The 50,000 bpd gasoline-making unit at the Point Breeze section of the Philadelphia Energy Solutions refinery was still running on Friday after a compressor issue caused flaring, according to a source familiar with the plant's operations. Energy industry intelligence service Genscape reported the unit was shut down on Friday afternoon. The company did not immediately respond to requests for comment.
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Genscape Inc. analysts Vanessa Witte and Nicole McMurrer on Friday said the region lost about 120 MMcf/d of production because of an explosion last month that forced part of the Leach XPress line to be shut in. Immediately after the explosion, “impacts were uncertain, but due to the recent in-service of the pipeline path, almost all production was able to be routed onto other pipelines,” Witte and McMurrer said. Further output from Leach XPress would add to what has been a “meteoric rise” in Lower 48 dry gas production this year. At least, that’s how RBN Energy LLC analyst Sheetal Nasta described the 3 Bcf/d surge since April that has seen production reach nearly 82 Bcf/d month-to-date. That’s roughly 9 Bcf/d (12%) higher year/year (y/y), Nasta said.
"The biggest problem is we are on pace this year to have the biggest year-over-year production growth in history," said Randall Collum Jr., managing director of natural gas and upstream analytics at Genscape, Inc. "A lot of it is driven by associated gas — close to 2 billion cubic feet per day of growth out of the Permian Basin alone — so the reason prices can't get above the $3 level is because the supply growth has been tremendous." Collum said there are some projects intended to carry some of the Permian's gas into Mexico, but added those projects still need to be built on the Mexico side and that work has been delayed. Another significant pipeline project that could help the Permian and producers in Oklahoma's STACK and SCOOP fields, Cheniere's Midship Pipeline, continues to wait for final approval from the Federal Energy Regulatory Commission so construction can begin. Once operational, the line will give producers in those areas a direct pathway of export to overseas customers. While Collum said producers might be frustrated that natural gas prices remain stuck below $3, he also said current pricing would be much worse were it not for the exports growth.
While most pricing locations across the country traded in line with the Nymex futures curve, Permian Basin hubs posted substantial increases late in the week as regional production declined considerably. Genscape Inc. on Wednesday said it was seeing continued production drops in the Texas portion of the Permian Basin as well as in Oklahoma, which appeared to be related to a maintenance event on the Atmos Intrastate Pipeline at its Maryneal Compressor Station, which sits on the border of the zones that bring gas from the western area to the eastern part of the pipeline system. Early Wednesday (July 11), Permian Texas production estimate decreased around 770 MMcf/d day/day, with only about 65 MMcf/d revised upward by Thursday morning. Production along the El Paso Natural Gas Pipeline and Northern Natural Gas Pipeline was shut-in at processing plant meters near the Atmos Waha header. Deliveries to Gulf Crossing in East Texas dropped 200 MMcf/d, it said. “Atmos has not publicly stated when the maintenance will conclude, however, rumors around the market indicate a late August end date,” Genscape natural gas analyst Nicole McMurrer said.
Brent crude strengthened late on Thursday, recouping some of its losses from the previous session, as market focus returned to concerns about spare capacity following a warning from the International Energy Agency (IEA). Brent crude oil gained $1.05 a barrel to settle at $74.45, rebounding from a session low of $72.67. On Wednesday, the global benchmark slumped $5.46, or 6.9 percent, its biggest one-day fall in two years. U.S. crude settled down 5 cents at $70.33 a barrel, after losing 5 percent the previous session. The IEA cautioned the world's oil supply cushion "might be stretched to the limit" due to production losses in several different countries. Ongoing concerns about supply disruptions from OPEC member Venezuela drove crude higher, said John Kilduff, a partner at Again Capital Management. "Production issues there today were a reminder that those issues are ongoing," he said. Several countries have seen their output fall in recent weeks, including Venezuela, Norway, Canada and Libya. "Rising production from Middle East Gulf countries and Russia, welcome though it is, comes at the expense of the world's spare capacity cushion, which might be stretched to the limit," the Paris-based IEA said in its monthly report. "This vulnerability currently underpins oil prices and seems likely to continue doing so," the agency said. At the same time, the U.S. has ramped up its rhetoric on sanctions against OPEC member Iran, contributing to rising prices, Kilduff said. Wednesday's sharp selloff was galvanized by worries over rising trade tensions between the United States and China and news that Libya had brought some production back online. The declines have not spurred buyers to return yet, after traders sold speculative positions on Wednesday. Libya's National Oil Corp said it would reopen four oil export terminals, ending a standoff that had shut down most of Libya's oil output; the reopening will bring back up to 850,000 barrels per day of crude production. The market also expects stockpiles at the U.S. oil delivery hub to fall, traders said, citing energy information provider Genscape. Supply to the U.S. market has also been squeezed by the loss of some Canadian oil production. Brent still may recover to above $80 a barrel by the end of the year, said Brian LaRose, a senior technical analyst at ICAP-TA. If Brent pulls to below $70 a barrel, that reduces the possibility the market will recover as quickly, he said.
Points across most regions generally saw small adjustments on day-ahead deals Thursday, with a number of regional averages finishing within a nickel of even. In Louisiana, Henry Hub finished flat at $2.84, while ANR SE added a penny to $2.73. Starting Monday (July 16) and extending until July 20, “ANR will reduce operational capacity through its ‘SWML Northbound’ location from 689 MMcf/d to 564 MMcf/d due to planned maintenance at its Havensville and Birmingham compressor stations,” according to Genscape Inc. analyst Vanessa Witte. “Maintenance on this leg has been ongoing since April of this year, and isn’t scheduled to end until September, with various capacity reductions during this time. “Average nominations through SWML have been 606 MMcf/d for the prior 30 days, however utilization has averaged 92%, indicating scheduled capacity is artificially low due to the fluctuation in operational capacity due to maintenance,” Witte said. “As the Midwest area approaches CDDs in the 16-17 range for this weekend and into the early part of next week, according to Genscape meteorologists, northbound flow restrictions could put pressure on ANR’s SEML to fulfill cooling demand.” In the Midwest and Midcontinent, prices eased slightly Thursday. ANR SW fell a penny to $2.49, while Joliet finished even at $2.72.
Focusing on bearish factors, the market shrugged off warnings from the IEA that there is potentially a spare capacity crunch. "Rising production from Middle East Gulf countries and Russia, welcome though it is, comes at the expense of the world's spare capacity cushion, which might be stretched to the limit," the Paris-based agency said in its monthly report. "This vulnerability currently underpins oil prices and seems likely to continue doing so," the IEA added. The market also brushed off bullish data from information provider Genscape, which reported that inventories at the Cushing, Oklahoma delivery hub had fallen 929,399 barrels per day from July 6 to July 10, traders said. Supply to the U.S. market, particularly Cushing, has also been squeezed by the loss of some Canadian oil production.
The NOC suspended its contractual obligations for loading at oil ports last week. Called force majeure, the suspension followed port blockades imposed by the Libyan National Army in violation of U.N. Security Council resolutions giving the NOC control. Storage tanks at the Ras Lanuf oil port suffered catastrophic damage after militants stormed the facility in June. Reconstruction efforts could take several years, especially considering the tense security situation in the country. The company said the loss to daily production was about 850,000 barrels of oil, about 80 percent of the country's pre-conflict production this year. Energy market data company Genscape estimated production was closer to 508,000 bpd, noting reporting on Libyan production has been highly volatile. Production woes in Libya that emerged in June added a premium to the price of oil moving through a market with little extra capacity to buffer against supply-side shocks. The price for Brent crude oil, the global benchmark for the price of oil, was down more than 2 percent before the start of U.S. trading on Wednesday.
Genscape Inc. observed a drop in production out of the Permian Basin and Oklahoma Wednesday morning, apparently related to maintenance on the Atmos Intrastate Pipeline at the Maryneal Compressor Station, “which sits on the border of the zones that bring gas from the West to the East area of the pipeline system,” according to analyst Nicole McMurrer. On Tuesday morning the firm’s Permian Texas production estimate “decreased around 770 MMcf/d day/day, with only about 65 MMcf/d revised upwards” Wednesday morning, McMurrer said. “Production along El Paso Natural Gas Pipeline and Northern Natural Gas Pipeline was shut-in at processing plant meters near the Atmos Waha header. Deliveries to Gulf Crossing in East Texas dropped around 200 MMcf/d. Atmos has not publicly stated when the maintenance will conclude, however rumors around the market indicate a late August end date.” Prices were mixed in the Northeast Wednesday. Algonquin Citygate added 13 cents to $2.69 as Transco Zone 6 New York backed off 3 cents to $2.92. “A brief minor swing to lighter national demand will occur the next two days as a weak cool front sweeps across the Northeast with highs easing back into the 70s to mid-80s,” NatGasWeather said. “However, a swing back to strong demand is expected this weekend into early next week as the hot ridge re-strengthens to again dominate most of the country besides the Northern Plains.” Genscape’s supply and demand tally shows cooling demand dropping off week/week, according to analyst Margaret Jones. “Last week Genscape’s gas demand for power estimate averaged 37.1 Bcf/d, topping out” last Thursday at 39.2 Bcf/d. “Lower 48 population-weighted” cooling degree days “for the end of this week have backed off considerably versus last week (and relative to last week’s forecast), and total estimated power demand this week is estimated at 35.6 Bcf/d” as of Wednesday morning, Jones said. “There is some potential for temperatures and demand to climb again next week, with current expectations putting average power demand at 36.7 Bcf/d for the week...potentially spiking to 38.7 Bcf/d on Monday.”