Monday, December 2, 2019

Back To The Future -- Dickinson Firm Awarded Contract To Build 31 Miles Of The Wall -- December 2, 2019

See this post:

Now this story from KXNET, dated today, December 2, 2019, 6:54 p.m. CST:
A North Dakota company has been awarded a contract to help build a border wall in Yuma, Arizona.
U.S. Sens. John Hoeven and Kevin Cramer said Monday that the U.S. Army Corps of Engineers awarded a border wall contract to Fisher Sand and Gravel of Dickinson.
Fisher will receive nearly $270 million of a $400 million contract. Cramer says the contract will go toward designing and building physical barriers along about 31 miles (49.9 kilometers) of the southern border in Yuma.
It appears after the Dickinson company built a half-mile section it impressed the USACE and awarded the contract to Fisher Sand and Gravel. Not sure how this all evolved, but there you have it.

A mile of crude oil pipeline: one million dollars.

A mile of interstate highway: one million dollars

A mile of wall: $270 million / 31 miles = $8 million dollars; or,

A mile of wall: $400 million / 31 miles = $13 million dollars.

USAF toilet seat: $640 (link here).

Keeping America great.

Wind Farm Update -- Williston Herald -- December 2, 2019

From The Williston Herald, data points:
  • Williams, Mountrail wind farm to use newest, largest turbines in the nation (Aurora Wind Farm; 
  • one mile away fromt he Lindahl Wind Farm, near Tioga; 
  • latest in a line of nine other wind energy projects either seeking permits or under construction;
  • together they will add another 2,435 MW to North Dakota's already impressive energy portfolio; by itself, Aurora will produce 299 MW (nameplate, though historically, wind farms produce about 25% of nameplate capacity); 
  • two types of turbines; the larger turbine will stand 181 meters from ground to tip-top blade, and product 4.8 MW; the rotor diameter of the wind turbine is 149 meters; 39 meters longer than Lindahl; 
  • the federal credit was available in full for projects started by 2016, and is gradually phased out thereafter
  • this year marks the last year for 40 percent of the credit; the Aurora Wind Farm, while breaking ground this year, was actually begun in 2016 due to the purchase of its turbines in that year;
  • it will be receiving 100 percent of the original tax credit.
Sophia Hitchhiking To Pre-School

Tell Me Again The "Downside" Of Global Warming -- December 2, 2019

Duluth, MN, early winter, 2019:

I never realized that I-35, here in Texas, extends all the way to Duluth, MN. Ninth-longest interstate and third-longest north-south interstate. It splits in two here in the DFW area as well as the Minneapolis-St Paul area. I love the symmetry.

Recession Is Just Around The Corner

From another source; google phrases if you want to find source:
Don't throw in the towel on the U.S. economy just yet.

Black Friday sales are the latest sign that the U.S. consumer, which makes up about 70 percent of the economy, is alive and well.

"All this talk of recession, and you know I thought that was ridiculous talk, it's not going to happen," Mohamed El-Erian, chief economic adviser at Allianz Global Investors, told FOX Business’ Maria Bartiromo on Monday. "The U.S. consumer is in a really good place and the U.S. consumer is the main driver of this economy."

Spending figures from the Black Friday weekend showed online shoppers spent a record $7.4 billion, almost as much as the $7.9 billion they spent during last year's Cyber Monday. That’s in addition to the $4.2 billion they spent online on Thanksgiving Day, which was 14.5 percent higher than last year's spending.
Why He Keeps Tweeting

He keeps tweeting because no one else will report this.

Snopes needs to fact check.

Link here:

New Operator In North Dakota: An Ethanol Producer, Red Trail Energy, LLC, Has An Oil And Gas Permit -- December 2, 2019


December 11, 2019: what is Red Trail up to? From April 20, 2019, US News, a carbon capture project. Data points:
  • this is being done to meet West Coast fuel standards
  • the company recently completed a geophysical survey of eight square miles around the plant
  • company's goal is to produce ethanol that will meet the low carbon fuel standards of California and/or the Pacific Northwest
  • the company and the EERC are targeting the Broom Creek formation, about 6,400 feet below ground that area
  • proposal: to inject about 160,000 metric tons of CO2 per year into the well
  • leaks? can anyone say Aliso Canyon gas leak?
December 7, 2019: from a reader, regarding the Red Trail Energy permit, see first comment:
The permit Red Trail is requesting for drilling could likely be related to research for a carbon sequestration project. Ive heard they have interest in a potential CO2 capture project. There will likely be permits requested for a well or wells in Oliver County in the near future as well which are related to Project Tundra, another potential CO2 capture project.
Original Post

Active rigs:

Active Rigs5666533964

One permit renewed:
  • Bruin: an FB Leviathan permit in McKenzie County
Four new permits, #37229 - #37232, inclusive
  • Operator: WPX (3); Red Trail Energy, LLC
  • Fields: Spotted Horn (McKenzie County); Wildcat (RTE 10, Stark County)
    • WPX has permits for a 3-well Patricia Kelly pad in section 3-150-94, Spotted Horn oil field;
    • Red Trail Energy, LLC, has a permit for a wildcat in SENE 10-139-92;
Over at the NDIC well search site, this is the first and only permit (so far) for Red Trail Energy, LLC.  The website for Red Trail Energy greets visitors with huge "Ethanol" banner.
From the website:
Red Trail Energy, LLC (RTE) is a North Dakota-based investor group formed to finance, construct and operate a corn-based ethanol production facility located near Richardton, North Dakota. This vision became a reality when the $99 million, state-of-the-art plant began producing ethanol, in January of 2007. RTE now employs 47 personnel with an annual payroll of $2.9 million.
As one of the first coal-fired ethanol plants in the nation, RTE produces 50 million gallons of ethanol, using 18-20 million bushels of corn and ~100,000 tons of coal, annually. The plant will generate 2.8 gallons of ethanol from every bushel of corn. Coproducts produced by RTE include 125,000 tons of dried distillers grain and 80,000 tons of modified-wetcake annually.
The Richardton plant’s physical layout is composed of eleven structures, totaling 100,000 square feet of buildings, including administration, maintenance, processing, grain receiving, dried distillers grains storage, coal island, dryers and a pump house. The second-generation plant incorporates all the latest advances in ethanol processing, including equipment and technologies proven to boost efficiency and return on investment.
No mention of oil and gas operations.  The wildcat will be drilled on/near RTE property north of Richardton, ND. Richardton is east of Dickinson and about 100 miles west of Sterling, ND, where one turns south to Linton, ND. Linton is the county seat for Emmons County. Folks may remember Linton, ND: that's where the recent NDIC hearing on the DAPL expansion was held. Emmons County is the location of the fabled "Sleeping Giant" natural gas field.

From a reader, alerting me to RTE, which could end up being quite a story:

Hope Springs Eternal

Area under discussion:

Schwab Move To Ft Worth Update -- December 2, 2019

I still think this will be one of the bigger 2019 business stories -- Top national non-energy story, from week #47:
Now an update from DallasBizJournal, said with a straight face, "finances were not a big driver in decision to move HQ to north Texas."
The Charles Schwab Corp. may be moving from San Francisco to North Texas, but a key executive doesn’t want you to think it’s all about saving money. [He said with a straight face. Perhaps it also has to do with quality of live.]

The discount brokerage announced last week plans to move its headquarters from California to Westlake, northwest of Dallas, after it closes its planned acquisition of TD Ameritrade Holding Corp. Both companies [each] already have more than 4,000 employees locally.

During a call following the announcement, an analyst asked how Schwab thinks about relocation and its connection to cost savings and tax rates – factors that are cited as advantages for Texas businesses. The planned deal is set to bolster earnings.

“I wouldn’t think of the eventual headquarters move to Texas as being a big driver from a financial standpoint,” Chief Financial Officer Peter Crawford said. “It’s really more a reflection of the reality today, which is that we have a large campus in the Westlake area. TD Ameritrade has a large campus in the Southlake area. We have opportunity for expansion there.” [He said with a straight face.]

He said the company will continue to have a large presence in San Francisco, consistent with where it’s at today.

Yet more folks should be coming to the North Texas locale in the future.

“As we look over the next four or five-plus years, that is a location where we will be likely adding a significant number and certainly ... a more significant percentage of our staff,” Crawford said.

Schwab is joining other companies that are relocating to – or expanding in – North Texas as more companies look for ways to save money and find more talent.

Some 660 companies moved 765 facilities out of California in the past two years, and Dallas-Fort Worth has been the beneficiary of many of the relocations -- previously reported/posted.

Earlier this year, McKesson, a pharmaceuticals and health care supplies provider, moved its headquarters from San Francisco to Irving. At the time of the announcement last year, John H. Hammergren, McKesson’s then-CEO, pointed to reasons that included spending in a prepared statement.
My hunch: Schwab was having trouble competing for talent, competing with the likes of Apple and dozens of other tech companies.

Two Staggering CLR Whitman Wells -- December 2, 2019

This page will not be updated; this well is tracked here

This well is back on line:
  • 20210, 803, CLR, Whitman 2-34H, API - 33-025-01259, 34-147-96, Oakdale, 4 sections, t9/11; cum 1.697381 million bbls 10/19; this well went off-line 10/17; FracFocus reveals no re-frack;
Recent production:
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

From the same pad, this well has been re-fracked:
  • 20212, 482, CLR, Whitman 3-34H, API-33-025-01261, 34-147-96, Oakdale, 4 sections, t9/11; cum 135K 11/17; this well was re-fracked 9/23/2017 - 10/5/2017; FracFocus, 9.8 million gallons of water; but note that was in 2017; look at what happened in late 2018; FracFocus shows no re-frack:
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

Four More Wells That Have Each Gone Over 500,000 Bbls Cumulative --

This page will not be updated; these wells are tracked here.

More wells reporting greater than 500,000 bbls crude oil cumulative:

The wells:
  • 31774, 5,058, Bruin E&P, Fort Berthold 151-94-27A-34-16H, Antelope-Sanish, t7/18; cum 516K 10/19;
  • 30541, 4,871, Bruin E&P, Fort Berthold 151-94-26A-35-4H, Antelope-Sanish, t6/18; cum 598K 10/19;
  • 20328, 1,647, Bruin E&P, Fort Berthold 151-94-26B-35-1H, Antelope, t3/12; cum 570K 10/19; offline since 1/18; back on line 9/18;
  • 22707, 1,959, Bruin E&P, Fort Berthold 151-94-26B-35-3H, Antelope, t4/14; cum 588K 10/19; offline since 1/18; back on line 9/18;
It should be noted that #30541 produced in excess of 150,000 bbls in two months. 

It should be noted that #31774 hit the 500,000 bbls cumulative in one year.

Section 2-151-93 -- Reunion Bay -- MRO Continues To Report Huge Wells In The Bakken -- December 2, 2019

Section 2-151-93.
  • 1280-acre drilling unit, sections 2/11-151-93.
Reported December 2, 2019: link here

The wells:
  • 35331, 6,028, MRO, Dietrich USA 11-2TFH, Reunion Bay, t9/19; cum 114K 58 days; cum 212K 1/20;
  • 35330, 4,401, MRO, Holmgren 41-3H, Reunion Bay, t9/19; cum 61K 41 days; cum 152K 1/20;
  • 35332, 5,530, MRO, Tommerdahl USA 11-2H, Reunion Bay, t9/19; cum 94K 58 days; cum 201K 1/20;
Although these are not record IPs, they are certainly among wells that need to be considered. Wells with record IPs are tracked here

PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

Notes From All Over, Part 3 -- December 2, 2019


Later, 8:09 p.m. CT: from seekingalpha --
  • Global electric car sales were down 28% YoY in October, reaching 2.2% market share. The fall was due to a large fall in sales in China (due to cut in state subsidies)
  • EV market news - Germany to hike electric car subsidies by 50% starting 2020 until 2025. NASA's unveils its first electric plane, the X-57 Maxwell.
  • EV company news - Production of Volkswagen ID.3 begins in Germany. Ford unveils Mustang Mach-E starting at roughly $44,000, due late 2020. Tesla launches its e-pickup cybertruck.
  • China's electric vehicle market to see sales rebound next year as automakers roll out more new products to lure buyers, but more supportive government policies are needed, auto executives said.
  • bottom line: EVs don't sell without huge government subsidies; still way too expensive; and too few charging stations; and, when you find a charging station, 30 minutes to charge, and hard to say how long one will be waiting in the queue to charge one's car
Later, 8:04 p.m. CT: from zerohedge -- 
Meanwhile, here are TSLA’s current cars/products not in production:
  • Roadster (unveil was 2yrs ago)
  • Semi (unveil was 2yrs ago)
  • Model Y (TSLA refuses to mention how many pre-orders they’ve received here)
  • Cybertruck ($100 fully-refundable deposits on a car that will likely cost $60K, or  0.167%, is the equivalent of someone putting $1.67 toward an $1,000 iPhone and Apple calling it an order)
  • ATV
  • FSD (to be FSD, TSLA would have had to achieve level 5 autonomy… they’re at level 2)
So… TSLA has more vaporware products (i.e., stuff that doesn’t exist) than real products for sale; and, it’s real products are seeing large negative y/y growth currently.
But there's more:
Oh… and what about E. Musk’s promise that:
  • TSLA would have flying cars (he made this claim 322 days ago),
  • TSLA would create break pads that never need to be replaced (he made this claim 336 days ago),
  • TSLA would have a base on Mars in 2028 (he made this claim 432 days ago),
  • TSLA would have a one hour body shop (this claim happened 437 days ago),
  • he would fix the water in all Flint houses above FDA levels (he made this claim 504 days ago),
  • there would be no more mass layoffs (533 days, and multiple layoffs, ago), etc.?
And the SEC looks the other way. Because they know no one takes Musk Melon seriously.

Original Post

EVs. After our cross-Texas trip over Thanksgiving I was again struggling to see how EVs were going to become "a thing." It's just not gonna happen. At least not in the US.
  • forty percent of the US population live in apartment complexes; charging units are expensive
  • homeowners need to install EV chargers; new homes will have them installed
  • the grid will be hard pressed to handle any surge in new EVs
  • convenience
    • ICEs: average time of stop to refill -- five minutes
    • to charge: 30 minutes, which also means that when one pulls in to charge, one will wait behind a queue of cars charging and waiting to charge
    • EVs have maps to show where charging station is, but convenience of service stations is not to be underestimated
  • at the end of the day, Americans don't like to be tethered, and an EV is a tethered vehicle, no matter what one says
  • other links:
    • oilprice
    • automotive news, September 11, 2019: as more EVs hit the market, selling them could be a challenge;
    • marketrealist, October 14, 2019: EV makers in trouble as China's market hits the brakes?
    • policyoptions, May 20, 2019: the challenge for EVs to disrupt trucks and buses; commercial vehicles use weighty, wildly expensive batteries and need powerful charging stations; a broad shift to electric will take some policy to help 
EV sales are tracked here. New sale data should be out later this week. Wow, that's strange. This site must be having problems. The side doesn't even have October data yet. As recently as a few months ago, sales data lagged only a few days after the end of the month. Oh, there it is, in the small print from the website: "With that being said, we are looking at moving to quarterly reporting as a whole."

It appears that automobile manufacturers are "afraid" to post monthly sales figures. Yes, it's gotten that bad. The "cheap" price of gasoline is not helping. Nor is the fact that some manufacturers are now facing phase out of their federal incentives. At one time a lot of folks thought that Congress might extend these incentives, but with the US House on vacation for the past two years and no end in sight for that vacation, nothing is going to get done. Incentives for EVs is way, way down on the list of things of which the public is interested. Has anyone heard any of the current crop of folks running for president mention EVs?

The fact that the "EV sales" site can't even get reliable data for months at a time tells me all I need to know about EVs in the US. If EVs were flying out of sales rooms, we would be getting the data.
  • GM: down a penny today at $35.99, mid-range for the year;
  • F: up six cents today, at $9.12, mid-range for the year; maybe a bit on the high side for recent investors;
  • TSLA: despite the Dow being down 220 points, TSLA is having a great day, up 1.22%; up over $4.00; trading at $334.
Disclaimer: this is not an investment site.  Do not make any investment, financial, job, career, travel, or relationship decisions based on what you read here or think you may have read here. 

By the way, the market is down today because "factories extend contraction as index misses forecasts." That headline will be forgotten by the end of the week.

Notes From All Over, Part 2 -- December 2, 2019

First things first: how Americans spent their Thanksgiving (and it wasn't watching Dallas Cowboys lose):

From the linked article:
Disney’s ice princess sequel brought in $85.3 million in the U.S. and Canada over the weekend and earned an unprecedented $132.7 million from Wednesday through Sunday. It has earned $288 million domestically in its 10 days of release.
The record was previously held by "The Hunger Games: Catching Fire," which grossed $109.9 million in 2013.
“Knives Out,” the innovative and star-heavy whodunit from director Rian Johnson, rode strong reviews and word of mouth to a $27 million weekend and a five-day total of $41.7 million that easily earned back its budget.
Echoing what others have said, "Knives Out" is/was one of the best movies I've seen in a very long time.

Disclaimer: this is not an investment site.  Do not make any investment, financial, job, career, travel, or relationship decisions based on what you read here or think you may have read here.

Market spooked: Dow down 212 points. Buying opportunity!
  • Apache plunges as oil-field update offers few details; update on Suriname site disappointed; as its Texas oil fields lose momentum; regular readers know where I am going with this
Disclaimer: I am inappropriately exuberant about the Bakken.

The Bakken, right now, is providing operators best bang for their buck; operators really, really overpaid for the Permian, but they were in a tough position. If they can survive the next couple of years, they will do incredibly well, but a lot of smaller Permian operators are not going to make it in the Permian. Next year, 2020, will probably be the "make or break" year.

The Bakken surprise: from November 30, 2019 --  previously posted --
This is perhaps most surprising news of the day, however.  "Everyone" knew the US was on its way to energy independence; no one saw this coming. Link here.
WTI: holding, and trending up a bit, $55.86, right now.

German car industry faces day of reckoning -- Financial Times. Link here. The number of jobs being lost looks huge but in fact, on a percentage basis, hardly anything to get excited about. The interesting thing is that German manufacturers are able to cut employees -- unions and government regulations make cutting jobs very, very difficult. It's been my observation that when times get tough, the better-run companies will shine. By the way, the FT story is behind a paywall but easy to find similar stories with a google search. Story also here, and not behind a paywall.

Which brings me to this: media outlets that put everything being a paywall are losing a lot of eyeballs and those eyeballs aren't seeing the ads at those sites. Most of us, if we have the headline, can find a way around the paywall. Exceptions: The NYT but that's because most of the original stories are op-ed pieces disguised as news articles. (i.e., fake news).  For the serious investor hobbyist (those playing at home, as Jim Cramer would say) Barron's is hard to beat, and their paywall is pretty much impenetrable. But the library is a great alternative.

Notes From All Over, Part 1 -- December 2, 2019

First things first: last week's fake news in pictures. Perhaps the funniest:

Texas triangle, link here: I'm not in the market for a McMansion, but this tells me a lot about the Texas economy and more specifically the area where we currently reside.
When Danelle and Ron Reimer moved to Austin, Texas, from Orange County, California, last month they were intrigued by its “big little city” feel.

“We’re not really city people, but we love how welcoming Austin feels and how easy it is to get to know and to get around in,” said Danelle Reimer. “We bought in the Seven Oaks neighborhood because it’s close to downtown but also has privacy and views.”

The Reimers’ 9,000-square-foot house, which they purchased for more than $2 million, reminds them of a Southern California-style home with its arched doorways, tile work, wood beams and stonework.

“We like a lot of space and this house has a lot of personality, too,” Ms. Reimer said.

The Reimers, who relocated for Ron’s work with a global financial services company, aren’t the only high-net-worth family to make the “Texas Triangle,” which includes Houston, Dallas and Austin, their home in recent years.

The Dallas-Fort Worth-Arlington metro area is ranked 10th in the world on the list of top locations for the ultra-wealthy, according to the 2019 Wealth Report from Wealth-X. 

Credit card debt at this link; click on the "metro area" list and scroll down to see all the metro areas. Arlington, Texas is near the top, but Alaska is even higher. 

The article did not mention Willie Nelson or Jerry Jeff Walker.

London Homesick Blues, Jerry Jeff Walker

Our little 900-square-foot two-room apartment is nestled within this triangle. I'm looking to downsize. LOL. 

We're not allowed to have grills on our balconies in the apartment complex, so I prepare the lamb in our apartment, and then drive over to our daughter's house and grill it there.

I use hardwood charcoal exclusively now (e.g., Fogo) and absolutely love it. I use a chimney to get the charcoal started; takes about 15 minutes.

Really thick lamb, six minutes on first side, and then turn for another five minutes. I assume with my delay getting to the grill, etc, total time is twelve minutes, again for very thick lamb. It is still quite pink in the center. For thinner cuts, four minutes at most on a side.

Prep time is about 30 minutes with all the chopping of rosemary and thyme. Biggest lesson learned last week: cut back on the balsamic vinegar. We had lamb twice last week.

Saudi Arabia Foreign Exchange Reserves -- Trending To An All-Time Low -- December 2, 2019

Link here.

How much trouble is Saudi in? How badly does Saudi need Brent to go to $80?

This is quite incredible, to say the least. And I love reading from folks saying that Saudi's lifting costs are the lowest in the world.

By 2029, Saudi Arabia will be a net importer of crude oil.

Not Laying Down Rigs In The Bakken; Holding Steady; Up One Today -- December 2, 2019

Active rigs:

Active Rigs5866533964

Wells coming off the confidential list over the weekend, last week -- it appears that the NDIC is no longer posting results until several days after wells come off the confidential list. Last Thursday's wells have still not been posted.

Monday, December 2, 2019: 115 for the month; 216 for the quarter:
  • 36095, SI/NC, WPX, St Anthony 9-16HUL, Mandaree, no production data,
  • 33448, drl, EOG, Clearwater 30-3103H, Ross,
  • 31655, 775, Oasis, Jensen 55-1 11-19 4B, Missouri Ridge, t6/19; cum 92K 10/19;
Sunday, December 1, 2019: 112 for the month; 213 for the quarter:
  • 36417, dry, Freedom Energy Operating, LLC, Oltmans Panther 1-16, wildcat, Lodgepole target; not a surprise; previously posted;
  • 36318, SI/NC, Petroshale, Anderson North 2MBH, Croff, small bit of production;
  • 36317, SI/NC, Petroshale, Anderson North 1TFH, Croff, small bit of production;
  • 35635, SI/NC, WPX, St. Anthony 9-16HZ, Mandaree, no production data,
  • 35634, SI/NC, WPX, St. Anthony 9-16HA, Mandaree, no production data,
  • 35331, 6,028, MRO, Dietrich USA 11-2TFH, Reunion Bay, t9/19; cum 114K 58 days;
  • 35330, 4,401, MRO, Holmgren 41-3H, Reunion Bay, t9/19; cum 61K 41 days;
  • 33183, SI/NC, BR, Franklin 44-36TFH, Little Knife, no production data,
Saturday, November 30, 2019: 104 for the month; 205 for the quarter:36317
  • 35636, SI/NC, WPX, St. Anthony 9-16HB, Mandaree, no production data,
  • 33184, SI/NC, BR, Franklin 34-36MBH-2NH, Little Knife, no production data,
Friday, November 29, 2019: 102 for the month; 203 for the quarter:
  • 36316, SI/NC, Petroshale, Anderson North 1MBH, Croff, some production;
  • 36135, SI/NC, XTO, Sorkness state Federal 34X-36G, Sorkness, no production data,
  • 35637, SI/NC, WPX, St. Anthony 9-16HY, Mandaree, no production data,
  • 35332, 5,530, MRO, Tommerdahl USA 11-2H, Reunion Bay, t9/19; cum 94K 58 days;
  • 30108, 820, Oasis, Jensen 5501 43-7 6B, Missouri Ridge, t6/19; cum 95K 10/19;
Thursday, November 28, 2019: 97 for the month; 198 for the quarter:
  • 36136, SI/NC, XTO, Sorkness State Federal 34X-36C, Sorkness, no production data
  • 35638, SI/NC, WPX, St. Anthony 9-16HC, Mandaree, no production data,
  • 35587, 1,688, CLR, Carus 12-28HSL1, 33-025-03596; Cedar Coulee, t7/19; cum 143K 10/19;
  • 35333, 1,414, MRO, Estenson USA 11-2TFH, Reunion Bay, t9/19; cum 31K 10/19;
RBN Energy: late crops and delivery snags send PADD 2 propane prices soaring.
Cold weather and spiking demand from Midwest and Great Plains farmers trying to dry their late-maturing, soggy crops have sent the PADD 2 propane market into a tizzy. Supply is not a major issue — propane inventory levels in the region are only a little below average, and stocks are plentiful along the Gulf Coast in PADD 3 — but distributing propane by rail and truck for crop-drying use has been a bigger-than-normal problem. As a result, farmers are scrambling to get more of the fuel, and propane prices in the U.S. heartland have been skyrocketing. Worse yet, Canada may not be able to come to the rescue as it has in the past, because its propane exports to Asia are up and its inventories are down. Today, we review recent developments on the fuel front in the nation’s breadbasket.
As anyone who traveled across the Midwest or Great Plains this past holiday weekend knows all too well, winter has arrived, spurring demand for propane from the many residential and commercial customers in PADD 2 — the big triangle of states between Ohio, Oklahoma and North Dakota — who depend on the fuel for space heating, not to mention for cooking Thanksgiving dinners and heating up leftovers.
The other big demand center for propane in the Midwest and Great Plains is drying harvested corn and other crops before they are stored or shipped. Propane demand for crop drying varies from year to year, depending on, among other things, the size of the crop, the crop-maturation rate (is it an early, late or normal harvest), and the weather during the harvest. 2019 has been a pretty good year from a crop production standpoint, but a wet spring delayed planting, crop maturation was slower than normal, and farmers are still in the midst of an unusually late harvest (see navy blue lines for 2019 in Figure 1). That complicates things because it means crop-drying demand for propane has been spiking just as heating demand is ramping up.