -- chock full of YouTube hits. I came across it while trying to figure out who did the cover for "Last Kiss" that is on the Starbucks playslist loop.

Sexist: if I had one piece of advice for working women -- carry two purses. Women seem to all carry a purse that appears to be about a cubic yard in volume -- makes them look like bag-ladies or homeless or insecure. Leave the cubic-yard purse in the car, at home, or in the workplace, and simply carry a clutch purse into Starbucks when picking up a cup of coffee. Something tells me Ivanka wouldn't show up to a meeting with a cubic-yard purse slung over her shoulder. [The secret service agent would be holding it. LOL.] On the other hand, a small brown, genuine leather, Gucci-quality- back-pack is incredibly sexy on a millenial -- but only on a contemporary millenial. 

A bit about Tim: I did not know that Tim has been around from almost the beginning. Steve and Tim must have really clicked. From MarketWatch:

Tim Cook is not a visionary CEO like his predecessor, Steve Jobs.

It was Cook’s skills in manufacturing and operations that interested Jobs, who hired him from Compaq a year after his triumphant return to Apple in 1997.

The Apple that Jobs returned to following his 1985 ouster was in a near death spiral, and Cook was a key partner in streamlining the company’s product lines, getting rid of hefty inventories, moving much of its manufacturing to contractors and forging long-term deals to buy components such as memory chips.

Since Jobs passed the torch, Cook has nearly quadrupled Apple’s share price by taking Jobs’s innovation and making it a permanent, perpetual and profitable ecosystem.

Apple’s revenue and market cap should have paused along with iPhone unit sales two years ago, but higher-priced phones, expensive accessories and more money coming in from software and services have kept the enormous Apple train running on time, and stuffed with cash.

Sales of wearables like the Apple Watch and AirPods headphones soared 37% to $3.7 billion. Watch progress has been seemingly slow and plodding and never fully disclosed by Apple. But executives told analysts last week that wearables had surpassed $10 billion in revenue in the past four quarters.

Putting $10 billion into perspective. In the pharmaceutical industry, a "billion-dollar-drug" is a home run. By the way, the "billion-dollar-drug" data point is something new investors would do well to remember. But I digress. If a "billion-dollar-drug" is a home run for the pharmaceutical business, Tim Cook hit ten home rooms in the past year. And that was just in wearables. Unprecedented? Probably. And that's from a sector (watches) that "everyone" said was doomed from the start. I remember reading all the negative commentary on social media when Apple introduced the AppleWatch. The AppleWatch is now ubiquitous.

Swag: speaking of wearables, my son-in-law recently attended a tech conference in Chicago. At the end of two days, those attending the TED-filled conference all received a pair of Apple ear buds.

Next Apple purchase: my next Apple purchase will either be a pair of ear buds, or a new iPad. Memo to wife: my birthday is coming up. Actually, in all seriousness, I don't want either: I'm teched out. I can't count the number of devices with USB charging that I have in the house. Most of them are front / rear lights for the bicycle and the back pack. This morning, coming into work before daybreak, I had four lights -- three rear-facing red lights on my bike/backpack and one forward white light on the bike.

Twitter wars: John Kemp tweets, "not impressed with jobs report." Meanwhile, from Ivanka:

************************************
Oil Production: The Majors, Y/Y

Disclaimer: this is not an investment site, but in addition to the production column, note that first column, net income y/y. Wow. Dark blue except for ExxonMobil, but the colors don't show how bad things really are for XOM, or better said, their investors. Chevron's net income y/y up 132% and BP's net income up an astounding 312% but XOM? Up 18% yoy.

Whiting: changes course. Will stay in Colorado.

Whiting won’t sell it’s Colorado oil and gas properties after all, saying would-be buyers didn’t offer enough to give up the high-yield wells.

The Denver-based company signaled this spring that it wanted out of the Denver-Julesburg Basin, in part, because operating in Colorado had grown too hard. Whiting put its Denver-Julesburg wells and undeveloped assets on the market during the second quarter.

“The bids received did not achieve our expectations or reflect the cash-flow power of the asset,” said Brad Holly, CEO of the company during a Wednesday conference call with investment analysts. 

Oil and gas production from the Colorado wells, which Whiting refers to as its Redtail field, have netted $250 million after expenses for Whiting in 2018, and they should produce hundreds of millions of dollars more over the next couple years, the company said.

Unlike MDU which sold off all its oil holdings at just the wrong time some years ago; great case study for "buying high, selling low."

 ************************************

Back to the Bakken

Wells coming off confidential list:
Monday, August 6, 2018:

• 33932, SI/NC, BR, Three Rivers 1B MBH, Charlson, no production data, 
• 33711, 403, Kraken Operating, Washburne 22-15 2TFH, Oliver, t3/18; cum 57K 6/18;
• 33710, 1,154, Kraken Operating, Washburne 22-15 3H, Oliver, t2/18; cum 90K 6/18;
• 33709, 733, Kraken Operating, Washburne 22-15 4TFH, Oliver, t2/18; cum 73K 6/18;
• 33708, 1,260, Kraken Operating, Washburne 22-15 5H, Oliver, t2/18; cum 93K 6/18;
• 33707, 953, Kraken Operating, Washburne 22-15 6TFH, Oliver, 9.8 million gallons of water; 78% water; 15.6% sand;  t2/18; cum 79K 6/18;
• 33706, 1,715, Kraken Operating, Washburne-Hodenfield LE 22-15 1H, Oliver, 9.8 million gallons of water; 78% water; 16% sand; t2/18; cum 118K 6/18;
• 30529, 1,485, CLR, Burr Federal 20-26H, 62 stages; 14.9 lbs proppant; 13.3 million gallons of water; 88% water, Sanish, t5/18; cum 65K 6/18;
• 30528, 935, CLR, Burr Federal 24-26H2, Sanish, 63 stages; 8.1 million lbs proppant, 9.9 million gallons of water, 90% water, t3/18; cum 72K 6/18;

Sunday, August 5, 2018:

• 33397, SI/NC, WPX, Hidatsa North 14-23HA, Reunion Bay, no production data,
• 33387, SI/NC, Crescent Point Energy, CPEUSC Paopao 3-35-26-158N-100W, Dublin, no production data,

Saturday, August 4, 2018: 

• 34056, SI/NC, BR, Kermit 7-8-32UTFH, Pershing, no production data,
• 34055, SI/NC, BR, Rink 7-1-5UTFH, Pershing, no production data,
• 33396, SI/NC WPX, Hidatsa North 14-23HW, Reunion Bay, no production data,
• 24235, SI/NC, Enerplus, Cheetah 149-93-30A-31H, Mandaree, no production data,

Active rigs:

$69.41↑↑	8/6/2018	08/06/2017	08/06/2016	08/06/2015	08/06/2014
Active Rigs	64	58	34	75	191

RBN Energy: Whistler Pipeline project goes the extra mile to link the Permian and Gulf Coast markets. Interesting -- we just blogged about the Whistler a couple of days ago -- a reader caught that and sent me the link. He noted the interesting partnership: Texas, Iowa, Florida partners. From the linked article:

Constructing greenfield pipelines is never easy — just ask any midstream developer you know — but building them across the breadth of Texas comes with its own unique challenges. There’s distance, for starters, and today’s massive associated gas growth in the Permian Basin is occurring more than 400 miles from the closest demand along the Gulf Coast. That makes the pipelines relatively expensive at somewhere near $2 billion a copy.

Integrating Permian supply with Gulf Coast demand also requires a big network of pipelines along the coast, as the demand is spread out from Louisiana to Mexico. Few midstream companies have such a network. Kinder Morgan does, one reason why, in our view, the Gulf Coast Express project was the first — and to-date the only — greenfield project from the Permian to proceed with a final investment decision. In the race to be the next Permian natural gas relief valve pipeline, the same hurdles will have to be overcome. On Friday, news came that a group of four companies is planning the Whistler Pipeline, and a closer look at the project reveals it may be capable of meeting the challenges needed to make it a serious player in the Permian pipeline race.

Today, we look at the details of the latest Permian natural gas pipeline project.

And then this, the recently announced Whistler Pipeline may prove to be one of the most interesting developments in the Permian gas story yet.

Some data points:

• natural gas
  450 miles, 42-inch diameter (huge diameter; think about that; more than a yard in diameter)
• from the WaHa hub in the Permian Basin to the NextEra Agua Dulce (sweet water) market hub in South Texas
• 2.0 billion cubic feet per day
• sourced from multiple upstream connections in both the Midland and the Delaware Basins, including direct connections to Targa plants
• from WaHa, turns south towards Mexico; parallels the southwest Texas-Mexico border before turning east to Agua Dulce, west of Corpus Christi
• from there, east into Corpus Christ, but also south to Brownsville, i.e., Mexico, and also southwest into Mexico via the NextEra NET Mexico Pipeline

RBN Energy has an interesting insight to "problems" with the natural gas pipelines in Texas. Wroth reading.

The Market, Energy, And Political Page, T+67 -- August 6, 2018

Tariffs: News readers on CNBC are slowly turning, admitting that "free trade" means a) zero tariffs; and, b) zero non-tariff barriers to trade. They cited Harley-Davidson this morning whose CEO has said global tariffs are a significant problem for the company.

Market: it could be a good day on the market -- certainly for some stocks. Berkshire is up over 2% in pre-market trading -- reflecting its surge in profits on the back of its AAPL holdings.

WTI: up over 1.4% -- now solidly above $69 again, and headed back toward $70. John Kemp suggested we were in "severe backwardation" in a tweet in late June.

Later, market opening:

• BRK-B: us over 3%; up about $7/share, now trading above $207; still not at 52-week high;
• AAPL: flat, holding;
• UNP: down a dollar; down 0.67%
• S: up 6% -- wow, that's nice
• CVX: flat
• COP: flat
• OAS: up 1%
• NOG: down 4%

********************************

The Book Page

Did Truman let us down? I don't know. I don't know anything about the Korean War.

President Truman, president, 1945 - 1953.

Korean armistice, from time of earliest discussions to signing: 1950 - 1953.

Talks ended in a stalemate; end of fighting; but divided peninsula and a legacy that continues to be problematic, to say the least.

I was reminded of that while reading Ravensbrueck: Life and Death in Hitler's Concentration Camp for Women, Sarah Helm, c. 2014.

A close reading of the book, especially in the later chapters, suggest that the Allies were under a huge amount of pressure to sign an armistice with the Nazis, and that the concentration camps gave the Germans and their chief negotiator, Heinrich Himmler, a lot of leverage. With what little I know from the Patton movie, one wonders if the American generals, and perhaps the British generals, were instrumental in an unconditional surrender. I suppose, one could argue, the situation was reversed between the US / Britain: US military would not accept anything less than an unconditional surrender; the politicians in Washington, maybe ready to sign an armistice. The Brits: no way would Churchill consider anything less than an unconditional armistice. As portrayed in the Patton movie, one wonders if the British generals would have accepted something less.

But with an incredible lack of understanding and knowledge about either conflict, it certainly looks like -- despite all the praise he gets -- with regard to Korea, Truman let us down.

This is written in context with what the women at Ravensbrueck experienced. Outside of that context, I have no opinion.

USGS Survey: Eagle Ford 2018

Update

Later, 7:15 a.m. CDT: my bad. It turns out I did post this the day the USGS released the information. I simply forgot. Whatever. I will leave this post up for those who may have missed it, like me.

Original Post 

A reader sent me this several weeks ago. For some obscure reason my editor let me down and failed to get this story moved to the top of the stack. But, better later than never. [Later: huge apologies to my editor -- she did get this to me and I did post it the day of the release. Link here.]

It seems I recall that the USGS was going to re-survey the Eagle Ford -- I can't remember, but apparently it did and here are the results, released June 22, 2018:

• for the Eagle Ford, the USGS 2018 survey
• 8.5 billion bbls of crude oil
• 1.9 billion bbls of NGLs 
• 66 trillion cubic feet of natural gas
• of note: the Eagle Ford ranks in the top 5 USGS assessments for both oil and gas; generally, a formation produces primarily oil or gas, but the Eagle Ford is rich in both

Compare with the USGS 2013 survey of the Bakken (linked at the sidebar at the right): 7.4 billion bbls.

From the press release:

This estimate consists of undiscovered, technically recoverable resources in continuous accumulations.

Undiscovered resources are those that are estimated to exist based on geologic knowledge and statistical analysis of known resources, while technically recoverable resources are those that can be produced using currently available technology and industry practices. Whether or not it is profitable to produce these resources has not been evaluated.

The USGS is the only provider of publicly available estimates of undiscovered technically recoverable oil and gas resources of onshore lands and offshore state waters.

The Eagle Ford is tracked here.

Great Britain Taking Baby Steps But Actually Fracking -- August 6, 2018

This is really an inconsequential story in the big scheme of things, but for the archives it's important, so I will post some quick data points. Go go the link to sort out the story:

• UK
• Cuadrilla; privately owned; British E&P; formed in 2017; HQ in Bamber Bridge, Lancashire
• targeting British shale in Lancashire;
• filed for 2nd permit to frack a well they have just drilled to depth
• first permit granted last month (July, 2018) -- considered a "momentous achievement"
• the second well drilled to depth: shallow at 6,890 feet TVD and then a very short lateral at 2,460 feet (total: less than 10,000 feet; compare with Bakken's standard 20,000 feet TD)
• from an industry body spokesman:

“At a time when the UK, and indeed the whole of Europe, is becoming ever more dependent on imported fuels it is very encouraging that we are taking steps to reverse the trend.” 

Sounds like a direct slam against France's ban on fracking; and Germany's dependence on Russian natural gas.
By the way, any economic benefits to Lancashire?

• over $13 million has been invested into the local Lancashire economy by this one company
• one can assume there are a lot of subcontractors adding to that total

If one looks at the official economic data reported for Lancashire, one could say its economy is fair at best compared to the rest of the EU. Something tells me the folks in Lancashire are happy with this influx of cash. Though, knowing the Brits, this will no doubt be about the speed of fracking in island nation: about two wells every six months, and it will be a headline story every time they get a permit to frack.

**********************************

Yarn Workshop At Orange County (California) Fair

A Bigger Story Than First Reported -- Noble Oil's Challenge In The Permian -- August 6, 2018

On Friday it was reported:

EOG Resources and Noble Energy said Friday they will shift well completions from the Permian Basin to their other oil assets, as the lack of sufficient pipeline capacity from the prolific shale play weighs on results.

EOG said completions at its Delaware operations in the Permian will fall to 30% of total work in the second half of the year from 40% in the first half.

EOG's completions in Wyoming's Powder River Basin, North Dakota's Bakken, and Colorado's DJ basin will account for 20% of work vs. 10% in the first half of the year.

Noble Energy said it would reduce Permian completions during the second half of the year and instead focus on the DJ basin.

Today, this story from Reuters via Rigzone: Noble Energy gives in to Permian and transport challenges --

Noble Energy Inc said on Friday it would shift some investments outside of the Permian Basin and cut back on planned well completions as the company adjusts to ongoing transportation bottlenecks plaguing U.S. oil companies.

During the quarter, a record output from the Permian Basin created a supply log-jam in the shale-rich basin, keeping U.S. oil prices below international grades.

The company, which is going to reallocate some resources to the DJ Basin, expects full-year sales volume to be near lower end of its forecast, while raising its capital expenditure budget slightly, blaming higher costs of drilling.

The company said, in February, it expected volumes to grow to about 525,000 barrels of oil equivalent per day (boe/d) in 2020.

Total sales volumes at the end of 2017 was 381,000 boe/d.

The producer now expects full-year 2018 total sales volume to be near the lower end of its forecast of 350,000-360,000 boe/d.

Apart from the Permian Basin, which is at the center of the shale revolution in the United States, Noble also operates in the Eagle Ford and DJ basins.

Noble's total sales volumes in the reported quarter fell 15.2 percent to 346,000 boe/d.

Wow, this is a bigger story than first posted last week. This is exactly the opposite of what is being reported in the Bakken --

• in the Bakken:
• drilling prices are coming down
• volumes produced are increasing
• at times, Bakken oil is selling at a premium to WTI (Cushing)

in the Permian:

• drilling prices are going up (and fracking is going to get more expensive)
• in the Permian it's boe; in the Bakken it's bo
• volumes for some operators are coming done
• Permian is selling at huge discount to WTI

But look at Noble:

• production fell well below what was expected

Disclaimer: this is not an investment site, but I'm curious -- just how did Noble's shares do on Friday?

• NBL fell amost 8% on Friday. Wow.

Other companies:

• OAS: down 0.65%
• NOG: up over 2%
  COP: down 0.38%

****************************

The Book Page

I don't know if I've ever experienced something like this before.

By he middle of chapter 8, page 122 in a book that spans 650 pages, I could read no further. The atrocities were too much for me. It was impossible for me to continue.

I can truly say that having read the book I am ashamed to be part of the human race. My life cannot end soon enough after having read what I've just read. I have no idea how Sarah Helm could have had the "strength" to write that book.

Ravensbrueck: Life and Death in Hitler's Concentration Camp for Women, Sarah Helm, c. 2014. Link here for my notes.

[Update: I did go back to the book. I read the epilogue and then read some of the later chapters. The "politics" that the International Red Cross played near the end of the war were truly pathetic. Most of what I recall, the Swedes were some of the true heroes, rescuing many prisoners, though the process was such that it added an additional dimension to the suffering and atrocities.] 

Saudis Increase Production -- Oilprice; Saudis Cut Production -- Bloomberg -- August 6, 208

Updates

Later, 10:32 a.m. CDT: someone noted the same thing I did -- something fishy going on over in Saudi Arabia.  

Saudi Arabia may have started to fill up its oil tanks, export and domestic consumption data suggests.

Traditionally, the summer months are the season of peak local consumption of crude, Lee notes, as air conditioning demand hits a high. However, this year temperatures have been below the five-year average for the period, and exports have not registered any marked increases, either.

Saudi Arabia has abundant storage capacity and over the last three years, stockpiles have been falling, from more than 300 million barrels to less than 250 million barrels. At the end of April this year, they stood at the lowest level since 2011, but in May they went up for the first time since last November.

They may well have continued to rise in the following months as well. At the same time, Reuters cited two unnamed sources from OPEC as saying Saudi crude oil production in July fell by 200,000 bpd instead of rising, as per the OPEC+ agreement from June 22.

This is a surprising turn of events after Saudi Arabia assured importers that India and the United States it would ramp up production quickly and solidly.

Original Post

 I posted this barely 72 hours ago; posted Friday; it's now early, early Monday:

Saudi Arabia nearly sets all-time production record. Yawn. How many times have we heard this story. 

The kingdom’s oil production grew by 230,000 barrels a day in July, to 10.65 million barrels per day. This is just shy of an all-time peak reached in 2016, according to a Bloomberg survey of analysts, oil companies and ship-tracking data.

Did you get that? Oilprice reported that Saudi Arabia produced at record levels in July, 2018, to 10.65 million bopd.

Now, today, from Bloomberg:

Saudi Arabia, which recently pledged oil-supply increases to tame rallying crude prices, cut production last month, according to OPEC delegates familiar with the matter.

The biggest member of the Organization of Petroleum Exporting Countries pumped 10.3 million barrels a day in July, according to the delegates, who asked not to be identified because the data is private. The kingdom told the cartel it produced 10.489 million in June.

The cutback comes despite promises from Saudi Energy Minister Khalid al-Falih that key OPEC members and their allies would add about 1 million barrels of supply, doing "whatever is necessary to keep the market in balance." Under pressure from U.S. President Donald Trump to reassure markets, the kingdom was said to have been preparing to pump 10.8 million or 11 million barrels a day.

The lower number follows signs that the Saudis couldn't ultimately find buyers to justify pumping at record output levels. U.S. crude futures lost more than 7 percent in July, their steepest drop in two years, amid signs that a surplus is re-emerging in some parts of the world market. There are growing fears that the trade war between the U.S. and China could impair demand.

What's most interesting about this is not production required for export, but production required for domestic consumption:

• Saudi oil consumption goes up significantly in the summer; provide electricity for a/c
• Vision 2030 requires increased oil for refining

To see a Saudi cut in production in July is quite interesting. Especially after we just told that production actually increased.

For newbies, there is nothing new here, nothing to see.

This is what is going on: there are two sources for information coming out of Saudi Arabie --

• the government's official statistics
• the anonymous sources from those who actually know what's going on

 The bottom line: Saudi Arabia pumps somewhere between 10 million and 11 million bopd. A number below 10 million will not occur and a number above 11 million will get everyone's attention.