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Shale: An Existential Threat From Within

Shale: An Existential Threat From Within thumbnail

1. Petrochemicals underperform oil


– The oil majors have undertaken massive investments in petrochemical projects, viewing plastics as a more durable investment than simply producing crude oil. With the spread of electric vehicles and peak demand looming, the soaring use of plastics is seen as one of the last refuges for oil companies.

– But chemical prices have underperformed oil and natural gas liquids since 2014, according to Bank of America Merrill Lynch. “The petchem market has struggled to regain the premium it commanded over oil and NGLs ever since,” the bank said. “More recently, as oil rebounded from 4Q18 lows, NGLs and petchems continued to decline.”

– Production of oil, gas and natural gas liquids has skyrocketed, but much of it remained trapped in the U.S. As a result, companies have invested in major petrochemical capacities, such as ethane crackers. But the products they produce – ethylene and polyethylene – are also somewhat trapped.

– “US export and downstream infrastructure has stranded NGLs, causing prices to collapse, particularly for ethane, which is now trading around $0.16 per gallon, down nearly 50% from the start of the year and approaching natural gas value,” Bank of America said.

– The infrastructure bottlenecks will likely be ironed out over the next few years, but the economic deterioration now has demand up in the air.

– “In light of the recent deterioration in economic activity, we are concerned that demand growth is at risk of another slowdown given current market conditions,” Bank of America said. “One consultancy suggests ethylene demand growth could fall by nearly 50% this year.”

2. Well interference a major problem for shale


– The Wall Street Journal reported on the poor results from Encana’s (NYSE: ECA) “cube” development, in which dozens of wells are drilled from one location at varying depths.

– The test was supposed to lead to greater productivity, more output while spending less due to economies of scale. But well interference has made the wells much less productive than similar wells spaced further apart.

– Encana’s 33-well cube project offers clear results. Each well may end up producing 300,000 bpd over 30 years, or about half of what Encana said a typical well produced in 2017.

– As a result, shale drillers may need to space out wells more, which ultimately means that they will run out of acreage sooner. “[S]ome executives and analysts have warned that U.S. production could peak far sooner than expected,” the WSJ said.

3. Wind and solar competitive with gas


– Expiration of subsidies for solar and wind are looming over the next few years, but solar and wind are already competitive with natural gas on an unsubsidized basis. In some cases, renewable energy is the cheapest option.

– With coal in terminal decline and nuclear power not far behind, new capacity additions in the U.S. electricity grid have been dominated by solar, wind and natural gas over the last five years.

– “We expect shale gas growth to continue to support natural gas power generation capacity additions, but natural gas must compete with wind and solar for new build generation market share,” Bank of America wrote in a report.

– Over the next 18 months, a rush of wind could come online as developers seek to benefit from expiring wind subsidies.

4. Soybeans lagging, corn surprises


– According to U.S. Department of Agriculture data, U.S. 2019 corn acreage planted reached 91.7 million acres at the end of June, only 1.1 million acres less than farmers had planned.

– This year, farm country has been lashed by floods, extreme weather and the depressing effects of the U.S.-China trade war. The floods in particular severely delayed planting.

– While farmers managed to keep corn plantings in line with expectations, soybeans lagged farther behind, down more than 9 million acres from 2018 levels.

– Corn prices had surged in the last few months on fears of shortages, but prices crashed upon release of this data in late June. In contrast, soybean prices surged.

– That isn’t the end of the story, however. “Market focus is now likely to shift to crop yields, and the excessively wet weather implies some real damage to corn yields,” Standard Chartered wrote in a note. “While it may be tempting to adopt a bullish stance on soybeans and bearish on corn-based on the Acreage report, we caution that significant uncertainty remains on final acreage and yields.” More data will be released in August.

5. Worrying contraction in global manufacturing


– Manufacturing data from a growing list of countries shows a pronounced decline in activity.

– The rate of decline is the fastest since 2012, according to IHS Markit. Only 12 of 30 countries covered by the consultancy had improved conditions, the lowest number in over six years.

– Worse, contractions are occurring in the manufacturing powerhouses – the Eurozone, the UK, China, Japan, the rest of Asia. The U.S. is “stagnant.”

– Weak diesel demand can be tied to the dip in manufacturing and industrial activity.

– Crude oil has fallen sharply in recent weeks as concern over declining demand and an economic downturn outweigh geopolitical risk in the Middle East.

6. Gold or palladium, which is more precious?


– Palladium prices have consistently traded higher than gold this year, making it the most expensive precious metal. “The two metals have been in a race for the most precious for some time,” R. Michael Jones, president and chief executive officer of Platinum Group Metals Ltd., told MarketWatch. “Palladium is still winning.” Prior to 2019, palladium hadn’t traded above gold in more than a decade.

– Palladium is an important metal used in catalytic converters, used to reduce pollutants from cars and trucks. The rush to clean up air pollution has pushed up prices. Palladium is up 30 percent this year, while gold is up 11 percent.

– At the same time, both have benefited from a weaker dollar and a more dovish turn from the U.S. Federal Reserve.

– “Palladium fundamentals continue to underpin the market,” said Joni Teves, a precious-metal strategist at UBS Group, according to the Wall Street Journal. “And although global car sales, especially in China, have been weak, tighter emissions standards are leading to higher loadings” of palladium inside catalytic converters.

7. Philadelphia refinery explosion impacts East Coast gasoline


– The 335,000-bpd refinery in Philadelphia that suffered from a massive explosion last month is slated to be shut down completely and permanently.

– The closure would decrease the number of refineries on the East Coast to just 7, according to the EIA, with a combined operating capacity of 889,000 bpd. It would slash East Coast gasoline supply by 160,000 bpd and distillate capacity by 100,000 bpd.

– The East Coast will need to import from other areas to make up for the lost output.

– According to Bloomberg, imports of refined products from Canada, Europe and the U.S. Gulf Coast will fill the gap. But the Gulf Coast is hampered by the Jones Act, which requires fuel shipped between American ports to run on U.S.-flagged ships.

29 Comments on "Shale: An Existential Threat From Within"

  1. Outcast_Searcher on Sat, 6th Jul 2019 12:29 pm 

    So lots of choices for energy. Several at competitive prices. Clean energy becoming competitive with NG, even without subsidies.

    With the rise of EV’s of all stripes, that makes our oil last much longer. If there is less petrochemical demand globally, that also makes our oil last longer.

    Clearly from Chart 1, the big picture is that NGL’s, WTI, and Petrochem prices are highly correlated. This isn’t news at all.

    Instead of “existential threat”, this article sounds like “very good news overall”.

    But I know — the message of permadoom must go on.

  2. print baby print on Sat, 6th Jul 2019 3:40 pm 

    no OS we all must believe in fairy tails, or at least pretend that we belive in ft

  3. dave thompson on Sat, 6th Jul 2019 5:06 pm 

    Renewable energy schemes rely on cheap FF to be produced and put into production. There are no solar plants or wind turbine factories that produce and replicate these renewable energy schemes with said renewable energy production, from solar panels and wind turbines.

  4. makati1 on Sat, 6th Jul 2019 6:12 pm 

    No mention of the destruction of the US’ water supplies, which is much more important then $$$$.

  5. JuanP on Sat, 6th Jul 2019 6:21 pm 

    Mak, why are you so dense? Can’t you see this is a war going on? Shit or get off the pot

  6. makati1 on Sat, 6th Jul 2019 6:40 pm 

    Davy, JuanP is not rude like you are. You are the “shit on the pot” guy. So full of it your eyes are brown. How’s that farm….er…swamp these days? LMAO

  7. JuanP on Sat, 6th Jul 2019 6:45 pm 

    Good mak, I always knew you were a true friend. Thanks for being on my side

  8. Davy on Sat, 6th Jul 2019 6:46 pm 

    It’s real hot here today makati, clouding over this evening with a risk of thunderstorms and severe flooding. How’s things going on your farm?

  9. makati1 on Sat, 6th Jul 2019 6:50 pm 

    About time the “empire” is taken down. If the Tax slaves won’t rise up and do it, Mother Nature will. I hope gas goes to $10/gallon and the Great Leveling speeds up. Is 2020 the end of the US’ dollar? Total US isolation? We shall see.

    GO TRUMP! TRUMP IN 2020! Take it down! You can do it! Just do it! LMAO!

  10. makati1 on Sat, 6th Jul 2019 6:55 pm 

    Very well Davy, thanks. We are constantly planting and improving our situation. It is another sunny Sunday morning here with a high about 90F and maybe a shower late in the day.

    No flooding possible as the farm is about 200 feet above the river. Our current town home is also well above flood levels but the river is still low. No typhoons in sight. Thanks for asking.

  11. makati1 on Sat, 6th Jul 2019 7:24 pm 

    Juan, I am 100% behind your effort at censoring Davy. Between anonymous and you and I we will get it done

  12. JuanP on Sat, 6th Jul 2019 7:29 pm 

    Mak, we have a special connection. It is similar to the special relationship boney joe and I have. Together we cannot fail.

  13. makati1 on Sat, 6th Jul 2019 7:56 pm 

    Davy, try to do a better job of imitation. I ALWAYS address JuanP with his FULL name, JuanP, not Juan. Too much moonshine?

  14. No on Sat, 6th Jul 2019 7:58 pm 

    It’s actually not about having the best per-well results, but the best per unit results. In NPV, not revenue or cost.

  15. Boney Joe identity theft on Sat, 6th Jul 2019 8:04 pm 

    makati1 on Sat, 6th Jul 2019 7:56 pm

  16. CoCoa Puffs on Sat, 6th Jul 2019 8:07 pm 

    This is what happens when Davy aka “Cocoa Puffs” is holed up in mommy’s single wide out by the dump alternating between cooking-up on the stove, (warning: watch out for fires, cocoa puffs) smoking cocoa puffs, and logging into I almost forgot to add “farming” as well-LOL.

    Makes sense Davy “cocoa puffs” is living in the Missoury county recognized as ground zero for crystal production.

  17. Davy on Sat, 6th Jul 2019 8:27 pm 

    I am spending less time on this lame unmoderated forum to concentrate on my own blog. I do want to thank all those who have attacked me with giving me material for growth. I have saved the best of my comments for my new blog. I have years worth of material. I have enjoyed moderating the worst of you and neutering your selfish useless agendas. I will still be here it is just I will be spending more time putting out a blog. I don’t expect much of a following with my blog. This is more a personal effort to assemble what I have learned over the last 10 years of formulating my REAL Green Deep Adaptation. Many of my ideas and lifestyles are not mine. I barrow what ever works. I do not claim anything either. It is an open source effort. Anyone can take what I am offering and use it however you want. Take my title if you like. For the stalkers here I hope you find my blog and visit the comment forum. It will be only lightly moderated to prevent juanpee identity theft and excessive cloggo spamming. LOL. There will be a prize for juanpee and annoymouse if you can stalk my blog. Double LOL. Anyway fuck my enemies and many thanks to those who contributed to my metamorphous.

    I guess I could have joined the moderated section at PO dot com, but I knew I’d get my ass permanently banned. I’ll try not to let the door smack me up the backside on the way out.

    Goodbye to ALL of you dumbasses.

    June 10, 2019

    I’m still here. I tricked you.

  18. Truth Buster sock puppeteering on Sat, 6th Jul 2019 8:28 pm 

    CoCoa Puffs on Sat, 6th Jul 2019 8:07 pm

  19. Anonymouse on Sat, 6th Jul 2019 8:31 pm 


  20. JuanP on Sun, 7th Jul 2019 6:20 am 

    Delusional Davy has reached a degree of insanity that is unprecedented on this forum, and that is saying quite a lot. Only in the land of the fee and the home of the slave could a dangerous lunatic like him be allowed to roam free. Little wonder Americans are constantly raping and murdering each other and everyone else. In any reasonable place Davy would have been institutionalized a long time ago, but the USA is full to the brim with demented bullies armed to the teeth. But, hey, they hate you for your freedoms! ROFLMFAO!

  21. JuanP on Sun, 7th Jul 2019 6:27 am 

    Jeffrey Epstein Has Been Arrested For Sex Trafficking of Minors
    Jeffrey Epstein has been arrested for allegedly sex trafficking dozens of minors in New York and Florida between 2002 and 2005, according The Daily Beast. Epstein is reportedly due to appear in court on Monday, about 12 years after the 66 year old received a slap on the wrist for allegedly molesting dozens of underage girls. The new charges claim that “Epstein sexually exploited dozens of underage girls in a now-familiar scheme: paying them cash for ‘massages’ and then molesting or sexually abusing them in his Upper East Side mansion or his residence in Palm Beach.” Epstein’s abuse allegations date back more than a decade and have been recently brought to light by his victims and authorities. Up until now, and even in the midst of the #MeToo movement, Epstein has been able to avoid any type of meaningful jail time. In an era where #MeToo has toppled powerful men, Epstein’s name was largely absent from the national conversation, until the Miami Herald published a three-part series on how his wealth, power and influence shielded him from federal prosecution. For years, The Daily Beast reported on Epstein’s easy jail sentence and soft treatment by the U.S. Attorney’s Office, which ultimately scrapped a 53-page indictment against Epstein. An earlier version of Epstein’s plea deal included a 10-year federal sentence—before his star-studded lawyers threatened to go to trial in a case prosecutors feared was unwinnable, in part because Epstein’s team dredged up dirt on the victims, including social media posts indicating drug use. Employees and associates of Epstein allegedly recruited the girls for Epstein, and some victims also became recruiters themselves. The girls were as young as 14 and police allege that Epstein knew they were underage. Epstein’s attorney, Martin Weinberg, declined to comment Saturday night. Epstein has been accused of transporting young women on his private jet to facilitate the abuse, according to his alleged victims. For more background on the allegations already made in lawsuits, and in the public domain against Epstein, read the full Daily Beast article here. Recall, back in 2017, we wrote about former secret service agent Dan Bongino threatening to reveal new details about Bill Clinton’s 26 documented trips aboard notorious pedophile Jeffrey Epstein’s private jet, nicknamed the “Lolita Express.” Bongino dropped a ominous-sounding threat at the time: “…people know things not yet released publicly about your messiah Hillary. Don’t poke the bear loser, you may not like the results. #Epstein #EmailGate,” tweeted Bongino. For those who are unfamiliar with his story, Jeffrey Epstein is a New York City financier who pled guilty in 2008 to a single count of soliciting sex from an underage girl. He eventually spent 13 months in prison and was forced to register as a level three sex offender (considered the highest risk of re-offending) though stories of his lust for girls as young of 12 have spread like wildfire in recent years. Epstein allegedly installed beds in his custom jet, and also purportedly filmed powerful men during romps with underage girls to obtain materials for blackmail. According to Fox News, Epstein allegedly had a team of traffickers who procured girls as young as 12 to service his friends on Epstein’s “Orgy Island,” an estate on Little St. James in the US Virgin Islands. Epstein now lives permanently in the US Virgin Islands. Clinton chose to continue his association with Epstein even after the lurid trial, according to the Alliance to Rescue Victims of Trafficking, “everyone within his inner circles knew was a pedophile.” Speculation that Clinton was involved with Epstein was noted in “Bill Clinton Was Here”: The Elite One-Percent’s ‘Orgy Island’ Exposed.” An article by the now defunct Gawker titled “Flight Logs Put Clinton, Dershowitz on Pedophile Billionaire’s Sex Jet” added to speculation about Clinton’s troubling relationship with the convicted sex offender. Back in 2017, we revealed the full flight logs from Epstein’s “Lolita Express”.

  22. The Truth Shall Set You Free on Sun, 7th Jul 2019 6:32 am 

    Who’s Jeffrey Epstein and who gives a shit, except you DavySkum.

    Are you trying to alert us that your truck stop escapades involve far more than fat and hairy truckers?

  23. Davy on Sun, 7th Jul 2019 6:33 am 


    You really are a smart one. What clued you in? Was it my often repeated moto:

    Yummy, yummy, yummy, I have cum in my tummy.

  24. Davy on Sun, 7th Jul 2019 6:34 am 

    You are so dramatic juanpee and this drama reminds me of people with dysfunctional personalities. You are obviously triggered by my slapping your oversized pride with moderation. You can’t stand the fact I have slaughtered you on multiple occasions with on topic debate. You are a low life Miami Beach illegal alien who for some reason thinks he is special. Miami Beach breeds disgusting people like you. People reflect their environments and this is why you are so disgusting. Miami Beach is a disgusting place you choose to stay in and there is a reason for this.

  25. Not Davy on Sun, 7th Jul 2019 6:35 am 

    Davy on Sun, 7th Jul 2019 6:33 am

  26. JuanP sock on Sun, 7th Jul 2019 6:35 am 

    The Truth Shall Set You Free on Sun, 7th Jul 2019 6:32 am

  27. Davy on Sun, 7th Jul 2019 9:09 am 

    I am Davyscum

    Here me rore!

  28. Obviously JuanP on Sun, 7th Jul 2019 9:55 am 

    Davy on Sun, 7th Jul 2019 9:09 am

    I am Davyscum
    Here me

  29. Duncan Idaho on Sun, 7th Jul 2019 10:42 am 

    In 1975, Brazil and China had roughly the same GDP — Brazil, obviously, having a much higher per capita GDP because of its much smaller population.

    Both countries took polar opposite directions with their economies: Brazil capitulated to the USA and followed the liberal doctrine blindly; China continued with its socialist strategy.

    Nowadays, China’s average salary is double the Brazilian average salary (so much for the “slave labor” argument…); China’s GDP is thirteen times the Brazilian; and China is a superpower, while Brazil continues to be a banana republic.

    Mao was right: for the Third World, it is the task of socialism to do the development stage that capitalism should’ve done theoretically. This is the dialectic nature of History of the 20th Century.

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