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Monday 9/13 - "High Natural Gas Prices Today Will Send U.S. Production Soaring Next Year" by Irina Slav

Tom Nolan in Nat Gas / LNG

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Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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https://www.zerohedge.com/commodities/goldman-laughs-todays-oil-selloff-our-bullish-view-remains-unchanged-sees-deficits

Goldman Laughs At Today's Oil Selloff: "Our Bullish View Remains Unchanged", Sees Deficits Requiring Much Higher Prices

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by Tyler Durden
Thursday, Nov 04, 2021 - 03:01 PM

It has been a rollercoaster session for oil which initially tumbled into today's OPEC+ session on the naive belief that Saudi Arabia and Russia would actually comply with Biden's demands to pump more (they did not), and then after reversing losses, it was hammered again only not due to supply fears but over positioning ahead of the BCOM/GSCI roll that starts on Friday, futures brokers said cited by Bloomberg. Unconfirmed reports of a 1 million bpd increase of crude at Cushing according to Wood Mackenzie did not help sentiment.

2021-11-04_11-35-13_0.jpg?itok=wszzG1p3

So is today's reversal a warning from the market that we have seen the local highs? Not according to Goldman, because on Thursday afternoon, the bank's commodity analyst Damien Courvalin wrote that his "bullish view remains unchanged: the oil deficit remains unresolved, the current strength in oil demand remains a near-term tailwind and the increasingly structural nature of the deficits will require much higher long-dated oil prices"

 

First, some background from Courvalin on what took place during today's OPEC+ meeting: OPEC+ agreed to maintain its gradual production increase of 400 kb/d for the month of December despite pressure from oil importing countries to ramp-up faster. Three stated reasons during today’s press conference:

  1. concerns over oil demand in the short-term on the potential for a winter COVID wave, as seen currently in China, as well as seasonal year-end demand weakness,
  2. an expected weak oil market next year, with the OPEC Secretariat forecasting a large surplus,
  3. the already agreed upon plan to ramp-up production further in coming months and the potential to ramp-up more aggressively quickly given the monthly frequency of OPEC meetings.

Here, Goldman sees three additional catalysts.

  • First, the unanimous nature of OPEC’s decision makes a faster ramp-up difficult to agree to, especially as half of OPEC+ members are unable to meet their quotas. This includes Russia who, as the second pillar of the deal, would likely oppose a unilateral increase by Saudi Arabia.
  • Second, the slow supply response of shale producers has brought the group its pricing power back, leaving a slow ramp-up in output fiscally more beneficial than higher volumes.
  • Third, oil prices are ultimately not elevated, especially when factoring in wealth effects –our estimate of oil consumer spending per GDP (based on retail prices covering 98% of global demand) shows that current prices are only in their 63rd percentile since 2000.

While the openness to potentially produce more later stated at the press conference (where members were called to speak and state their commitment to oil market stability) could assuage for now the demands of the US and other oil importing countries, there is a risk, however, that these countries nonetheless respond by releasing oil from their strategic reserves to help cool prices (which may not be a coordinated IEA emergency release as there has been no “sudden and significant supply disruption”).

However, as Goldman has argued previously (see "SPR Sale Would Release Only 60MM Barrels; Will Bring Even Higher Oil Prices: Goldman") an SPR release would only be of modest and temporary help and could in fact backfire next year given the structural nature of the oil market deficits starting in 2023.

  • First, a 60 million barrel US SPR release would only represent $3/bbl downside risk to the bank's price $90/bbl year-end Brent forecast.
  • Second, any larger negative price impact that further slows the US shale oil activity rebound would in turn lead to much higher prices next year.
  • Finally, an SPR release now would likely be premature in our view given that the US mid-term elections (which have been cited by the US administration as a catalyst to push prices lower) are still a year away.

Net, Goldman's bullish view "remains unchanged" for three reasons:

  • First, the oil deficit remains unresolved and requires higher oil prices.
  • Second, the current strength in oil demand remains a near-term tailwind as it is coming above consensus expectations (with OPEC’s demand assessment especially low in our view).
  • Third, the increasingly structural nature of the deficits will shift next year the bullish impulse to supply, requiring much higher long-dated prices. As for a larger increase in OPEC+ production at its next meeting on December 2, it may well be warranted with the strength in demand, bringing the global deficit to 2.5 mb/d last month, 0.8 mb/d larger than the bank had expected.

Still, the now open disagreement between OPEC and the US administration and the threat of an SPR release - which according to some is behind today's oil price weakness - will nonetheless increase the volatility in oil prices, as evidenced already this week in particular for WTI timespreads. This volatility may be further exacerbated by headlines around the resumption of negotiations with Iran, tentatively scheduled for late November, as well as winter weather which could swing oil demand by 1 mb/d and with trading liquidity further set to fall into year-end.

As Courvalin concludes, "this leaves our long Dec-22 trade recommendation our favored bullish oil trade, offering in our view the best return vs. volatility trade off as perceived near-term bearish risks (COVID, OPEC, Iran, US SPR) would only further delay the required ramp-up in investment and exacerbate the structural deficits that we forecast starting in 2023."

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https://oilprice.com/Latest-Energy-News/World-News/Sinopec-Signs-Huge-Long-Term-LNG-Deal-With-US-Firm.html

Sinopec Signs Huge Long-Term LNG Deal With U.S. Firm

By Charles Kennedy - Nov 04, 2021, 11:30 AM CDT

China’s energy giant Sinopec has signed a long-term delivery contract for liquefied natural gas with U.S. Venture Global in what has become the biggest such deal in China.

Quoting state news agency Xinhua, Channel News Asia reported that the gas, which will be delivered for 20 years initially, will come from Venture Global’s plant in Louisiana. Separately, a subsidiary of Sinopec will buy 3.8 tons of LNG from another Venture Global facility, in Calcasieu Pass. The annual supply size or value of the bigger deal was not disclosed.

The news report follows earlier ones from Reuters, which said in October that Sinopec had sealed three LNG delivery deals with Venture Global, two of which would see the Chinese state company receive 4 million tons of liquefied natural gas annually over the 20 years of the contract.

The deals, Reuters reported at the time, would double the total LNG imports into China from the United States. Yet the deals will not solve China’s immediate energy problems: the Louisiana liquefaction plant in Plaquemines has yet to receive its final investment decision, and only then will construction begin. The Calcasieu Pass facility is also at the pre-construction stage.

“China is absolutely key to global LNG market growth,” Frank Harris, head of global LNG consulting at Wood Mackenzie, said, as quoted by the Financial Times in October. “If Chinese buyers are now ready to sign long-term US deals again, it’s hugely significant for US LNG players in terms of supporting development of new capacity.”

Asia as a whole has become an even bigger market for U.S. LNG, leaving Europe behind as Asian buyers were willing to pay more for deliveries amid the energy crunch.

Going forward, a rebalancing of the gas market could once again make U.S. gas popular with European buyers for diversification reasons, if nothing else. Yet, with Asia’s insatiable appetite for energy and its willingness to pay a premium for U.S. LNG because of the lack of major pipeline supplies, it is likely to remain as the ultimate market for U.S. LNG.

By Charles Kennedy for Oilprice.com

Charles Kennedy

Charles is a writer for Oilprice.com

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US natural gas futures held above $5.6 per million British thermal units, after rebounding from a near two-week low of $5.3 hit on November 1st, in line with the European and UK contracts, as domestic stockpiles expanded at a softer pace while an ongoing global energy crunch kept fueling US exports. EIA natural gas stockpiles increased by 63 billion cubic feet last week, as expected, slowing from an 87 bcf addition in the previous period. Elsewhere, jitters over the natural gas shortage in Europe remained heightened after supplies from Russia decreased, as seen through the decline in shipments headed to Poland and lower flows passing through Ukraine. Other upside risk factors include the pending approval of the Nord Stream 2 pipeline, which Russia says could ease the crisis in Europe, and concerns that colder-than-usual winter temperatures could deplete European stockpiles this year.

https://tradingeconomics.com/commodity/natural-gas

Gas prices in Europe bounced back above 70 euros a megawatt-hour from a 6-week low reached in the prior week, as gas flows increased from Germany to Poland while those entering the continent from Russia declined. The latest data from grid operator Gascade showed Russian gas shipments entering Germany’s Mallnow compressor stations dropped to zero as of Saturday at a time when flows moved faster to eastward. Moreover, Russian gas transit to the EU via Ukraine also declined and a damaged pipeline in Bulgaria impacted flows to Romania, Serbia and Hungary. Adding further pressure on an already tight market was the halt of gas flowing to Spain from Morocco after the end of a 25-year transit deal between Spain and Algeria. Natural gas prices hit an all-time high of 162 euros a megawatt-hour on October 5th, and have since declined by over 55% on hopes that supplies will increase with the help of Russia.

https://tradingeconomics.com/commodity/eu-natural-gas

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La Nina Sparks "Cold Wave" Across China As CCP Tells Households To Stockpile Food 

Tyler Durden's Photo
by Tyler Durden
Thursday, Nov 04, 2021 - 07:45 PM

 

China Meteorological Administration (CMA) warned Thursday of a cold blast to sweep across the country from northwestern to southeastern China due to a La Nina weather event. 

Xue Jianjun, deputy director of CMA, said: "The cold air will bring a plunge in temperature nationwide compared with mid-October. The cold wave came from west Siberia which was then enhanced by cold air from the North Pole." 

"Heavy snow or rain will take over the Northeast and North China and the Inner Mongolia autonomous region, and farmers there should store corns outdoors ahead of the precipitation," Jianjun said.

CMA warned last month that a La Nina weather pattern would bring colder weather to the country. The timing of the cooler air is problematic amid an energy crisis that has resulted in nationwide power rationings. 

Beijing understood ahead of time La Nina would bring colder weather. It ordered the country's top state-owned energy companies to secure coal supplies for this winter at all costs in September. 

State-run news outlet Xinhua News Agency said, "the possibility of phased extreme and strong cooling events is high." 

Bloomberg's mean temperature forecast for China shows a deep dive in temps this week. Temps will remain well under a 30-year average through mid-December. 

Snag_132eb5f7.png?itok=ttkBPDXL

For some context, a 2008 La Nina event unleashed a devastating blow of snow and freezing weather that caused deaths and damage to crops, affecting 20 provinces. 

So it now makes sense why the Ministry of Commerce told households Monday to stock up on food in case of emergencies, mainly because it expects food shortages. 

China could be in for a world of trouble as colder weather will continue to strain energy and food supplies, opening up the chance for a winter of discontent among its citizens. 

On the bright side, La Nina could be good news for Beijing to host the Winter Olympics in February.

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https://www.zerohedge.com/commodities/depleted-us-oil-inventories-leave-market-vulnerable-shocks

Depleted US Oil Inventories Leave Market Vulnerable To Shocks

EXCERPT

More broadly, total stocks of crude and products outside the strategic petroleum reserve had fallen to their lowest level since 2014 (https://tmsnrt.rs/3whzjLX).

cushing%20inv.png?itok=5ELIxbr9

But there are some tentative signs the supply situation is stabilizing: deficits in both crude and products inventories to the pre-pandemic five-year average have narrowed slightly since late September.

Likely in response, WTI futures prices for deliveries in December 2021 have been trending gently downwards since Oct. 26 and the six-month calendar spread has been softening since Oct. 29, though it is too early to determine whether this marks a turning point or simply a temporary pullback.

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U.S. Crude Production Continues To Trail Rising Oil Rig Count

By Julianne Geiger - Nov 05, 2021, 12:17 PM CDT

  • The U.S. oil rig count rose this week to 450—a 6-rig increase since last week
  • The total rig count is now at 550, up 250 from this time last year
  • Canada's overall rig count decreased by 6

https://oilprice.com/Energy/Crude-Oil/US-Crude-Production-Continues-To-Trail-Rising-Oil-Rig-Count.html

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https://oilprice.com/Energy/Crude-Oil/The-US-Considers-Strategic-Petroleum-Reserve-Release-After-OPEC-Snub.html

The U.S. Considers Strategic Petroleum Reserve Release After OPEC+ Snub

By Tsvetana Paraskova - Nov 05, 2021, 1:00 PM CDT

  • Energy Secretary Granholm: ''The SPR is certainly on the table as an option''
  • "The Biden Administration is very concerned about the price at the pump," Granholm added
  • The SPR is the world's largest supply of emergency crude oil, and it currently holds around 600 million barrels of crude

 

https://oilprice.com/Energy/Energy-General/Pioneer-CEO-Back-Off-Biden.html

Pioneer CEO: Back Off, Biden

By Irina Slav - Nov 05, 2021, 9:00 AM CDT
  • Sheffield: Instead of urging OPEC+ to supply more oil, President Biden should back off American drillers
  • Sheffield: The Biden administration's measure to limit oil and gas drilling on federal lands has started to backfire

 

https://oilprice.com/Energy/Oil-Prices/Citi-Oil-Will-Continue-Rising-This-Quarter.html

Citi: Oil Will Continue Rising This Quarter

By Irina Slav - Nov 05, 2021, 10:00 AM CDT
  • Citi: Crude oil prices will continue rising this quarter as global oil inventories drawdowns continue and OPEC sticks to its limited addition output policy
  • Citi's Ed Morse: U.S. shale could surprise the oil markets with new production boost

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https://www.activistpost.com/2021/10/the-ceo-of-blackstone-is-warning-that-a-real-shortage-of-energy-will-cause-social-unrest-all-over-the-planet.html

The CEO Of Blackstone Is Warning That “A Real Shortage Of Energy” Will Cause Social Unrest All Over The Planet

EXCERPT

Blackstone CEO Stephen Schwarzman warned Tuesday that high energy prices will likely set off social unrest around the world.

“We’re going to end up with a real shortage of energy. And when you have a shortage, it’s going to cost more. And it’s probably going to cost a lot more,” the private-equity billionaire told CNN International’s Richard Quest at a conference in Saudi Arabia.

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https://oilprice.com/Energy/Energy-General/US-Shale-Patch-Reports-Blowout-Earnings.html

U.S. Shale Patch Reports Blowout Earnings

By Alex Kimani - Nov 06, 2021, 6:00 PM CDT

  • U.S. shale drillers have posted strong Q3 earnings as a result of rising crude prices
  • Large shale drillers in the U.S. are slow to increase production, and instead focus on shareholder returns
  • 2022 production guidance remains very modest for most large shale drillers

Nearly 60% of S&P 500 companies have reported third-quarter 2021 earnings, and the energy sector has again emerged as a standout performer.

According to the latest FactSet data, the Energy sector is reporting the second-largest positive (aggregate) difference between actual earnings and estimated earnings (+15.9%), behind only the Financial sector. 

Within this sector, Phillips 66 (NYSE:PSX) ($3.18 vs. $1.90), Chevron (NYSE:CVX) ($2.96 vs. $2.20), and Valero Energy (NYSE:VLO) ($1.22 vs. $0.92) have reported the largest positive EPS surprises.

However, the U.S. Shale Patch has emerged as the class valedictorian.

After a turbulent period characterized by mounting debts, dwindling cash flows, and awful share performance, the U.S. shale patch has roared back to life with the current earnings season, proving that the worst is finally behind the rearview mirror. Earnings are on tap this week for U.S. independent oil producers, with Continental Resources (NYSE:CLR), Devon Energy (NYSE:DVN), Diamondback Energy (NASDAQ:FANG), EOG Resources (NYSE:EOG), and Occidental Petroleum (NYSE:OXY) all reporting stellar Q3 2021 earnings.

Here's a peek into how shale producers have been faring this earnings season.

#1. Continental Resources

Continental Resources (NYSE:CLR), the shale driller owned by one of the richest and most prominent shale wildcatters, Harold Hamm, has reported strong Q3 numbers that, nevertheless, failed to meet Wall Street's expectations.

Continental Resources has reported Q3 revenue of $1.34B, good for 93.5% Y/Y growth but $70M below the Wall Street consensus. Adjusted net income clocked in at $437.2 MM while GAAP EPS of $1.01 missed by $0.20.

With oil prices consolidating above $80 per barrel, the majority of shale producers are solidly profitable, and many are returning excess cash to shareholders in the form of hiked dividends. Continental Resources has followed suit by hiking its dividend 33% to $0.20, but has also gone off the beaten path–the company is finally taking a stake in North America's biggest oil field.

Continental has announced plans to acquire 92,000 net acres in the Permian Basin from Pioneer Natural Resources Co. for $3.25 billion. The company will pay cash for the assets in the Delaware Basin, a subregion of the massive Permian.

Until now, CLR has focused on the Bakken shale in North Dakota, where it's the largest operator. But with output from other U.S. oil fields flatlining or declining, the Permian's multi-layered tiers of oil-soaked rock offer new avenues for growth. According to Continental, its new Permian assets will pump the equivalent of about 50,000 barrels of oil a day, and generate an extra half-billion dollars in annual free cash flow at current commodity prices.

CEO Bill Berry has revealed that the company has been exploring a potential Permian deal for 20 years, but until now, it "never thought the time was right or the economics were right."

Wall Street is hardly convinced.

CLR shares have tanked nearly 9% after announcing the deal, with Siebert Williams downgrading the shares to Hold from Buy with a $55 price target, cut from $69.  The firm says the deal raises serious questions regarding Continental's M&A strategy, and the lower potential shareholder capital returns over the near future.

Meanwhile, Leo Mariani, an analyst at Keybanc Capital Markets Inc., says the market may not like the idea of CLR getting into a new basin at this point in the commodity price cycle.

Despite the latest selloff, CLR still boasts a 174% gain in the year-to-date.

#2. Devon Energy Devon Energy (NYSE:DVN) has returned its Q3 scorecard that easily beat on both top-and bottom-line expectations. The Oklahoma-based shale producer reported revenue of $3.47B (+224.3% Y/Y), $1.08B higher than the consensus, while net earnings of $838M represented a vast improvement from the $92M loss the company reported for last year's corresponding quarter. Meanwhile, the company reported Q3 GAAP EPS of $1.24 vs.($0.25), beating by $0.31.

Q3 production soared 87% Y/Y to 608K boe/day, with production expenses declining 1% to $9.91/unit driven by operational efficiency gains and the benefits of scalable production growth in the Delaware Basin.

The company expects Q4 output of 583K-601K boe/day and expects to maintain FY 2022 production of 570K-600K boe/day, with $1.9B-$2.2B in capital spending on its upstream operations.

Devon's free cash flow generation increased 8-fold from the fourth quarter of 2020 to $1.1B, while the balance sheet strengthened with cash balances increasing by $782 million to a total of $2.3 billion.

Related: Aramco CEO: Underinvestment In Oil Is A ‘’Huge Concern’’

Devon Energy increased its fixed-plus-variable dividend payout by 71% to $0.84/share and also authorized a $1B stock buyback program. The company says the top priority for its free cash flow generation will continue to be the funding of its fixed-plus-variable dividend and distribute up to 50% of the remaining free cash flow to shareholders through a variable dividend.

DVN shares are up 176% YTD.

#3. Diamondback Energy

Diamondback Energy (NASDAQ:FANG) has posted Q3 revenue of $1.91B (+165.3% Y/Y) beating Wall Street's consensus by $430M while GAAP EPS of $3.56 beat by $0.73.

The company's Q3 2021 average production clocked in at 239.8 MBO/d (404.3 MBOE/d), with Q3 2021 Permian Basin production averaging 223.0 MBO/d (374.3 MBOE/d).

Q3 2021 cash flow from operating activities came in at $1,199 million; Operating Cash Flow was $1,131 million while Free Cash Flow was $740 million.

Diamondback has announced a commitment to return 50% of free cash flow to stockholders beginning in Q4 2021. To this end, the company raised its dividend 11% to $0.50 per share, marking the second consecutive quarterly increase after hiking by 12% in the second quarter. The company's board has also authorized a $2 billion share repurchase program as part of this commitment.

For the full year, FANG expects production to clock in at 222 - 223 MBO/d (370 - 372 MBOE/d), up from its previous guidance of 219 - 222 MBO/d (363 - 370 MBOE/d). The company has also lowered its full-year 2021 cash CAPEX guidance to $1.49 - $1.53 billion, down 4% at the midpoint from $1.525 - $1.625 billion previously.

FANG shares have rallied 133% YTD.

#4. EOG Resources

EOG Resources (NYSE:EOG) has reported Q3 revenue of $4.78B (+103.4% Y/Y), beating by $430M while net income of $1,095M represented a big jump from a $42M loss recorded in Q3 2020. Meanwhile, GAAP EPS of $1.88 narrowly missed by $0.01 but was a big improvement from last year's $0.07 loss.

EOG generated $1.4 billion of free cash flow and announced that capital expenditures came near the low end of guidance range driven by sustainable cost reductions.

EOG said total company crude oil production of 449,500 Bopd was above the high end of the guidance range due to better well productivity. 

EOG Resources has declared a $0.75/share quarterly dividend, good for an 81.8% increase from prior dividend of $0.41. The company also declared a special dividend of $2.00 per share, payable on December 30; for stockholders of record on December 15.

"Our high-return investment program... has positioned the company to step up our cash return to shareholders,should also be taken as a signal of our confidence that we can continue improving in the future. EOG has never been in better shape. Our high-return business model is sustainable for the long term, underpinned by a deep inventory of double premium drilling locations," EOG CEO Ezra Yacob told shareholders during the company's earnings call.

#5. Occidental Petroleum

Occidental Petroleum (NYSE:OXY) has become the latest shale patch producer to post an easy earnings beat on the strength of high oil and gas prices. The Texas company–which eschews wildcatting in favor of an oil recovery model–reported Q3 Non-GAAP EPS of $0.87 beats by $0.20 while GAAP EPS of $0.65 was in-line with expectations. 

OXY reported that cash flow from continuing operations clocked in at $2.9 billion, capital spending was $656 million, while free cash flow excluding working capital came in at over $2.3 billion.

The company exceeded production guidance midpoint by 15 Mboed, despite the impact of Hurricane Ida, with production of 1,160 Mboed from continuing operations. Meanwhile, OxyChem generated record earnings and increased total year pre-tax guidance to $1.45 billion

Occidental also announced that it had completed its large-scale divestiture program with the sale of Ghana in October; repaid $4.3 billion of long-term debt and retired $750 million of interest rate swaps.

OXY shares have gained 95% YTD.

By Alex Kimani for Oilprice.com

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https://oilprice.com/Geopolitics/Africa/Conflict-In-North-Africa-Threatens-Gas-Supply-To-Europe.html

Conflict In North Africa Threatens Gas Supply To Europe

By Cyril Widdershoven - Nov 06, 2021, 4:00 PM CDT

  • A diplomatic crisis between Morocco and Algeria threatens gas supply to Spain
  • Spain considers importing more (expensive) LNG
  • Algeria faces a number of problems in expanding its gas market share in Europe

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https://www.yahoo.com/news/russian-gas-flows-via-yamal-120719332.html


 

Sat, November 6, 2021, 7:07 AM

Russian gas flows via Yamal-Europe pipeline to Germany halted again

MOSCOW/FRANKFURT (Reuters) - Gas flows through the Yamal-Europe pipeline westbound into Germany have stopped again and are flowing in the opposite direction back towards Russia, data from German pipeline operator Gascade showed on Saturday.

The reversal of gas flows through one of the three major pipelines carrying Russian gas into western Europe is the second time the situation has developed in a matter of days. In the past week benchmark European gas futures rose as much as 23% due to the halting of westward flows.

The latest switch comes amid accusations from some regional politicians that the Kremlin is restraining supplies in order to pressure Germany and the European Union to approve the Nord Stream 2 pipeline - currently undergoing licensing procedures in Germany.

Russia has denied this and promised additions to the west from Nov. 8 once its own stocks have been replenished.

Gascade data on Saturday showed entry flows at the Mallnow metering point were zero at 1000 GMT, having been in that condition for three hours, after standing at an hourly volume of more than 3,000,000 kilowatt hours (kWh) since Thursday.

Exit flows at Mallnow - or requests to transport gas into Poland from Germany - stood at 1,442,934 kWh/hour for the second hour running, the data showed.

Flows into Germany at Mallnow, which lies on the Polish border, had been halted last Saturday and were only resumed on Thursday.

A spokesperson for Polish gas company PGNiG said Poland was receiving gas from both directions.

"Everything is fine from our point of view. The contract with Gazprom is being executed," the spokesperson said, referring to the Russian gas major.

Russia has said it is concentrating on replenishing domestic stocks before releasing any more gas to Europe. It expects its own replenishment process to finish by Nov. 8.

The level of Yamal flows between Poland and Germany and their direction are managed by Gaz-System in Poland and Gascade in Germany, based on customers' requests. One analyst said last week the reversal of flows pointed to demand from Poland given generally high prices and tight supplies of liquefied natural gas (LNG).

PGNiG's contract with Gazprom provides for supplies of around 10 billion cubic meters (bcm) of gas a year, out of which at least 8.7 bcm under a take-or-pay agreement.

If there is a chance to buy cheaper gas from the West and Poland has already bought enough gas under its agreement with Gazprom, it can switch to deliveries from the West, traders have said.

(Reporting by Alexander Marrow in Moscow, Vera Eckert in Frankfurt, and Anna Koper in Warsaw; Editing by Gareth Jones and David Holmes)

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https://www.zerohedge.com/markets/janet-yellen-reveals-net-zero-grand-reset-price-tag-150-trillion

Janet Yellen Admits The "Net Zero" Grand Reset Price Tag Will Be $150 Trillion

Tyler Durden's Photo
by Tyler Durden
Saturday, Nov 06, 2021 - 12:15 PM

For years, the climate change lobby was laser-focused on just one aspect of the "climate change" crusade: the end - which supposedly is some world where the temperatures no longer rise due to fossil fuel emissions (because we now supposedly live in a world of global warming as most 'scientists' agree, not to be confused with the global cooling hypothesis that emerged in the 1970s, when scientists were warning of a new ice age, and so on until the money blows in the opposite direction again in a few years when it becomes politically convenient) as opposed to bothering with the means. Meanwhile the "means", or the final cost to taxpayers of all that endless, tedious virtue-signaling, was almost never touched upon for a reason - as we first explained three weeks ago, the bill for getting the world from point A to that mythical, utopic point B, was so high, it would be double global GDP over the next three decades.

For those who missed it, here is an excerpt of what we wrote back on October 14, shortly after Bank of America published the definitive compendium on climate change and the coming Net Zero (i.e., great reset) world, and which we discussed in depth:

"while it is handy to have a centralized compendium of the data, a 5 minute google search can provide all the answers that are "accepted" dogma by the green lobby. But while we don't care about the charts, that cheat sheets, or the propaganda, what we were interested in was the bottom line - how much would this green utopia cost, because if the "net zero", "ESG", "green" narrative is pushed so hard 24/7, you know it will cost a lot.

Turns out it does. A lot, lot.

Responding rhetorically to the key question, "how much will it cost?", BofA cuts to the chase and writes $150 trillion over 30 years - some $5 trillion in annual investments - amounting to twice current global GDP!....

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https://oilprice.com/Energy/Energy-General/Supply-Chain-Crisis-Could-Be-Bullish-For-Oil-Prices.html

Supply Chain Crisis Could Be Bullish For Oil Prices

By Irina Slav - Nov 07, 2021, 6:00 PM CST

  • A shortage of truckers could lead to delays in deliveries of specialty chemicals, cement, and pipes
  • A shortage of workers in other related industries is affecting the oil and gas industry
  • Rising transportation costs and general price inflation are eroding profit margins for U.S. drillers

The global supply chain disruptions that have fueled inflation alongside rebounding demand for everything have been in the spotlight for weeks now. Although little attention has been paid to the effect of these disruptions on the oil and gas industry, it is certainly not insulated. And these disruptions could add further upside potential to oil prices. The American Trucking Association has calculated a shortage of 80,000 drivers that the industry needs to keep delivering goods on time. But it’s not just finished goods that truckers deliver. They also move chemicals, cement, and pipes—goods and materials necessary in the oil industry. To make matters worse, some chemicals are imported, making supplies vulnerable to port logjams that have plagued the U.S. for weeks.

For now, there are no complaints from the oil industry. There is anecdotal evidence that prices are on the rise for various goods and materials, and that there is occasionally a shortage of drivers. It couldn’t really be any other way: global supply chains are breaking down precisely because they are global. Every industry is so connected in the modern world that a breakage in one industry halfway across the globe affects half a dozen others all over the place.

One big problem, as noted in this Bloomberg report, is the production of enough goods. After last year pummeled business activity into the ground, destroying demand for all sorts of goods, this year we’ve witnessed a faster recovery than many in the business of manufacturing goods probably expected. It takes time to return to normal rates of production, whether it’s the production of pipes or microchips, and demand is rising faster than producers can respond to it.

Then there is the labor shortage problem, especially acute in the United States. The shortage of truckers is only one part of a much bigger problem. According to a Wall Street Journal report from last month, the U.S. economy needs 4.3 million workers—the number that would bring the workforce in the country to the level it was at in February last year.

Related: U.S. Shale Patch Reports Blowout Earnings There are 10 million job openings across the country right now, and employers are finding it impossible to fill many of them. When it comes to blue-collar jobs, the WSJ wrote in its report on trucker shortages, the task of filling positions is even harder because there is such demand for workforce; the competition is brutal.

Because of surging demand for everything from consumers, warehouses and factories are also on the hunt for more workers, as are delivery companies, construction businesses, and manufacturing firms. And because demand is outstripping supply to such an extent, prices are rising across the board. This does not necessarily need to be a problem for oil drillers—with oil prices up substantially over the past year, these companies have greater spending power.

Yet besides prices, the shortage of workers, the port jams, and internal problems in major exporting countries—such as China’s energy crunch, for example—also mean longer delivery times for a variety of goods. Longer delivery times mean it takes longer to do everything, including drill and complete a well. And things might not get better anytime soon.

A recent report in Logistics Management cited the account of a long-time trucker who explains that the U.S. transport industry has neither the workforce nor the equipment capacity to respond adequately to the surge in consumer demand. There is also a shortage of storage space. The combination of these factors spells further trouble well into next year.

Related: Aramco CEO: Underinvestment In Oil Is A ‘’Huge Concern’’

Just how affected the oil industry will be from all this is yet to be seen. But there is no way an industry that uses huge amounts of raw materials and goods that need to be transported from one place to another—sometimes imported from as far as China—could remain immune to the logistics and transportation problems that the whole nation is having.

Perhaps the impact will only be in the form of higher prices for the delivery of goods and materials. If things get even worse, though, it might begin to affect drilling activity. The global figures are worrying: according to a purchasing manager survey, delivery times for manufacturers across the world are extending, with the October number the worst on record, Reuters reported this week.

On the consumer demand side, there is light at the end of the tunnel—consumers cannot continue to buy durable goods at the current rate forever and will soon switch to services, at least according to the chief economist of UBS Global Wealth Management, Paul Donovan, as quoted by Reuters.

This should ease the pressure on the transport industry and free up more workers for other industries, including oil and gas. With such a shortage in the labor force, however, employers will likely continue to offer higher pay to get the workers they need and will pass on the additional costs to clients. Therefore, the prices of products and services oil drillers use could remain elevated for a while yet, potentially affecting production-related decisions.

By Irina Slav for Oilprice.com

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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Tom Nolan    + 2,441

TN

https://oilprice.com/Energy/Natural-Gas/Europe-Considers-Tapping-Cushion-Gas-As-Market-Continues-To-Tighten.html

Europe Considers Tapping “Cushion Gas” As Market Continues To Tighten

By Tsvetana Paraskova - Nov 07, 2021, 4:00 PM CST

  • Europe is experiencing the lowest level of gas in storage in a decade just ahead of the winter sent natural gas prices spiking to record highs last month
  • The very tight European gas market may find relief from the supply crunch if it taps part of the so-called cushion gas.
  • Increased Russian flows to Europe would be an easier way to meet winter demand in a cold winter without stretching thin working gas volumes to zero.

Europe could have a way out of a natural gas shortage if the winter is colder than usual. The very tight European gas market may find relief from the supply crunch if it taps part of the so-called cushion gas, which keeps supply pressure at storage facilities, energy consultancy Wood Mackenzie said this week.  

Tapping this cushion gas, however, may not be easy because of technical issues and regulations. Under normal circumstances, cushion gas cannot be withdrawn from storage facilities or considered part of the working gas volume (WKV), WoodMac notes.  

Yet the past two months have shown that Europe’s gas market is experiencing anything but “normal circumstances.”

The lowest level of gas in storage in a decade just ahead of the winter sent natural gas prices spiking to record highs last month. Prices also surged on the back of a lack of extra Russian supply on top of Gazprom’s contractual obligations. Gas prices have eased since mid-October, but they are still triple compared to the beginning of 2021.   

Earlier this week, Wood Mackenzie warned that “A cold European winter could result in storage levels falling to zero by the end of March 2022, unless more Russian gas supply is available versus current export levels.” 

WoodMac suggested an alternative to easing the crunch that could free up to 

15 billion cubic meters (bcm) on the gas-hungry European market—tapping part of the cushion gas.

Typically, these volumes shouldn’t be touched because they could damage the long-term performance of storage sites and because the gas is owned by storage operators which cannot sell gas under existing regulations.

“However, with the level of concern that there is in the market and the accompanying exceptionally high prices, these are not normal times. Should WGV go close to zero, governments might need to concede on regulations if they are going to keep the heating on,” said Graham Freedman, principal analyst, Europe gas research, at Wood Mackenzie.

“We understand it is possible to use up to 10% of the cushion gas - or quasi-working gas as it is sometimes known - within the engineering tolerances of each facility,” Freedman added. 

Ten percent of the 150 bcm of cushion gas in Europe would theoretically make 15 bcm of gas available on the tight market, according to WoodMac. 

However, European policymakers could see the technical and regulatory issues as too big hurdles to tapping cushion gas. 

Related: Oil Rally Reverses On Signs Of Cooling Demand

Increased Russian flows to Europe would be an easier way to meet winter demand in a cold winter without stretching thin working gas volumes to zero. 

Russian President Vladimir Putin has promised more gas would be flowing to Europe as soon as November 8, when Gazprom is expected to have completed filling Russia’s storage. But this week, gas deliveries dropped as a key pipeline from Russia to Europe reversed flows from west to east. 

Following several days of declines, natural gas prices at the key European and UK hubs surged again early this week, after gas flows on the Yamal-Europe pipeline reversed the direction eastward instead of westward through Germany. 

This reverse flow lasted for six days between Saturday and Thursday afternoon when gas started flowing to Germany once again, leading to a drop in European gas prices.  

Some analysts and EU member states such as Poland accuse Russia of using gas and energy as a weapon to continue exerting influence on the European gas market and forcing Europe’s hand into accepting that it needs the controversial Nord Stream 2 pipeline, which awaits regulatory consent in Germany. 

The Kremlin, Putin, and all Russian officials deny those accusations and point the finger at Europe’s own gas and energy policies of the past decade. 

All eyes on the European gas market are now turned to whether Russia’s Gazprom would follow Putin’s order to increase gas at its storage sites in Austria and Germany. 

“If Russia does what Putin said it will do, then there will be a big relief,” Frank van Doorn, head of trading at Sweden’s Vattenfall, told Bloomberg in an interview at the Flame gas and LNG conference in Amsterdam this week. “If there is no additional gas coming on Monday, we could see a significant price spike,” van Doorn said.   

By Tsvetana Paraskova for Oilprice.com

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Tom Nolan    + 2,441

TN

https://oilprice.com/Energy/Natural-Gas/Natural-Gas-Prices-Soar-As-Putin-Punks-Europe.html

Natural Gas Prices Soar As Putin Punks Europe

By ZeroHedge - Nov 08, 2021, 12:00 PM CST

  • Natural gas prices fell in late October after Russian President Vladimir Putin promised to raise volumes to Europe by November 8th
  • Gas prices could be set to spike this week as there as gas volumes remain subdued

In late October, the market rejoiced and nat gas prices puked (even as we warned this was just the latest joke the Kremlin was playing at gullible Europe's expense) after news that Russian President Vladimir Putin had asked Gazprom to "gradually" raise volumes to Europe starting November 8. So fast forwarding to November 8, i.e., today when not only is there no gas being shipped to Germany via Russia's anchor Yamal pipeline as of today...

1636391408-o_1fk08eirk1a7p1tp01rqe1l811m

... but there are there no signs the continent will get any relief any time soon, with Gazprom moments ago tightening the proverbial (and literal) squeeze on Europe's gas supply:

 
  • GAZPROM DIDN'T BOOK EXTRA GAS PIPELINE CAPACITY FOR TUESDAY
  • GAZPROM OPTS AGAINST SENDING MORE GAS TO EUROPE VIA UKRAINE
  • NO PIPE SPACE BOOKED TO SHIP EXTRA GAS INTO GERMANY'S MALLNOW.

Today's squeeze follows a supply shock on Sunday, when no extra capacity to send additional supplies to Europe was booked in auctions. That’s a disappointment for traders who had been counting on Gazprom to follow Putin’s orders to ease the continent’s supply crunch.

Oops.

Natural gas prices have more than tripled this year as Europe started the heating season with the lowest inventories in more than a decade. Russia had been keeping supplies capped, but traders were hoping for relief after Putin ordered Gazprom to send more gas to Europe from Nov. 8, when domestic storage sites were set to be full. Meanwhile, after peaking above €160 then tumbling back to €60, Dutch nat gas futures have resumed their steady climb again as the prospect of a freezing European winter once again gets all too real.

1636391417-o_1fk08eru916qb1g9iij116lg2j7

"If Russia does what Putin said they will do, then there will be a big relief,” Frank van Doorn, head of trading at Vattenfall, said in an interview at the Flame gas conference in Amsterdam last week. “If there is no additional gas coming on Monday, we could see a significant price spike.”

Precisely that spike is tarting to emerge.

Another sign that Europe won’t see any relief on Monday is the result of a series of auctions for pipeline capacity. Gazprom didn’t book any of the space offered at the Sudzha and Sokhranovka entry points on the border between Russia and Ukraine. No extra capacity was booked either for the Mallnow station in Germany, which handles Russian gas through Belarus and Poland. And then, as noted above, on Monday Gazprom once again opted against sending more gas to Europe via Ukraine.

As Bloomberg notes, shipments through those routes have been far below capacity so far this month. To make matters worse, some Russian gas was flowing from Germany eastward to Poland for the second time since last weekend, the reverse of the normal direction.

1636391425-o_1fk08f3u51fkf12v6rhor0j98t8

In any case, European gas prices will likely spike again in coming days: without the volumes promised by Putin, there’s concern the market could soar again, with storage levels on the continent well below normal as the winter heating season gets underway.

Indeed, as Goldman wrote late on Sunday, after the initial $8/mmBtu sell-off in TTF to under $22/mmBtu following Russia’s President Putin’s statement last week that Russia would increase gas sendouts to Europe from the 8th of November, TTF prices have recovered to $25/mmBtu, as uncertainty of supply remains.

And while Goldman believes that Russia will "likely increase ?ows to NW Europe from this week to some extent," the bank does not expect an immediate full normalization of ?ows and, hence, "we believe price-induced demand destruction remains necessary to balance storage in the coming months."

1636391439-o_1fk08fgmb1j01d7g241okkf1t8.

Speci?cally, as Goldman concludes, "if Yamal ?ows do not average at least 60 mcm/d from this week, which it clearly won't, Goldman believes TTF will recover to $30/mmBtu to constrain gas demand, especially given that current NW Europe weather forecasts point to the third week of November being signi?cantly colder than average."

And while soaring prices are a nightmare to Europe's freezing citizens, it is a blessing to the nation that clearly controls Europe's heat for the next 4 months.

putin%20popcorn.jpg?itok=XnNlgtdq

By Zerohedge.com

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Andrei Moutchkine    + 828

Andrei Moutchkine

On 11/7/2021 at 1:12 AM, Tom Nolan said:

https://www.yahoo.com/news/russian-gas-flows-via-yamal-120719332.html


 

Sat, November 6, 2021, 7:07 AM

Russian gas flows via Yamal-Europe pipeline to Germany halted again

MOSCOW/FRANKFURT (Reuters) - Gas flows through the Yamal-Europe pipeline westbound into Germany have stopped again and are flowing in the opposite direction back towards Russia, data from German pipeline operator Gascade showed on Saturday.

The reversal of gas flows through one of the three major pipelines carrying Russian gas into western Europe is the second time the situation has developed in a matter of days. In the past week benchmark European gas futures rose as much as 23% due to the halting of westward flows.

The latest switch comes amid accusations from some regional politicians that the Kremlin is restraining supplies in order to pressure Germany and the European Union to approve the Nord Stream 2 pipeline - currently undergoing licensing procedures in Germany.

Russia has denied this and promised additions to the west from Nov. 8 once its own stocks have been replenished.

Gascade data on Saturday showed entry flows at the Mallnow metering point were zero at 1000 GMT, having been in that condition for three hours, after standing at an hourly volume of more than 3,000,000 kilowatt hours (kWh) since Thursday.

Exit flows at Mallnow - or requests to transport gas into Poland from Germany - stood at 1,442,934 kWh/hour for the second hour running, the data showed.

Flows into Germany at Mallnow, which lies on the Polish border, had been halted last Saturday and were only resumed on Thursday.

A spokesperson for Polish gas company PGNiG said Poland was receiving gas from both directions.

"Everything is fine from our point of view. The contract with Gazprom is being executed," the spokesperson said, referring to the Russian gas major.

Russia has said it is concentrating on replenishing domestic stocks before releasing any more gas to Europe. It expects its own replenishment process to finish by Nov. 8.

The level of Yamal flows between Poland and Germany and their direction are managed by Gaz-System in Poland and Gascade in Germany, based on customers' requests. One analyst said last week the reversal of flows pointed to demand from Poland given generally high prices and tight supplies of liquefied natural gas (LNG).

PGNiG's contract with Gazprom provides for supplies of around 10 billion cubic meters (bcm) of gas a year, out of which at least 8.7 bcm under a take-or-pay agreement.

If there is a chance to buy cheaper gas from the West and Poland has already bought enough gas under its agreement with Gazprom, it can switch to deliveries from the West, traders have said.

(Reporting by Alexander Marrow in Moscow, Vera Eckert in Frankfurt, and Anna Koper in Warsaw; Editing by Gareth Jones and David Holmes)

Poland is buying up all the gas it can get before it gets worse. They are one of only two countries fully dependent on TTF spot prices, with the other one being Ukraine, which is too broke to do anything in advance. Worst case, they'll resell what they got to Ukraine at a premium.

  • Upvote 1

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