Oil prices settle lower as U.S. output hits 2-year high

 

EIA data show U.S. crude output topped 9.5 mln bbls a day last week

http://www.marketwatch.com/story/oil-prices-rise-on-hopes-for-another-big-drop-in-us-inventories-2017-08-16

Oil settled lower Wednesday after the Energy Information Administration report revealed a weekly climb in domestic production to the highest level in over two years. 

The government data also showed the largest weekly decline in U.S. crude supplies since September of last year and they have now fallen seven weeks in a row, but those figures failed to offer any lasting price support for oil during the session. 

September West Texas Intermediate crude CLU7, +0.26%  shed 77 cents, or 1.6%, to settle at $46.78 a barrel on the New York Mercantile Exchange. The decline marked the third-consecutive loss for WTI, which stands at its lowest finish since July 24, according to FactSet data. October Brent crude LCOV7, +0.44%  on London’s ICE Futures fell 53 cents, or 1%, to $50.27 a barrel.

Data from the Energy Information Administration on Wednesday showed a rise of 79,000 barrels a day in total crude-oil production to 9.502 million barrels a day last week. That was the highest output figure since mid-July 2015, according to EIA figures, based on weekly reports.

U.S. production “increased at a pretty good clip,” and demand for gasoline and distillates was also down, said Tariq Zahir, a managing member at Tyche Capital Advisors.

The EIA also said, however, that supplies of crude oil for the week ended Aug. 11 fell by 8.9 million barrels. That was more than double than the decline of 3.6 million barrels expected by analysts polled by S&P Global Platts, but below the 9.2 million-barrel decrease reported by the American Petroleum Institute late Tuesday. 

“A combination of record refinery runs for the time of year and strong exports have encouraged the largest draw to crude inventories in eleven months,” said Matt Smith, director of commodity research at ClipperData.

Troy Vincent, an oil analyst at ClipperData, said that his outlook for significant supply draws throughout August “points to a continuation of this expanding year-on-year deficit in the coming weeks.”

Gasoline stockpiles were unchanged for the week, while distillate stockpiles lost 700,000 barrels last week, according to the EIA. The S&P Global Platts survey showed expectations for declines of 400,000 barrels for gasoline stockpiles and 700,000 barrels for distillates, which include heating oil.

Looking ahead, “the peak of summer driving season has now passed, and demand for crude will also wane as refinery runs drop,” said Smith. “Gasoline demand will ebb as summer road trips are mostly over and children head back to school.”

On Nymex, gasoline for September RBU7, +0.31%  fell 1.6 cents, or 1%, to $1.564 a gallon, while September heating oil HOU7, +0.19%  ended at $1.574 a gallon, down 2.5 cents, or 1.6%. 

September natural gas NGU17, +0.10%  fell 4.5 cents, or 1.5%, to $2.89 per million British thermal units ahead of its own U.S. supply update due Thursday from the EIA.

In related news, the U.S. Energy Department announced Tuesday that it will put 14 million barrels of crude oil from the Strategic Petroleum Reserve up for sale later this month under the crude-oil sales offer programs announced in 2015 and 2016.

U.S. plans sale from Strategic Petroleum Reserve

https://www.upi.com/Energy-News/2017/08/16/US-plans-sale-from-Strategic-Petroleum-Reserve/4441502885378/

The U.S. Department of Energy said it plans to sell some of the oil from the Strategic Petroleum Reserve, the world's largest emergency supply of oil.

The department's Office of Fossil Energy said the sale from the federally-owned stockpile was scheduled for late August. The office aims to draw down and sell 14 million barrels of oil in order to meet the requirements of bipartisan legislation, most recently enshrined in the 21 Century Cures Act.

Under the measure, signed in January, the government aims to sell off 25 million barrels of oil over the next three years, with 9 million on tap for sales next year.

"Revenues from the sale will go to the general fund of the United States Department of the Treasury, to carry out the National Institutes of Health's innovation projects," the department reported.

This would be the second release from the SPR this year and would come at a time when analysts and investors are watching for data indicating the degree to which the market is balanced between supply and demand. Members of the Organization of Petroleum Exporting Countries in late November agreed to trim production to counter a glut of oil brought on in part by the rise in U.S. shale oil production a few years ago. That agreement went into force in January and expires in March.

A report from S&P Global Platts that followed the first SPR release, indicated the volume of crude oil injected into the market from the SPR would be relatively negligible and the long-term impact on the price for oil should be relatively minor. To put it in perspective, total U.S. crude oil production per day is around 9 million barrels.

Phil Flynn, senior market analyst for the PRICE Futures Group in Chicago, told UPI that "based on what we have seen lately, it will only replace two weeks' worth of draws" from U.S. crude oil stockpiles.

OPEC's balancing effort aims to bring inventories down near the five-year average. According to OPEC, commercial oil stocks for the developed countries in the Organization for Economic Cooperation and Development in June were still above the latest-five year average by about 252 million barrels.

The amount of crude oil in the SPR was 678.9 million barrels as of Aug. 4, a decline of 16.2 million barrels from one year ago.

The SPR was designed as an emergency reserve and any release of oil from there usually coincided with international crises like the outbreak of the civil war in Libya in 2011. The International Energy Agency requires member states to hold the equivalent of 90 days of the previous year's imports in reserve.

A budget proposal put forward by U.S. President Donald Trump in March relied in part on additional SPR sales.

Venezuela Inches Closer to Dictatorship

Shell launches methane detector pilot at shale sites in Canada

Sherry Vargson ignites the tap water in her kitchen in Granville Summit, Pennsylvania, in 2012. Her family’s farm is in the Marcellus Shale region, where the fracking rigs have contributed to increased methane in the water supply.

http://fluidhandlingmag.com/display_news/12753/shell_launches_methane_detector_pilot_at_shale_sites_in_canada/

Shell has launched a methane detector pilot at one of its shale gas sites in Alberta, Canada.

The pilot test is part of a wider initiative called the Methane Detectors Challenge, a collaboration between the Environmental Defence Fund (EDF), oil and gas companies, US government agencies and technology developers to develop a next generation methane detection system. It is hoped that the initiative will result in earlier detection and repair of methane links, in turn reducing emissions.

“This pilot shows we’re serious about reducing the methane emissions associated with natural gas production to support the overall climate benefit of this fuel,” said Greg Guidry, Executive Vice President Unconventionals, Shell. “Shell is looking at all aspects of its operations, from equipment to processes, to assess and identify emission reduction opportunities.”

34 times more potent as a heat trapping gas than carbon dioxide, methane is a greenhouse gas which proves a costly challenge for the energy industry. It is a common byproduct of shale gas extraction, making detecting the presence of the gas hugely important.

Shell already has leak detection and repair programmes in operation across all of its shale gas sites, however, the Quanta3 sensing system used in the pilot is a new technology that can continuously monitor methane emissions, unlike handheld optical gas imaging (OGI) cameras.

“A new frontier of methane detection is coming, and Shell is helping to give us a glimpse of that future,” said Ben Ratner, Director, EDF. “The ultimate test will be whether the industry scales new tools and approaches to minimize wasteful methane emissions in North America and across the world.”

Depending on the outcome of the pilot, next generation detection technologies could be used to complement OGI cameras and other monitoring tools. These technologies could also have broader applications across the natural gas value chain.

In addition to the Methane Detectors Challenge, Shell is involved in other partnerships, including the Oil and Gas Climate Initiative (OGCI), to understand the gaps in methane data and detection technology to help both companies and policy-makers act more effectively.

OPEC's oil output hits a 2017 high, another setback for its deal to pump less

 

 Essam Al-Sudani | Reuters

People work at the Halfaya oilfield in Amara, southeast of Baghdad, Iraq.

https://www.cnbc.com/2017/08/10/opecs-oil-output-hits-a-2017-high-in-july.html

• OPEC's oil output rises to the highest level since December, the month before the cartel started cutting output.
• A production recovery in Libya and Nigeria drives the gains last month.

OPEC raised its collective oil output for a fourth-straight month in July, another sign that it is struggling to stick to a deal to pump less.

OPEC output jumped by 173,000 barrels a day to nearly 32.9 million barrels, according to independent sources cited by the group Thursday in a monthly report. That was the highest level since December, the month before the cartel began enforcing an agreement to limit its output in a bid to rebalance the market after three years of oversupply.

OPEC officials met earlier this week in Abu Dhabi to discuss how to improve compliance with the deal but didn't announce any clear steps.

The producer group has partnered with nonmembers, including Russia, since January to keep 1.8 million barrels a day off the market in order to shrink global crude stockpiles and boost prices. Rising output from U.S. drillers and OPEC members Libya and Nigeria, which are exempt from the deal, has frustrated that effort.

The oproduction recovery in Libya and Nigeria continued in July as the African nations restored output sidelined by civil conflicts.

Libya's daily output rose above 1 million barrels last month, up more than 150,000 barrels a day.

Nigeria hiked daily production by about 34,000 barrels, reaching about 1.75 million barrels a day. Nigerian officials agreed last month to consider production limits once the country hits 1.8 million barrels a day.

Saudi Arabia, the group's top producer and de facto boss, pumped above the limit it agreed to last winter, producing 10.07 million barrels a day. The kingdom has cut production well below its quota throughout much of the year, helping to offset weak compliance from other members. The rise is likely due in part to seasonal factors, as the Saudis burn crude to meet higher electricity demand in the summer.

Still, Saudi Arabia and Russia last month warned they would not tolerate cheating and took a tough line with producers.

Two of the laggards, Iraq and the United Arab Emirates, reduced output in July, but were still pumping above their quotas.

The world's appetite for oil will reach 96.5 million barrels a day this year and 97.8 million barrels a day in 2018, according to OPEC's latest assessment.

OPEC believes interest rates in developed nations will rise gradually from current low levels, supporting borrowing and economic growth in developing countries. The cartel also sees a reduction in geopolitical tensions in some pockets of the world boosting growth.

"Taken together, this will allow the global economy to enter the coming year with a firm basis to support better-than-projected growth in 2018," OPEC said in the report.

Oil prices drop as IEA sees slow market rebalancing

https://www.reuters.com/article/us-global-oil-idUSKBN1AR01N

Oil prices fell on Friday after the International Energy Agency said weak OPEC compliance with production cuts was prolonging a rebalancing of the market despite strong demand growth. 

Brent crude LCOc1, the global benchmark, was at $51.83 a barrel at 1220 GMT, down 7 cents, having earlier fallen 50 cents or around 1 percent to its lowest since Aug. 1. 

U.S. West Texas Intermediate crude CLc1 was down 10 cents at $48.49 per barrel, having earlier dropped 1 percent to its lowest since July 26. 

Oil touched 2-1/2-month highs on Thursday but closed down around 1.5 percent, with U.S. prices slipping back below $50 amid oversupply concerns. 

"There would be more confidence that rebalancing is here to stay if some producers party to the output agreements were not, just as they are gaining the upper hand, showing signs of weakening their resolve," the IEA said in its monthly report. 

The IEA said OPEC's compliance with the cuts in July had fallen to 75 percent, the lowest since those curbs began in January. It cited weak compliance by Algeria, Iraq and the United Arab Emirates. 

In addition, OPEC member Libya, which is exempt from the cuts, steeply increased output. 

"Crude oil prices failed to hold recent gains, with a nervous market starting to doubt recent falls in inventories," ANZ bank said in a note. "Supply-side issues also weighed on prices." 

The IEA also said it had revised historic demand data for 2015-2016, meaning a lower demand base in 2017-2018 combined with unchanged high supply numbers could lead to lower stock draws than initially anticipated. 

Saudi Arabian Energy Minister Khalid al-Falih said the kingdom did not rule out additional oil production cuts, the Saudi-owned Al Sharq Al Awsat newspaper reported. 

Meanwhile, U.S. President Donald Trump stepped up his rhetoric against North Korea again, saying his earlier threat to unleash "fire and fury" on Pyongyang if it launched an attack may not have been tough enough. 

"I think the issue that is affecting the market is the general risk sentiment of sabre-rattling between Washington and Pyongyang," said Michael McCarthy, chief market strategist at CMC Markets. 

Reporting by Dmitry Zhdannikov; Editing by Dale Hudson and Jason Neely

Impacts of Intra-Weekly Ethanol Storage Measurements on Ethanol Exports

http://www.genscape.com/blog/impacts-intra-weekly-ethanol-storage-measurements-ethanol-exports

With storage terminals becoming more and more efficient in loading and unloading operations, a lot can happen within a week. For instance, at Texas International Terminals in Galveston, Texas, the terminal has 20,000 feet of unit train landing track and designed to discharge via rail at 15,000 barrels per hour. The terminal’s loading docks are also capable of loading onto vessels at a rate of 11,500 barrels per hour with potential for expansion.

Genscape began measuring ethanol storage at Texas International Terminals on July 7, 2017. Between the initial and following week’s measurements, total ethanol storage differed by only 6,246 barrels suggesting very little change from one week to the next. Over this same period, daily measurements were collected as well. It was discovered that while weekly measurements indicated a lack of storage movement, there was actually more to the story.  

Figure 1: Week-over-week ethanol storage measurements at Texas International-Galveston. Click to enlarge

 

Figure 2: Daily storage levels taken at Texas International Terminals. Click to enlarge

 

Over the course of the week, roughly 57,000 barrels of ethanol were delivered to the terminal. However, on July 12, there was a withdrawal of 63,000 barrels of ethanol resulting in a net change of only 6,246 barrels from July 7 to July 14.

The Nordic Mari, a chemical oil products tanker, was moored at the time of the withdrawal indicating that roughly 63,000 barrels of ethanol was loaded onto the vessel. This was confirmed by visual imagery and data collected through Genscape Vesseltracker™. Brazil port data at Itaqui later validated that the Nordic Mari delivered roughly 62,000 barrels at the end of the July.

Figure 3: The Nordic Mari arrived at Texas International Terminals on July 12 corresponding to the large ethanol withdrawal from the facility. Click to enlarge

 

In addition to Texas International Terminals, Genscape is performing the same daily tank level measurements at four other terminals in the Houston and New Orleans area focusing on terminals that store and export ethanol. Genscape flies over these terminals once a week to collect detailed tank level measurements using infrared imagery.

In review of these terminals, it is apparent that daily storage information can provide greater insight into ethanol movement into and out of the Gulf Coast. Major events that occur at storage terminals, such as vessel loading, cannot slip under the radar with this level of granularity.

Beginning next month, Genscape plans to expand on this intra-week storage analysis. By pairing daily tank measurements with vessel monitoring, it can be detected when ethanol is loaded onto vessels. Furthermore, this information can provide timely information and transparency into ethanol exports well ahead of the ITC or EIA.

Using proprietary technology, Genscape delivers weekly ethanol storage measurements a full day ahead of EIA estimates in the PADD 3 region. Genscape’s Gulf Coast Ethanol Inventory Report provides actual measured ethanol inventories as a reference point to gain transparency and help better understand market supply and demand. For more information on Genscape’s Ethanol Inventory reports or upcoming Ethanol Exports Monitor, please click here.