The Market And Energy Page, T+326; Saudi Shenanigans -- Reason #45 Why I Love To Blog; BLM Estimates Wyoming Wind Farm Will Kill Upwards Of 64 Eagles Per Year -- December 14, 2017 -- This Page Is Complete But Details May Yet Be Added

Disclaimer: in a long note like this, there will be factual and typographical errors. It is often difficult to separate fact from opinion in a post like this. Read it at your own risk.

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

Some days there is just too much to post. Amazing how fast things seem to be moving.

Economy: the economic news this morning was simply stunning. I will fill this in later when I get caught up, but the retail sales simply blew the socks off anyone really paying attention. Steven Liesman was one of those paying attention and he said he was unable to find such a huge month-over-month increase in retail sales as far back as he could look. I think he said he went as far back as 2004. CNBC has this story on retail sales: the increase in US retail sales for the month of October was almost triple what experts expected. The jobs data was reported elsewhere; it, too, was stunning and nothing was mentioned about Trump's campaign promises.

Trump gets no credit: after those numbers were released and comments about the great economy made, President Trump was not mentioned. Instead, CNBC immediately switch to Europe and went on to suggest that all of this was a global phenomenon, having nothing to do with the US president. It never quits. One can be sure had this happened under the Obama administration we would hear no end of his great policies.

Yellen: by the way, Steve Liesman, again CNBC, noted that with regard to the stock market, she said it was neither "red nor orange." As Liesman noted, there's only one color left and that's green. The stock market at this level does not scare "the Fed" (red), nor the stock market at this level lead "the Fed" to be cautious (orange), but rather, Liesman suggests that "the Fed" is suggesting US equities are enticing (green). [This, by the way, is/was in great contrast to what a former Fed chairperson said about the frothiness of the stock market.]

Gasoline demand. I posted the weekly petroleum report and the "gasoline demand" graph yesterday. Gasoline demand actually exceeded that for the same time period a year ago. But this was the headline story over at Reuters: oil slips as US gasoline stock build overshadows crude draw. 

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Saudi Shenanigans

I talked about "Saudi shenanigans" and/or "Saudi smoke and mirrors" all through 2015 and 2016 when Saudi was talking about their surge, and then their "cuts" in production. In the big picture, the surge was a $1 trillion mistake and the cuts in production simply brought them back to where they were before the surge. I probably won't provide all the links but  google search of the site will lead one to those posts.

Now, today, a reader sent me an Oilprice.com article that said the very same thing about "Saudi cuts." That article was full of interesting data, which I will come back to later, but for now this paragraph from the article:

More important than demand, however, was the November supply of OPEC oil, which declined by 133.5K to below 32.5 million bbl, a fresh six month low if only 195K bbl lower than last year's output, confirming that ahead of last year's production cut agreement, OPEC furiously ramped up production effectively offsetting the subsequent output limit.

Saudi Shenanigans link. The graph at this post is one of my favorite graphs; as is this one; and this one. I hope the latter is updated a year from now.

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Huge WTI-Brent Spread Boosts US Crude Oil Exports

Also at Oilprice.com, an update on US crude oil exports. One word: wow! But it's been previously posted on the blog: U.S. crude grades into China climbed to a record in November.

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The White Butte Jore Federal Permits

This is just a reminder to myself to post my thoughts regarding the White Butte Jore Federal permits. This is a huge story, especially in light of the announcement this week that Oasis is selling its "non-core assets" in the Bakken to buy acreage in the Permian. The most recent post on these permits is at this post. 

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GE Hitachi Nuclear Confirms North Carolina Layoffs

Incredible. I just pointed this out a couple of days ago. The Washington Post link is here. I talked about this at this post, "Reality of Renewables," December 12, 2017.

The reader who sent me that story asked if I thought there might be a capacity surplus of electricity in the US right now and that we might see a cutback in some of that capacity next year (2018). This was my reply:

The decommissioning of a nuclear plant, if this is what this is, is a huge bullish story for natural gas.

In my "Reality of Renewables" post, December 12, 2017, linked above , I mentioned that there is no way solar/wind will be able to replace all the electricity provided by nuclear plants being decommissioned.

On top of that, I get the feeling that tax credits for wind/solar are going to be eliminated/significantly reduced under the new tax bill. Of course that could change. But every time I see a nuclear plant being decommissioned, I know that natural gas will benefit; even if they add a bit of wind/solar it won't be enough and natural gas peaking units will be needed.

With regard to your question: I don't think there is a surplus of electricity as much as there is a mismatch between when/where electricity is needed and how it is supplied.

I could have added that renewables will simply increase the cost of electricity to all consumers, all else being equal.

By the way, for those faux environmentalists who love wind farms, note that the largest wind farm in the US (yet to get started), the Chokecherry and Sierra Madre Wind Energy Project in Wyoming has been give carte blanche with regard to killing eagles and other migratory birds. Perhaps not carte blanche but awful darn close:

A team researches golden eagles, as an "eagle take" permit is necessary. The research is to be continued during construction and operation of the wind farm so as to be compared with the condition prior to construction. The $3 million research project is paid by PCW. The Bureau of Land Management estimated 40-64 eagles per year for 1.000 turbines, whereas the Fish and Wildlife Service estimates 10-16 for 500 turbines. 

It's amazing how they can get such a great estimate: an upper limit of 64. Why now 66 or 61 or 73for 1,000 turbines; and, for 500 turbines, why not 14 or 21 or 17 for the upper limit. Of course anything over the limit will result in an inconsequential fine, which will be passed on to consumers, regardless.

2% Pop In Brent Prices -- Due To Major Brent Pipeline Llink --- Carries 40% Of Brent Output -- 80 Platforms Shutdown For Three Weeks -- BBC -- December 11, 2017

It's amazing that one pipeline carries 40% of all North Sea crude oil, and it services 80 platforms. 

Story here. Data points:

• one of the UK's most important oil pipelines will be closed for about three weeks for repairs
• discovered in Aberdeenshire
• the Forties pipeline carries about 40% of North Sea crude oil
• more than 80 platforms will have to be shut down

My hunch: OPEC and Russia can close the gap.

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Saudi To Slash Oil Exports To Asia By 100,000 BOPD

Story at oilprice.

• January, 2018: 100,000 bopd less than the previous month, December, 2017
• for December, 2017, Saudis cut:
• total crude oil exports by 120,000 bopd, from just above 7 million bopd in November
• cut exports to all regions of the world, including a 10-percent reduction of oil exports to the US
• Saudis also raising the official selling price (OSP) to the region for January

Recession: A Near Certainty By 2020 -- Morgan Stanley -- November 28, 2017 -- The Energy And Market Page, Part 2, T+311

From Reuters via Twitter: 

JUST IN: OPEC and non-OPEC committee back extension of crude oil supply cut until the end of 2018 with an option to renew in June

Interpretation: a six-month option since it will be reviewed in June. Previous extension went to March, 2018, so this is simply a three-month extension to June, with another review then.


Raining on Trump's parade: the short-term, long-term Treasury curves are flattening. This is what it means to some people:

A flattening yield curve spells trouble for banks, which generate money from the gap between long-term loans and short term deposits. So it’s no surprise that financial stocks have trailed the S&P 500 this year.

Finally, an inverted yield curve has predicted the past 7 recessions. Flattening isn’t the same thing as inverting, but it is one step closer. Morgan Stanley notes that “we are not on recession watch now, and peg the 12-month probability of recession at 25% … [but] by 2020, that probability grows to near certainty.”

Something for Jay Powell to manage.

Dollar become scarce overseas. If firms don't have access to the US dollar, their growth is challenged. From The Wall Street Journal.

It is one of the ironies of the global financial crisis: A decade later, a panic whose origins were in the U.S. has left the dollar more important to the rest of the world than ever before.

Putative contenders for its throne—the euro, the Chinese yuan—have failed to gain global acceptance. It remains the dominant force in world trade. A slow, yearslong decline in the proportion of dollars among the holdings of the world’s central banks, which were trying to diversify, has stopped. And the commercial banks of Japan, Germany, France and the U.K. now have more dollar-denominated liabilities than those in their own currencies.

The dollar dominance is testing the world again: Rules designed to make finance safer have already made dollars harder to come by. To add to the pain, the Federal Reserve is now sucking dollars out of the world’s financial system as it tries to tighten its monetary policy.

Those commenting suggest there is nothing to worry about.

GDP now: Latest forecast: 3.4 percent — November 22, 2017.

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2017 is 3.4 percent on November 22, unchanged from November 17.

After this morning's advance durable manufacturing report from the U.S. Census Bureau, the forecast of real nonresidential equipment investment growth inched up from 14.1 percent to 14.2 percent and the forecast of the contribution of inventory investment to fourth-quarter GDP growth inched down from 0.06 percentage points to 0.02 percentage points.

Smoke And Mirrors -- August 6, 2017

Updates

August 11, 2017: OPEC compliance is estimated to be 75%.

August 6, 2017: see comments. Link brought up here for easier access: https://www.platts.com/news-feature/2017/oil/opec-guide/prod_targets. 

Original Post 

If I recall correctly, and I probably don't, OPEC set "the cut" at 1.2 million bopd. [Later: I did not: the article says OPEC and non-OPEC partners agreed to cut 1.8 million bopd.]

Headline from Platts: OPEC July oil outputs hits high of 32.82 million bopd on Libya recover. OPEC is about 1 million bopd above ceiling.

Now the smoke and mirrors: Platts says "not including Libya and Nigeria, compliance among OPEC's 12 members ...remains robust at 114%, down slightly from 116% in June, based on an average of January through July output."

Compliance is 114% but yet OPEC production "hits high of 32.82 million bopd." Wow. 

If that's accurate, that the compliance rate is 114% based on a six-month average, it appears that more recent data suggests some members are increasing production. Let's see. From the linked article:

• Libya: exempt from OPEC cuts, averaged 990,000 bopd in July; up 180,000 bopd from June
• Nigeria: exempt, averaged 1.8a million bopd, up 30,000 bopd
• Saudi Arabia: averaged 10.05 million bopd in July; June data not provided
• Iraq: second largest OPEC producer; production grew to 4.48 million bopd; quota is 4.35 million
• Iran: third largest OPEC producer: production grew to 3.82 million bopd; quota is 3.80 million
• UAE: production rose to 2.89 million bopd; above its quota of 2.87 million bopd
• Ecuador: openly defied OPEC; discontinued goal to cut production; production rose to 530,000 bopd, also above its quota of 520,000 bopd

More: look again at the bottom line number -- 32.82 million bopd. Then look where that falls on the graph posted in May, 2017.  Prior to the "Saudi Surge," OPEC was producing just slightly above 30 million bopd. Now, after the surge, OPEC is producing above 32 million bodp. I assume most folks thought OPEC was going to cut below their pre-surge production. Nope, OPEC surged production to almost 34 million bopd and then agreed to a 2-million bopd cut, which would put them at 32 million bopd, or 2 million bopd above their pre-surge production.

One can see how global crude oil flows were sustained at robust levels even during the cuts with the graph at this post.

Having said that, if the numbers are accurate, Saudi Arabia is taking the brunt of the cut. The linked Platts article said Saudi's production in July was at 10.05 million bopd. If accurate, that is about what Saudi produced back in 2009. An old graphic, frequently posted:

OPEC Cuts -- "Every Arab For Himself" As Agreement Starts To Break Apart -- July 18, 2017

I recently wrote that as the OPEC cuts fail to increase prices, we will likely see "every Arab for himself." Apparently I wasn't too far off. From Bloomberg:

"Ecuador breaks ranks with OPEC and increases oil output."

It is breaking down for the reasons previously suggested. Ecuador says it must boost production to raise revenue.

Bloomberg also reports that OPEC's total compliance with deal sank to a 6-month low in June. Maybe I'm missing something, but isn't the deal only eight months old? It was announced in November, 2016, and if it was realistically to go into effect in January, 2017, we're only six months into the deal. Whatever.

More from the linked article:

OPEC has for years cheated on its own agreements, particularly when oil prices fail to recover after an output cut. But Ecuador has taken the rare step of saying publicly it will increase production, making it impossible for the group to conceal the desertion.

The Latin American country won’t be able to meet its commitment to lower output by 26,000 barrels a day to 522,000 a day, as agreed with OPEC last year, Oil Minister Carlos Perez said.

“There’s a need for funds for the fiscal treasury, hence we’ve taken the decision to gradually increase output,” Perez said. “What Ecuador does or doesn’t do has no major impact on OPEC output.”

That would be true. But what Ecuador does or doesn't do has a major impact on how the rest of the world sees OPEC.

Does this 26,000 bopd increase concern Saudi Arabia? LOL. John Kemp is reporting, via Twitter, that "senior Gulf OPEC source will be making an emergency trip to Ecuador with the Joint Ministerial Monitoring Committee to address compliance."

Oh, oh. Ecuador may be kicked out of OPEC.

Blog Is Guilty Of Fake News -- My Bad! -- June 30, 2017

From Platts questioning where OPEC is headed:

As a result, while OPEC can point to 117% compliance for those members with production caps, it has to temper that achievement with the fact that after promising cuts of 1.2 million b/d, OPEC’s total output in May was just 690,000 b/d below the October benchmark.

Worse still, Iraq is proving — as expected — a reluctant partner to the deal. Arguably the country had just as much justification as either Libya or Nigeria for an exemption.

In the event, Iraqi production has averaged 4.415 million b/d from January through May, against an allocation of 4.351 million b/d. Iraqi output rose in May by 70,000 b/d to 4.43 million b/d.

It is thus very hard to see where OPEC is heading. 

I posted that because I had made a mistake in an earlier post. In an earlier post I said that Iraq was exempt from the OPEC agreement to cut production. I was wrong. At the time of the post, I knew I wasn't quite sure, but didn't take the time to confirm. My bad. Fake news.

Anyway, now I've got it. Iraq is part of the OPEC agreement to cut production (wink, wink).

That OPEC Cut? I'm Not Seeing It -- March 7, 2017

Updates

Later, 10:40 p.m. Central Time: see first comment. To make it goggle-searchable --

All that comes from Tables 7 & 8 of today's report, where there's a couple hundred line items listed: https://www.bea.gov/newsreleases/international/trade/2017/pdf/trad0117.pdf.

This is the point: we should really net out our oil & product imports and exports for the complete picture.

Bill McBride has a monthly chart that does just that:
https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjT1IIKyFwYJ5wkqIO0dzXfhMfFKMdGHIKeqTYqbJWfDK29O9q13OevffUHS3Vd6ZIrK33oEwtWf-20jKeLOFTpGNJD8_x9AJuVxbXrmU71BzPAkXknHjY3P0ftnG34G8P2by4D_rlAQ2Eu/s1600/TradeDeficitJan2017.PNG.

The black graph is the petroleum deficit, red is everything else, and blue is the total. From this, one can see that oil & oil products aren't nearly as big a part of the trade deficit as they were 5 years ago, because as our imports rose, our exports rose even faster.

Original Post

 
The other day I mentioned that with regard to all that talk about OPEC and non-OPEC crude oil cuts, I wasn't seeing it. Now, today, Reuters is reporting that US imports of crude oil have actually increased the US trade deficit to near five-year high. Link here in The Dickinson Press.

The U.S. trade deficit jumped to a near five-year high in January as rising oil prices helped to push up the import bill, pointing to slower economic growth in the first quarter and posing a challenge for the Trump administration.

President Donald Trump took office with a pledge to boost annual economic growth to 4 percent and renegotiate trade deals in favor of the United States. Trump blames U.S. trade policy for the loss of American factory jobs and the import-driven surge in the trade gap could intensify the debate on a cross-border tax.

The article mentions "rising" oil prices and yet, from my perspective, oil is pretty cheap, unless they are comparing today's $50-oil to 2014's $100-oil.

And I guess that's what they are doing. Near the bottom of the article;

The price of imported oil averaged $43.94 per barrel in January, the highest since August 2015. That pushed the value of petroleum imports to a two-year high. Imports of cell phones and other household goods rose $1.0 billion, while those of automobiles hit a record high.

A "five-year" high takes us back to 2012. Between February, 2012, and July, 2014, WTI averaged around $100, starting with $114 in February, 2012. 

Reason #75 Why I Love To Blog -- December 2, 2016

Before reading the post below, if you haven't seen the earlier post on breakeven costs in the Bakken compared to the rest of US shale and the Mideast, go to that post, and then consider those numbers in light of the projections below. Just saying.

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The Post

Earlier this morning I posted the link to Filloon's Bakken update. His final words: WTI still has room to run.

The short squeeze continues, and institutional dollars will begin to roll into energy names over the last two weeks of this month. 

Not less than fifteen (15) minutes later, I see this headline over at Rigzone: OPEC crude cut could push oil to $75 per bbl in 2017.

The story was actually posted last night but I general wait until the next morning to look at the Rigzone articles. In this case, I'm glad I did.

From the linked Rigzone article:

The International Energy Agency has estimated that as a group, OPEC currently produces 33.8 MMbpd. In the September meeting in Algiers, the cartel said member nations would target dropping that volume between 32.5 MMbpd and 33 MMbpd.

Designed to boost the oil market’s recovery, the production drop will “accelerate the ongoing drawdown of the stock overhang and bring the oil market rebalancing forward,” OPEC said in a statement Nov. 30.

World oil demand is expected to grow by about 1.2 MMbpd this year and in 2017. OPEC said that underscores that a market rebalancing is underway, but both Organization for Economic Co-operation and Development (OECD) and non-OECD inventories remain well above average. Given the inventory overhang, a lack of investment in 2016 and 2016, as well as massive industry layoffs, OPEC said it’s vital that stock levels are brought down.

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Looking Past 2017

Shale production to grow, offshore production to decline starting in 2018 -- Rigzone. 

But then in that same article:

With the announced OPEC production cut Wednesday, Rystad Energy expects global liquid production to remain at current levels into next year.

At the same time, demand is expected to grow by around 1.3 million barrels per day.

This means that the large amount of stored oil will decline considerably in 2017.