Wednesday, November 14, 2018

Did Y'all See This? API US Crude Oil Inventory --- Up Another Whopping 9 Million Bbls -- November 14, 2018

Link here.
The American Petroleum Institute reported late Wednesday that U.S. crude supplies rose by 8.8 million barrels for the week ended Nov. 9, according to sources.
The API data, which was released a day later than usual because of Monday's Veterans Day holiday, also showed gasoline supplies edged up by 188,000 barrels while distillate stockpiles fell 3.2 million barrels, sources said.
Inventory data from the Energy Information Administration will be released Thursday. Analysts polled by S&P Global Platts expect the EIA to report a climb of 2.3 million barrels in crude supplies.  
Absolutely incredible.

When I was tracking this, back in 2017, for two years, I do not recall any increase of 9 million bbls of oil. This is staggering. I quit tracking this back in March, 2018. Maybe I need to start tracking it again. My threshold: 400 million bbls.

Weeks to RB
Week 0
Apr 26, 2017
Week 24
October 12, 2017
Week 25
October 18, 2017
Week 26
October 25, 2017
Week 27
November 1, 2017
Week 28
November 8, 2017
Week 29
November 15, 2017
Week 30
November 22, 2017
Week 31
November 29, 2017
Week 32
December 6, 2017
Week 33
December 13, 2017
Week 34
December 20, 2017
Week 35
December 28, 2017
Week 36
January 4, 2018
Week 37
January 10, 2018
Week 38
January 18, 2018
Week 39
January 24, 2018
Week 40
January 31, 2018
Week 41
February 7, 2018
Week 42
February 14, 2018
Week 43
February 21, 2018
Week 44
February 28, 2018
Week 45
March 7, 2018
Week 46
March 14, 2018

"Forever" Stamps To Go From 50 Cents To 55 Cents -- November 14, 2018 -- For The Archives -- Whatever Happened To The Caravan?

USPS first class stamps increase by 10%: from 50 cents to 55 cents for a "Forever' stamp. Link here. From Fortune:

This pretty much ends Christmas cards for me.


 Back to Kneeling

MRO Reports Two More Incredible Wells -- November 14, 2018

MRO reports two more staggering wells; see below; see this link also. Record IPs are tracked here

Active rigs:

Active Rigs63543864186

Six new permits:
  • Operators: MRO (3); Whiting (3)
  • Fields: Deep Water Creek Bay (McLean County); Sanish (Mountrail County)
  • Comments: MRO has permits for a 3-well Merwin USA/Foote USA/Avallon USA pad in 8-150-90; and Whiting has permits for a 3-well Ogden pad in 3-154-92;
Thirteen permits canceled:
  • Thunderbird (13): Fleck, Lange, Frank (Stark County), Franks Creek Federal (Billings), Watson A, Watson B, and Lower Thirty Federal (Billings) permits, all in McKenzie County except as indicated;
Two producing wells (DUCs) reported as completed:
  • 34484, 6,504, MRO, Yellowface USA 13-23H, Reunion Bay, t9/18; cum 60K over 22 days; extrapolates to 81,700 bbls in 30 days;
  • 32975, 9,166, MRO, Jerome USA 12-23TF, Reunion Bay, t9/18; cum 19K in 5 days; extrapolates to 116K over 30 days; 
The Bakken Will Do Just Fine, Thank You

From oilprice:

The Market, Energy, And Political Page, Part 4, T+8 -- November 14, 2018

See link here. From Mike Fitzsimmons over at Seeking Alpha --
  • Imperial Oil, which is majority owned by Exxon, has decided to move ahead with "Aspen," a 75,000 bpd, C$2.6 billion oil sands project
  • this decision was a big surprise considering the lack of pipeline exit capacity that has WCS trading at a $44/bbl discount to WTI
  • it looked to be worse of a decision after a federal Judge subsequently dealt the Keystone-XL pipeline another blow
  • meantime, oil prices have crashed as President Trump backtracked on the Iran sanctions by giving waivers to Iran's top-eight customers
  • there are very good reasons why no oil sands projects have been green-lighted since 2013. Aspen shouldn't have either
In my mind, there are only two reasons for doing this:
  • Exxon sees something on the horizon that the rest of us don't; or,
  • Exxon is desperate to recoup some of their investment.
With regard to the latter, perhaps they hope to "define" what they have and then sell it.

But it is amazing to see how much money the oil companies can make when times are good.

75,000 bopd x $15/bbl = $1.125 million / day.

$2.6 billion / $1.125 million = 2300 days = 6.3 years.

Off The Net For Awhile -- Lots Of Reading -- November 14, 2018

CLR has a new corporate presentation at this link. I will look at it later. Considering current price situation and the fact that CLR does not hedge, this should be a very, very timely presentation.

I brought Sophia two "children's" books. She looked at them, put them away, and went back to the book she had started "reading" yesterday: a Mediterranean recipe book. I am not kidding.

The Market, Energy, And Political Page, Part 3, T+8 -- November 14, 2018


Later, 12:18 p.m. CT:

Original Post

The biggest energy story of 2018? We talked about this several months ago (the first tag was October 3, 2018; and the first link there took us back to August 25, 2018). Did y'all see this:

Natural gas spiked almost 12% overnight; now trading above $4.50.

By the way, the current slump in oil prices?
  • lots of pain right now, but ...
  • huge benefits down the road
  • not to worry.

The Market, Energy, And Political Page, Part 2, T+8 -- November 14, 2018

WTI?  It was classic bait and switch.

1. Iran sanctions announced six months before they were to go into effect.
2, Iran produces at max level to sell as much as they can before sanctions go into effect.
3. Likewise, Russia and Saudi max out production -- were ready to make up for Iranian shortfall.
4. So, now we had more oil on the market than ever before.
4a. China buying as much oil as fast as they; as much storage as they have.
4a. Canada hit really, really hard.
5. Sanctions go into effect.
6. Once any country has a piece of paper that has "waiver" on it, it opens the door wide open. No one can keep track of how much oil is coming in; exceeding Iran sanctions or not.
7. Bottom line: no Iranian sanctions on oil.
7a. Classic bait and switch.
7b. Trump is smart enough to know exactly what was going to happen.
7c. Obama had his war on coal; I'm convinced that Trump has his war on oil -- in the sense that he wants to drive prices down to lowest in many, many years. That will be a great headline going into 2020.
7d. Low, low oil prices, by the way, kill the renewable industry.
8. Mideast Arabs are the greatest traders in the world -- I learned that when stationed in Turkey. They played this very, very well.
9. It will take at least six months to turn this around and only if Saudi and Russia cut significantly. Russia won't cut. Saudi might cut. Saudi is in deep doo-doo.

Notes For The Granddaughters

This morning I was the driver for all three granddaughters. First two to middle school and then high school. Then back to the house to get Sophia ready for TutorTime (day care). Everything -- just like clockwork.

Sophia's letter of the day: "s". We came up with all the "s" words we could think of on the way to school. She had a "scarecrow" for "show and tell."

With the older granddaughters our discussion:
  • the weather; coldest day since last February (2018)
  • biome of the day: the riparian biome
  • significance of "high water" and "low water" mark
  • origin of "East of Eden" -- from Genesis; the phrase is mentioned twice
  • "beyond the pale" -- Irish; Dublin
I really wanted to talk about ionic bonding and covalent bonding with the oldest, but I don't think she was ready for it, and we probably needed a bit more time -- maybe a good  subject for our longer ride to water polo Thursday evening.

The Market, Energy, And Political Page, T+9 -- November 14, 2018

Unprecedented (haven't used that word in a long time on the blog):

OPEC in deep doo-doo:

Here comes da judge:

And I assume they won without Hillary's help, without Michelle's help, or without Trump's help. Good for them.

To What Extent Might Coal Impact Natural Gas Prices This Winter -- RBN Energy -- November 14, 2018

Hang on to your hats:

The "shale price band." From The Financial Times. This is a pretty good article. Some data points:
  • OPEC seriously under-estimated what US shale producers would add to global supply
  • one year ago: OPEC forecast an additional 540,0000 bopd from the US, 2018 yoy
  • in fact, the US added 1.5 million bopd, 2018, yoy
  • shale oil and its light-end yield characteristics does not easily replace the heavier qualities of crude oil from the Middle East
  • US shale oil is not necessarily the crude most desired by refiners, but that is irrelevant for US producers. They are driven by economics and will produce as long as the price is right
  • in early October, data started to indicate that the US weekly statistical reports had been under-estimating production. That is when oil prices started to retreat and also when large speculators started to reduce their long exposure to crude oil futures
  • by trying to control supply and support prices, Opec and its new partners have created better economics for the US producers and are back to facing a wave of supply increase that they did not expect and are struggling to control
  • Comment: the US is nowhere near what it can produce -- the Permian is barely getting started; there are some interesting production profiles in the Bakken that have not been seen before 
  • archived.
Back to the Bakken

One well coming off confidential list today -- Wednesday, , November 14, 2018:
  • 34453, SI/NC, XTO, Cherry Creek State 14X-36EXH-S, Pembroke, no production data, 
Active rigs:

Active Rigs65543864186

RBN Energy: how much could coal generation stem gas price upside in a cold winter?
The U.S. natural gas market enters winter this year in a delicate balance: production is at an all-time high and growing fast, but gas storage inventories are well below year-ago levels and the five-year average — and at an all-time low relative to consumption. If winter weather is normal or mild, the U.S. gas market will likely begin to settle into a period of sub-$3/MMBtu prices. But this year’s low inventory level means that colder-than-typical weather this winter could spell more gas price upside than the market has seen in many years. Today, we continue our review of the current gas market with a look at the relationship between gas- and coal-fired generation, and at how the combination of low gas storage inventories and low coal stockpiles might play out this winter.
Entering the winter (before forecasts turned cold), our NATGAS Billboard called for an end-of-March underground gas storage inventory level of about 1,250 Bcf (or 1.25 Tcf).
Even a moderately colder winter can add 400 Bcf of residential and commercial heating demand, and the upside to industrial demand could add another 100 Bcf.
But a colder-than-normal winter also adds demand in the power sector, more so now that increasing numbers of people are heating their houses with electricity, particularly in the South. We estimate that a moderately cold winter would add about 200 Bcf to gas demand for power generation, all other things being equal.
However, an atypically cold winter would quickly push coal inventories into uncharted territory, too. The coal demand upside in a moderately colder winter — before accounting for any additional market share gained from gas — would be in the neighborhood of 15 million tons. Current coal consumption rates average just under 2 million tons per day, so 15 million tons of extra demand divided by 2 million tons per day would reduce days of inventories by 7.5 days, taking coal inventories from just over 70 days of consumption to the low 60s — outside of the historical range. Layering in an additional 20 million tons of coal demand due to gas price upside (the coal equivalent of the 350 Bcf we discussed earlier) would bring coal inventories to only 53 days of consumption — likely an unsettlingly low level for utilities, even in an environment of declining coal demand.
Of course, the higher that gas prices climb, the more expensive it gets to source gas or coal from somewhere other than storage or stockpiles, and therefore the more comfortable utilities get with drawing down gas storage inventories and coal stockpiles to meet winter demand. We saw how gas and coal prices could spiral upward in the Polar Vortex winter of 2013-14. Gas prices rose and coal became more economic, but declining coal stockpiles — along with logistical constraints around delivering coal from mines in the West to power plants in the East — meant that coal generation didn’t prevent gas prices from climbing to $6/MMBtu in February 2014.
So this winter, the precise elasticity — just how high gas prices would need to rise to pull gas and coal out of inventory — will not be so predictable as it would be, for example, in response to a short-lived gas production outage. Rather, this elasticity will depend on the trajectory of winter weather (early versus late cold, extreme versus moderate cold, etc.), of gas supply growth (whether the market is comfortable that gas supply will be robust a few months down the line), and likely other factors. 
A somewhat unpredictable power-sector response means that we need to look elsewhere for factors that might stem gas price upside in a colder-than-normal winter. That brings us to a relatively new potential source of gas demand elasticity in the U.S.  — LNG exports — which we’ll cover in the final episode of this series.
Much more at the linked article.