What You Should Know About Oil and Gas Today
The State of Play
Yesterday, we told you that the big crude inventory builds in the U.S. last week were mainly due to all of the Saudi crude produced during March and April – when the Kingdom and Russia were flooding the market – was finally arriving at U.S. refineries.
Today, Reuters confirms that that is indeed the case, citing an EIA report:
US crude oil stockpiles rose unexpectedly last week to an all-time high as refiners boosted imports, particularly from Saudi Arabia, while exports dropped to lows not seen since November.
The Energy Information Administration also said on Wednesday that refined product demand ticked up, but still remained far below normal levels.
It’s hard to understand why this inevitable build in inventories as those 50 tankers filled with Saudi crude come into U.S. ports was not already built into the price, but it obviously had not been, given that WTI is falling like a rock this morning, down by about 8% as of this writing.
I will never fully understand the oil markets, but this too shall pass.
Object Lesson of the Day – How to distinguish logical, fact-based reporting on energy from click-bait, sensationalist reporting on the subject. It’s all in the headlines:
- Logical, fact-based reporting: “A reshaped U.S. oil sector awaits“. That’s the headline accompanying a very solid analysis at Axios today by Ben Geman.
- Click-bait, sensationalist reporting: “U.S. Shale Could Collapse If Oil Prices Don’t Bounce Back“. Sigh.
That latter story at Oilprice.com is based on the absurd report I talked about yesterday from the climate alarmist “Institute for Economics and Peace.” Let’s move on.
Here we go again. Politico reports this morning that the Trump Administration’s Department of Interior is planning to yet again pursue oil and gas leasing off the coast of Florida in the eastern third of the Gulf of Mexico. This particular white elephant is very similar to the 50-odd efforts since the mid-1970s by various Republican presidents and members of congress to open up drilling in the Alaska National Wildlife Refuge.
Should President Trump win his re-election, you can expect this latest effort to open up the eastern Gulf – which has been adamantly opposed by every Florida governor for the past quarter century – to fail just like all of the previous efforts have failed. This is the madness of Don Quixote brought to America’s politics and oil industry.
Speaking of madness in the oil industry, French Oil major Total got poured out yesterday by the Arlington City Council. Total had sought a permit to drill a well in the middle of a largely Latino/African American neighborhood of the Texas city of Arlington, just a few hundred feet from a daycare center. I promise I’m not kidding: At this particular moment in time in America, someone in a high position at Total thought it was just a great idea to seek this permit.
I’m picking on Total, but that story illustrates a major failing that has been epidemic within oil and gas companies forever: Senior management at these companies consistently refuse to integrate their PR and communications operations into their strategic decision making. Had Total done so, its PR/Comms people would surely have informed them that drilling a well in that specific location at this specific time in the U.S. probably would not go over well with the local population and their elected representatives. Thus, a major PR black eye could have been avoided.
Note to other Barnett Shale leaseholders: The days of drilling wells in the middle of Arlington, Fort Worth and other DFW Metroplex cities are over. You should abandon whatever undrilled leases you have in those areas and stop shooting yourselves and your industry in the foot. Stop this madness.
That’s all for today.