YIN YANG ZONE: December 2015

Thursday, December 31, 2015

Exxon's Climate Cover-Up Just Got Bigger: Docs Suggest All Major Oil Gia...

Tokyo’s take on comfort women deal stirs anger

On Monday, the foreign ministers of both countries announced the agreement, in which Japan offered an official apology and a fund worth 1 billion yen ($8.3 million) for the victims.

The settlement is “final and irreversible,” they said, as long as Tokyo faithfully follows through with its promises.

“As of yesterday, everything ended. We won’t apologize anymore,” the conservative newspaper quoted Abe as telling his associates on Tuesday. “In the future, we will never talk about this issue. We will make no mention of it at the next Korea-Japan summit.”

The newspaper went on to say that the prime minister had already informed President Park Geun-hye about Japan’s stance. “If Korea breaks the agreement, its status as a member of the international community will also end,” the paper quoted Abe as saying.

According to the Sankei Shimbun, Korean Foreign Minister Yun Byung-se confirmed in a televised media conference that the deal was irreversible and that the United States supported it.

“This means Korea will have to fix the goalpost that it has moved around until now,” Abe was quoted as saying.

On Tuesday, the prime minister met with Japanese Foreign Minister Fumio Kishida, who briefed him on the negotiations, the newspaper said, and praised him for getting Yun to confirm the settlement as “final and irreversible.”

Another Japanese newspaper also reported on Wednesday that the Korean government had

agreed to relocate a controversial monument in front of the Japanese Embassy in Seoul before Tokyo provides the funds.

contextualizations: I Support Regime Change

contextualizations: I Support Regime Change:

I support regime change - to change the military industrial regime which provokes and fights aggressive totalitarian wars for the socio-e...
READ MORE

South Korea’s Betrayal of the “Comfort Women”

Wednesday, December 30, 2015

Saudi Stocks Drop as World's Biggest Oil Exporter Cuts Subsidies - Bloomberg Business

Saudi Stocks Drop as World's Biggest Oil Exporter Cuts Subsidies -

Saudi Arabian stocks declined after the kingdom announced one of its biggest shakeups in economic policy.
The Tadawul All Share Index sank 0.9 percent at the close as the gauge of petrochemical companies slid to the lowest level since July 2009. The kingdom reduced energy subsidies and intends to cut spending in 2016 to 840 billion riyals ($224 billion) from 975 billion riyals this year.
Petrochemical companies are among the first to feel the pressure because a "cut in fuel subsidies will drive up the costs,".
Oil prices hovering near their lowest levels since 2004 and a decision to plunge into a war in neighboring Yemen are straining the kingdom’s finances. That’s forced Saudi Arabia to tap its foreign reserves, which dropped for a 10th straight month in November to about $630 billion, a three-year low, and to sell bonds for the first time since 2007 to help plug a budget gap.
The desert nation had its sovereign rating cut for the first time in October when Standard & Poor’s lowered it one level to A+, the fifth-highest investment grade, citing budgetary concerns. The nation’s stock index is headed for its worst year since 2008, even after the bourse in June allowed foreign institutional investors to trade shares directly for the first time.
Saudi forward contracts, which are used to bet whether Saudi Arabia will allow its dollar-pegged currency to weaken in the next 12 months, rose as much as 280 points to 755 points, the highest level since March 1999. They pared the increase to 145 points as of 4:01 p.m. in Riyadh.
Budget Deficit
The government recorded a budget deficit of 367 billion riyals in 2015. That’s about 16 percent of gross domestic product, according to the National Bank of Abu Dhabi, but below the 20 percent forecast by the International Monetary Fund. For 2016, the government expects the deficit to narrow to 326 billion riyals. Revenue is forecast to decline to 514 billion riyals from 608 billion riyals.
“Government expenditure is a key driver of growth in Saudi Arabia, so a cut in spending will certainly feed through to domestic output and earnings,” Akber Khan, the director of asset management at Doha-based Al Rayan Investment, which manages about $900 million, said by telephone before Saudi Arabia announced its budget.
Subsidy Cut
The kingdom announced on Monday that it was raising domestic fuel, power and water prices, according to the official Saudi Press Agency.

Goodbye, Lemmy

US, China show markedly different reactions to comfort women resolution

Abe's sincerity questioned

A Crisis Worse than ISIS? Bail-Ins Begin by Ellen Brown

A Crisis Worse than ISIS? Bail-Ins Begin

Philippines Makes Last-Minute Decision to Join China-Led Asian Infrastructure Investment Bank

A Breakdown of the 2016 Saudi Budget and Its Implications

................................The government plans to

spend 840 billion riyals in 2016 compared

with 975 billion riyals this year. The biggest

ticket in the budget was 213 billion riyals

allocated for military and security services.

Economy Minister Adel Fakeih said Monday

that 20 billion riyals of this year’s spending

overshoot was due to increased military and

security spending related to the military

operation against Shiite Houthi rebels in Yemen........................

China hits India where it hurts BY M.K. BHADRAKUMAR

China hits India where it hurts

........................Clearly, India’s ruling elites are yet to realize that the zero sum mindset is irrelevant today. The Chinese diplomacy is in a ‘win-win’ situation. If Modi eases pressure on Kathmandu, that is not going to prompt the fiercely independent new leadership there to freeze their deepening engagement with ‘communist China’, while, on the contrary, the present stand-off is only driving them to embrace China’s friendship tightly.

The backdrop is one of the mandarins in Indian foreign-policy establishment needling China constantly by butting into the South China Sea problem, flaunting Modi’s bonhomie with Japan’s Shinzo Abe or America’s Barrack Obama, and identifying closer than ever with the US’ rebalance strategy in Asia. (With an eye on China, India is inching close to signing an unprecedented treaty with the US that would provide access for the American forces to Indian bases.)

The Modi government estimates that if India joins a trilateral US-Japan-India quasi-alliance in Asia, Beijing will sooner or later read the tea leaves and reach out for a mutual accommodation with India. There is an element of bravado here, because Delhi assumes that the US and Japan see India as a ‘counterweight’ to China in the geopolitics of Asia, and have a strategic interest to build up India as a powerhouse......................

The Illusion of Freedom: by Chris Hedges

The Illusion of Freedom: Chris Hedges

...................No vote we cast will alter the configurations of the corporate state. The wars will go on. Our national resources will continue to be diverted to militarism. The corporate fleecing of the country will get worse. Poor people of color will still be gunned down by militarized police in our streets. The eradication of our civil liberties will accelerate. The economic misery inflicted on over half the population will expand. Our environment will be ruthlessly exploited by fossil fuel and animal agriculture corporations and we will careen toward ecological collapse. We are “free” only as long as we play our assigned parts. Once we call out power for what it is, once we assert our rights and resist, the chimera of freedom will vanish. The iron fist of the most sophisticated security and surveillance apparatus in human history will assert itself with a terrifying fury..............

Moscow, Cairo to ink $26bn nuclear plant construction deal in Q1 2016

Moscow, Cairo to ink $26bn nuclear plant construction deal in Q1 2016 — RT Business

Korea, Japan reach deal over sex slavery

Sunday, December 27, 2015

US oil prices reach parity with global prices, and then some, et al

several times over the past year we warned that if the ban on exports of crude oil from the US was lifted, US oil prices would rise to the level of the international benchmark price, and we'd all end up paying higher prices for all the oil based products we use...at most of those times, US prices had been averaging between $5 and $10 less than global prices, which would have indicated a 10% to 20% increase from the $50 dollar a barrel oil we were then seeing...what we certainly didn't expect is that both US and international prices would be near $35 a barrel when that parity was reached, and that it would come about as international oil prices crashed, instead of while US prices were rising, but that's what happened this week...

last week we posted side by side graphics of the prices for the US benchmark oil, WTI (West Texas Intermediate), and the international benchmark of Brent oil...as Obama was signing the budget bill with the oil export clause last Friday afternoon, WTI oil prices were closing at $34.73 a barrel, down less than 50 cents for the week, while Brent prices had fallen more than a dollar to $36.88 on the same day...on Monday, after it was clear to all market participants that the US would be exporting crude, WTI contract oil prices rose more than a dollar to $35.81 a barrel, while Brent prices fell 50 cents to $36.38 a barrel...on Tuesday, prices of US oil reached parity with international prices, and then went on to close a bit higher, with WTI up to $36.14 a barrel while Brent fell to $36.11....the spread between US and global prices then widened the rest of the week, with US oil prices rising to $37.50 a barrel on Wednesday, while Brent had closed at $37.36, and then with US prices closing at $38.10 a barrel on Christmas eve after a half day's trading, after Brent had closed for the holidays at $37.89 a barrel...

so as of today, US oil prices are now 21 cents a barrel more than international prices, having increased more or decreased less each day of the past two weeks, while the prospect of US oil exports was in the news...that has wiped out the discount American refineries were seeing a year ago, when international oil prices were more than $6 a barrel higher than US prices, and it's a swing of more than $28 a barrel since the Spring of 2011, when US oil was $27.88 a barrel cheaper than Brent....now, as we pointed out last week, with oil prices more than $10 or as much as $25 lower than what the frackers need to break even, we aren't gonna see a rush to drill new wells to supply that international market anyhow, but with US prices now the same as what they're seeing overseas, oil refining companies are even more unlikely to be willing to pay the estimated extra $2 a barrel for a transoceanic shipment....that isn't to say it isn't going to happen at all; a Swiss company has already announced they'd be loading a 600,000 barrel cargo of South Texas Sweet crude in Houston next week for shipment to Europe after the first of the year...that would be a very light crude from the Eagle Ford shale, lighter than WTI, and like Bakken crude, said to be of a grade of oil preferred by some European refineries...but except for such special cases, or perhaps when a Latin American refinery would choose an American crude over say Bonny Light from Nigeria, we should not see a whole lot of oil exporting starting up just yet...so the additional 26,385 new oil wells that the Center for American Progress forecast would be drilled in the U.S. each year with the end of the export ban will likely be deferred until such time as the global oil pricing structure changes...

***

although it was a slow news week, the Columbus Dispatch ran an important four part investigative series titled "Wrong Track" on trains carrying volatile crude oil, a series which was also carried by several other Ohio newspapers...such train transport of explosive oil will eventually become more common with North Dakota's Bakken crude targeted for export through both Atlantic and Pacific ports... the Dispatch found that while Federal regulators are focused on improving the safety of the oil tanker cars, most crude oil train derailments are caused by human error or defective track; ie, an oil tanker car, even if it's defective, isn't going to explode into a fireball if it stays on the tracks...but even as crude by rail more than doubled over two years, there has been no increase in Federal rail inspectors since 2006...and although the railroads do hire their own inspectors, what they find is often not acted on; ie, the fiery derailment and explosion in Mount Carbon, W.Va, which forced 1,100 from their homes for 10 days, was caused by a split rail, which a CSX-hired inspector had known about beforehand...moreover, once a train goes off the rails and a fire starts, emergency first responders are woefully unprepared to deal with such derailments along the roughly 138,000 miles of track in the US, including 5,300 miles in Ohio....finally, to wrap up the series, the Dispatch explains how difficult it was to complete the series, as Federal and state regulators often collaborate with the railroads to keep the public in the dark; reports the Dispatch obtained from Illinois had the names of the railroads blacked out, while West Virginia authorities even redacted the names of the counties through which the oil bomb trains were rolling...

The Latest Oil Data from the EIA

this week's reports from the US Energy Information Administration indicated that our production of crude oil was virtually unchanged from last week, that we imported nearly a million barrels per day less than last week, that our refineries processed somewhat less crude, and that our crude oil inventories fell by almost 5.9 million barrels from the prior week... our field production of crude oil increased by just 3,000 barrels per day to 9,179,000 barrels per day in the week ending December 18th, up from 9,176,000 barrels per day during the week ending December 11th...that's nearly 0.6% above the 9,127,000 barrels per day output during the week of December 19th last year, a time when nearly 3 times as many oil drilling rigs were deployed than have been currently....our output of of shows no sign of letting up; field production over the last 8 weeks has stayed in a range roughly 50,000 more barrels per day than than we saw during the prior 8 weeks...

however, our imports of crude oil were down by 986,000 barrels per day from last week, when they were at a 2 year high, as we imported 7,326,000 barrels per day during the week ending the 18th, down from 8,312,000 barrels per day during the week of the 11th....as a result, our imports this week were 11.6% below the 8,292,000 barrels per day we imported in the third week of December a year ago, a reversal of last week's imports, which were 17.0% above last year's second week in December...that weekly volatility in oil imports is why the EIA's weekly Petroleum Status Report (62 pp pdf) reports a four-week moving average of oil imports, which averaged about 7.9 million barrels per day in this week's report, 3.4% above the same four-week period last year...

meanwhile, the amount of that crude used by our refineries fell by another 143,000 barrels per day to an average of 16,468,000 barrels per day during the week ending December 18th; the third such weekly drop in a row, as the US refinery utilization rate fell to 91.3%, down from 91.9% last week and from a utilization rate as high as 94.5% four weeks ago...however, we still managed to process 0.8% more crude this week than 16,341,000 barrels per day we used the same week a year ago, when the refinery utilization rate was 93.5%....both production of gasoline and production of distillate fuels (diesel fuel and heat oil) decreased from last week, with gasoline output down by 617,000 barrels per day to 9,346,000 barrels per day, and output of distillates down by 169,000 barrels per day to 4,938,000 barrels per day...even with that large production shortfall, however, our week ending supplies of gasoline rose by 1,111,000 barrels, from 216,867,000 barrels as of December 11th to 220,495,000 barrels of gasoline in storage as of December 18th, which nonetheless meant that gasoline inventories slipped into the lower half of the average range for this time of year, as last year we were adding an average of 4 million barrels a week to our gasoline stocks during December...but even with reduced consumption of heat oil, distillate fuel inventories fell by 661,000 barrels, from 151,976,000 barrels as of December 11th to 151,315,000 as of December 18th, although distillate fuel supplies remained in the upper half of their normal range for this time of year...

however, even with refinery throughput lower, that big drop in our oil imports meant the refineries had to take oil out of storage to meet demands...our total inventories of crude oil in storage, not counting what's in the government's Strategic Petroleum Reserve, fell by nearly 5.9 million barrels, dropping from 490,657,000 barrels on December 11th to 484,780,000 barrels on December 18th, which was still only the 2nd drawdown of our oil supplies in the last 13 weeks...that means we still had 30.8 million, or 6.8% more barrels in storage than the 453,969,000 barrels we had stored on September 18th of this year, and leaves us 25.2% above the 387,209,000 barrels we had stored on December 19th last year...so we still have the most oil we ever had stored in the 3rd week of December in the 80 years of EIA record keeping, which had never seen more than 400 million barrels stored before this year....

finally, you might recall that a few weeks ago i complained that the weekly EIA totals we had for that week didn't add up...there was a bit of that sense again this week, so i tried sorting through the U.S. Petroleum Balance Sheet for the Week Ending 12/18/2015, which is Table 1 in the EIA's weekly Petroleum Status Report (pdf)...in that table, under the heading "Crude Oil Supply", on line 13 they include "Adjustments", which the footnote tells us is "Unaccounted-for Crude Oil" which their glossary tells us is "the arithmetic difference between the calculated supply and the calculated disposition of crude oil."...in other words, the weekly "Adjustments" are a fudge factor used by the EIA to make the week's new supply of crude balance with the week's disposition of that crude...this week the adjustment was a rather large -377,000 barrels per day, meaning, in effect, that 377,000 barrels per day were unaccounted for...in contrast with that, last week the adjustment was +254,000 barrels per day, or that the figures showed that we ended up with 254,000 barrels per day more than was apparently supplied...together, those adjustments give us a week to week swing amounting to 630,000 barrels per day in our oil supply, certainly enough to make virtually all the weekly figures suspect...interestingly, the large number of barrels unaccounted for comes near year end, when 2 of the largest states for oil storage, Texas and Louisiana, are going to be assessing crude oil and products in storage for their annual inventory tax...

Latest US Rig Counts

with the holiday, Baker Hughes reported the US and Canadian rig counts on Wednesday (December 23) instead of the usual Friday, so this week's rig count represents the change in drilling activity over just 5 days...over that period, the total count of rigs drilling for gas and oil in the US was down by 9 from December 18th to 700 rigs as of the 23rd, with active oil rigs down 3 to 538, and working gas rigs down 6 to 162...that was down from a total of 1,840 drilling rigs that were deployed on December 26th last year, of which 1499 were rigs drilling for oil, 340 were rigs targeting gas, and one was classified as miscellaneous...oil rigs had hit their fracking era high at 1609 on October 10, 2014, while the recent high for gas drilling rigs was 356, and occurred on November 11th last year...

all types of drilling rigs were shut down this week...there were 554 horizontal rigs in use this week, 5 fewer than last week, and down from 1350 horizontal rigs that were deployed in the the same week last year....the vertical rig count was down 1 to 86, and down from from 309 a year ago, while the directional rig count was down by 3 to 60, down from the 181 directional rigs that were in use as of the 4th weekend of December last year...24 drilling platforms remained in use offshore, all in the Gulf of Mexico, which was unchanged from last week but down from 56 in the Gulf and a total of 58 offshore last year at this time...

of the major shale basins, the Permian of west Texas again saw the largest change, as they added 6 rigs to bring their total to 212, which was nonetheless still down more than 60% from last year's 536...three other basins saw additions of a single rig: the Cana Woodford of Oklahoma, the Mississippian of southwest Kansas, and the Granite Wash of the Oklahoma-Texas panhandle region; the Cana Woodford was up to 39 rigs, but still down from 48 rigs working a year earlier, the Mississippian was up to 12, but down from 72 rigs a year ago, while the Granite Wash was up to 15 rigs, but down from the 52 rigs deployed there the same week last year....meanwhile, the Williston basin, centered in North Dakota, saw 3 rigs pulled out, leaving 55, down from 179 a year ago, and both the Fayetteville of Arkansas and the Haynesville of northwest Louisiana were down 2 rigs; the Fayetteville was left with 1 rig standing, down from 9 a year ago, while Haynesville still had 24 rigs deployed, down from 40 in the same week last year...in addition, the DJ-Niobrara chalk of the Rockies front range saw one rig stacked, leaving 23, down from 60 rigs as of a year ago...lastly, the always mysterious "other basins" saw a net reduction of 10 rigs, 6 oil and 4 gas, leaving these other basins with 167 rigs still deployed, down from 477 rigs working those basins on December 26th of last year..

the Baker Hughes state count tables show that both North Dakota and Wyoming saw their net rig count down by 3, with North Dakota's 55 rigs down from 169 a year ago, while Wyoming's 17 rigs was down from last year's 57...then both Louisiana and Arkansas saw 2 rigs taken out; that left Louisiana with 56 rigs working, down from last year's 111, while Arkansas was left with just 1 rig, down from 12 a year earlier...in addition, Alaska, Colorado, and Texas each saw their net rig count reduced by 1; in Alaska, they still had 11 rigs working, which was up from 10 a year earlier, while Colorado's count was down to 24 rigs from last year's 69, and Texas still had 319 rigs, down from 852 a year earlier...meanwhile, 2 additional rigs were deployed in Oklahoma, and both New Mexico and Kansas saw 1 rig added; those additions brought Oklahoma back up to 88, which was still down from 209 a year ago, while New Mexico had 38 rigs working as of the 23rd, down from 102 a year earlier, and Kansas had 12 rigs, down from the 29 drilling rigs that were deployed on December 26th of 2014...

more here

South Korea world's biggest arms importer

Korea world's biggest arms importer

Friday, December 25, 2015

Gold, Frankincense and 'Murica

The Bushidos Have Never Gone Away

Thursday, December 24, 2015

Meet the Sultan of Civil War by Pepe Escobar

Meet the Sultan of Civil War

Russian defense choppers to be ‘made in India’

Russian defense choppers to be ‘made in India’

Russia's President Vladimir Putin (L) shakes hands with India's Prime Minister Narendra Modi during a meeting at the Kremlin Thursday

Russia's President Vladimir Putin (L) shakes hands with India's Prime Minister Narendra Modi during a meeting at the Kremlin Thursday

Jingle Bell Rock-Gayageum by Luna

Beware 'Sunni-Stan': Neocons are Back and Their 'Vision' is Darker than Ever

Beware 'Sunni-Stan': Neocons are Back and Their 'Vision' is Darker than Ever - Palestine Chronicle

Drone Footage Shows Levels of Devastation in Damascus

Wednesday, December 23, 2015

Romancing the Sunni: A US policy tragedy in three acts; Act II

Romancing the Sunni: A US policy tragedy in three acts; Act II

Act I is HERE

The Coming Saudi Crack-up?

The Coming Saudi Crack-up? | Consortiumnews

President Obama, like generations of Western leaders, has coddled the oil-rich Saudi monarchy by tolerating its reactionary politics, its financing of radical Islam and its military support for Sunni jihadist terrorism. But the spoiled Saudi leaders may finally be going too far, as Daniel Lazare describes.

By Daniel Lazare

Is the Saudi monarchy coming apart at the seams? Scholars and journalists have long predicted the kingdom’s demise, but this time the forecasts may finally prove correct.

The reason is an unprecedented avalanche of problems pouring down on Saudi Arabia since 79-year-old Salman bin Abdulaziz Al Saud assumed the throne last January. A hardliner in contrast to his vaguely reformist predecessor Abdullah, Salman lost no time in letting the world know that a new sheriff was in town. He upped the number of public executions, which, at 151, are now running at nearly double last year’s rate.

China, Iraq establish strategic partnership

China, Iraq establish strategic partnership - Xinhua | English.news.cn

Strategic Air Command Declassifies Nuclear Target List from 1950s

Russia will start building 2 nuclear reactors in Iran

Tuesday, December 22, 2015

Capitalism - Not China - Is to Blame for the Current Global Economic Decline

Did Obama Really “Surrender the Middle East to Putin?”

Germany Becomes AIIB's Largest Non-regional Shareholder

Where Do The Majority Of Muslims Want Sharia?

Where Do The Majority Of Muslims Want Sharia?
Infographic: Where do the majority of Muslims want Sharia? | Statista

Monday, December 21, 2015

Six US soldiers killed in Afghanistan as Taliban gains strength

Romancing the Sunni: A US policy tragedy in three acts; Act I

How Could Socialism Be Boring? It's a System Run By and For People

Structural Repression: America’s “Soft”-Fascism

Saudi Arabia: The Source Of Islamic Radicalism

Sunday, December 20, 2015

US oil export ban lifted as oil imports surge to 2 year high, natural gas hits an all time low

most of you probably know by now that a provision to repeal the 40 year old ban on US oil exports was included in the bipartisan budget bill that passed this week...as you'll recall from our discussion last week, this bill was the regular annual budget bill, delayed since October 1st, that funds all the discretionary spending the government undertakes over the year, from defense to the EPA, but not including non-discretionary entitlements such as social security...since it's an absolute must pass bill, all the congresscritters try to hang whatever they might want to push through on it, proposals that would otherwise not be viable as stand alone legislation...such as it is, this creates the incentive for most congresscritters to vote for the entire package, because although it may have provisions they'd otherwise oppose, they've got their own high priority rider attached that they couldn't get through otherwise...

thus, while there was undoubtedly much more horsetrading behind the scenes than was covered in the press, what basically happened is that the Democrats traded their votes for the repeal of the oil export ban for Republican votes in favor of extending tax subsidies for wind and solar for another five years, with a gradual phase out of those subsidies thereafter...Republicans also agreed to free up a $500 million payment to a trust fund for developing countries as part of the Paris climate deal....this deal was completed late Tuesday night, and by early Wednesday morning congresscritters were presented with 2242 pages of legislative text and over 1000 pages of explanatory material...then, after a thorough & thoughtful reading and discussion, the $1.15 trillion spending bill and $680 billion package of special interest tax-breaks was passed by the House on a 316-113 vote early Friday morning, hurriedly followed by Senate passage by a 65-33 vote, in plenty of time for them to all make the afternoon flights out of DC for the Christmas recess...Obama, who was staying in Washington, then put his signature on that bill later that afternoon...

so, henceforth, US & international oil companies will have free reign to frack for oil anywhere and everywhere in this country with the clear knowledge they can sell it to the highest bidder, be they in Europe, Japan, or China...as a practical matter, since we are still importing oil at well over a 7 million barrel a day pace, every barrel we export will have to be replaced by additional imports, except to the degree that our drilling and fracking increases to meet foreign demand... the American Petroleum Institute estimates that our domestic production of crude will increase by up to 500,000 barrels per day over what it would otherwise be without exports, that investment in oil infrastructure would increase by $70 billion, ultimately adding 300,000 more jobs in consumer products and services and hydrocarbon production by 2020...Oil Change International, an advocacy group committed to exposing the true cost fossil fuels, concurs with the API in that they estimate unfettered oil exports could add an additional 467,000 barrels a day to our production, raise the price of crude and it's products in the US, and eventually double the oil bomb-train by rail traffic from today's levels...ultimately, we'll end up draining American oilfields first, before those anywhere else, and end up paying Russia and OPEC five times as much for whatever oil our country still might need someday in the future..

all that notwithstanding, at today's international price for oil (under $40 a barrel), there isn't going to be a lot of new drilling in the near future to supply those international markets...remember, early this year, Bloomberg showed that 97% of US fracking operations were unprofitable below $50 a barrel...while there have been much touted efficiency gains since then, the fact that US oil production is unprofitable at levels even up to $60 a barrel was born out by 2nd quarter and 3rd quarter financial reports from the oil companies, when most reported significant losses...what we may see is some outsourcing of refinery work, where the international oil companies ship oil to their lower cost refineries in Asia or the Caribbean, possibly importing the gasoline that is thereby produced while selling other products elsewhere (it's for that reason that a tax credit for oil refiners was also added to the budget bill)...there has also been talk of some initial shifting of crude around to better optimize refinery throughput; such as shipping Bakken crude from North Dakota to Europe, where their refineries make optimum use of such a light grade, and importing more Venezuelan crude or Basra Heavy from Iraq to process in Gulf Coast refineries, both of which sell at a discount to the lighter grades....however, any profits from such shifting will just accrue to the oil company's bottom lines and is unlikely to benefit anyone in our neighborhood..

to show how US and international oil prices have played out as the lifting of the export ban approached, we'll include a graph of the difference between the benchmark US oil price (WTI) and the benchmark global price (Brent) below...the graph comes from Jack Kemp, energy analyst with Reuters...

the above graph shows the monthly difference in the average price between the US benchmark oil, WTI (West Texas Intermediate), and the international benchmark of Brent oil, named after a North Sea oilfield, over the period from 1989 till November...the types of oil are very comparable, both are light sweet grades, meaning they're less dense and lower sulfur than other grades, and typically produce more gasoline and distillate grade fuels when refined...when the US price was higher, it's shown as a positive number of dollars above the zero line; when the US price was lower, as it has been recently, it's shown as a negative dollar amount below the zero line..

what we can see from the above graph is that before fracking became widespread, US prices for oil were typically in a range averaging around $2 a barrel more than international prices; this was because there was a limited supply of domestic crude, and to make up the shortfall refiners had to import, and $2 generally represented the average cost of shipping suitable grades of oil from the Middle East, Africa or South America...then as fracking became widespread, the light grades of crude oil thus produced were in surplus in the US, and without the ability to export them, their prices fell, a glut developed, while some refineries that were designed to process sour or heavy crudes continued to import those...more recently, as it became clear that the push to allow exports might pass, the international price of oil fell even faster than the US price, and the price differential has closed, and for the most of this week the international price has averaged just $2 more than the US price...

since the chart above only shows the difference in price between the two types of oil, we'll include 5 year charts of both side by side, so you can see how that played out in terms of actual prices...these graphs should also load separately if you click on them...

This Week’s Oil & Gas Prices

contract prices for both oil and natural gas closed lower this week, with oil closing at a new low for this cycle, as you can see above, while natural gas saw it's lowest price ever on an inflation adjusted basis...after falling roughly 10% to $35.24 a barrel last week in a reaction to news from OPEC, US oil prices rose by more than a dollar a barrel on both Monday and Tuesday as it became clear the move to allow unfettered oil exports would be included in the budget bill, ultimately closing at $37.35 a barrel on Tuesday...but on Wednesday, the EIA's weekly Petroleum Status Report showed a large jump in oil & oil product inventories, and traders suddenly remembered that we have a huge glut of oil on our hands, and oil fell to close Wednesday at $35.74 a barrel...that inventory building continued to weigh on prices Thursday as prices fell to close at $35.94, but prices rose again Friday morning as the budget bill, including the repeal of the oil export ban was passed...that rally was not to last, however, as Baker Hughes showed the largest increase in oil rigs in 5 months, and oil prices crashed again in the afternoon to close the week at $34.73, having come within a whisker of the 2009 lows...

meanwhile natural gas prices fell every day this week except Friday, when they rebounded slightly to close the week at $1.767 per mmBTU, after closing Thursday at $1.755 per mmBTU, the lowest price ever on an inflation adjusted basis, and the lowest actual price for a January natural gas contract in 21 years of NYMEX trading....after closing last week at $2.015 per mmmBTU, they fell to $1.894 on Monday after weekend forecast showed warm weather would continue in the Eastern US...a forecast of 65 degrees in New York on Christmas day contributed to their drop to 1.822 mmBTU on Tuesday, the lowest since 1999 and the second lowest price on record on an inflation-adjusted basis...gas prices then fell another 1.8% to close at an all time inflation-adjusted low of $1.79 mmBTU on Wednesday, but it didnt stop there, as the Weekly Natural Gas Storage Report from the EIA showed a slim drawdown of 34 billion cubic feet, leaving 3,846 billion cubic feet of gas still in storage, the most ever for the 2nd week of December, and 16.4% more gas than was stored the same week last year, raising fears that we'd run out of storage space for gas when the weather turned warmer...we're including a graph of the NY mercantile exchange prices for January delivery of natural gas over the past three months below, so you can see how rapidly the price has dropped over than short span...we'd have to go back to 1999 to find contract prices for natural gas this low at any time of year..

the graphic below from the EIA clearly shows why such a glut of natural gas has developed...it shows the output in billions of cubic feet per day from each of our gas producing shale basins from 2000 to October of this year, color coded and stacked on top of each other such that the top of the Marcellus output in green represents the total daily output of gas nationally over that period...from an output near 5 billion cubic feet a day in 2008, mostly from the Barnett in Texas, gas production increased to 10 billion cubic feet a day by 2010, to nearly 20 billion cubic feet a day by 2011, and to nearly 40 billion cubic feet a day by 2014....even after a glut of gas developed in the warm winter of 2012 and drove prices down to $2 per mmBTU by March of that year, there was barely any sign of a pullback; natural gas production continued to grow like bacteria in a petri dish...the "polar vortex" winters of early 2014 and 2015 may have saved them from a price crash then, but facing an El Nino winter, when gas consumption promises to be low, they're still producing gas like they're expecting a new ice age…the catch 22 for these gas frackers is that the more methane they release into the atmosphere from their fracking operations, the faster the planet will heat up, and the less of their gas consumers will need to use to heat their homes...

The Latest Oil Stats from the EIA

this week's reports from the US Energy Information Administration showed a new two year high in oil imports, a small increase in our crude oil production, a small reduction in refinery use of that crude, and another large jump in the surplus oil that we've got stored....for the week ending December 11th, our imports of crude oil rose by 291,000 barrels per day to 8,312,000 barrels per day, the most oil we've imported in any week since September 2012...thus, this week's imports were 17.0% above the 7,104,000 barrels per day we imported in the 2nd week of December last year, and brought our 4 week average of imports up to 7.9 million barrels a day, now 6.3% more than we imported in the same 4 week period last year...tell me again, why should we be exporting oil?

in addition, our field production of crude oil was at 9,176,000 barrels per day in the week ending December 11th, a slight increase of 12,000 barrels per day from the production rate of 9,164,000 barrels per day during the week ending December 4th...that is still 0.4% above the 9,118,000 barrels per day output in the same week last year, when most oil drillers were still running a large fleet of drilling rigs...looking at oil production over the last 6 or 7 weeks, it appears to be settled into a range about 50,000 more barrels per day than our level of crude production during September and October...

meanwhile, net U.S. crude oil refinery inputs averaged 16,611,000 barrels per day during the week ending December 11th, 41,000 barrels per day less oil than our refineries used during the previous week...that was still at a refinery throughput level 1.9% above last December 12th's 16,301,000 barrels per day, even though the US refinery utilization rate fell to 91.9%, down from 93.1% last week...our production of gasoline increased by 94,000 barrels per day to 9,963,000 barrels per day, which was the greatest refinery output of gasoline since the 2nd week of August, despite refinery utilization rates as high as 94.5% in the interim...our production of distillate fuels (diesel fuel and heat oil) fell, however, as output of distillates were at 5,107,000 barrels per day during the week ending December 11th, down from 5,228,000 barrels per day during the week ending December 4th...even so, with reduced consumption of heat oil during the week, our distillate fuel inventories increased by another 2,563,000 barrels, on top of last week's 5 million barrel increase, as they rose from 149,413,000 barrels as of December 4th to 151,976,000 barrels on December 11th, leaving distillate fuel supplies well into the upper half of their normal range for this time of year...our week ending supplies of gasoline also saw a big jump, rising by 1,731,000 barrels, from 217,653,000 barrels as of December 4th to 219,384,000 barrels as of December 4th, which also kept gasoline inventories solidly the upper half of their normal range for this time of year...

so, with our oil field production holding steady and our refinery throughput lower, that big jump in oil imports served no immediate useful purpose, and hence had to be added to our already monstrous glut of stored oil...moreover, it appears that almost all the imports, or 8 million additional barrels, went into storage in the Gulf Coast PADD, even though oil inventories in that region are usually drawn down near year end to avoid inventory taxes in Louisiana and Texas...at any rate, our total inventories of crude oil in storage, not counting what's in the government's Strategic Petroleum Reserve, rose by over 4.8 million barrels, increasing from 485,856,000 barrels on December 4th to 490,657,000 barrels on December 11th, the 11th increase in the last 12 weeks...that's up by 36,688,000 barrels since September 18th, and leaves us with 110.7 million more barrels, or 29.1% more oil in storage, than the 379,942,000 barrels we had stored at the end of the second week of December a year ago...so we now have the most oil we ever had stored anytime in December in the 80 years of EIA record keeping, which had never seen more than 400 million barrels stored before this year, and we're closing in on the all time inventory record of 490,912,000 barrels set on April 24th this spring...

Latest US Rig Counts

this week's rig count from Baker Hughes provides us an anecdote on how short-sighted some US oilmen can be...despite US oil prices that have been below $40 a barrel for more than 2 weeks, and international prices that have been below $42 over that span, upon hearing that the export ban would be lifted, the frackers appear to have gone out and started up the most oil rigs they've added since late July, at a time when oil prices had rallied above $60 a barrel....the total number of rigs drilling for oil increased by 17 to 541 during the week ending December 18th, after the oil rig count had previously decreased for four consecutive weeks...the total rig count was unchanged from last week, however, as 17 gas rigs that had been working last week were pulled out, leaving 168 gas rigs still active...those totals were down from 1536 oil rigs, 338 gas rigs and 1 miscellaneous rig that were active as of the third weekend of December a year ago, as the rig count at that time had already fallen from the peaks in October and November...

of the rigs started this week, one was offshore in the Gulf of Mexico, where there are now 24 active, down from 56 in the Gulf and 58 total offshore a year ago...however, we did see a drilling rig pulled from an inland lake in southern Louisiana, so there is now only one rig operating on inland waters, down from 12 a year ago... 4 vertical rigs were shut down this week, leaving 87, which was down from 324 vertical rigs in the same week a year ago...the directional rig count was reduced by 1 to 63, down from the 195 directional rigs that were in use the 3rd week of December last year...meanwhile, the frackers added 5 horizontal rigs, bringing the active horizontal rig count back up to 559, which was still less than half of the 1356 horizontal rigs that were working a year ago...

of the major shale basins, the Permian of west Texas saw 2 rigs added, after that basin had seen the most rig reductions over each of the past five weeks; that brought the Permian up to 206 rigs as of December 18th, which was still down from 539 a year earlier...in addition, the Barnett shale of the Dallas area, the Eagle Ford of south Texas, Oklahoma's Cana Woodford, and the DJ-Niobrara chalk of the Rockies front range all saw one rig added...the Barnett now has 8, down from 26 a year ago, the Eagle Ford has 77 rigs, down from 206 a year ago, the Cana Woodford has 38 rigs, down from 45 a year ago, and the Niobrara has 24, down from 59 last year at this time...meanwhile, three basins saw single rig reductions: the Haynesville of northern Louisiana now has 26 rigs remaining, down from 42 a year ago, the Marcellus of Pennsylvania and adjacent states is down to 41, from 82 a year ago, and the Mississippian of the Kansas / Oklahoma border area is down to 11, from the 73 rigs that were drilling in that basin the 3rd week of December 2014...

the Baker Hughes state count tables show that both Texas and Pennsylvania saw their net rig count down by 4, with Texas now with 320 active rigs, down from 868 a year ago, and Pennsylvania with 26, down from 55 a year earlier....Louisiana saw 2 rigs pulled, leaving 58, down from 110 a year earlier, while a single rig was stacked in Wyoming, where there are now 20 rigs active, down from 58 a year ago...meanwhile, 3 rigs were added in West Virginia, which now has 16 drilling, which is still down from 31 a year ago, and 2 rigs were added in Illinois, which had none last week and only one a year ago....in addition, new rigs were added in Alaska, Alabama, Mississippi, Nebraska, Kansas, New Mexico and Oklahoma...Alaska now has 12 rigs, up from 11 a year ago, Alabama now has a rig offshore, while last week and a year ago they had no rigs anywhere in the state, Mississippi has 5 rigs, down from 14 a year ago, Nebraska has 1 rig running, down from 2 a year ago, Kansas has 11 rigs, down from 30 a year ago, New Mexico has 37 active, down from 103 a year earlier, and Oklahoma now has 86 rigs working, down from 205 a year ago...

note: links to dozens of additional related articles from the past week can be found here..