Energy Week

Saudi Arabia is dramatically changing its oil exports to China and the US
https://www.cnbc.com/2019/08/15/saudi-arabia-dramatically-changing-its-oil-exports-to-china-and-the-us.html
Mixed bag of signals about what Saudi relationship with United States is - are Saudis changing that relationship? Why are Saudis decreasing oil shipments to the United States and increasing exports to China? US is a reliable customer - Aramco can decrease its exports to the US without worrying that it will lose the US as a customer.

Trump’s Oil Sanctions Leave Russian Exporters $1 Billion Richer
https://finance.yahoo.com/news/trump-oil-sanctions-leave-russian-040000349.html
Sanctions on Iran and Venezuela have made Urals crude more expensive and therefore Russia made more money. Spread between Urals crude and European benchmark decreased as a result of sanctions. Is there a nefarious connections here?

Oil rises 0.7% as Wall Street rebounds, but weak OPEC outlook caps gains
https://www.cnbc.com/2019/08/16/oil-markets-us-retail-sales-global-economy-in-focus.html
How much oil would OPEC actually have to cut to make a difference in price in this market? Down 20-30 rigs in US July.

The Rocket And Drone Attacks Against Saudi Arabia Are A Nuisance But Strategically Irrelevant
https://www.forbes.com/sites/ellenrwald/2019/08/18/the-rocket-and-drone-attacks-against-saudi-arabia-are-a-nuisance-but-strategically-irrelevant/#2dcd9d0685c4
Not impacting market either. Saudi oil infrastructure has a great deal of redundancy built into the system that makes it difficult to actually disrupt Saudi Arabia’s flow of oil.

RV sales - an indicator of recession?
https://www.wsj.com/articles/one-countys-rv-industry-points-to-recession-around-the-bend-11566207001?redirect=amp#click=https://t.co/NHUsJFfczk
Is this the new indicator for recession.

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Big News - Oil and Gas CRUISE coming in 2020.
Thoughts on Saudi Aramco Investor Relations call
- Why hold this call? What did they really even disclose? Issue with dividends (see Ellen’s piece in Forbes https://www.forbes.com/sites/ellenrwald/2019/08/12/saudi-aramco-investor-relations-call-reveals-massive-profits-but-fails-to-address-key-ipo-concerns/)

Saudi Aramco Has to Answer Three Tough Questions
https://www.bloomberg.com/opinion/articles/2019-08-09/saudi-aramco-ipo-here-are-three-burning-questions
Oil jumps more than 3% on European stockdraw despite demand slowdown forecast
https://www.cnbc.com/2019/08/09/oil-markets-opec-us-china-trade-in-focus.html

Web of Lebanese companies may be shipping Iranian oil to Syria
https://amp.thenational.ae/world/mena/web-of-lebanese-companies-may-be-shipping-iranian-oil-to-syria-1.897168

API Monthly Statistical Report Review with Dr. Dean Foreman

- petroleum demand for July 2019 is the highest since 2005. 14 year high. mixture of bright spots and weak spots. Relatively strong picture on balance.
- Trucking: repression and weakness on industrial side
- Jet fuel demand: people in North America still want to travel by jet. Not growing as fast as it was but its still growing. Solid growth, record demand for the month. Strong consumer activity. Historically there is seasonal variability in jet fuel demand but this year its been a straight line - no seasonal variability
- API D-E-I (Distillate Economic Indicator) signaling continued economic slowing. Reading for July is 0. On a three month average still indicating contraction. Macro picture plays into this. U.S. economy continued to grow but diesel demand
- U.S. crude oil production is 12.0 million bpd year-to-date. U.S. is basically filling in all of the oil demand growth. Really strong production growth in absolute terms. Not offsetting all of OPEC’s production cuts, but a lot of those cuts.
- US lost 800,000 bpd of exports in July. But year on year we’re still up. Trend is very solid.
- Supply growth is outpacing the demand growth.
- Producers in the Permian, especially, are pulling rigs off. They might not put those rigs back H1 2020. There are the DUCs, but production should ease up a little bit. Will that be reflected in production numbers in Q4? EIA’s view is pace of growth will slow but production will still grow in 13 mbpd. Should start to see rig pullback in a few months in data. DUCs can be brought to market, and EIA is showing that number of DUCs is coming down. DUC numbers from EIA may be over-estimated.

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https://www.wsj.com/articles/big-oil-flashes-the-plastic-11564328146

Is fossil fuel demand growth REALLY waning?
But are plastics really the place where returns will come from? SABIC showed poor returns last quarter but is that transient and plastics are really where its at?
Plastic is everywhere, even if use of disposable plastic decrease.
For laughs, buy your TRUMP straw here: https://shop.donaldjtrump.com/products/trump-straws/?utm_medium=ad&utm_source=dp_googlesearch&utm_campaign=20190718_na_store_djt_tmagacmerch_ocpmypur_bh_audience0001_na_copy00162_us_b_18-99_gsn_all_na_lp0032_shop_conversion_search_na_na_na&utm_content=sto&gclid=Cj0KCQjwsvrpBRCsARIsAKBR_0IGw_3zz2Yiu3YGQNbAt341lWMPzNHxqdBk5oxykk1TNp0kXwC5EGMaAjVQEALw_wcB)

https://www.reuters.com/article/us-china-economy-trade-crude/chinas-iran-oil-imports-plunge-as-us-sanctions-bite-idUSKCN1UM0CB

Iranian shipments to China are down in May and June but up in July
Will President Trump use the Iranian oil issue as leverage in discussions with China over trade?

https://www.nytimes.com/2019/07/25/opinion/climate-change-fossil-fuels.html
Why Are We Still Looking for Oil and Gas? What recourse could government really have in this?
Leasing on Federal Lands, EPA staffing, etc.
Can they stop it entirely? No, but could make it very frustrating.

Discussion with Gene Epstein
Director at SoHo Forum - debate coming up on August 12 on Bitcoin!
Where is the economy heading right now? When will recession occur? How bad will be it be?
Perma-bears say recession that is to come will be worse than 2008 recession
Maybe will be mild recession similar to 2001 and 1991? Less severe bubbles now (housing and stock market) Distortion of interest rate - it’s too low but maybe not that low.
Global recession? Certain sectors could continue to do ok while others do not. Where the decline in jobs occurs is key.
If the United States sneezes, the rest of the world catches cold. Difficult to imagine that a recession in the U.S. won’t impact the rest of the world.
Trump and China - not the main event
www.TheSoHoForum.org
Check out their debate on bitcoin and crypto-currency
Could it be the wave of the future?

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Hurricane Barry - https://www.forbes.com/sites/ellenrwald/2019/07/12/heres-how-hurricane-barry-could-impact-american-oil-and-gas/
Lingering impacts in the EIA data as over 1 million bpd were shut in as a result of the hu

Venezuela Sanctions Spotlight
https://www.argusmedia.com/hubs/venezuela?
Sanctions on Venezuela different from ones on Iran, no secondary sanctions but pressure from US not to import Venezuelan oil
Venezuela pays Russia in oil and that oil ends up all over the place

China June crude oil throughput rises to record on new plants
https://www.reuters.com/article/us-china-economy-output-crude/china-june-crude-oil-throughput-rises-to-record-on-new-plants-idUSKCN1UA04Q

China posts its lowest quarterly growth in 27 years as the trade war drags on
https://www.cnbc.com/2019/07/15/china-economy-beijing-posts-q2-gdp-amid-trade-war-with-us.html

Oil prices nudge up on Chinese economic data
https://www.cnbc.com/2019/07/15/oil-markets-china-economic-data-in-focus.html

China says its economic growth has slowed to 6.2% from 6.4% - China won’t let it fall below %6 so does that mean government spending is coming?

Interview with Dr. Dean Foreman Chief economist from API to discuss the Monthly Statistical Report

Record US oil production sustained despite less drilling - how long will be see record production WITH less drilling. 12.2 million bpd production growing toward 13 million bpd. Pipeline infrastructure is key along with DUCs
DUCs can increase production for more than 6 months without another well being drilled. But productivity is also increasing. Technology is an important factor now. Targeting drilling and the amount that technology has added to learning.

Flaring - as productivity is up, so is flaring. Majority of flaring in Permian, but also a lot in Bakker. 5 billion cubic feet of capacity for natural gas to come online. What about LNG exports? Record amounts now flowing to Europe. Natural gas pricing is changing! EUropean natural gas prices have been cut in half! ($8 to $4). Key is to have a business model that gives you the ability to monetize the growth in the US natural gas market.

Hurricane/Tropical Storm Barry - Impacts
1 million barrels per day of oil production shut in from Gulf of Mexico and 1.2 billion cubic feet of natural gas production - but the market hasn’t been impacted by this
We have a great cushion that the US oil and gas industry provides - so news of this hasn’t even really impacted the prices.

Jet fuel - Max plane still out of commission, but airplanes have replaced it with older planes in the fleet. Bigger question for airlines then for jet fuel consumption. Jet fuel consumption has been one of the brightest spots for demand.

Distillate economic indicator - still showing slowing. Freight trucking sector is technically in a recession now.

China - If a deal with China gets done we will a rally in the financial markets. Resumption of global trade flows, though this has been sporadic. Baltic Dry SHipping index went up 20% in June! And its up more in July. This is the time of year when goods get shipped out of CHina to get to where they need to be for the Holiday Season. Effort to beat another round of tariffs on China. $75 billion in tariff revenues coming into government from China. US government will get used to that. China has also depreciated its currency. 3/4 of all toys in the United States are imported from China.

Venezuela - going to get worse before it gets better.

Teasers for next month - Weather issues and end of summer driving season.

https://www.forbes.com/sites/ellenrwald/2019/07/11/what-will-happen-to-crude-oil-if-the-dollar-falls/#2dddb44a1744

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China refiners curb fuel output after massive new plants stoke glut
https://www.reuters.com/article/us-china-oil-throughput/china-refiners-curb-fuel-output-after-massive-new-plants-stoke-glut-idUSKCN1U30J2
Chinese demand seen as a bell weather for oil demand, especially since the “teapots” were responsible for keeping demand up when oil prices were low.
Will a resolution of the US-China trade war help with this demand?

German refinery halts Russian oil imports over contamination
https://www.reuters.com/article/us-russia-oil-germany-contamination-idUSKCN1U01OQ
Pipeline is back online but German says “we don’t want your oil”
Cannot say when full oil operations will resume

Adviser warns Tehran could seize UK oil tanker if Iranian ship not released
https://www.cnn.com/2019/07/05/middleeast/oil-tanker-gibraltar-iran-intl-gbr/index.html
Is it crude oil or fuel oil? Apparently its crude oil, exported in April

Oil prices edge up; gains capped as investors eye global risks
https://www.cnbc.com/2019/07/08/oil-markets-us-jobs-report-in-focus.html

The U.S. Is Overflowing With Natural Gas. Not Everyone Can Get It.
https://www.wsj.com/articles/the-u-s-is-overflowing-with-natural-gas-not-everyone-can-get-it-11562518355
US is flaring so much natural gas right now. We have places producing it that don’t need it and places that need it but refuse to pay for it.

Israel’s Energy Dilemma: More Natural Gas Than It Can Use or Export
https://www.nytimes.com/2019/07/05/business/energy-environment/israel-natural-gas-offshore.html
Israel is considering banning the import of gasoline and diesel cars and trucks by 2030 and converting to compressed natural gas and electric cars

BP Oil Tanker Shelters in Persian Gulf on Fear of Iran Retaliation
https://www.bourseandbazaar.com/news-1/2019/7/8/bp-oil-tanker-shelters-in-persian-gulf-on-fear-of-iran-retaliation

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As Coal Fades in the U.S., Natural Gas Becomes the Climate Battleground
https://www.nytimes.com/2019/06/26/climate/natural-gas-renewables-fight.html
The pace of transition away from coal is astounding but a divide is growing between states embracing natural gas and state seeing natural gas as bad and focusing more on renewables. If this plays out will we see much larger gaps between energy prices in different states.

Saudi energy minister backs OPEC+ oil cut extension, after Putin, MBS meet
https://www.spglobal.com/platts/en/market-insights/latest-news/oil/063019-saudi-energy-minister-backs-opec-oil-cut-extension-after-putin-mbs-meet
Has OPEC been co-opted by Russia?

Saudi Arabia must OK nonproliferation standard: U.S. energy secretary
https://www.reuters.com/article/us-usa-saudi-nuclearpower-idUSKCN1TQ2OC
Saudi Arabia really needs nuclear power to diversify their electricity generation mix. Nuclear could be a real solution for them, but the Saudis seem hesitant to comply with US regulations to ensure that the technology isn't misused or proliferated or weaponized.

Iraq's brighter oil future at odds with meeting OPEC quota
https://www.spglobal.com/platts/en/market-insights/latest-news/oil/062919-iraqs-brighter-oil-future-at-odds-with-meeting-opec-quota
US oil surges above $60 as OPEC+ poised to extend supply cut

https://www.cnbc.com/2019/07/01/oil-markets-russia-saudi-arabia-opec-in-focus.html
Factors: Trump-China Deal more influential that OPEC
If OPEC doesn't agree could we get down to $40?

Loosening Russia's stranglehold on European natural gas
https://thehill.com/opinion/energy-environment/450512-loosening-russias-stranglehold-on-european-natural-gas
Argument against putting sanctions on companies involved in building the Nord Stream II

Check out Ellen's piece on OPEC in Forbes: https://www.forbes.com/sites/ellenrwald/2019/07/01/big-opec-meeting-little-movement-from-oil-prices/#237fec48470b

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Oil prices rise as Middle East tensions simmer
https://www.reuters.com/article/us-global-oil/oil-prices-rise-as-middle-east-tensions-simmer-idUSKCN1TP02I
What’s driving the geopolitical premium on oil prices? Risk to oil tankers is still there but risk of war seems averted, so prices may be driven more by threat of war than actual threats to oil supply

Suspected Iranian Oil Caught in Sanctions Trap
https://www.wsj.com/articles/suspected-iranian-oil-caught-in-sanctions-trap-11560966215?
Eni rejected a cargo of oil from Iraq that it suspected wasn’t Iraqi oil
Tanker Trackers investigation concluded that the oil did come from Iran. Who is culpable here? Onus for sanctions on importers of Iranian oil.

Unit at Philadelphia refinery completely destroyed in fire: sources
https://www.reuters.com/article/us-usa-refinery-blast/unit-at-philadelphia-refinery-completely-destroyed-in-fire-sources-idUSKCN1TO0SZ
Major refinery - largest on east coast - could impact gasoline prices
Struggled through bankruptcy - check out Ellen’s Forbes piece from last year looking into the role that the Renewable Fuel Standard played in the refinery’s financial struggles: https://www.forbes.com/sites/ellenrwald/2018/01/22/ethanol-policy-puts-philadelphia-refinery-into-bankruptcy/#38e094cf37e6

Russia Seeking Concessions With Maduro Regime To Access Natural Gas Resources
https://en.businesstimes.cn/articles/114062/20190621/russia-seeking-concessions-with-maduro-regime-to-access-natural-gas-resources.htm
Is this to help pay the Russian “advisors”?
Rosneft wants to built LNG processing plant and send natural gas via pipeline to Trinidad
Has China pulled back? Will the US catch on and want to sanction natural gas from Venezuela?

Feature: As Middle East attacks intensify, Iraq warily eyes its vital oil gateway
https://www.spglobal.com/platts/en/market-insights/latest-news/oil/062119-middle-east-attacks-intensify-iraq-eyes-vital-oil-gateway
Difficult for Iraq to export oil because it has very little coastline along the Persian Gulf (one of the main causes of the Gulf War, when Saddam Hussein invaded Kuwait and got a lot more coastline and easy access to the Gulf-until he was defeated.

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The US energy revolution continues to exceed expectations, despite negative predictions
https://www.api.org/news-policy-and-issues/blog/2019/06/12/growing-us-energy-revolution-keeps-exceeding-expectations

Saudi seeks oil supply protection as U.S and Iran face off
https://www.cnbc.com/amp/2019/06/15/reuters-america-wrapup-3-saudi-seeks-oil-supply-protection-as-u-s-and-iran-face-off.html
Saudis want the US to secure the transit of oil in the Persian Gulf - should the US be doing this? Political pressure on the US to do something.
Oil prices jumped 4% when the incident occurred but prices had just fallen 4% the previous day.

Interview: Abundant oil supply prevented spike to $140/b after ship attacks - US DOE deputy
https://www.spglobal.com/platts/en/market-insights/latest-news/oil/061619-interview-abundant-oil-supply-prevented-spike-to-140-b-after-ship-attacks-us-doe-deputy
It sounds crazy, but we have seen wartime oil prices spike
$140 may be too high - representative of a really high number, not an actual forecast.
Also, Polish President visited US LNG plant with US energy secretary Rick Perry

Iran, Russia talks raise hopes of progress on OPEC+ meeting date
https://www.reuters.com/article/us-oil-opec/iran-russia-talks-raise-hopes-of-progress-on-opec-meeting-date-idUSKCN1TI11J
Larger issues of Russia/Saudi Arabia/Iran - is IRan trying to get something out of the meeting date issue?
Can they work out a date? If they agree on a date can they agree on quotas.
Possibility that they might not agree on any extension in which case the shale oil industry could be in for some problems.

https://tdameritradenetwork.com/video/rB4AoWs0FU-Ba1aPohoFqw

API Monthly Statistical Report
US crude oil production high 12.2 mbpd
Texas producing 5 mbpd - is that good news or bad news right now? Good news! We are seeing a significant alleviation of serious bottlenecks.
Between Permian and Bakken we are flaring the entire natural gas usage of Israel in a year! How much natural gas does the US have? 100-200 years worth of natural gas.
For US LNG to get a foothold in Europe it would have to compete against so many other sources, including Africa! Less competition with Asia, which is why the US really wants to get contracts with China. If the US can convince Asian trading partners that US gas is reliable and US is reliable trading parter, it will increase liquidity and depth across the globe.
Slowing trend of industrial activity across the US - current statistics from IEA say concern is mostly in global economy not US. API economic indicators indicate reverse.
US demand for petroleum down to 20.1 mbpd - distillate demand is weak, diesel demand especially dropping. Fell 9% - is this why we keep seeing larger builds in US stocks? Are we using more domestically produced oil to compensate or are imports down? Are refinery runs down or are we exporting the unused diesel? What is driving them? Freight and agriculture are the big areas of weakness. Flooding in the Midwest is probably a factor - but also China’s decision not to buy US soybeans. Seems
We’ve got slipping gasoline and diesel demand but record jet fuel demand - this complicates the “economic slowdown” picture. The fact that jet fuel demand is still up could indicate that the weaknesses aren’t indicative of economic slowdown but really uncertainty due to the trade issues.
Concerns over whether there’s enough diesel fuel as we go into IMO 2020.
Alleviation of bottlenecks - by the end of 2019 will see about 1.5 million barrels worth of new petroleum pipelines come online. More for natural gas.

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Question-what are the Trump supporters in the oil and gas industry in Texas thinking about Trump and his policies considering the recent price downturn? Support for Trump is strong on the ground, Democrats could leverage this and win support away from Trump based on jobs issues. But they aren’t.
RPT-Challenges slow Mexico's billion-dollar oil hedge this year -sources
https://mobile.reuters.com/article/amp/idUSL2N23E1CG
The amount that’s being leveraged is key for Mexico’s entire budget.
Banks are hesitant to take on Mexico’s massive oil hedging now because of stricter rules, increased volatility because Mexico’s Maya heavy crude has been trading at a premium to WTI for the last 8 months.

Opec output slips to five-year low
https://www.argusmedia.com/en/news/1917848-opec-output-slips-to-fiveyear-low?amp=1
OPEC crude oil output shrinks in May, as Saudis cut further: S&P Global Platts survey
https://www.spglobal.com/platts/en/market-insights/latest-news/oil/061019-opec-crude-oil-output-shrinks-in-may-as-saudis-cut-further-sampp-global-platts-survey

Saudi production is down to 9.7 mbpd according to Argus (9.65 mbpd according to Argus)
Iraq’s numbers are at an all time high - but is some of that actually Iranian oil

Iran has no plans to leave OPEC despite tensions: oil minister
https://mobile.reuters.com/article/amp/idUSKCN1T9085?
Iran doesn’t want to leave now and lose out on influence later when sanctions are removed. Perhaps the best move for Iran would be to try and cozy up to Russia at this point.
Saudi Arabia's energy minister: The benefit of participation in OPEC+ is obvious
http://tass.com/economy/1063004/amp
Looks like a OPEC deal is going to be extended
Saudi Arabia is still pursuing nuclear power plants with Russian firm Rosatom. Want to build 2 plants, gain expertise and then expand. This is classic Saudi strategy.

Why oil prices are dropping this summer
https://thehill.com/opinion/energy-environment/447334-why-oil-prices-are-dropping-this-summer
US production is giving traders the impression that they don’t need to worry about falling OPEC production.

Frackers Scrounge for Cash as Wall Street Closes Doors
https://www.wsj.com/articles/frackers-scrounge-for-cash-as-wall-street-closes-doors-11559915320?mod=hp_lead_pos7
Wildcatter mentality has dried up now. If you expect prices to rise then would want to pick up assets sooner. Now the global economic outlook is murky. Could be deals on the table if prices stay in $50s-$60s in 6 months.

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit energyweek.substack.com

epautos.com - https://www.ericpetersautos.com/

Ethanol-free gas stations - https://www.pure-gas.org/

Pompeo says Iran attacked oil tankers to raise global oil price
https://www.reuters.com/article/us-usa-iran-pompeo/pompeo-says-iran-attacked-oil-tankers-to-raise-global-oil-price-idUSKCN1T02MH
- US is looking for UN Security Council to put more sanctions on Iran and building the case for these sanctions.
- Also building support for this from the GCC and Arab states
- How likely is a UN Security Council resolution? Not likely because Russia and China are likely to veto

US oil falls 5.5% to $53.50 per barrel on fresh trade worries
https://www.cnbc.com/2019/05/31/oil-market-us-tariffs-on-mexico-iranian-oil-sanctions-in-focus.html
- oil dropped like a stone when the Trump administration announced impending tariffs on imports from Mexico
- this would impact the energy trade and there is a lot of energy going back and forth between Mexico
- If Mexico put reciprocal tariffs on US gasoline that Pemex is importing from the US, can Pemex afford it?

‘Freedom Gas,’ the Next American Export
https://www.nytimes.com/2019/05/29/us/freedom-gas-energy-department.html
- not Rick Perry’s brightest moment

Russia's May oil output hits 11-month low on dirty oil crisis
https://www.reuters.com/article/us-russia-energy-production/russias-may-oil-output-hits-11-month-low-on-dirty-oil-crisis-idUSKCN1T306T
- this is an important issue but isn’t impacting the market that much because all everyone cares about now is trade outlook

Guest Eric Peters - www.epautos.com
EVs and Tesla - where are we with the EV market?
They aren’t really viable. About 1% of all vehicles on the road. Most of those in California and Arizona which have mandates that force companies that produce cars in their state to make a certain percentage of EVs.
Problems remains - cost, range and slow charging times even with rapid charge.
Impractical and unaffordable.

How long does an EV battery last? Spare parts issues?
Real problem is the cost of replacing the battery compared to the cost of the vehicle itself. Begin to degrade in performance after 7-8 years. Same issues with batteries in ICE cars, but replacing battery is a hundred dollars or so. Replacing an EV battery is several thousand dollars and the car might only be worth $7,000 by then.

Who are EVs right for?
People who want to buy expensive cars. For most people it doesn’t add up. Nissan Leaf is cheapest EV on market and its $30,000. Compare that to Nilsson Versa ICE which is $14,000. Range of EV goes down in cold and when using “extras” like air conditioning.

Tesla is best EV model for performance.
EV pick up truck coming next year
Hybrid vehicles - much more successful and don’t suffer from many of the functional problems that EVs suffer from. Basically carries around its own charger. Problem with hybrids is cost - costs $3,000 more than comparable vehicle.
Car companies lose money on every electric car that is built. Tesla loses money on every car it seems. Tesla makes money selling credits to car companies that don’t manufacture electric vehicles and have to pay for these credits because of government mandates.

Why aren’t there $15,000 EVs even if they aren’t fast or fancy? The way the government mandates impacted EV development disincentivized companies from developing this.

On ethanol
It is water attracted, which is problematic for boats and for power tools that aren’t designed to handle it.
Www.puregas.com to see where ethanol-free gasoline is available
Use for generators too!

US federal regulations for fuel and mileage standards push companies to make expensive but incrementally more fuel economical vehicles. They are too expensive for people to buy.

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit energyweek.substack.com