Record Cushing Storage; Update On PADD 2 Storage -- RBN Energy; How Badly Is Russia Being Pinched By Oil Prices? -- July 7, 2016

Active rigs:

	7/7/2016	07/07/2015	07/07/2014	07/07/2013	07/07/2012
Active Rigs	30	75	189	188	213

RBN Energy: "I still haven't found all the crude storage I'm looking for -- PADD 2."

The famous Field of Dreams misquote “If you build it, they will come” certainly has proved true for the midstream companies that added a record 18.7 million bbls of crude oil storage capacity in PADD 2 in late 2015 and early 2016.

During that six-month period, crude inventories in PADD 2 blasted 24.4 million bbls higher to a record 155.6 million bbls. 

And while PADD 2 oil stockpiles have been shrinking somewhat in recent weeks, they remain above 150 MMbbl—a mark the PADD had never seen before this year. Storage levels have been particularly high at the Cushing, OK, storage and distribution hub within PADD 2.

Why is so much crude being socked away?  Today, we continue our look at the new storage capacity being added in the U.S., and at why demand for storage has been so high.

Jobs, the weekly spin: tumble 16,000 to 254,000; four-week average dipped slightly to 264,750. It looks like we may have finally turned the corner.

Norway oil service firms, unions fail to agree to wage deal. Link here. [UPDATE, 58 minutes ago: agreement reached; strike averted.]

How badly is Russia getting pinched by low crude oil prices? Link here. See notes below.

Us oil boom is not dead. It's plotting a 2017 comeback. Link here.

Pennsylvania to get power from shale gas. Link here.

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How Badly Is Russia Being Pinched?

From the linked article above:

• Russia is the world's top energy exporter
• Russia is enduring the longest economic downturn of Putin's 16-year rule
• crude oil export duties and extraction taxes cover 23% of Russia's budget
• Russia is running the widest deficit since 2010

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Cabot Oil & Gas Signs 10-Year Sales Agreement 

To Be Sole Supplier Of Natural Gas For New 1,500 MW Plant

Lackawanna County, Pennsylvania

From the linked article above:

• energy landscape in Pennsylvania shifting away from coal
• the state still relies on coal for about 40% of its electricity
• the Lackawanna Energy Center will be one of the most efficient power plants in the country
• full-scale operations by end of 2018
• Cabot's NG production from the Marcellus shale basin increased 10% in 1Q16 over 4Q15

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The Coming Boom In 2017

From the linked article above, which was not a particularly useful article; mostly filler:

• "OPEC has hardly dealt the US oil boom a death blow"
• Goldman Sachs recently predicted US production would continue to fall in 2016, but then would climb again in 2017
• US production still twice what it was just before President Obama took office
• reiterates that US, with 264 billion bbls of oil reserves, has more reserves than either Russia or Saudi Arabia
• record US crude oil production set in April, 2015, best month since 1971

The article again emphasizes "rig count" which I think is low on the list of important data points to follow.

There was a report out yesterday that 4,000 DUCs across the US have 2 billion bbls of oil ready to be pumped.

In the Bakken:

• many wells choked back
• 1,500 inactive wells
• 900 DUCs
• pad drilling
• drilling sweet spots
• halo effect
• better completion techniques

Natural Gas Shortage This Winter? -- July 6, 2016

Bloomberg is reporting:

A blistering start to summer is helping put U.S. natural gas futures on course for the biggest gain in eight years.

Gas has surged 17 percent this year, rebounding from a 17-year low. Drillers, burned by earlier declines, are refilling storage at half last year’s pace as extreme heat boosts the use of air conditioners, increasing gas demand from power plants.

By November, supplies will probably drop below the five-year average, the benchmark for normal levels, for the first time in 13 months, based on storage rates.

Just four months ago, gas plunged after the warmest winter on record left the market with a glut large enough to last through the year. Instead, hot weather and a slowdown in shale production are eating into the surplus, signaling an era of higher prices as gas exports rise and electricity generation cuts into excess supply.

“We’re moving toward a potentially serious deficit in the supply-demand balance for this coming winter,” said one analyst.

Gas inventories were 25 percent above the five-year average in late June, down from 54 percent in April. An extended slide in production would erase the surplus by the end of the year, leaving stockpiles at a deficit to normal levels for the first time since May 2015 and pushing prices to $3 this month.

Oil Demand Might Peak By 2030 -- McKinsey -- July 6, 2016

As you go through the highlights of the McKinsey analysis, recall the proposal to build a petrochemical plant in North Dakota. These are the highlights of a recent McKinsey study as reported by the Oil & Gas Journal:

• The energy demand growth rate worldwide will slow to 0.7%/year through 2050—30% slower than the firm originally forecast. Energy demand will grow in emerging and developing countries and decline in Europe and North America.
• Chemicals will grow twice as fast as energy demand while demand for light vehicles peaks around 2023.
• Demand for electricity will grow at twice the rate of nonelectric energy. Solar and wind will account for almost 80% of net added capacity and 34% of generation by 2050.
• The fossil-fuel share of total energy will decline to 74% in 2050 from 82% at present. Gas will grow at almost twice the rate of total energy demand, while coal peaks by 2025. Oil demand growth will slow to 0.4%/year.
• Carbon dioxide emissions related to energy will flatten and start to subside about 2035 as efficiency of combustion engines improves, electric vehicles increase in number, and power generation shifts to wind and solar.
• Through 2035, the analysts say, 70% of growth in demand for liquid hydrocarbons will be for petrochemical feedstock.
• But global demand growth for petrochemicals soon will fall to 1.2 times the increase in gross domestic product from the traditional 1.3-1.4 times GDP as mature plastics markets become saturated.
• Increased plastics recycling and improved plastic-packaging efficiency can slow the rate further.
• By 2030, meanwhile, electric vehicles might represent nearly half the new cars sold in China, the European Union, and the US and almost 30% globally, according to a business-as-usual case that for the first time includes adoption of autonomous vehicles and car-sharing.
• “If the market penetration of electric, autonomous, and shared vehicles accelerates oil demand driven by light vehicles could be approximately 3 million b/d lower in 2035 than assumed in the business-as-usual case,” the analysts say. Accelerated adoption of light-vehicle technologies and changing plastics demand together might lower oil demand in 2035 by nearly 6 million b/d.
• “An important result is that oil demand will peak around 2030 at fewer than 100 million b/d in this scenario,” the analysts say.

Three New Permits -- July 6, 2016

Active rigs:

	7/6/2016	07/06/2015	07/06/2014	07/06/2013	07/06/2012
Active Rigs	31	76	191	188	213

Two wells coming off confidential list Thursday:

• 26907, 1,716, HRC, Fort Berthold 152-93-19D-18-6H, Four Bears, 33 stages, 4.9 million lbs, t1/16; cum 76K 5/16; only 13 days in 5/16;
• 31977, drl, Statoil, Lougheed 2-11 3H, Todd, no production data,

Three new permits:

• Operators: Whiting (2), Crescent Point Energy
• Fields: Banks (McKenzie), Blue Ridge (Williams)
• Comments:

Five permits renewed:

• EOG (2), two Burke permits in Mountrail County
• Slawson (2), two Periscope Federal permits in Mountrail County
• Whiting, a Pronghorn State Federal permit in Billings County

Two producing wells completed:

• 30611, 347, XTO, Odegaard State 31X-16DXA, Midway, 4 sections, t4/16; cum 24K 5/15;
• 31147, 454, XTO, Ryan 14X-9F2, Siversto, t3/16; cum 3K over 12 days;

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26907, see above, HRC, Fort Berthold 152-93-19D-18-6H, Four Bears:

Date	Oil Runs	MCF Sold
5-2016	3526	2225
4-2016	16670	15415
3-2016	16579	24788
2-2016	32939	37743
1-2016	6400	7399

The Market At Midday -- July 6, 2016

The US Fed given "cover": the Fed probably won't raise rates until Brexit impact clearer. It could take several years for the Great Britain / EU relationship to unwind.

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Even with a struggling market, we have 180 NYSE issues hitting new 52-week highs, including:

• AEP (a big whoop)
• Duke Energy
• MDU (a big whoop)
• NextEra Energy (so, what's with NextEra Energy -- day-after-day of new highs)
• SRE (wow, another big whoop)
• TransCanada (the Keystone folks)
• UnitedHealth Group (the folks who dumped ObamaCare)

New lows: 46 -- a bit more than the last few days.

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GDP Now -- 2Q16

Link here, July 6, 2016:

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2016 is 2.4 percent on July 6, down from 2.6 percent on July 1. The forecast for second-quarter real consumer spending growth ticked down from 4.4 percent to 4.3 percent after yesterday's light vehicle sales release from the U.S. Bureau of Economic Analysis. The forecast of the contribution of net exports to second-quarter real GDP growth declined from 0.25 percentage points to 0.15 percentage points after this morning's international trade report from the U.S. Census Bureau.

And didn't Janet Yellen suggest there's a 60% chance of rain a recession? Oh, I'm sorry, it was Deutsche Bank but there was a big picture of Ms Yellen at the story/link. The 60% chance for a recession is for the next 12 months.

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Cape Cod and Rising Sea Levels 

From The New York Times, byline Provincetown:

It is a simple pleasure in a classic summertime locale: Pull a car between the stripes on the parking lot here, a ribbon of asphalt parallel to the water atop a sloped wall in the sand, and look right out over the beach, where one can see Cape Cod Bay meeting the Atlantic Ocean.

Here amid the unearthly dunes, Herring Cove Beach — and especially its north parking lot — draws locals from just down the road and travelers from hundreds of miles away, who might arrive in camper vans studded with American flags. Some come for a quick swim, others to watch the sublime sunsets, famous in New England because the beach faces west, not east.

But there is a problem, evident in the chunks of asphalt lying on the sand and the deep fissures in the lot, parts of which are so damaged that they are off limits to parking: The beach is eroding, and parts of this beloved spot, built in front of the dunes, not behind them, are slowly crumbling into the ocean.

The result here at the Cape Cod National Seashore raises a practical dilemma in a setting meant to be a place to escape: how to react to rising seas and eroding coastlines as climate change looms for coastal communities across the nation. The decision here was to demolish the parking lot and construct a new one 125 feet behind it, allowing for a restored shoreline in front of it.

If I had "all the money in the world" or better said, if "money was not an issue," I would have a home in Provincetown.