The Market And Energy Page, T+325 -- December 12, 2017 -- This Market Is Unstoppable

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.

Market: this market is simply unstoppable. The Dow and S&P 500 each hit a new record yesterday. I keep looking for a pullback. Last night, Dow futures were up 30 points. I had not looked at the market until a few minutes ago and now I see that the Dow is up 135 points and I can't explain it. The market just hit another milestone -- it just hit a new, all-time intra-day high (24,538). I quickly turned on CNBC, to a reader I wrote:

Santelli was just talking about bonds, and telling us that one of the curves will invert tomorrow when the Fed raises rates. [The 10-year is now 2.415%.]

Then the anchor says the "market is having a pretty good day." Wow, what an understatement ... these guys simply can't excited about the Trump rally.

I have no idea why the market jumped 130 points today; perhaps investors are happy to see a bit of wholesale price inflation ... finally.

US economy. The WSJ on jobs last week -- December 8, 2017 -- 607 comments to date. The lede:

The U.S. economy is hitting milestones not seen in more than a decade, marked by robust hiring that has led to low unemployment and a sustained pickup in output.

Labor Department data Friday showed nonfarm payrolls rose a seasonally adjusted 228,000 in November—the record 86th straight month of expansion—after a 244,000 gain in October. Steady hiring has in turn driven the unemployment rate down to 4.1% for two straight months, holding at a 17-year low.

That would put economic output on track for a third straight quarter of near 3% growth, a breakout, for now at least, from a long period of 2% growth. The economy hasn’t delivered three straight quarters of growth at or above 3% since a period from mid-2004 to early 2005.

GDP Now. I don't know if I posted this earlier, but the latest forecast has dropped below 3%:

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2017 is 2.9 percent on December 8, down from 3.2 percent on December 5.

The forecasts of real consumer spending growth and real private fixed-investment growth declined from 2.8 percent and 8.1 percent, respectively, to 2.5 percent and 7.0 percent, respectively, after this morning's employment report from the U.S. Bureau of Labor Statistics. The model's estimate of the dynamic factor for November—normalized to have mean 0 and standard deviation 1 and used to forecast the yet-to-be released monthly GDP source data—declined from 1.13 to 0.47 after the report.

Surge: in the ten minutes it has taken me to write this much, the Dow has jumped from 135 points to 167 points. I have some hunches but won't say anything. I don't want to remove all doubt about my  insanity.

Brent crude oil prices soar -- TheStreet. Highest price since mid-2015, ... 

... topping $65 a barrel as J.P. Morgan Chase & Co. analysts increased their price forecasts for next year and identified some spread trades for investors might consider in the oil market. 

Prices for the global benchmark Brent crude oil for February 2018 delivery were up more than 1% to $65.45 at around 8:30 a.m. EST. Future contracts for West Texas Intermediate crude for January delivery rose about 0.8% to settle at $58.45 on Tuesday.

Update On "Port Of North Dakota" -- December 12, 2017

The last time I blogged about ND Port Services it was about the port being in default in lease payments. A short update from The Minot Daily News in this story:

• the city has been seeking lease payments from NDPS that it states are overdue. In court documents, NDPS alleges the city breached the lease by failing to maintain the property. First Western Bank filed foreclosure against NDPS in May for delinquent loan payments. That legal debate continues in North Central District Court. 

Bur now there appears to be new interest in the port:

• NDPS currently operates with three tracks of about 4,500 feet. Limitations with those tracks preclude handling more than a few cars at a time. NDPS would like to construct four rails of 9,500 feet to enable the port to serve more cars and create a more viable operation.

Because of the way the story is written, it's a bit hard to follow but this is what it sounds like to me:

• the Port had a projected $130 million investment fall through in 2013; focused on Bakken energy; investor got "cold feet" -- worried how long the boom would last
• the Port was unable to maintain lease payments to the city of Minot
• the Port now has an investor group interested in investing $80 million the project
• but to do that, the Port needs to add rail on land that the city of Minot owns
• the Port focused on Bakken oil back in 2013; now it pivots to agriculture, wants to become a distribution and logistics center for a core hub between Chicago and Seattle

Background:

• development of the Port began in 2005
• NDPS was established in 2007 (still commonly called the Port of North Dakota)
• transloading activity began in 2010

To put this in perspective, compare with Red River Oilfield Service, on the east side of Williston, ND -- built privately by a single individual. When I was last there, the rail yard had around eleven rail spurs; I don't know the exact length of each spur, but at least one had been completed as part of the "Unit Train Project" -- unit trains are colloquially said to be a "mile long."

Comments: this is incredibly good news for the Port, the city of Minot, and, the entire region. It certainly suggests the "Bakken economy" continues to hum along.

Reality Of Renewables -- December 12, 2017

Chart of the day:

It may be hard to read, but of the 97.5 quads of energy consumption in the graph above:

• solar: 0.532 (and the heyday of solar may be over)
• wind:1.82 (wind is still exciting, but best public are starting to say "NIMBY"; off-shore inconsequential)
• nuclear: 8.34 (this is the big story. Nuclear plants are being shut down; it's hard to think that wind could even begin to make up what is going to be lost as the nuclear power plants are decommissioned)
• hydro: 2.39 (static)
• biomass: 4.72 (static)

One individual at this article noted:

Over the last four years solar and wind have increased energy production in the US by 0.8 quads. Natural gas over the same time has increased by 2.3 quads - almost 3 times as much.

And that gap in production between wind/solar and natural gas will continue to increase. Every time I see a utility announce that the company is adding more wind/solar, there is also an accompanying announcement that more natural gas will be also added -- and many times more than wind/solar. The wind/solar is added for two reasons:

• public relations; help get the project through the regulation/approval process
• for the tax credits

Huge Fracks -- Random Note -- December 12, 2017

Note the large amount of proppant and/or the large number of stages on several wells that came off confidential the last three days. This page will not be updated.

Tuesday, December 12, 2017: 49 for the month; 159 for the quarter
31629, 2,208, Oasis, Lawlar N 5199 41-23 2B, North Tobacco Garden, 70 stages; 10.2 million lbs; t7/17; cum 182K 10/17;

Monday, December 11, 2017: 47 for the month; 157 for the quarter
32316, 674, EOG, Van Hook 71-1411H, Parshall, 35 stages; 13.1 million lbs, t6/17; cum 105K 10/17;
31630, 1,497, Oasis, Lawlar N 5199 41-23 3T, North Tobacco Garden, Three Forks, 70 stages, 10 million lbs, t7/17; cum 110K 10/17;

Sunday, December 10, 2017: 43 for the month; 153 for the quarter
32315, 615, EOG, Van Hook 70-1411HX, Parshall, 28 stages; 10.6 million lbs; t6/17; cum 106K 10/17;

Saturday, December 9, 2017: 40 for the month; 150 for the quarter
33050, 1,703, EOG, Clarks Creek 75-0719HX, Clarks Creek, 4 sections, 57 stages, 15.1 million lbs; t6/17; cum 230K 10/17;
32794, 2,382, Clarks Creek 74-0719H, Clarks Creek, 4 sections, 59 stages, 17 million lbs, t6/17; cum 230K 10/17;
31836, 1,827, Whiting, Evitt 34-12H, Truax, 4 sections 43 stages; 11 million lbs, t6/17; cum 148K 10/17;

WTI Up On Brent Pipeline News -- December 12, 2017

Drawdown of US crude oil inventories: API data -- huge drawdown --

• forecast: a drawdown of 4 million bbls
• actual: a drawdown of 7.382 million bbls

Fracking our way to Mideast peace: a nice article in the WSJ. 

What a doofus?

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Nodding Donkeys Nodding Off

From Bloomberg via Rigzone, data points:

• nodding donkeys, failing
• effective on vertical wells; less effective on horizontal wells
• pumpjacks can last five or six years without any problems; on new wells in the Eagle Ford, they may not last two years
• currently about 50,000 horizontal wells that have nodding donkeys; total number of horizontal wells in North America: over 1.2 million producing wells
• costs about $250,000 to install a pumpjack; $100,000 to repair or replace it
• this has been discussed before, not sure if I've ever blogged about it

From the article:

“If you’re failing your pump all the time, you’re not getting low lifting costs,” said Saponja, who had first-hand experience when he worked at a small exploration and production company in the Bakken shale region of North Dakota. Over a two-year period, Saponja said he replaced its pump more than half a dozen times.

“There is no one favorable solution for the problem,” .... trying to develop alternatives with funding from companies including Exxon and BP.

One workaround engineers have used is to shove natural gas into the hole to lighten the oil and make it easier to pump to the surface. Another is placing an electric-submersible pump, or ESP, down in the well. While both techniques work during the early stages in the life of a well, they often aren’t as effective after output falls.

This explains all the sundry forms in the NDIC files documenting that ESPs have been installed. One wonders to what extent this is associated with the "dreaded Bakken decline." If it is a significant reason for the "dreaded Bakken decline" and if the problem is solved, it will be yet another incredible story coming out of the Bakken.

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Other Market And Energy Notes

Lay Flat Hose: MBI Energy Services laid 35 miles of Lay Flat Hose to transport fracking water to its service areas. From myNDnow. I'm not sure what's particularly new about this; I saw this five or six years ago in the hills on the north side of Lake Sakakawea.

Gray Oak Pipeline, Texas: Phillips 66 and Enbridge launch open season. Data points:

• west Texas (Reeves, Loving, Winkler, and Crane counties) to Corpus Christi, Freeport, and Houston
• initial capacity: 385,000 bpd
• will consider increasing that capacity
• will link to more than 3 billion bbls per day of refining capacity and multiple export facilities

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

SRE: opening price, pending. FERC approves SRE takeover of Oncor. Other agencies still need to approve. As expected, investors are not happy. SRE shares are down almost 2%, or about $2/share. 

Active rigs:

$58.44↑↑	12/12/2017	12/12/2016	12/12/2015	12/12/2014	12/12/2013
Active Rigs	52	41	65	181	191

RBN Energy: condensate production decline hits splitters and neat conde exports.

The sharp decline in U.S. condensate production since early 2015 and the end to the ban on U.S. crude oil exports a few months later were a one-two punch for the companies that made throughput commitments to condensate splitters and made other conde-related infrastructure investments.

In what seemed like a flash, conde supply plummeted and the steep price discount to WTI and other light crude that made conde so attractive for splitting and exporting was gone. Holders of splitter capacity were paying top-dollar for what conde they could corral, and operators were forced to run their brand-new facilities at far less than capacity. And, when the general ban on crude exports was lifted in December 2015, the special status that conde had enjoyed since exports of lightly processed conde were permitted in June 2014 was a thing of the past.

Today, we continue our review of a conde world in upheaval, this time with a focus on splitters and exports.

Superlight crude and conde sit side-by-side at the far end of the crude-oil spectrum. They’re both sweet (low-sulfur) and very pourable — superlight (using EIA’s API gravity breakdown, 50.1 to 55.0 degrees) is like iced tea, and conde (API gravity of 55.1 or more — also EIA’s breakdown) is like cream soda — and they can either be refined, exported, blended with heavier crudes, or (for conde) run through a splitter. A splitter uses atmospheric distillation to separate high-API-gravity conde into its component fractions to produce intermediate, semi-finished blend stocks like naphthas and distillates that are processed further at refineries.