Why The Crude Oil Rally Fizzled -- Platts -- 3rd Of 3 Parts -- April 29, 2017

Part 3 of a 3-part article. First two articles also archived. The link will take you to Part 1 and Part 2, also.

Just Wednesday, Platts reported that China received a record 4.83 million b/d of crude from OPEC in March. While Saudi barrels were down, they were more than made up by barrels from Angola, Kuwait and Venezuela.

No matter how you slice it, today’s crude market is set up to quickly displace lost supply. And this dynamic will most likely hold up until the Brent/Dubai EFS and the WTI/Dubai spread unwind. Cheaper Dubai will be the key to that. And that will come about when OPEC countries again compete for market share.

A recent upturn in Persian Gulf-Asia VLCC rates suggest this may be in the cards sooner than some had expected.

Bottom line: the only thing that will raise crude oil prices significantly -- geopolitics -- a nice little war somewhere in the Mideast. Whether a skirmish on the Korean peninsula would raise oil prices was not discussed.

Flashback: New "Featured Post" At The Sidebar At The Right -- April 29, 2017

Link here. Originally posted back in 2014. From the original post with regard to a study of the Bakken back in 2014:

The most glaring short-coming (obviously one can say this in hindsight), KLJ did all their studies based on three price-points for oil: $70/bbl; $85/bbl; and, $100/bbl. In hindsight, they needed to take this to $50/bbl which is very possible for the next two to three years. (It is very possible but very unlikely.) $50-oil won't shut down the Bakken but it changes the economic picture and the impact on North Dakota dramatically. In fact, the impact with $50 oil might be greater than if oil goes to $150 for the next five years. The contractor was lucky to complete this study by September, 2014, before the plunge in oil prices. 

$50 oil -- "very possible but very unlikely" -- written just before Saudi opened the taps in 2014. Wow, was I wrong -- I did not see Saudi Arabia making a trillion-dollar mistake. But the thesis holds true: it would have been a lot more valuable to look at the impact of $50 oil vs $70 oil, let's say. Someone suggested looking only at the "high end." Hindsight is 20/20 -- no one saw $50 oil coming. I wonder if they will repeat the study looking at the impact of $30 oil and $40 oil.

Further Thoughts On The Pipeline Protests -- Follow The Money And The Amenities -- April 29, 2017

Earlier I posted this note:

No repeat of the DAPL (link at FuelFix): Trans-Pecos Pipeline ready; protest camp to close. See more of this story at this post. 

Through e-mail a reader and I have been discussing how the Texas Trans-Pecos Pipeline protest was different from that of the DAPL protest. One can imagine all the well-known reasons, most of which I have probably written about before. Regardless, the reader pointed these things out which is as good as anything as I've seen regarding the DAPL protest:

Another thought is that these Pecos folks weren't being paid or at least not as much.  There were many versions of a rumor that [name deleted] didn't want to lose all that Bakken rail business so was paying $150 a day to protestors largely recruited on the West Coast through Craigslist/Facebook ads.  That didn't seem to factor into Pecos.

Standing Rock Indian Reservation ran a propane truck to camp every day until late January - the "campers" were fed by tent kitchens that cooked on propane, and heated their yurts/yurtpees with propane.  Propane refills were free until the tribe voted to disband the camps.  If the Pecos campers didn't have the luxury of a casino where they could swarm the showers, recharge their cell phones, etc., living was more expensive and sparse.

Then there's the fact that Texas doesn't have a reservation, having dealt with the land's previous inhabitants differently.

Of course, unrelated, but I had completely forgotten about Texas and native American reservations (actually, I never thought about it) . Apparently there are three -- but they must be incredibly inconsequential -- reservations in Texas. 

It was well-known that the DAPL protestors were being paid: it appears they were given a "finder's fee" for initial expenses and then paid on an hourly basis based on "activity." I had forgotten (or did not know) about the amenities that the reservation and the casino would have provided.

One wonders how many "homeless" from Portland, OR, went to North Dakota to protest the DAPL. The "Portland homeless" would have been a perfect fit: many/some/most of the "homeless" in Portland live in tents. They would have felt at home on an Indian reservation. 

From what I can tell, the tents in Portland are becoming more and more high-end. If so, one starts to think about the marijuana story in Portland.

Wow, I'm getting off the subject.

As most folks know, there are now "hundreds" of "pot shops" in Portland, OR, now that the state has legalized marijuana. Apparently the "black market" is as vigorous as ever, maybe more so despite all these shops. It turns out that buyers must provide personal information before they can purchase marijuana legally, something some/many/most prefer not to do. 

The personal information requires one's name and an address. Think about that. If the Feds ever decide to crack down on this federally illegal activity -- anyway, I guess it's federally illegal -- they will have books and books with names and addresses. Mostly fictitious. Whatever.

It appears the "going-price" for marijuana at the "pot shops" is $30 for a quarter ounce (or maybe it was a half ounce, I forget). Something tells me, an entrepreneur can buy a pretty nice REI tent selling pot for that price.

Here it is: average price of Portland marijuana: $200/ounce. Or at this site, $12/gram = $360 / ounce. As far as I know there are no recycling fees on plastic bags unlike recycling fees for Coca-Cola's aluminum cans. I know politicians are trying to help us cut back on Coca-Cola due to it being so dangerous to our health. Whatever.

On a different note, there are so many "pot shops" in Portland it begs the question how so many were set up so fast. One rumor is that most "pot shops" had been "virtual," illegal, street, "pot distribution centers." True or not, I don't know, but it certainly makes sense. 

And folks are worried about fracking. LOL.

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America's First Homeless Person

This is pretty cool. In today's WSJ "Review Section," there is an essay on Henry David Thoreau who would be 200 years old this summer (July 12, 2017, to be exact). Expect a lot of HDT books to hit the bookstores this summer. The two mentioned in the WSJ essay are already available, and a third, a comprehensive biography by Laura Dassow Walls, will come out this summer. The two available now:

• The Boatman, by Robert M Thorson; and,
• Thoreau and the Language of Trees, by Richrd Higgins

During our four years in Boston, I visited Walden Pond often; it's interesting and a must-see, but it's not particularly awe-inspiring. It's a huge land-locked pond. Surrounded by trees.

Thoreau's bigger story was the Concord River on which he rowed many, many times, and many, many miles for many, many hours. I knew Thoreau kept a journal of his boating on the river but I did not know that his journal was kept for 24 years and goes on and on: two million words long.

The longest I ever kept one continuous journal was from June 9, 1968, to August 14, 1977. On 9 June 1968, I was a junior in High School, not yet 17. On 14 August 1977, I was celebrating my 26th birthday and looking forward to starting my career (and family), having graduated from graduate school just a few weeks earlier.

Then, the high point in the essay, at least for me. Well into the article, this paragraph:

In the early 1850s, Thoreau would accompany William Ellery Channing on what they called "riparian excursions," paddling the Musketaquid, a vessel compromised by the memory of a dead brother , up the Concord Rier, a channel compromised by modern industry, to woodlands, compromised by unprecedented deforestation. 

Had it not been for the blog, I probably would have skipped over the word "riparian." I know I would not have know a) its definition; or, b) its significance.

Wow, the blog has taught me a lot.

Resource Energy Adds More Bakken Acreage For Less Than $800 / Acre -- April 29, 2017

I always wondered what happened to Magnum Hunter. This article has the answer, from Oil and Gas Investor:

Resource Energy Can-Am LLC continues to build up its position in the Bakken Shale with its third acquisition in Divide County, N.D., the Denver-based company said April 26.

For $34.7 million cash, Resource Energy will acquire interests in producing wells and mineral acreage from Blue Ridge Mountain Inc., formerly known as Magnum Hunter Resources. The deal includes average production of more than 1,500 barrels of oil equivalent per day (boe/d) and 3 MMboe of reserves.

Data points:

• 167 wells
• 45,000 net mineral acres
• $35 million 
• buyer: Resource Energy Can-Am LLC
• seller: Blue Ridge Mountain Inc, formerly Magnum Hunter Resources
• mostly in Divide County, it appears
• back-of-the-envelope: less than $800 / acre

More from the article, again, which sheds light on a lot of players during the Bakken boom:

Since Resource Energy’s formation in 2015 with backing from Apollo Global Management LLC , the company has acquired Williston Basin assets from E&Ps hit by financial troubles, including chapter 11 bankruptcy.  Blue Ridge Mountain itself emerged from bankruptcy protection in May 2016.

In November, Resource Energy was the successful stalking horse bidder on Samson Resources Co.’s Bakken assets in North Dakota and Montana in a $75 million deal. A year earlier, Resource Energy purchased bankrupt American Eagle Energy Corp.’s Divide County assets for an undisclosed amount.

Pro forma for its recent acquisition, the company’s footprint in the Williston will include proven reserves of about 32 MMboe and interests in 385 wells.

The deal will also mark Blue Ridge Mountain’s full exit from the Bakken as the company plans to now focus on its core acreage in Appalachia, said John Reinhart, Blue Ridge Mountain’s president and CEO.

Obviously there is no comparison between the Permian and Divide County in the Bakken, but considering some are paying upwards of $40,000/acre in the Permian, Bakken acreage for less than $800/acre certainly seems incredible.

To extent possible, I track Bakken operators here. 

A Request From A Reader -- Hot Spots In North Dakota -- April 29, 2017

Suggestions from readers (to know what this is all about -- see original post).


Readers write:

One sight to see that immediately came to my mind, especially for one  driving through, is a short (30 miles or so) stretch of highway in south west North Dakota - the ENCHANTED HIGHWAY.

My goodness you left out Our Place Cafe Lanes and Lounge in Elgin, ND. You haven't experienced ND if you haven't bowled in a 4 lane alley.

Medora and the small road trip through TR Park, Heritage Center in Bismarck is revamped and very nice to see.

Original Post

 

A reader writes:

Little request, I have a friend who travels America looking at the various hot spots in each state.

He will be traveling through ND on his next leg.

Can you give me a top ten list of things you would recommend to see as someone is driving through.

The biggest problem, of course, is the sheer size of the state. If he/she is coming specifically to North Dakota for a week or two, the items on that list will be far different from a list for someone simply spending a few extra days crossing the state on a cross-country road trip.

I will open this up to readers who can comment anonymously (below) or by e-mail with their thoughts. I don't the eastern half of the state well enough, so I will limit most of the thoughts to the western half of the state, with some exceptions:

Coming from the east on I-94, Fargo is going to be the last huge metropolis one will find in North Dakota. "Hot or not," it might surprise someone from out of state how big this city has become.

Continuing on I-94, going west, crossing the Missouri River at Bismarck/Mandan will be a beautiful, beautiful sight.

At the far west end of I-94, one arrives at the south unit of Theodore Roosevelt National Park which is probably the highlight for most folks driving across North Dakota.

That's the south side of the state, from east to west. Hopefully, your friend has time when he/she reaches the west end of I-94 in North Dakota to drive three to five hours north to the Bakken.

The activity has slowed down immensely so the excitement of 2007 - 2012 is no longer there. But prior to reaching the Bakken, one will enter the Badlands and the entrance to the north unit of Theodore Roosevelt National Park, off US Highway 85, just south of Watford City.

If the timing is right, one of the best steak dinners can be had in the "bank restaurant" on Main Street in Watford City.  Even if one does not eat there, it is an interesting spot to stop just to see what oil money has brought to this part of the state.

Another 45 minutes north or so and one is in Williston, heart of the Bakken.

If really touring the area, watch for Fort Union and Fort Buford; if time for only one such excursion, Fort Union. Again, we're talking a lot of cross-country driving, even after one arrives in Nroth Dakota.

It's a long scenic drive from Williston to Four Bears Casino, well east of Williston, but the view across the Missouri when one gets there is spectacular.

My best advice: the North Dakota Tourism website.

I'll build on this post over the next few days as thoughts come to mind / readers respond.

Traveling across North Dakota, I would stop at coffee shops or restaurants off the beaten path, outside the "big cities." The wait staff: almost always very, very friendly and once they learn you are from out of state and curious about North Dakota, they might surprise you with their thoughts. "Original North Dakotans" are generally northern European -- German/Scandinavian -- and a bit reserved. After all they've been through the past few years, they may also be a bit skeptical of newcomers and circumspect in their comments.

In Williston, of course, Books on Broadway.