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The EIA released the latest edition of their Electric Power Monthly on December 26th, with data for October 2018. The table above shows the percentage contribution of the main fuel sources to two decimal places for the last two months and the year to date.

In October, as usual for this time of the year, the absolute amount of electricity generated continued to decline with the mid summer demand for air conditioning falling away further. Coal and Natural Gas between them, fueled 64.98% of US electricity generation in October, with the contributions from most other major sources edging up slightly. The contribution from Natural Gas was down at 38.11%, from 40.01% in September, with the amount generated falling from 142,745 GWh to 124,027 GWh. Generation fueled by coal declined from 96,743 Gwh to 87,452 GWh resulting in the percentage contribution falling from 27.12% to 26.87%. The amount of electricity generated by Nuclear plants decreased from 64,725 GWh to 59,397 GWh with the resulting contribution actually rising very slightly from 18.14% to 18.25% in October. The amount generated by conventional hydroelectric increased from 18,663 GWh in September to 18,779 GWh in October with resulting contribution increasing to 5.77% as opposed to 5.23% in September. The amount generated by wind increased from 16,022 GWh to 19,507 GWh with the resulting contribution rising from 4.49% to 5.99% in September. The estimated total solar output fell from 9,153 GWh to 7,625 GWh with the resulting contribution falling from 2.57% to 2.34%. The contribution of zero carbon or carbon neutral sources rose from 32.01% in September to 34.10% in October.

The graph below shows the absolute production from the various sources as well as the total amount generated (right axis).

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…click on the above link to read the rest of the article…

What’s Behind The Crash In Crude?

December 19, 2018

What’s Behind The Crash In Crude?

Oil prices crashed to new one-year lows on Tuesday, dragged down by a deepening sense of global economic gloom as well as fears of oversupply in the oil market itself.

The reasons for the sudden meltdown were multiple. Rising crude oil inventories and expected increases in shale production weighed on oil prices, but the price crash was accentuated by the broader selloff in financials.

Genscape said that inventories are rising, which has raised fears of tepid demand amid soaring supply growth. “The Cushing number came in higher than anticipated … it’s definitely pointing to the concern that there’s more supply and demand is weakening,” said Phil Flynn, analyst at Price Futures Group in Chicago, according to Reuters. “The market is still very nervous about that.”

Crude prices fell 4 percent on Monday and about 7 percent on Tuesday. WTI dropped below $47 per barrel and Brent fell to the $56 handle.

The EIA said in its latest Drilling Productivity Report that it expects U.S. shale production to top 8.1 million barrels per day (mb/d) in January, rising by a massive 134,000 bpd month-on-month. The Permian alone will see production rise by 73,000 bpd next month. By way of context, the gains in the Permian are bigger than even some of the large monthly declines that we have seen in Venezuela, for instance.

Still, with WTI dropping below $50 per barrel, shale drillers will start to face increasing financial strain. That could force a slowdown in the shale patch. “We’re probably going to see a supply slowdown in the U.S.,” Michael Loewen, a commodities strategist at Scotiabank, told Bloomberg. “I do think that producers will react.”

…click on the above link to read the rest of the article…

No, The U.S. Is Not A Net Exporter Of Crude Oil

December 14, 2018

No, The U.S. Is Not A Net Exporter Of Crude Oil

Last week Bloomberg created quite a stir with this story: The U.S. Just Became a Net Oil Exporter for the First Time in 75 Years. I have seen a number of follow-up stories that praised the significance of this development, but others laughed it off as misleading or incorrect.

There is some truth to both viewpoints. Yes, the headline is somewhat misleading and requires some context. But there continues to be a trend in the direction of energy independence for the U.S. So, today I want to break down the numbers so readers can understand the truth about U.S. petroleum production, consumption, and exports.

Domestic Crude Production Has Surged

The Bloomberg story is based on data from the Energy Information Administration (EIA). Each week the EIA publishes detailed statistics on U.S. oil production, consumption, exports, and inventories in a report called the Weekly Petroleum Status Report. So, let’s go straight to the source.

For the week ending 11/30/18, the EIA reported that the U.S. produced 11.7 million barrels per day (BPD) of crude oil. That represents a 2 million BPD increase from the year-ago number. This number is generally accepted even by those who believe the Bloomberg headline was misleading.

Further down in the report, the category of Products Supplied is listed at 20.5 million BPD. This is approximate U.S. crude oil consumption for the week. Thus, as some skeptics of the story suggested, the bottom line is that the U.S. is burning more than 20 million BPD while producing less than 12 million BPD. Thus, the conclusion for some was that the U.S. isn’t close to being energy independent.

Other Supply

But there is important context between these numbers. First, the 20.5 million BPD is a fairly accurate representation of U.S. consumption, but there is a large U.S. production number that isn’t included in the crude oil production numbers.

…click on the above link to read the rest of the article…

Is Gasoline Demand Really Slipping?

December 8, 2018

Is Gasoline Demand Really Slipping?

Genscape’s Weekly Gasoline Demand Report data shows relatively flat growth in weekly year-on-year demand for September through November. On the other hand, the U.S. Energy Information Administration (EIA) Weekly Products Supplied data has shown year-on-year declines over the same period despite lower gasoline prices.

Our data shows U.S. total motor gasoline spot prices averaged $1.56/gal on November 28, down almost $0.70/gal from the high of $2.25/gal on October 2, pushing prices to the lowest level since June 30, 2017. Gasoline demand generally increases during prolonged periods of low prices, casting doubt on the demand declines.

What’s Going On?

Genscape analyzed this discrepancy and found the root cause lies in the methodology differences between our data and the EIA. While our data is based on actual gasoline liftings from rack locations headed to gas stations/consumption points, EIA Product Supplied data, both weekly and monthly, is a calculation of implied demand for refined products. The EIA uses a combination of survey components, production, inputs, stock change, ethanol adjustment, imports, and exports in a formula to estimate demand.

This disparity between the two numbers appears to be related to the recent decrease in gasoline imports and increase in gasoline export levels, two factors that the EIA includes in its formula to calculate Products Supplied. By adding imports and subtracting exports, this shift change in recent import/export patterns has had a depressive effect on the Weekly EIA Products Supplied level, showing declining year-on-year demand during a time of sharply falling prices at the pump. The basis for the Genscape Weekly Gasoline Demand Report is total U.S. rack liftings, sourced from our Supply Side data. These rack liftings represent the movements of gasoline from secondary (rack) terminals to retail stations.

…click on the above link to read the rest of the article…

What Crashing Refining Margins Mean For Oil Markets

December 3, 2018

What Crashing Refining Margins Mean For Oil Markets

Oil prices have plunged to one-year lows, but refiners in certain parts of the U.S. are not benefitting from cheaper crude.

According to new data from the EIA, refining margins for motor gasoline have fallen to five-year lows. “Flattening year-over-year growth in gasoline demand in the United States, combined with high levels of refinery output, have contributed to low or negative motor gasoline refining margins for refiners along the East and Gulf Coasts,” the EIA said on November 27. Gasoline refining margins have been declining since August.

In November, U.S. gasoline demand is expected to have averaged 9.2 million barrels per day (mb/d), down 262,000 bpd from a year earlier.

(Click to enlarge)

Meanwhile, prices for distillates, such as diesel, are much higher. The discrepancy is notable, and the markets for gasoline and distillates have diverged sharply this year. The forthcoming 2020 International Maritime Organization regulations on sulfur content in maritime fuels is set to push extremely dirty heavy fuel oil out of the mix for ship-owners. One of the most important replacements for fuel oil be diesel and gasoil – in other words, distillate demand is set to spike at the start of 2020. In anticipation of these regulations, distillate prices are seeing upward pressure.

With diesel prices on the rise and gasoline prices heading in the other direction, refiners might want to maximize diesel output. However, things aren’t that simple. As the EIA notes, for every barrel of crude oil processed in a refinery, it tends to yield twice as much gasoline as it does diesel. “As a result, although gasoline margins have been low recently, refiners cannot completely stop making gasoline in favor of other petroleum products, such as distillate,” the EIA said.

…click on the above link to read the rest of the article…

Oil Falls On Crude Inventory Build

November 28, 2018

Oil Falls On Crude Inventory Build

Crude oil prices slipped further down today after the Energy Information Administration reported crude oil inventories for the week to November 23 had added 3.6 million barrels. That’s compared with a build of 4.9 million barrels a week earlier.

The EIA figures came after yesterday the American Petroleum Institute reported an estimated inventory increase of 3.453 million barrels, which failed to affect prices in any significant way.

EIA also said gasoline inventories last week had declined by 800,000 barrels and distillate fuel inventories had added 2.6 million barrels. A week earlier, the authority estimated a decline of 1.3 million barrels in gasoline and a 100,000-barrel decline in distillate fuel inventories.

Meanwhile, production is hitting new highs and this will continue, according to most estimates, unless oil prices continue declining at a fast pace. The likelihood of this happening is relatively low, however. OPEC is meeting next week in Vienna to discuss a new round of production cuts and most analysts expect the cuts to be agreed with Russia also joining in again.

However, Morgan Stanley, for one, sees a 33-percent chance of the cartel failing or refusing to agree a production cut, in which case prices will definitely slump more, pressured by bleak economic outlooks and concerns about a crude oil oversupply. The argument against a production cut is simple enough: market share. It’s no wonder some OPEC members have already spoken against a cut, notably Libya, which said it expected to be granted an exemption from any cuts.

Besides the OPEC meeting, oil market observers would be watching the G20 meeting, where Russia may or may not give a clear indication whether it will join any cut agreements. Just like last time, Moscow would be a crucial ally for the cartel if it decides to join the cuts or a deal-breaker if it decides to sit these out.

WTF Just Happened with Natural Gas?

November 17, 2018

WTF Just Happened with Natural Gas?

If you blinked, you missed it.

The price of natural gas for December delivery plunged 19% on Thursday, the biggest percentage plunge since February 2003.

This comes after futures prices had skyrocketed 20% on Wednesday to $4.931 per million Btu intraday, before settling at $4.837, the highest settlement price since February 2014 – when “polar vortex” entered into everyday language in the US. It was a gain of 19% for the day, the biggest percentage gain since 2004. Today’s plunge took the price back to $3.899 at the moment, where it had been on Monday. If you blinked you missed it:

The spike yesterday was driven by “a sharp cold revision in the winter weather outlook,” according to a commodities strategist at Morgan Stanley, cited by Bloomberg. “We see modest downside from here assuming current weather forecasts, but a very wide range of potential short-term prices,” he said.

The weather outlook hasn’t really changed overnight, but instead of a “modest downside” move, natural gas performed a historic plunge today.

Speculative fever goes both ways. Today was impacted more than anything by the hangover from yesterday’s spike that completed a 45% run-up since November 2. Time to cash out.

And then there was the Weekly Natural Gas Storage Report, released this morning by the EIA. It was a cold shower, after the drunken party yesterday.

Turns out, thanks to surging production, 39 billion cubic feet were addedduring the latest reporting week to underground storage facilities across the US. Over the past five years on average – with the colder season having already started at this week in November — natural gas levels in storage would drop by 15.6 billion cubic feet during that week.

…click on the above link to read the rest of the article…

U.S. Oil Production Is Set To Soar Past 12 Million Bpd

November 8, 2018

U.S. Oil Production Is Set To Soar Past 12 Million Bpd

Rising shale production is putting the United States on track to hit the 12 million bpd oil production mark sooner than previously forecast, the Energy Information Administration (EIA) said in its November Short-Term Energy Outlook (STEO).

Next year’s U.S. crude oil output is now expected to average 12.1 million bpd, up from a forecast of 11.8 million bpd just a month ago in the October STEO.

U.S. crude oil production reached a new monthly record of 11.3 million bpd in August 2018, exceeding 11 million bpd for the first time. Production in August was 290,000 bpd higher than expected in the October STEO, and it was this higher level that raised the baseline for the EIA’s forecast for production in 2019.

Comparing the forecasts in the latest STEO with the October estimates, the EIA now sees U.S. crude oil production hitting the 12-million-bpd mark in the second quarter of 2019 rather than the fourth quarter.

The EIA raised its 2018 production forecast by 1.5 percent compared to the October STEO, to 10.9 million bpd, and the 2019 forecast by 2.6 percent from 11.76 million bpd to 12.06 million bpd.

While the EIA lifted its projections for U.S. oil production, it revised down its forecasts for oil prices in 2019. In the November outlook, it forecasts Brent Crude prices of $72 per barrel in 2019 on average, which is $3 a barrel lower than previously forecast. The EIA sees WTI Crudeprices to average $65/b next year, down by $5/b from the previous estimate.

“The lower crude oil price forecasts are partly the result of higher expected crude oil production in the United States in the second half of 2018 and in 2019, which is expected to contribute to growth in global oil inventory and put downward pressure on crude oil prices,” the EIA said.

…click on the above link to read the rest of the article…

Peak Shale: Is the US Fracking Industry Already in Decline?

November 7, 2018

Peak Shale: Is the US Fracking Industry Already in Decline?

Fracking well sites from the air, in Jonah, Wyoming

But the industry shouldn’t get complacent, warned Robert Clarke of energy industry research and consulting group Wood Mackenzie. Cracks already are starting to emerge in the optimistic forecasts of how much these shale formations can produce, which is a bad sign for turning around the industry’s struggling finances.

“It was only the best rigs, with the most experienced crews, drilling the best rock at the lowest service costs,” which were doing well in 2016, said Clarke at the 2018 Energy Information Administration (EIA) annual conference in June. “If you are a producer, it’s very dangerous to think that that is the new norm.”

But producers seemed to think it was the new normal and plowed ahead, going all in on fracking in the Permain Basin, currently seen as the best shale play in the country.

Granted, the results have been impressive from a production standpoint. The EIA expects “Permian regional production to average 3.3 million [barrels per day] in 2018 and 3.9 million [barrels per day] in 2019.” Those numbers may reach 5.4 million barrels a day by 2023, according to oil industry consultants IHS Markit.

While the Permian’s oil production has been prolific, it hasn’t translated into profits. “Why Aren’t Permian Oil Producers Profitable?” asked a headline on industry publication Oilprice.com this past May.

…click on the above link to read the rest of the article…

Every Big Bit Helps

October 26, 2018

Every Big Bit Helps

The post describes how new supercritical CO2 Brayton Cycle turbines may revolutionise the efficiency of electricty generation. Background image, existing Rankine Cycle steam turbine. Foreground, Brayton Cycle turbine with same power rating.

Let’s say you and I need to move 1 million tons of sand. You show up to the site with a backhoe and a dump truck, and I show up with a teaspoon. Naturally you ask me what the heck I’m planning to do with that teaspoon. I answer seriously with “Every little bit helps.”

Would you think me rational?

The problem with people advocating reducing carbon dioxide emissions is they are frequently bringing a teaspoon to do the work. Oh, they don’t call it a teaspoon, they’ll show you all sorts of fanciful projections and imaginary outcomes, but at the end of the day, it is still a teaspoon. And no, the teaspoon doesn’t help – we are wasting time energy and money on things that have no hope of moving that mountain.

The U.S. EIA International Energy Outlook 2017 projects that world energy consumption will grow by 28% between 2015 and 2040. Most of this growth is expected to come from countries that are not in the Organization for Economic Cooperation and Development (OECD). Non-OECD Asia (which includes China and India) accounts for more than 60% of the world’s total anticipated increase in energy consumption.

The world currently uses nearly 22,000 TWh/yr. of electricity. But this is far less than what we need. If the world, everyone on it, used electricity as frugally as Europeans, we would need approximately 34,617 TWh/yr. So we need a LOT more electricity. That is just electricity mind you – if we go to electric cars we need much more than that to power transportation.

…click on the above link to read the rest of the article…

US Oil Exports Are Exceeding Almost All Predictions—Thanks to Fracking

October 16, 2018

US Oil Exports Are Exceeding Almost All Predictions—Thanks to Fracking

And crude oil exports are supposed to double by 2020, according to the San Antonio News-Express. That’s a lot of oil — and almost all of it is fracked.

That should come as no surprise. In August 2015, my story for DeSmog, “Lifting Ban On U.S. Crude Oil Export Would Enable Massive Fracking Expansion,” pretty much sums up what is happening now. However, that’s not what the industry experts at the time were predicting.

Last year I noted how quickly these experts, from energy consultants to academics, were proven wrong in their predictions about the effects of overturning the 40-year-old ban, which occurred in December 2015.

If exports double by 2020, those experts will be that much more wrong. Perhaps the best example of this phenomenon is from a December 2015 newsletter from CME Group — a commodities trading group that stood to profit greatly from trading U.S.exported oil. The newsletter, which takes a question-and-answer format, included the following:

Question #2: Will lifting the crude oil export ban result in greater U.S. production?

The answer: No.

Couldn’t get more wrong that, but CME now lists U.S. WTI crude on its website as one of the top commodities it trades. I guess there’s a lesson here about whether to trust a commodities trader.

…click on the above link to read the rest of the article…

US Demands For More Oil Could Backfire

October 8, 2018

US Demands For More Oil Could Backfire

This week the State Department accused OPEC of hiding spare capacity exceeding 1.4 million barrels daily. It urged the cartel to use it to stop the oil price rally that has continued uncomfortably close to midterm elections. The request—or demand, depending on your interpretation—is unprecedented and it might do more harm than good.

Bloomberg quoted a veteran energy analyst from Jefferies, Jason Gammel, as saying, “This is the lowest level of spare capacity in the global system relative to demand that I’ve ever seen. Spare capacity is moving to a precariously low point.” The problem is, nobody seems to be certain exactly how much OPEC’s spare capacity is.

In its latest Short-Term Energy Outlook, the EIA estimated OPEC’s spare production capacity at 1.66 million bpd. But the International Energy Agency last month estimated OPEC’s spare capacity at 2.7 million bpd and is fast declining. What we do know, however, is how much spare capacity Saudi Arabia has: 1.3 million bpd, as revealed by the Energy Minister of the Kingdom during the Russian Energy Week in Moscow.

This is bad news. Until now, various sources, including the Saudis themselves and the EIA, put the Kingdom’s spare capacity at between 1.5 and 2 million bpd. In June, President Trump said the Saudis could pump 12 million bpd. The IEA concurred. Saudi Arabia’s September production rate rose to 10.7 million bpd.

From this level of production, with 1.3 million bpd in spare capacity, we get a maximum production rate of 12 million bpd, indeed. However, Khalid al-Falih delivered a worrying message: Saudi Arabia will spend US$20 billion on maintaining and boosting its spare capacity in the coming years. The news naturally cast doubt on whether the current capacity will be sufficient to cover demand.

…click on the above link to read the rest of the article…

EIA’s Electric Power Monthly – August 2018 Edition with data for July

October 4, 2018

EIA’s Electric Power Monthly – August 2018 Edition with data for July

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The EIA released the latest edition of their Electric Power Monthly on September 25th, with data for July 2018. The table above shows the percentage contribution of the main fuel sources to two decimal places for the last two months and the year to date.

For the month of July, the total amount of electricity generated was the second highest amount generated for any single month since January 2013 at 410,148 GWh, 2,302 GWh less than the amount generated in July 2016. Coal and Natural Gas fueled almost 68.5% of US electricity generation in July and while the contribution from Coal increased from 27.36% in June to 28.18% in July, the contribution from Natural Gas also increased by slightly more than five percentage points, reaching an unprecedented 40.28% up from 35.02% in June. Nuclear power generated 72,456 GWh, 3.97% more than it did in June but, due to the increase in total generation, the percentage contribution to the total actually declined to 17.67% from 18.77% in June.

In July, the contribution from All Renewables at 13.01% fell further below that from Nuclear at 17.67%, similar to July 2017 when the ramp up of total generation resulted in the percentage contribution from All Renewables falling further below that from Nuclear. The absolute contribution from Solar declined from it’s all time high in June of 10,880 GWh to 10,049 GWh, with the corresponding percentage contribution declining to 2.45% as opposed to 2.93% in June. The amount of electricity generated by Wind decreased by almost 35%, from 24,411 GWh to 15,897 GWh and coupled with the increased total generation, the percentage contribution declined from 6.58% to 3.88% in July. The contribution from Hydro decreased 13.53% from 27415 GWh in June to 23706 GWh, resulting in the percentage contribution decreasing from 7.39% in June to 5.78%. The combined contribution from Wind and Solar decreased to 6.33% from 9.51% in June. Consequently the contribution from Non-Hydro Renewables also decreased to 7.23% from 10.48%.

…click on the above link to read the rest of the article…

How Much Spare Capacity Does Saudi Arabia Really Have?

October 1, 2018

How Much Spare Capacity Does Saudi Arabia Really Have?

Saudi Arabia has pledged to cover any supply gap that may emerge as Iranian oil goes offline, but how much spare capacity does it really have?

The massive reserve of spare capacity located in the Saudi desert is the stuff of legend, taken as gospel in the world of oil. After all, Saudi Arabia is the only country in the world that can ramp up or down millions of barrels of production on short notice. And the Saudis have never let us down.

But Saudi Arabia’s mythical spare capacity may finally be tested. Saudi officials insist that they can produce up to between 12.0 and 12.5 million barrels per day (mb/d) if needed. With output at about 10.4 mb/d in August, the latest month for which data is available, that suggests that they have around 1.5 to 2 mb/d of spare capacity.

Not everyone buys that figure. Indeed, the precise amount of spare capacity has been the subject of much debate for years and even decades. Now, because Iranian supply is going offline at a rapid clip, the world may soon find out if Saudi Arabia’s confidence is backed up by reality or if it has all been a bunch of bluster.

The EIA says that total OPEC spare capacity is set to average 1.49 mb/d in the fourth quarter, which is rather low by historical standards. The EIA sees OPEC spare capacity falling to 1.19 mb/d by the fourth quarter of 2019.

There are a few times in the relatively recent past when spare capacity was that low, including two years ago, when spare capacity plunged to 1 mb/d. However, this was during the depths of the oil market downturn, and it was a reflection of Saudi Arabia producing flat out in order to flood the market in an attempt to edge out U.S. shale. Spare capacity was low, but there was a glut of supply.

…click on the above link to read the rest of the article…

Is The Bakken Close To Breaking?

September 24, 2018

Is The Bakken Close To Breaking?

While the Permian has experienced a drilling boom and has received tons of media attention, a lesser-known but still remarkable revival has been underway in the Bakken this year. At the same time, the increased rates of drilling in North Dakota are starting to reveal signs of strain on the basin, as drillers are increasingly forced into less desirable locations.

The Bakken was hit harder than the Permian during the oil market downturn that began in 2014, with rigs and capital diverted away from North Dakota and rerouted to West Texas. Oil production hit a temporary peak in late 2014 at 1.26 million barrels per day (mb/d), declining for much of the next two years.

However, production began to rise again in early 2017 before accelerating this year. In October, the EIA expects Bakken production to hit 1.33 mb/d, a new record high.

In some ways, the Bakken is enjoying a bit of a revival because the Permian has become overcrowded. The pipeline bottleneck, the strain on rigs and equipment, completion services, labor, water and even on road traffic has caused a lot of headaches for shale drillers in West Texas. Some shale executives have decided to shift resources elsewhere, and the Bakken has received a boost as a result.

The Bakken took over as the most profitable place for shale drillers on average this summer, at least temporarily surpassing the Permian. That may not last as the steep discounts for WTI in Midland drags down the profitability of the Permian, a situation that will resolve itself over the next few years as pipelines come online. But the improved outlook for the Bakken is notable nonetheless.

…click on the above link to read the rest of the article…

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