Diesel Is The Real Problem -- Diesel Moves America -- October 15, 2022

Diesel costs will impact every product sold in America. 

Ninety-nine percent of Americans do not worry about the price of diesel because they don't buy it (needs to be fact-checked). 

Did anyone notice that US refiners are now operating below 90% of their capacity? Link here.

• U.S. crude oil refinery inputs averaged 15.7 million barrels per day during the week ending October 7, 2022 
• 279,000 barrels per day less than the previous week’s average
• refineries operated at 89.9% of their operable capacity last week. 
• gasoline production decreased last week, averaging 9.2 million barrels per day;
• distillate fuel production decreased last week, averaging 4.9 million barrels per day

Diesel: the real concern has moved from gasoline to diesel

• if one wants to see why diesel fuel is now the real concern, not gasoline, drive I-40 from Memphis to Nashville
• from this week's EIA weekly petroleum report
• distillate fuel inventories decreased by a whopping 4.9 million barrels last week and are about 23% below the five year average for this time of year.
• propane is in good shape:
• propane/propylene inventories increased by 1.1 million barrels from last week and are 1% above the five year average for this time of year.

The "numbers" this week were absolutely stunning.

Seven Wells Coming Off Confidential List -- And So Much More -- April 11, 2022

Masters: one for the ages.

• one highlight: Cameron Smith, #12
• favorite post-tournament interview: with Rory McIlroy 
• best round ever? McIlroy's fourth round, 2022; 64 strokes
  
• Scheffler:
• mother, big firm lawyer; her own successful firm moved from NJ to TX when Soctt was a child
• father: stay-at-home dad
• Texas: takes their sports seriously; very seriously
  

Covid:

• watching China confirms that the US, and perhaps much of the western world threaded the needle;
• US releasing significant amount of vaccine
• currently the US releases "no" vaccine on Sunday; rest of week, about 500,000 doses per day
• most recent week:
• Sunday: 1.7 million doses; all-time record for a Sunday? Certainly in recent memory
• Friday: 1.7 million doses
• Thursday: 1.2 million doses
• Wednesday: 1.3 million doses
• these are incredible numbers
• reminder: judge rules in favor of Biden -- federal employees must be vaccinated
• Hong Kong: we'll get to this in a stand-alone post; very interesting; another meme.
• investment thoughts, coming.
  

Diesel: will still be one of top five energy stories for 2022.

• question not be asked: why is diesel such a problem for refiners?
• France, UK, Germany: biggest buyers of Russian diesel; great graphic; Platts.
• personal observation from a trucker crossing North Dakota / Montana:
  

Electricity: US consumers are so incredibly fortunate. Why do they want to break something that is not broken? EIA. Great graphic.

India: March, 2022, fuel demand hits 3-year high; petrol sales at all-time peak. 

WTI: broke below $96. 

Oil trending down:

• bad: oil trending down.
• good: $5- and $6-gasoline not good for the US

Libya: background noise; I have little interest in Libya, but thought this interesting enough to post:

Spare capacity: OPEC+ with no real spare capacity -- Nigerian oil minister.

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Back to the Bakken

Whiting's Lacey wells in the Sanish

• several new Lacey wells coming off confidential list this week;
• most of the older neighboring wells are still off line
• the few older neighboring wells back on line show moderate halo effect

Active rigs:

$95.75	4/11/2022	04/11/2021	04/11/2020	04/11/2019	04/11/2018
Active Rigs	39	15	36	63	59

Monday, April 11, 2022: 23 for the month, 23 for the quarter, 182 for one year

• 38514, conf, CLR, Thorp Federal 4-28H, Little Knife, no production data,
  
• 37014, conf, CLR, LCU Ralph 3-27H1, Long Creek, no production data,
  
• 36105, conf, CLR, Gordon Federal 3-5H, Haystack Butte, nice well;
  

Sunday, April 10, 2022: 20 for the month, 20 for the quarter, 179 for one year

• 38553, conf, Crescent Point, CPEUSC Pankake 6-6-7-157N-99W-MBH, Dublin, no production data,
  

Saturday, April 9, 2022: 19 for the month; 19 for the quarter, 178 for the year

• 38554, conf, Crescent Point, CPEUSC Pankake 5-6-7-157N-99W-MBH, Dublin, no production data,
• 38515, conf, CLR, Thorp Federal 5-28H1, Little Knife, no production data,
• 37712, conf, Hess, EN-Johnson A-LE-155-94-2932H-1, Alkali Creek, a nice well;
  

RBN Energy: unseen costs of the energy transition: minerals and metals, part 2. Even RBN Energy has transitioned to "energy transition."

On March 24, 2022, in the wake of the still-unfolding crisis in Ukraine, “energy and climate ministers” from 40 countries convened in Paris for an International Energy Agency summit to send a “strong message of unity” regarding energy security and to issue a consensus on accelerating “clean energy transitions worldwide.” 

But there are already strong signals that accelerating the construction of solar and wind power systems, battery storage and electric vehicles (EVs) won’t be easy and won’t be cheap. 

One of the greatest challenges ahead is this: The minerals and metals that will be needed to build it all may not be available in the massive, almost unthinkable volumes that will be required. And the materials that will be available may cost a lot more — maybe even enough to force a scale-back of energy transition goals. There was already evidence of impending shortages and higher prices well before Ukraine was invaded by Russia. And the price inflation has worsened considerably since then, in part because Russia is a major supplier of many key commodities. In today’s RBN blog, we discuss the major cost challenges of pursuing the energy transition.

*********************************
Initial Production

36105, CLR, Gordon Federal, Haystack Butte, the Gordon Federal wells are tracked here.

Date	Oil Runs	MCF Sold
2-2022	21879	41004
1-2022	30933	50307
12-2021	32778	48793
11-2021	31246	42733
10-2021	353	0

37712, Hess, EN-Johnson, Alkali Creek,

Date	Oil Runs	MCF Sold
2-2022	15774	25557
1-2022	18478	27318
12-2021	15662	25746
11-2021	26089	45434
10-2021	26780	38825

Diesel Is Going To Be The Big Energy Story For 2022 -- March 14, 2022

Diesel: a top story in 2022.

Others are spotting the same thing. Oil is going to be a big story; gasoline a bigger story; and, diesel, the biggest story.

Link here.  

Diesel Will Be A Top Energy Story in 2022 -- March 11, 2022

Updates

April 30, 2022: update.

March 14, 2022: update.

Original Post

Diesel: this is going to be one of the big energy stories of 2022.

• remember, Saudi just put in an order for multi-million bbls of diesel;
• now this: global diesel shortage raises risk of oil price spike, a repeat of conditions that led to record price in 2008; Reuters.
• pat on my back: I track the weekly EIA report and noticed the distillate fuel issue several weeks ago; pretty cool coming from someone who nothing about oil until the blog and input from readers;
• from Reuters:
• in 2008, similar situation helped propel oil prices to a record high;
• US: inventories are 21% below the pre-pandemic five-year average, and lowest level since 2005
• Europe: inventories are 8% below ... and lowest level since 2008;
• Singapore: inventories are 32% below ... and also lowest since 2008
• first question I would ask: why is Europe a relative outlier; this tells me the German economy is struggling;

Diesel, cont'd: loss of Russian crude will force European refiners to cut diesel output.

• reduction in output would coincide with tight diesel market
• Europe will need to pull crude supplies form further afield
• one-third of UK diesel imports come from Russia; no others come close.
  

Note: it could be worse. I have tags for both $16-diesel and $26-diesel.

Canada's Diesel Glut -- May 30, 2017

From Bloomberg via Twitter:

It seemed like a good idea at the time. When Canada’s government decided to fund the nation’s first new refinery in three decades in 2012, a diesel shortage had just caused some truckers to be turned away from filling stations, and demand was climbing. Oil-sands producers were ramping up output and crude prices topped $100 a barrel.

Fast forward to 2017, and North West Refining’s Sturgeon plant in Alberta is poised to add 40,000 barrels a day of diesel to an already-glutted market. Crude is hovering around $50 amid surging North American output, oil-sands producers have shelved expansions and Alberta has just emerged from a two-year recession. Diesel demand is lower than it was two years ago, and truck-fuel prices relative to crude oil are half their level from three years ago.

“Diesel demand is dropping in Alberta,” John Auers, executive vice president at energy consultant Turner Mason & Co., said by phone. “Any time you are adding more supply, you are going to impact the price negatively.”

The Sturgeon plant, Canada’s first new refinery since 1984, will begin turning oil-sands bitumen into diesel by the end of the year, according to Ian MacGregor, chairman of Northwest Redwater Partnership, which owns half the project in partnership with Canadian Natural Resource Ltd. Bitumen is a molasses-like substance extracted from oil sand that is so thick, it has to be blended with condensate or upgraded into synthetic oil to be processed.

Much more at the link. 

Another Open-Book Test For Energy Investors -- 2020 Is Only Four Years From Now -- October 29, 2016

A couple of days ago I posted this little gem:

Watch the price of gasoline in November: indications suggest the price of gasoline could spike in Europe in November, 2016.

Now, yesterday this story over at Platts:

Global gasoline demand will rise as long as crude stays below $60/b, and a shortage of Asian gasoline refining capacity will drive US exports higher, [according to an analyst].

"Any way that we look at the future refineries under construction [in Asia], they cannot produce enough gasoline." Fesharaki expects US net exports of refined products to keep rising.

Cool, huh?

Other data points in the Platts article:

• in one decade, the US has made a dramatic swing from 3.9 million b/d of net imports to 2.3 million b/d in net exports (July, 2016) -- insert "Bakken" or "shale revolution" here
• this was the decade in which Obama famously said, "we can't just drill our way to lower prices" 
• as time goes by, there is a gasoline shortage worldwide that only US refiners can supply -- analyst
• expect huge amounts of exports of US gasoline to all over Asia, without which Asia cannot balance its system
• in addition, ocean-going tankers must reduce sulfur-containing fuel

Now get this -- that last bullet, regarding ocean-going shippers (you will see this posted again):

• currently, ocean-going tankers bunker 4 million b/d, which is using 3.5% to 4% sulfur fuel oil
• "If God almighty comes from the heavens, He cannot make 0.5% fuel oil by 2020" -- analyst
• thus: cheating, rampant noncompliance, use of US LNG for bunkering and blended diesel
• the price of fuel oil will collapse and refinery economics will go through the roof

Is this an open book test for investors or what?

Saudi Arabia has announced plans for new refineries; the only question is whether they will locate those refineries in Saudi Arabia (lack of skilled labor force); Europe (unlikely); Asia (possibly); along the Texas/Louisiana coast (very likely).

With regard to fuel oil, by the way, it will be interesting to read the tea leaves -- New England -- fuel oil or natural gas?

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

A Note For The Granddaughters

This has been quite a day for the oldest granddaughter, Arianna, age 13.

Last year she was the only flutist in her symphonics band to audition for honors band, and she made it. She plays second chair in honors band.

Today, she auditioned for District Band, and she made it. A huge honor. This is really quite exciting for an eighth grader in her last year at middle school before moving to high school next year.

Now, she is playing water polo in Denton, TX, at a north Texas water polo tournament. Hoo-ahh!

What Is Prince Salman Up To? OPEC's Pain Is Only Getting Worse As Revenues Continue To Fall -- Oilprice.com -- June 27, 2016

Updates

Later, 11:59 a.m. Central Time: see first comment. Brought up here so the comment be searched by the browser:

Re: diesel consumption ...

I believe there is a much bigger story unfolding here, with the government/environmental forces only playing a minor role.

CNG versus diesel for transportation needs, with the commercial sector leading the way, is apt to become more mainstream in a decade's time.

If an OTR trucking firm can save a thousand bucks or two - and they can - on a round trip cross country run, they will have a huge competitive advantage in the marketplace.

Many retail CNG prices, according to online sources, sell a GGE (gallon of gas equivalent) for $1.50 or less.

Retail infrastructure build-out for CNG continues and, in a self - reinforcing way - is accelerating.

Engine manufactures, both big and small, are researching and rolling out products fueled by CNG.

With an energy equivalence of 6 to 1, the price of natgas should be $9/MMcfd or, conversely, oil should run $18/bbl.

This economic/energy arbitrage poses enormous potential for those able to take advantage.

Original Post

 

The tea leaves are swirling. What is Prince Salman up to?

From an earlier post:

• October, 2015: Saudi's inventory at record levels; have since fallen almost 40 million bbls
• over same period, US crude oil inventories have increased by slightly over 60 million bbls

Saudi policy appears to be to continue inventory drawdowns for the foreseeable future.

Now we have this article from an oil hedge fund, oilprice.com: 

OPEC lost $349 billion in revenue last year because of low oil prices, cutting revenues almost in half from the year before.

A report from the EIA in mid-June estimated 2015 revenues for OPEC countries at $404 billion, down 46 percent from the $753 billion the member countries earned in 2014. Revenues last year fell to their lowest level in eleven years.

Worse still for OPEC is the fact that revenues could fall even further this year, as low oil prices sank to new depths, particularly in the first quarter of 2016. The EIA projects OPEC revenues this year to drop to $341 billion. That will result in per capita oil export revenues in OPEC countries falling from $606 in 2015 to $503 this year. 

Not only is the drop precipitous, it takes OPEC back to 2004 revenues.

Saudi Arabia? Net oil export revenues in 2014, $247 billion. In 2015, the first full year of the "Saudi Surge," $130 billion. Ouch.

For its part, OPEC put out a more dire assessment of its own finances, putting its losses last year at $438 billion, much higher than the $349 billion estimated by the EIA.

That came even though overall exports climbed by an average of 400,000 barrels per day, or a 1.7 percent increase, largely because of production gains in Iraq and Saudi Arabia. The plunging revenue led to OPEC members to post a current account deficit of $99.6 billion, the first deficit since 1998. That compared to the 2014 surplus of $238.1 billion.

With regards to my thoughts on Prince Salman, go back to the very first link at the top of the page.

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

EIA Moment

From the EIA today:

Proposed fuel economy and greenhouse gas emissions standards would increase fuel economy and reduce diesel consumption in medium- and heavy-duty vehicles.

Unlike light-duty vehicles, which have been subject to fuel economy standards since the 1970s, the first phase of medium- and heavy-duty vehicle standards was recently implemented, starting with model year 2014. The proposed Phase 2 standards—issued jointly by the U.S. Environmental Protection Agency and the National Highway Traffic Safety Administration—would take effect in model year 2021 for most medium- and heavy-duty vehicle classes and increase in stringency through model year 2027.

These standards are projected to reduce diesel consumption by 0.5 million barrels of oil equivalent per day by 2040. --- EIA 

One-half million bopd by 2040 -- hardly worth thinking about.

The estimated reduction in boe, of course, goes out the window, if more folks buy medium- and heavy-duty vehicles than projected, which is very, very possible.

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

Meanwhile, This Weekend --

The AP is reporting:

It's going to be a busy holiday weekend on the nation's highways.

A record 43 million Americans are expected to travel this Independence Day weekend.

The Economics Of Switching From Diesel To LNG -- RBN Energy -- September 5, 2014

RBN Energy: the economics of switching from diesel to LNG.

The shift from diesel to LNG (and sometimes CNG or field gas) as a fuel for drilling rigs and hydrofracturing pump engines is underway, and there is interest in having ships, locomotives and long-haul trucks run on natural gas from LNG too.

But before investing in new or converted engines that can run on natural gas or on a diesel-natural gas blend, diesel and shipping fuel users need answers to three questions: What will it cost? How much will we save? And—this is important, too--is the LNG infrastructure sufficiently robust to support the switch?Today we explore the economic ins and outs of converting from diesel to gas, and describe the current state of domestic LNG supply infrastructure.

With US natural gas selling at roughly one-quarter the price of crude oil on a per-BTU basis, it is not surprising that major consumers of diesel (an oil-based fuel whose pricing is closely linked to crude) are exploring the possibility of switching to natural gas from LNG. As we said in our Series Opener on the domestic use of LNG, diesel engines that power drilling rigs, fracking pumps, locomotives and long-haul trucks can be converted to dual-fuel operation or replaced with natural gas-only engines, as can ship engines now fueled by marine distillate or bunker fuel.

LNG, produced mostly with modest-size (less than 200 Mgal/d) plants sited near major customers, is seen as a logical, cost-effective and consistent quality source of gas. LNG also stores several times as much gas per gallon volume as CNG (helping with weight and storage space).

But there are significant costs involved in making a switch, and even some risk—the biggest of which is whether, after making the investment to change to dual-fuel or all-gas engines, you can count on LNG to be available when and where you need it. To help sort out the economics and the risk, let us first look at what is involved in switching engines from diesel (or shipping fuel) to dual-fuel or all-gas.

Millions of Gallons of Diesel Fuel Being Used in the Bakken

Link to Minot Daily Press here (regional links break early and break often).

As of April 23, 210 drilling rigs were operating in the North Dakota oil field ... 

"That's 630,000 gallons of diesel fuel a day that are just going in for operating the drilling rigs. That's not everything else that's going on up there," ...

"We believe from what our marketers can tell us and these aren't solid statistics but this is information we've gathered from visiting with our marketers that 2.5 to 3 million total gallons per day is being consumed in the Bakken. So you can see we experience some diesel fuel crunch now and then.

Essentially, that's 280 semi loads a day that's just going in to feed the Bakken," ...

If you put that into perspective, Tesoro (Mandan Refinery) can produce if it really pushes it about 750,000 gallons of diesel fuel a day. So everything Tesoro is making could essentially be going into the Bakken," ...

The link will provide additional background and source of statistics.