Does The US Need 1,000 "Modern" Rigs -- Zeits Over At Seeking Alpha -- October 1, 2015

Does the US need 1,000 "modern" rigs? Richard Zeits over at Seeking Alpha. Mostly for investors. Me? I'm not particularly interested.

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Seeing The Light

PennEnergy is reporting:

COLUMBUS, Ohio (AP) — Government requirements for the use of solar, wind and other forms of renewable energy by Ohio power companies would be suspended indefinitely under recommendations being prepared for release Wednesday by a legislative panel.

The Energy Mandates Study Committee's draft report was obtained by The Associated Press ahead of its release.

The panel is reviewing an Ohio law requiring utilities to generate 25 percent of electricity from alternative and advanced sources by 2025. It was created as part of a compromise brokered by Gov. John Kasich amid efforts to repeal the targets outright.
The report cites legal uncertainty and a need for "greater clarity" surrounding proposed federal clean coal rules among reasons that proceeding with Ohio's state-level mandates would be imprudent.

Ohio is among states that have sued over the Environmental Protection Agency's Clean Power Plan, which sets targets for carbon dioxide emissions for existing power plants as a means of reducing emissions from 2005 levels by 32 percent by 2030. Kasich has also written to President Barack Obama asking him to hold off on implementing the plan until questions are resolved by the courts.

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For The Granddaughters

Back in 1996, my parents gave me a copy of Stephen E. Ambrose's D-Day June 6, 1944: The Climactic Battle of World War II, c. 1994, obviously published for the 50th anniversary.

For some reason I never got around to reading it until now. Having been stationed in Europe for over ten years and having visited Normandy several times and having read so much about "it," I guess I never was interested in reading about the subject again.

What a pleasant surprise. After reading the first three chapters, I'm hooked. This is another great Stephen Ambrose history. I always find it amazing how he can take a subject on which thousands of books have been written and make it all seem "fresh" again. An excerpt from the book, early on, p. 45.

Something tells me there will be "stories" in this book that will relate to what's going on in the Mideast today.

More importantly, it will dovetail very, very nicely with Foyle's War which we are watching on DVD. We are into Set 3 of 8. I assume they are streaming set 9 now. From wiki:

Foyle's War is a British detective drama television series set during and shortly after the Second World War, created by screenwriter and author Anthony Horowitz and commissioned by ITV after the long-running series Inspector Morse came to an end in 2000. It has been broadcast on ITV since 2002. Simon Shaps, then ITV's director of programmes, cancelled Foyle's War in 2007, but numerous complaints and positive public demand prompted the next ITV director, Peter Fincham, to revive the programme after successful ratings in series five, which was broadcast in 2008.

On 12 January 2015, ITV announced that no more episodes will be commissioned due to the high costs of production and its intention to broadcast original drama commissions. The last episode was broadcast on 18 January 2015.

War? -- October 1, 2015

Updates

October 1, 2015: I was wrong. The reason oil was up was because of predictions that Hurricane Joaquin might hit the Gulf. Those early predictions were wrong, and oil has come back down a bit.
 

Original Post

 

The movers and shakers on Wall Street seem to think war has broken out in the Mideast. The Dow is down about a 100 points (after being up in pre-market / futures) and oil is up over 4%.

Or maybe they are just reading Drudge headlines:

• Russia airstrikes in Syria continue
• Putin drafts 150,000
• USA disarray
• Iran troops ready
• President's weekend golf schedule released

Okay, I made up that lat one.

If one looks at the timeline, it seems the transition from "no US strategy for fighting ISIS" and the "invasion by Putin" occurred at a time when SecState took his eyes off the ball, as they say here in the Midwest, and started talking about climate change. Again. I guess we need a Syrian Czar.

Any Information Which Companies Might Be Fracking This Winter? -- October 1, 2015; Dems Walking Back ObamaCare -- Fiscal Times

A reader asked if anyone knew which companies would be fracking through the winter? I certainly don't know. If anyone has any information, feel free to commend (anonymously, is fine) and/or by e-mail (my e-mail is at the blog.

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Speaking of Fracking

A reader writes:

Just thought I would let you know Abraxas will be fracking three wells this upcoming week, most likely Tuesday or Wednesday. They are pulling all adjacent wells right now for frack protection. All three had failed liner hangers that prohibited the completion earlier last month.

The reader did not provide any more details. But possibly,

• 29779, SI/NC, Abraxas, Sten-Rav 1H, North Fork,
• 29780, SI/NC, Abraxas, Ravin 8H, North Fork,
• 29990, SI/NC, Abraxas, Stenehjem 5H, North Fork,

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TrainWreck

Fiscal Times is reporting:

After five years, two midterm disasters, and a rollout that reminded Americans why they fell out of love with big government in the 1970s, reality has finally begun to dawn on some Democrats about Obamacare. With open enrollment about to start and a third straight round of premium spikes about to hit voters’ pockets, the Democrats’ leading presidential candidate has offered a “major break” with the Obama administration on its signature domestic policy achievement.

Hillary Clinton will speak out against the so-called Cadillac tax on high-coverage health care plans, as early as this week, according to The New York Times. The politics on this are complicated, and not entirely focused on health care; in fact, this has more to do with the health of Clinton’s struggling and scandal-plagued campaign. Even so, the Cadillac tax on high-coverage plans is a key to Obamacare, both fiscally and philosophically, and Clinton’s coming attack on it shows just how much of an albatross the entire system has become for her party.

The nature of this strategic decision becomes plain from Maggie Haberman’s report. Clinton reached out to Randi Weingarten to inform her of this decision. Weingarten is president of the American Federation of Teachers and an important player in the labor movement. Unions have long opposed the Cadillac tax, having spent decades demanding top-notch coverage for their members. The tax applies a 40 percent fee on benefits above a certain level, potentially costing labor unions hundreds of millions of dollars that they would rather spend elsewhere – say, on Democratic presidential and Congressional campaigns.

Why make this particular sop to Big Labor now? Clinton recently announced her opposition to the Keystone XL Pipeline, a project backed by unions in anticipation of the skilled labor required to build it. Clinton needed to take that position to defend her left flank from Bernie Sanders, whose opposition to Keystone has been consistent and vocal. That forced Clinton to placate labor leaders by pushing back on Obamacare, which until now Democrats have defended in its entirety – even from unions.

Union opposition arose during the drafting of the Affordable Care Act, with unions demanding either the removal of the Cadillac tax or an exemption from it, but the Obama administration and the Democratic Congress resisted. In part, the decision to oppose the unions came from the desperate political need to produce a Congressional Budget Office review that would show Obamacare as deficit-neutral in its first decade. Under the static tax analysis of Democrats, the Cadillac tax was expected to raise $32 billion in that first decade.

This is a huge trainwreck. Not only are they going to keep (and probably expand) the benefits, the Dems are cutting the ways to finance ObamaCare. Watch for demands for the middle class to pony up for money to support ObamaCare.

Thursday Data -- October 1, 2015

Natural gas fill rate (dynamic link): 98.  In the East Region, stocks were 25 Bcf below the 5-year average following net injections of 62 Bcf.

Gasoline demand (dynamic link): still decreasing as we go into the autumn months; around 500,000 bopd higher than one year ago.

The July crude oil import data has just been released:

• Saudi Arabia: 1.172 million bopd for the month of July, 2015, vs 1.231 million bopd one year ago
• For the past decade, the range has been 1.499 million bopd - 1.026 million bopd

All countries: 9.51 million bopd, July, 2015

• OPEC: 2.896 million bopd, July 2015
• Kuwait took a huge drop, from 313,700 bopd to 143,741 bopd
• Nigeria, on the other hand, month-over-month, a huge jump: 20,900 bopd to 130,064 bopd 
• Venezuela remained fairly flat

Non-OPEC

• Mexico is about the same as Venezuela
• Canada is major source of US imported crude oil at 3.52 million bopd 

I assume much of the US imported oil is heavy oil required by our Gulf Coast refineries. I assume most of Saudi imported oil goes to the refineries it owns along the Gulf Coast. I seem to recall US Saudi refineries require about a million bopd.

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 Job Watch

Wow, first time unemployment claims surge 10,000, and this is the Bloomberg headline: US Jobless Claims Are Near Decade Lows. Six or seven years into the recovery and a gazillion dollars in stimulus, I would hope that jobless claims were at decade lows.

And yet applications surge 10,000 today. It is clear that these boilerplate articles are written ahead of time, and the numbers filled in when the data is released.

From the linked article, it turns out that not only did first time claims surge, they increased significantly more than expected:

Jobless claims climbed by 10,000 to 277,000 in the week ended Sept. 26. The median forecast of 48 economists surveyed by Bloomberg called for 271,000.

The four-week moving average fell to the lowest level in almost two months and the total number of people receiving benefits was the smallest in 15 years.

I'm somewhat surprised this was not the lede:

The four-week moving average, a less volatile measure than the weekly claims numbers, decreased to 270,750 last week, the lowest since early August, from 271,750.

Let's see, early August -- what was that? Six weeks ago? Whatever.

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Ford's September Auto Sales

Six minutes after the market opens, the first day after the end of the month, auto companies release their sales data. Meanwhile, the EIA lags about two months with crude oil import data.

Whatever.

Ford's September sales:

• sales increased 23% month-over-month; up 23% year-over-year
• F-Series pick-up trucks up 28%
• total truck sales at highest level in nine years
• commercial vans post best September since 1987 -- up 86%
• SUV sales up 27%; best September since 2003
• Mustang sales up an astounding 199% -- best performance since 2007

All gas guzzlers.  

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US Auto Sales, September, 2015

CNBC is reporting: 

• best is more than a decade
• 18.17 million total sales; best run rate since July, 2005
• [note: entire Labor Day weekend fell in September for the first time since 2012]
• GM: sales rose 12%, to 251,310 vehicles
• Ford: sales rose 23%, to 221,599 vehicles
• Fiat Chrysler: sales increased 14% to 193,019 vehicles; Jeep jumped 40%
• VW: US sales rose 0.6% versus an expected decline of 7.3% in September

RBN Commentary On Refinery Adjustments -- Thursday, October 1, 2015

Active rigs:

	10/1/2015	10/01/2014	10/01/2013	10/01/2012	10/01/2011
Active Rigs	68	191	187	186	201

RBN Energy: could refinery adjustments to handle more light crude be a bust? This is another very important article for those trying to get a better understanding of the US shale revolution. This is a keeper. The article will be archived at the source.

The deluge of light (and super light) sweet crude from U.S. tight-oil plays like the Permian Basin, Bakken and Eagle Ford has had many effects, including a push by refiners to rework facilities designed for heavy-crude processing to handle an excess of lighter oils. Many of these projects are underway and expected online in the next two years. Today, we consider refinery infrastructure investments that might not pan out in a low crude price world.

Everyone--even those whose interest in the oil industry extends only to how much they pay for gasoline or heating oil—knows that U.S. oil production has risen significantly over the past few years (from 5.6 MMb/d in 2011 to 8.7 MMb/d in 2014, and 9.3 MMb/d as of June 2015). You need to be something of a petro-geek, though, to know that almost all of the increase in domestic production the past few years has come in the form of lighter, sweeter crudes, especially very light oil with American Petroleum Institute (API) gravity of between 40 and 50 degrees. (Crudes with API gravity between 32 and 40 degrees are typically categorized as light, while heavy crudes--say, diluted bitumen from the Alberta oil sands--have gravities below 22 degrees, and medium oils have API gravity of between 22 and 31 degrees.) Refineries are designed and built to operate most efficiently when processing a certain type or mix of crudes, and a lot of refinery upgrades in the years leading up to the Shale Revolution were intended to accommodate a world where lighter crudes were thought to be running out, to be replaced by heavier (lower API gravity) crudes – particularly on the Gulf Coast. There is still plenty of heavy crude out there that comes to the Gulf Coast – from Mexico and Venezuela for example and also Western Canada. But with the U.S. producing a surfeit of light crude and with prices for that light crude being discounted – refiners began to consider investing in functionality to improve their light crude processing capacity.

Production in “light tight” oil plays like the Permian, Bakken and—most pertinent to today’s blog—Eagle Ford (which produces the lightest crude of them all) has grown exponentially since 2011 and is expected to remain high even under a pessimistic oil-price scenario according to the Energy Information Administration.