Saudi On The Ropes -- OPEC Sees Less Demand For Their Oil -- January 15, 2020

Why Is OPEC demand dropping?

US supply expectations soar. And the US has the "right" kind of oil.

Forecast:

• US to break another production record this year
• US liquids supply in 2020 is forecast at 18.81 million b/d -- a 7.77% increase over last year -- source: OPEC
• by 4Q20, US liquids could reach 20.21 million b/d -- cracking the 20 million mark for the first time 

A reader commented elsewhere shortly after posting the above:

Paging James Hamilton! Self styled super academic oil economist. How's that "Peak oil in America" article looking?

https://econbrowser.com/archives/2007/05/peak_oil_in_ame

Probably no better than your JUL2014 "hundred dollar oil here to stay" article. Just a few months before the price crashed.

It's always entertaining to read those old "peak oil" articles. If you do click on the linked article, be sure to scan through some of the comments to James Hamilton regarding his "peak oil"theory.

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

First Things First

I'm impressed. It was expected that the US Senate voting on the USMCA was going to have to wait until after the Articles of Impeachment, the latter having precedence over everything else.

But now I understand that Mitch McConnell will hold the vote Thursday morning, before taking up the impeachment trial.

I'm impressed.

Three Second-Bench Three Forks Wells -- January 15, 2020

Re-posting:

Three producing wells (DUCs) reported as completed:

• 34639, 601, Slawson, Wolverine Federal 12-31-30TF2H, Elm Tree, t12/19; cum --; 2nd bench, Three Forks; spudded December 16, 2018, TD on February 22, 2019; vertical drilled, January 26, 2019 - January 30, 2019; curve started immediately after completing the vertical segment; segment took 10.3 hours; landed 66 feet into the Three Forks formation; the lateral was drilled in 48.3 drilling hours; drill rates ranged from 26 to 362 feet / hour; gas ranged between 57 and 2,270 units;
• 34603, 1,034, Slawson, Wolverine Federal 11-31-30TF2H, Elm Tree, t12/19; cum --; 2nd bench, Three Forks; spudded December 14, 2018; vertical began on February 3, 2019; completed in 65.6 hours; curve built in 9.7 hours; lateral was drilled in 48.3 drilling hours; gas units ranged between 13 and 3,260 units;
• 34604, 458, Slawson, Wolverine Federal 10-31-30TF2H, Elm Tree, t12/19; cum --; 2nd bench, Three Forks, spudded December 16, 2018; vertical drilled in 64.4 hours, January 26 - 28, 2019; curved built in 10.3 hours; lateral drilled 48.3 hours; gas ranged from 57 to 2,270 units; compare that with gas units from 26 to 380 in the first bench, Three Forks.

I find that absolutely incredible.

Drilling the vertical in 48 hours. Completing the curves in less than 12 hours which, up until now, seemed to be the norm. Finally, the lateral drilled in 48 hours.

Frack data not yet posted at the NDIC site. FracFocus:

• 34604, 14.3 million gallons of water; 92.7% water by mass; a huge frack; fracked 8/23 - 8/28/2019;

Seven New Pemits; WPX And Oasis -- January 15, 2020

Active rigs:

$58.06	1/15/2020	01/15/2019	01/15/2018	01/15/2017	01/15/2016
Active Rigs	52	68	55	36	49

Seven new permits, #37346 - #37352, inclusive

• Operators: WPX (6); Oasis
• Fields: Eagle Nest (Dunn County); Sand Creek (McKenzie County)
• Comments:
• WPX has permits for a 6-well Fast Dog pad in Eagle Nest, section 18-148-94;
• Wold has a single permit for a Wold well in Sand Creek, section 34-153-97; 

Three disposal wells permitted.
 
Three producing wells (DUCs) reported as completed:

• 34639, 601, Slawson, Wolverine Federal 12-31-30TF2H, Elm Tree, t12/19; cum --; 2nd bench, Three Forks; spudded December 16, 2018, TD on February 22, 2019; vertical drilled, January 26, 2019 - January 30, 2019; curve started immediately after completing the vertical segment; segment took 10.3 hours; landed 66 feet into the Three Forks formation; the lateral was drilled in 48.3 drilling hours; drill rates ranged from 26 to 362 feet / hour; gas ranged between 57 and 2,270 units;
• 34603, 1,034, Slawson, Wolverine Federal 11-31-30TF2H, Elm Tree, t12/19; cum --; 2nd bench, Three Forks; spudded December 14, 2018; vertical began on February 3, 2019; completed in 65.6 hours; curve built in 9.7 hours; lateral was drilled in 48.3 drilling hours; gas units ranged between 13 and 3,260 units;
• 34604, 458, Slawson, Wolverine Federal 10-31-30TF2H, Elm Tree, t12/19; cum --; 2nd bench, Three Forks, spudded December 16, 2018; vertical drilled in 64.4 hours, January 26 - 28, 2019; curved built in 10.3 hours; lateral drilled 48.3 hours; gas ranged from 57 to 2,270 units; compare that with gas units from 26 to 380 in the first bench, Three Forks.

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

Gasoline Demand

The dog days of gasoline demand:

Notes From All Over, Part 3 -- January 15, 2020

Income: For the first time in 26 years, all US metropolitan areas enjoyed income gains -- Bloomberg.

Americans in every U.S. metropolitan area experienced economic prosperity in 2018.

For the first time in 26 years, no metro area saw per-capita incomes fall that year -- the latest available data -- and it was only the fourth time since 1970 that every U.S. urban region experienced prosperity.

Americans in fewer than 6% of metropolitan areas have experienced uninterpreted gains in personal income since 1970. In contrast, as the country began to recover from the Great Recession in 2009, residents of 84% of metro areas saw incomes decline. A large number of areas saw significant decreases in 2013 and to a lesser extent in 2016.

Metros that haven’t experienced per-capita income drops in recent years include Washington D.C. and Pittsburgh. The nation’s capital is buffered from sector-based recessions by a federal government that pulls tax revenue from a variety of sources and geographies. The Pennsylvania city, meanwhile, has emerged as a health care, education, and technology hub even as its population declines.

The most notable thing that came out of the Democrat presidential debate last night: Joe Biden wants to raise payroll taxes. Payroll taxes are the most regressive taxes. Will affect blue collar workers disproportionally. 

Nothing like the threat of a war to learn geography:

Notes From All Over, Part 2 -- January 15, 2020

Liz Peek: hands down, my favorite Fox Business News contributor.

Biden: proposes to increase the most regressive tax there is -- payroll taxes. Is that all he has to "counter" Trump's economy -- raising taxes? This is not going to fly.

The market close: first time ever, Dow closes above 29,000. S&P 500 also hits all-time high. NASDAQ also rose for the day but did not hit a new high.

Oil closes at a 6-week low. Closes under $58. Diesel supplies "went through roof," gasoline supplies increase.

Peak oil? Bloomberg reports "experts" insist that Permian output is approaching a peak. The "experts"? Amad Waterous at Waterous Energy Fund. Article suggests otherwise or least raises doubts.

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.

Making Texas great: EPD reports that its isobutane dehydrogenation (iBDH) plant near Mont Belvieu, Texas, is completed and producing. Earlier note back in 2017.

Enterprise stated that market demand is growing for isobutylene – a byproduct of ethylene production plants – amid increased use of low-cost, light-end feedstocks such as ethane rather than more expensive crude oil derivatives.

The firm pointed out the iBDH facility will turn plentiful, cost-advantaged natural gas liquids into a higher-value product using the company’s integrated midstream network.

Ovintiv update: Encana Corp. won investors’ approval to relocate to the U.S. and change its name to Ovintiv, a plan that has dented morale in Canada’s beleaguered energy industry.

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

Diridon

I think this is a most fascinating story.

The headline: old complexities of how trains should reach new Diridon station stymie San Jose city council.

Behind a paywall at Silicon Valley Business Journal, but a google search will provide background and story. This is pretty much the story:

The major passenger railroads that serve San Jose’s Diridon Station — or plan to — have talked individually about the complexity of getting to and through the Diridon of the future, envisioned as the West Coast’s greatest transportation hub surrounded by a downtown reimagined by Google.

Now they have the concurrence of a European design partnership with considerable experience in planning this kind of station, which is routine on that continent. And rather than accept all its preliminary recommendations so far, the City Council decided Tuesday to further study how tracks from the north and south get to Diridon at a public study session in January before deciding.

As described to the council by Jessica Zenk, the city transportation department’s deputy director, the options identified by the Dutch architectural team of Arcadis-Benthem Crouwel — especially routing tracks southward from Diridon — are “very challenging” and accommodating the freight requirements of the Union Pacific Railroad render some of them “fatally flawed.”

The council voted unanimously to ratify ABC’s concepts for an elevated station with concourse entrances on the east and west along Santa Clara and San Fernando streets, which were released last month.

The key problem area is where it has always been since high-speed rail became a factor to consider two decades ago — getting through or around the Gardner neighborhood that now is split by Caltrain’s corridor and is adjacent to the I-280 / Guadalupe Freeway interchange. Earlier high-speed rail studies, confirmed by city-hired consultants a year ago, ruled out a tunnel to an underground station.

How big is this going to be?

When the new station opens sometime in the 2030s, ABC expects between 212 and 262 passenger trains a day to run through it, a figure that will increase over the next 20 years to 480 daily trains.

Mayor Sam Liccardo put the price tag for the complex, which will include BART, Caltrain, high-speed rail, VTA light rail, Altamont Corridor Express (ACE), Capitol Corridor and Amtrak trains, at about $15 billion. Funding sources for most of that are still unidentified.

And then you have the freight trains in the area.

Options for getting Union Pacific freight trains from the East Bay through Diridon toward Gilroy or along the Vasona branch line toward the Lehigh Permanente Quarry in Cupertino are a major complication as well, she said. The railroad does not permit its trains to climb steep grades nor share tracks with electric trains, which means tracks used for Caltrain and high-speed rail must cross Union Pacific on tall viaducts.

At the Tamien Station now used by Caltrain, for example, one concept would require elevating the station 70 feet above the ground if Caltrain and high-speed rail share tracks there.

It completed, it sounds like it will become the ninth engineering wonder of the world. 

China-US Trade Deal -- January 15, 2020

The numbers are huge. China has pledged to boost its purchases of US goods and services over the next two years by $200 billion over 2017 levels:

• that $200 billion is an increase of more than 50%
• agricultural purchases: $32 billion
• manufactured goods: $78 billion
• energy products: $52 billion
• additional US services: $38 billion

This is what I find most remarkable in that list: energy.

Up until recently the US was a net oil importer. The US is now producing record amounts of oil and has the capacity to meet the Chinese demand for oil. This would not have been true some years ago when we were told we cannot simply drill our way to lower oil prices. On the blog, search doofus-in-chief.

On another note, from NPR (consider the source):

But steep 25% tariffs remain in place on much of what the U.S. buys from China, including components that American factories use to assemble finished products. While Trump insists that China is paying those tariffs, numerous studies have found the costs are largely borne by American importers.

And numerous analysts have not seen that Americans are affected all that much -- if at all -- by American importers. If there has been an increase in retail products due to tariffs, I haven't seen it. It appears that the real costs affecting Americans are healthcare costs; housing costs; college tuition; new automobiles. None of these are due to tariffs on Chinese imports.

Most amazing: Trump took a huge political risk pursuing this fight. The agricultural sector was hit very, very hard by the tariffs, but if deal holds as signed this is huge for the agricultural sector.

US Weekly Production Hits All-Time Record -- 13 Million BOPD; WTI Drops Below $58 -- January 15, 2020

EIA: after weeks flirting with a new record, US oil output hit a record 13 million bopd last week.

EIA weekly petroleum report, link here:

• US crude oil in storage decreased by 2.5 million bbls from the previous week
• US crude oil in storage: at 428.5 million bbls, US inventories are at the 5-year average
• refineries operated at 92.2% capacity; trending down the past couple of weeks
• gasoline production increased, average 9.3 million bbls per day
• over the past four weeks, crude oil imports averaged 13.1% less than the same four-week period last year
• jet fuel product supplied continues to trend up; jet fuel product supplied was up 2.0% compared with same four-week period last year

WTI: after the report and on the same day the China-US trade deal signed -- down 24 cents; drops below $58. 

Re-balancing:

Week	Week Ending	Change	Million Bbls Storage
Week 0	November 21, 2018	4.9	446.9
Week 1	November 28, 2018	3.6	450.5
Week 2	December 6, 2018	-7.3	443.2
Week 3	December 12, 2018	-1.2	442.0
Week 4	December 19, 2018	-0.5	441.5
Week 5	December 28, 2018	0.0	441.4
Week 49	October 30, 2019	5.7	438.9
Week 50	November 6, 2019	7.9	446.8
Week 51	November 14, 2019	2.2	449.0
Week 52	November 20, 2019	1.4	450.4
Week 53	November 27, 2019	1.6	452.0
Week 54	December 4, 2019	-4.9	447.1
Week 55	December 11, 2019	0.8	447.9
Week 56	December 18, 2019	-1.1	446.8
Week 57	December 27, 2019	-5.5	441.4
Week 58	January 3, 2020	-11.5	429.9
Week 59	January 8, 2020	1.2	431.1
Week 60	January 15, 2020	-2.5	428.5

Notes From All Over, Part 1 -- January 15, 2020

Love him or hate him: I've never seen such a successful presidency despite 93% of all news reports on Trump being negative. Amazingly, guys like Schumer are now saying that Trump did not go "far enough." Not nothing that no previous president has taken such incredible action in the past. Most presidents seem to be reactive; Trump is proactive. Success stories:

• USMCA
• China-US trade
• Iran
• the southern surge
• tax overhaul 
  

$13 trillion: since president took office, the wealth effect on the stock market -- $13 trillion added to Americans' wealth. Check your retirement funds.

Dissed: no Democrat senators, reps are in attendance at the signing of the Chinese - US trade deal.

Present: in attendance at the White House trade deal signing ceremony, the CEOs of Conoco, Devon, Cheniere, Tellurian, and of course, Harold Hamm of Continental Resources.

The Chinese - US trade deal is a huge, huge deal, and apparently all the cable news networks -- except Fox Business News -- are talking about impeachment. Truly amazing how Pelosi orchestrated the timing of the Articles of Impeachment to be delivered to the US Senate. Or maybe not. The place to be today? In the East Wing of the White House. Folks not watching the coverage are really missing a historic event. Amazing how magnanimous Trump's remarks are. Gives podium to VP Pence. Huge shout-out to Senator Kevin Cramer of North Dakota. Trump says he will be going to China "shortly," probably about the time the US Senate votes to acquit/find guilty Trump. Watching this historic signing makes Pelosi's comments seem incredibly petty, short-sighted.

Buttigieg: a $1 trillion infrastructure program. The US does not need another trillion-dollar program. The country needs the government to get out of the way. Example: Trump says after this East Wing event he will be signing approvals for new Texas pipelines -- says he shortened the process from 15 years to two months. 

North Korea, Iran: will see that China is working with the US. I doubt North Korea will change, but there's a possibility that Iran will change. Not much change, but possibly.

Target: missed expectations. Shares drop over 7%. More on this later, perhaps. But this was a huge story. Target has been the media darling for quite some time. I visit Target periodically. Compared to Walmart floor traffic in Target is pathetic. Buying opportunity? Two data points:

• holiday sales grew just 1.4%
• digital sales grew 19% this past holiday season compared to 29% in 2018

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

Exodus: Trump's SALT cap fuels a wealth exodus from high-tax states. CrainsNewYork.

Jamie Dimon: again has it right. No pun intended. Unfortunately you can only find the story over at Fox News.

EPD: rewards unitholders with distribution hike. This represents a rate hike for 62 quarters in a row. EPD is up today and pays 6.15%.

AAPL: currently paying less than 1% now due to huge jump in share price. It had been paying 1.97% at one time (or thereabouts). Currently paying $3.08/share the dividend would have to go to $6/share. Won't happen but hope springs eternal.

ENB: up a bit today and pays 6%.

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

Trade deal beneficiary: UNP -- up $1.09/share on the day the trade deal gets signed. Near its 52-week high. Pays 2.2%.

CMCSA: up a bit today; trading near 52-week highs. 

Five Wells Come Off The Confidential List Today -- January 15, 2020

It's always a surprise for the oilprice folks when it comes to the weekly US crude oil reports. Yesterday was no exception. Oilprice regular contributor said the 1.1-million-bbl build was a surprise when analysts a 500,000-bbl draw. When one is talking 450 million bbls in storage I would argue that a spread between 0.5 million and 1.1 million is hardly a rounding error.

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

Back to the Bakken

Active rigs:

$58.23	1/15/2020	01/15/2019	01/15/2018	01/15/2017	01/15/2016
Active Rigs	51	68	55	36	49

Wells coming off the confidential list today -- Wednesday, January 15, 2020: 46 for the month; 46 for the quarter; 46 for the year:

• 36399, conf, Rimrock, Two Shields Butte 4-24-12-4H3, 
• 35995, conf, Whiting, Martell 34-36-2H, 
• 35779, conf, Hess, EN-Farhart-156-93-0409H-7,
• 35689, conf, BR, Tailgunner 1D TFH, 
• 34828, conf, Hess, HA-Nelson A-152-95-3427H-7,

RBN Energy: the new and expanded refined products pipes criss-crossing Texas.

Texas consumes far more diesel fuel than any other state and almost as much gasoline as car-crazy California, which also has 10 million more people. The long-distance distribution of refined products within the Lone Star State is handled largely by tanker trucks, but in the past couple of years, midstream companies have been adding a lot of new refined products pipeline capacity, not just to help deliver diesel and gasoline within Texas — including the diesel-hungry Permian Basin — but also to move motor fuels to the Mexican border for export. And more diesel and gasoline pipe capacity is on the way. Today, we discuss the new and expanded refined products pipelines criss-crossing Texas.