No significant metaphorical blog this week, just a theoretical meandering and a bit of crankiness.

This week saw a number of energy-related stories draw lots of attention here in Canada, probably the most significant one being Democratric Presidential hopeful Hilary Clinton finally coming off the fence and saying that she was against approving the completion of the Keystone XL pipeline. The announcement created a big flap and firmly placed 1,800 km of pipeline into the middle of the U.S. election campaign since, as much as the Democratic Party likes to posture against the pipeline, the Republicans are just as eagerly in favour of it.

There was much agonizing in the Canadian press about this being the final nail in the coffin for the project etc., etc. to which I say maybe. Or maybe not. Or maybe for a while.

First, let’s take a step back for a second and consider where this is coming from, because a lot of it is politics.

Hilary Clinton, while currently a front-runner, is far from securing the democrat nomination and is facing a significant challenge from the more progressive side of her party from Bernie Sanders (what is he – 100 years old? I remember Sanders ads growing up in Montreal), so she needs desperately to shore up her support and prove her environmental bona fides. In addition, the donor base to the Democratic Party is heavily made up of individuals, PACs and foundations that have strong environmental biases, including the infamous Tom Steyer, who is a major power broker, influencer and agenda setter of the Obama adminstration.

At the same time, the pesky email controversy regarding the embassy attack in Libya continues to wear away at Clinton’s credibility with both the American public and the Democratic base such that many question whether that could be an Achilles heel in a presidential election. In that context, it is easy to see that coming out in favour of the Keystone XL (or even remaining on the fence) is the equivalent of political suicide for the Clinton campaign. And panning the Keystone expansion is an easy target, because it doesn’t really hurt anyone in the U.S. since it targets that big, stinky, Mordor-like mess of “dirtiest oil on the planet” (oh, except California) in that irrelevant neighbour that isn’t Mexico.  Any expectation of her to act otherwise is silly.  The timing of an announcement such as this is interesting, given that there is a Canadian election occuring at the same time, so it could be viewed as interference but in all likelihood, she had other factors as motivation. Interesting follow up as well on announcing the next day the intiative to create a working group from Canada, Mexico and the United States to work together on carbon initiatives (which ironically already exists).

At any rate, such is the political football that is Keystone XL. Suffice it to say that candidate Hilary may not like the project, but it’s a long time to November 2016, there are other candidates for the Democratic nomination and there is a whole other party to compete against in the presidential election and we know where they line up on the discussion. And ultimately, the U.S. election will likely be fought on pretty much any issue but a pipeline and in the current climate Clinton 2 vs Bush 3 (just guessing here) is a toss-up.

As this is going on, the U.S. continues to debate the lifting of the export ban on oil, even as the economics of doing so become less attractive as WTI prices approach Brent and U.S. production continues to decline along with storage. Given that under the most optimistic scenarios tight oil and deep water production in the U.S. is expected to peak in the 2020’s, lifting the export ban might seem a little counter-intuitive from a North American energy self-sufficiency perspective, but from the Canadian side, the mantra should be “bring it on!”

In fact, perhaps Canada should start meddling in U.S. affairs and actively encourage the lifting of the export ban, secure in the knowledge that when other sources begin to deplete (exacerbated no doubt by aggressive pursuit of short term financial gain through exports) the kooky, ice-bound, not currently walled-off neighbour to the North will still be there with their 170 some odd billion barrels of heavy oilsands crude – the only long term play in North America.

Not only that, but there are a lot of refineries in the Gulf Coast region that are specifically designed to process that heavy oil and, oh yeah, guess what? We also have a shovel ready project called Keystone XL to ship some of that oil.

Happy anniversary to my lovely wife of 16 years who tells me she sometimes reads this far in the blog and happy birthday to my sister (I will now find out if she even clicks through the email).

Prices as at September 25, 2015 (September 18, 2015)

The price of oil was choppy during the week before settling up for the week

• Storage posted a surprise decrease
  • Production was flat
  • Markets reacted positively to the fundamentals
  • The rig count decreased
• Natural gas lost gorund during the week primarily on warmer weather

• WTI Crude: $45.53 ($44.93)
• Nymex Gas: $2.562 ($2.605)
• US/Canadian Dollar: $0.7503 ($ 0.7565)

Highlights

• As at September 18, 2015, US crude oil supplies were at 454.0 million barrels, a decrease of 1.9 million barrels from the previous week and 96 million barrels ahead of last year.
• The number of days oil supply in storage was 27.8, ahead of last year’s 21.9.
• Production increased marginally to 9.136 million barrels per day from 9.117 with lower 48 flat while Alaska prodcution increased marginally. Production last year at the same time was 8.731 million barrels per day.
• As of September 18, 2015, US natural gas in storage was 3,440 billion cubic feet (Bcf), which is 4.5% above the 5-year average and about 16% higher than last year’s level, following an implied net injection of 106 Bcf during the report week.
• Overall U.S. gas consumption decreased by 0.1% this week. It is expected the consumption will increase markedly in the coming weeks as natural gas power replaces nuclear as those plants go through their annual shut-down cycle
  
• Oil rig count at September 4 was down to 640 from 644 the week prior.
• Natural gas rigs drilling in the United States was down to 197 from 198.
• As of September 21, the Canadian rig count was off amrginally to 172 (23% utilization), 110 Alberta (21%), 37 BC (44%), 20 Saskatchewan (16%), 5 Manitoba (26%)). Utilization for the same week last year was 50%.

Drillbits

• Market speculation is rampant on who will be the buyer for a chunk of ConocoPhillips assets in Alberta
• A semi-annual reset of borrowing bases for U.S. drilling companies is under way, rumoured to be utilizing a reference price of $48 a barrel. It is expected that some companies will see their lines of credit cut by as much as half with the avergae being 40%. It is expected that this may lead to a new round of insolvencies in the U.S.
• Total Energy Services announced its intention to launch an unsolicited takeover bid for Strad Energy Services. While this was exciting for a day or so, Total ultimately indicated they would not proceed
• Canada Election Watch
  • New polls show the Conservatives and Liberals pulling ahead of the NDP in the all important Ontario region
  • Justin Trudeau appeared at many campaign events in a t-shirt and flexed a lot, proving that us sheeple respond much more positively to virility than substance
  • Both the NDP and the Liberals embraced Hilary Clinton rejecting Keystone and enthusiastically supported the initiative to have a North America wide approach to climate change. The Harper campaign declined to comment on the pipeline file and pointed out that the North America working group already existed
• Drumpf Watch – still ahead in the polls, but it’s really not looking good as his popularity looks like the current production profile of many shale gas plays – peaked and about to hit a rapid decline? Rumour has it that Drumpf will be mocked on this week’s episode of the South Park.