The Bakken crude price at Clearbrook, MN, has widely disconnected from the light sweet grade’s value near the wellhead, while shippers vie for limited available takeaway pipeline capacity.

Though the tariff for Enbridge’s 210,000 bpd North Dakota pipeline system is $1.48/bbl between Beaver Lodge, ND, and end point at Clearbrook, the spread between the two pricing points has been more than twice the tariff.

Beaver Lodge is a storage and gathering hub located in close proximity to North Dakota crude oil production where a spot market has formed. Spot prices at Clearbrook are usually bid up by regional refiners who purchase barrels at the longstanding locational benchmark hub for Bakken crude. From Clearbrook, Bakken barrels can be shipped to refineries in the U.S. Midwest and U.S. Gulf Coast via Enbridge’s Mainline system and adjoining pipes.

Meanwhile, the Bakken price at the Beaver Lodge hub more closely reflects the value at nearby North Dakota production fields. The Bakken price there is also pressured lower by limited entrance onto the Enbridge North Dakota pipeline system due to capacity constraints.

Volumes on Enbridge’s North Dakota pipeline have averaged at or near-capacity for years, according to Genscape data.

As of May 16, 2016, volumes on the North Dakota pipeline have averaged 201,008 bpd so far this year, just slightly above the 194,779 bpd the line averaged in 2015. Flows on the pipeline have averaged 174,791 bpd since Genscape began monitoring the line in June 2011.

Just 10 percent of the Enbridge North Dakota pipeline capacity is allotted to new shippers, while the rest is reserved for historical shippers, which are predominately Midwestern refiners, sources said. The pipeline is significantly over-nominated by shippers, sources said. Enbridge was not immediately available for comment.

The price for Bakken at “Clearbrook is just a reference point – it’s not attainable. I can’t get there. No one would let me, except for a [relatively expensive] price,” one Bakken market participant said.

Alternative takeaway pipeline options for Bakken crude are also relatively expensive, another source said.

Though capacity is coveted on the Enbridge North Dakota pipeline, an active and liquid spot market for secondary line space has not developed like it has on other pipelines, such as TransCanada’s Gulf Coast and the Enterprise-operated Seaway crude lines, which both run from Cushing, OK,-to-Texas.

In a secondary line space deal, a buyer pays the owner of the line space for the right to use it, and the owner directly schedules the loading and receipt of the product with the pipeline operator, in consultation with the buyer. A secondary line space deal on the North Dakota pipeline system would reflect line space availability demand, which would likely take into account the arbitrage value between Beaver Lodge and Clearbrook.

But, there are a multitude of alternative transportation options from Beaver Lodge with pipeline connectivity to Tesoro’s Mandan, ND, refinery and several North Dakota crude-by-rail loading facilities including Hess’ Tioga, EOG’s Stanley and Crestwood’s Epping.

The Bakken shale boom that spurred the growth in midstream infrastructure several years ago in North Dakota contributed to the fall in global crude prices, which caused narrowing key arbitrage spreads and put the brakes on crude by rail. A narrower NYMEX light sweet crude-ICE Brent futures contracts spread forced coastal refiners, which railed-in price advantage Bakken crude, to opt for foreign waterborne crudes instead.

As trading for June-injected barrels comes to a close, the market for Bakken crude at the Beaver Lodge hub in North Dakota maintained a discount to Bakken benchmark price in Clearbrook, MN, according to market sources.

The Bakken price at Beaver Lodge was assessed by Genscape on May 16, 2016 at WTI CMA minus $4.45/bbl, as trading for June-injected barrels came to an end. The Bakken at Clearbrook market was assessed at WTI CMA plus $0.10/bbl.

Looking at Genscape's weekly price assessment data, at minus $4.55/bbl, the spread between Bakken at Beaver Lodge and Clearbrook on May 16, 2016 was its widest since April 18, 2016, when it was minus $5.05/bbl, according to Genscape. The widest spread between the two pricing points was $5.75/bbl on March 21, 2016, and the spread has never been narrower than $3.00/bbl since Genscape began assessing the Bakken price at Beaver Lodge on March 7, 2016.

Pricing dynamics for Bakken at Beaver Lodge could soon change after Energy Transfer Partners’ Dakota Access pipeline comes online by the year’s end.

The 450,000 bpd pipeline, which will run to the storage hub of Patoka, IL, will originate near Stanley, ND, and run through Beaver Lodge, leading it to become much more “of a Dakota Access-type market,” one source said.

About 390,000 bpd of North Dakota crude production shipped via rail in March 2016, according to the most recent data from the North Dakota Pipeline Authority. So far this month as of May 15, 2016, 318,501 bpd has loaded in North Dakota, up from 265,093 bpd in April 2016, but down from 474,329 bpd in May 2015, according to Genscape.

Much of the rail shipments will shift to Dakota Access once it’s online, which will “take away reliance on train (shippers) as an outlet,” a source said. Producers will “only rely on (train shippers) based on the price that they pay. … DAPL [will] ship almost the equivalent amount that moves on trains today.”

As part of the PetroRail Report, Genscape assesses Bakken Beaver Lodge and North Datoka Bakken Raihead crude grades based on market intelligence gathered daily through traditional price-reporting methods. Genscape market reporters contact market participants, gather bid, offer and trade information and assess each market based on the tradable value at 4 p.m. EDT/3 p.m. CDT. To learn more, click here and request a free trial of the PetroRail Report.

Following the numerous retirements in late spring and early summer 2015, the installed capacity in PJM suffered a serious blow as over 10 GW of capacity deactivated. However, plans for cleaner, environmentally friendly, new natural gas facilities are coming to fruition.  So far in 2016, Panda Liberty and Woodbridge Energy Center have come into commercial operation. Multiple other generators are expected online this year. This blog post focuses on the most recent addition: the natural gas combined-cycle Brunswick County Power Station.

Overview of Brunswick Power Station

Dominion announced that Brunswick County Power Station was operational and generating electricity for customers on April 25. After receiving approval from the Virginia State Corporation Commission in August 2013, Dominion shortly thereafter began construction of Brunswick. While the plant was expected online in 2016, Brunswick was a very welcome early addition to the supply stack as the facility was originally reported to be in commercial operation on September 30, 2016 according to PJM’s interconnection queue. Dominion’s own website reported an online date of summer 2016. The plant is located in the town of Freeman in Brunswick County, Virginia as part of the Dominion zone in PJM (“DOM”). The combined-cycle facility is composed of three 265 MW gas turbines and one 580 MW steam turbine for a total summer net capacity just under 1,400 MW.

Following the host of retirements in PJM last year, Brunswick is a key block in rebuilding the thin supply stack in PJM. In the Dominion zone in particular, the 600 MW Chesapeake coal plant retired in December 2014 and deactivations at Yorktown were recently pushed back to April 2017 for reliability reasons, highlighting the need for new generation in the region. The new natural gas-fired facility is ideally situated in PJM as it is able to serve load centers in Virginia, while also reducing the need for imports from the surrounding areas, including APS and CPLE. Genscape Analysts forecast that Transco Z5 (non-WGL) gas prices will stay low for the coming months despite the recent fall in supply. The new facility will benefit from inexpensive gas and likely run at baseload levels given that the plant’s heat rate is estimated to be around 6 MMBtu/MWh. Heat rate is a measure of the amount of fuel needed per unit of output from a plant, i.e., the fuel efficiency of a plant. The lower the heat rate, the more efficient a plant is.

Brunswick Power Station Congestion Impacts

In addition to its implications for energy costs, Brunswick will have an impact on a number of different constraints in PJM. One of the plant’s many congestion impacts is easily identified using Genscape’s Power Real-Time (RT) platform. While Brunswick is expected to be added to Power RT, the plant is already included in Genscape’s Natural Gas Real-Time platform, which presents the plant’s gas nominations data on a daily basis.  Beyond the nomination data, those customers with Transmission Real-Time are able to get a sense of Brunswick’s activity by looking at flows on the Wake-Brunswick 500kV line that is currently monitored. Historically, the Wake-Brunswick line always brought power from North Carolina into Virginia - it is one of the key pathways for power to flow between the two states. When imports from North Carolina are particularly strong, the line is often a contingency for a host of constraints in both the DA and RT.  Since Brunswick’s start, flows on Wake-Brunswick 500kV have often reversed. Genscape Analysts are confident that when Brunswick is running, power often flows from Brunswick (Virginia) to Wake (North Carolina).  

As a result of Brunswick Power Station, pressure on Wake-Brunswick is significantly reduced due to less power is required to flow into VA from NC. Going forward, Wake-Brunswick and the Brunswick Switching Station are not expected to be contingencies for constraints as frequently as they have been in the past. For reference, thus far in 2016, the total shadow price for constraints with Brunswick as the contingency total $352,480/ MWh in the RT. These constraints included Person-Halifax 230kV and Bed-Bla interface. Looking at day-ahead congestion in 2016, constraints for the loss of Wake-Brunswick have shadow prices that total a staggering $447,778/MWh. Again, coverage of these constraints is expected to soften as Brunswick Power Station alleviates pressure on the surrounding network and the facility considerably lessens the amount of imports needed from North Carolina.

In addition to constraints with Wake-Brunswick as the contingency, there exist other equipment that bind and impact prices at Brunswick. The table below highlights the constraints that Brunswick will help alleviate and exacerbate. Overall, Brunswick is expected to be far more beneficial than harmful in terms of congestion.  

Rebuilding the Supply Stack in PJM

Brunswick in combination with a number of other new natural gas plants are changing the congestion setup in PJM and contributing to historically low prices.  Brunswick joins Woodbridge Energy Center and Panda Liberty as new plants that are confirmed to be commercially operational in 2016.  Genscape Power RT monitors showed power plant testing at Panda Patriot in early May, indicating that the plant should come online soon.  Later this year, Joliet units 6-8 and Shawville units 1-4 are expected to reincarnate as cleaner and environmentally friendly natural gas-fired facilities.  Outside of PJM, the MISO Covert gas plant will become a PJM unit in June and Watts Bar 2 is expected to come into commercial operation next month.

Using thousands of patented in-the-field monitors, Genscape's Power Real-Time (RT) service provides access to real-time power plant statuses on an easy-to-use online dashboard, giving clients a real-time view into the status of the U.S. power grid. Users receive notifications of generation outages and changes, helping to better inform their trading strategies, analyze production, and optimize asset utilization. Click here to learn more or request a free trial. 

Along with Genscape's unparalleled analyst support and insight, Genscape's Natural Gas Real-Time (RT) service provides the most comprehensive view of public data. With up-to-the-minute informational postings for over 200 natural gas pipelines, 900+ pipeline updates per day, covering up to 48 cycles, and a myriad of other public data, analysts now have the comprehensive data they need to know everything. Click here to learn more or request a free trial of Genscape's Natural Gas RT service. 

Have you ever wondered how to recognize a colleague who went above and beyond to complete a project or the behind-the-scenes analyst who assisted the Sales team in closing a deal? We did too! We created the Spot Award program to “spot” these talented Genscapers and highlight them for their achievements and contributions. Through this program, employees are encouraged to nominate colleagues who are doing an exceptional job.  Nominations are submitted to our Leadership Team, reviewed, and recipients are chosen through a unanimous vote. The recipients receive a public acknowledgement at the quarterly Town Hall. The cash award doesn’t hurt either!

Below is a sneak peek at a couple of our recent Spot Award recipients and the types of achievements that Genscape makes a point to recognize year round! Congrats to our recipients thus far and we look forward to highlighting our future Spot Award champs!

Recipient - Jason Fuchs

“When asked if he could “help” with the first ever Genscape 2015 Innovation Contest, not only did he agree to help, he ran the entire contest.  Generously devoting his time and effort along with performing his day job, he designed the competition; provided resources and advice to the team; was the central go-to person for requests, inquiries, encouragement, timelines and resources; and organized the judging panel and presentations which ran to perfection.  For your excellent organization and support of the Genscape Innovation Contest, and for putting up with Matthew and Deirdre’s “suggestions” all along the way, the Leadership team recognizes your effort and the entire Genscape Nation thanks you for your Contribution.”

Recipient- Reid Brown

“Since the start of his employment with Genscape, this individual “hit the ground running” and has gone above and beyond time and time again. Making sure the field agent equipment requests are processed without delay and to perfection:  if something in the request looks unusual, he picks up the phone and calls the field agent to verify; after a request is processed, he calls to make sure it was received and is as expected; if there are problems with the equipment, he will educate himself on his own time and resources so he can assist the agent on site.  In one particular instance, he worked with the field agent who was in a pinch, after hours, to assist with resolving RTU cell modem issues in Canada.  He served to support him over the phone and then developed a guide on how to reprogram the modems in the field – something that is typically done only in the lab – so that the expense and disruption of shipping a monitor back the lab is omitted. And when asked to put together something that could illustrate the redesign progression of RTU monitors, he built the display himself and built another one like if for the IR/Visual monitors which are now used daily for training, testing, and sharing the Genscape story with customers and visitors.  Simply put, this guys’ “tude” is amazing and for that we recognize your effort and the entire Genscape Nation thanks you for your Contribution.”

U.S. crude inventories monitored by Genscape in Texas, Louisiana, and Cushing, OK, increased during the week ending May 13, 2016, bucking market expectations that stocks would fall following recent oil sands production disruptions. Meanwhile, Canadian crude barrels were taken from storage to compensate for lower output.

Cushing stocks reached a record high during the week ending May 13, 2016 of near 71mn bbls. Between May 3 and May 13, 2016, inventories there rose 708,000 bbls, pushing utilization above 80 percent for the first time since Genscape began monitoring the hub in 2009. During the week ending May 13,  2016, total inventories in Houston, Beaumont-Nederland, TX, and Corpus Christi, TX, rose 2.466mn bbls to a record high of more than 83mn bbls.

Flow from Cushing to the Texas Gulf Coast increased 129,000 bpd to 1.076mn bpd during the week ending May 13, 2016, contributing to the storage build there. Pipeline utilization between the two markets increased eight percent to 69 percent, the highest utilization since week ending March 4, 2016.

During the week ending May 13, 2016, total Genscape-monitored stocks in Texas and Louisiana were 93,000 bbls less than the record high reached March 18, 2016. Record-high stock levels at U.S. Gulf Coast and West Texas locations were reached several times in 2016 following Cushing highs throughout the year. Weekly Cushing stocks have hit record highs 17 times this year as more crude moved into storage due to a global crude glut and a contango price environment.

Total U.S. crude stocks increased 1.31mn bbls to 541.294mn bbls for week ending May 13, 2016, according to the U.S. Energy Information Administration on May 18, 2016. However, market analysts polled by Reuters expected U.S. crude stocks to decrease about 3.4mn bbls compared to the previous week, the news agency said on May 17, 2016.

Canadian stocks fall with production output

Some of the crude stored in the U.S. during the week ending May 13, 2016 was likely from Canada. During the week ending May 13, 2016, Western Canadian stocks fell 1.223mn bbls to below 25mn bbls, according to Genscape. The previous week, Western Canadian inventories declined 951,000 bbls, when a massive wildfire began in northern Alberta. Genscape monitors storage locations including Alberta Heartland, Hardisty, and Edmonton in the province, as well as storage levels at Kerrobert, SK.

Total U.S. imports from Canada fell 366,000 bpd to 2.587mn bpd for the week ending May 13, 2016 compared to the previous week. Canadian imports have averaged 3.130mn bpd in 2016, according to EIA data.

A good deal of Canadian crude that enters the U.S. moves on TransCanada’s 590,000 bpd Keystone pipeline, which originates in Hardisty, AB, and terminates in Cushing via Steele City, NE. From Steele City, the pipeline runs to both Cushing and Patoka, IL. Canadian crude pipeline flow to Cushing on Keystone increased 12,000 bpd to 218,000 bpd the week ending May 13, 2016, while volumes to Patoka on the pipeline were 9,000 bpd below the week before.

Crude flow into the U.S. Midcontinent also increased during the week ending May 13, 2016 on the Marathon-operated 1.2mn bpd Capline Pipeline, which runs from St. James, LA,-to-Memphis, TN, or Patoka. During that week, volumes increased 43,000 bpd to 343,000 bpd compared to the previous week. Capline’s volumes are expected to increase to as much as 600,000 bpd in May 2016 due to higher shipper demand following the production outages in Canada, according to Reuters, citing sources familiar with the matter. Between May 14 and May 19, 2016, the pipeline’s volumes averaged 317,000 bpd. Flow was shut for 17 hours on May 17, 2016.

Genscape's suite of oil market services provide access to expert insight and accurate, timely notice of changes in oil market fundamentals. To learn more or request a free trial, click here.

Genscape has recently monitored Talen Energy’s Brandon Shores using infrared technology, adding the plant to the Power Real-Time (Power RT) interface on April 22, 2016. The infrared camera takes images every five minutes displaying real-time images, and is commonly used for plants located in urban areas where Genscape’s traditional technology is unable to monitor generation output. Brandon Shores has long been one of the top requested plants by customers for the North American Power RT product. The 1,273 MW coal plant is located in Pasadena, Maryland just outside of Baltimore.

Brandon Shores is arguably the most important plant in PJM because of its critical location right in the center of the BGE zone. Looking at the map on the right displaying Real-Time generation less Real-Time load from January 2016 - March 2016 in GWhs, the green zones such as AEP, PENELEC, and PPL have excess generation relative to load, and thus send additional power east to the more generation deficient zones such as PEPCO and BGE. The two zones have a combined generation capacity of 10.5 GWs, while last summer the PEPCO and BGE combined loads peaked at 12.6 GWs. Brandon Shores accounts for 12 percent of the combined capacity in the two zones, and is thus a critical baseload unit.

Any further under-commitment in these zones will result in significantly more expensive energy costs and congestion.

Having monitors on the Brandon Shores facility instantly brings increased transparency to WHUB Traders as it is essential to understanding congestion in BGE. As excess power flows south onto a constrained network serving load in Baltimore and DC, the transmission lines will overload causing congestion on Bagley-Graceton (when the line is in service) and Conastone-Northwest (when the line is on outage). With ongoing work on Bagley-Graceton as a parallel line is currently being built, outages on the surrounding network continue to make BGE volatile and the most expensive zone.

Brandon Shores alleviates congestion on Bagley-Graceton 230kV and Conastone-Northwest 230kV, which are the most frequently binding and costly constraints in PJM.  Any loss of output at Brandon Shores can result in very expensive dispatch, and having this generation output will help Traders stay ahead.

To get an idea of how important Brandon Shores is to congestion in BGE and WHUB, we can look back at the morning of October 14, 2015 when Brandon Shores had tripped offline in HE 8. West Hub 5 minute prints went from $32 at 7:45 to $267 within the next 10 minutes, while Conastone-Northwest shadow prices went from $62 to $1,732 during the same time interval.

Brandon Shores is also located on the sink side of congestion affecting West Hub, meaning that the facility receives upside from congestion costs and is incentivized to increase output to alleviate congestion. On a nodal level, Brandon Shores has approximately a 10 percent shift factor on Conastone-Northwest congestion. So at a shadow price of $1,000, the Brandon Shores node will receive $100 in Marginal Congestion Costs (MCC).  Consequently, the absence of Brandon Shores generation is a very bullish indicator for both BGE congestion and WHUB. 

Aside from West Hub Traders, other market participants are also able to capitalize on the status of Brandon Shores generation. Up-To Traders that believe BGE congestion will be greater in the Real-Time than in the Day-Ahead, due to the absence of Brandon Shores generation, can submit financial transactions in the Day-Ahead market that speculate on Real-Time versus Day-Ahead  congestion between two points. As an example, one could source at Peach Bottom and sink at BGE with expectations that the congestion spread in the Real-Time will be greater than the Day-Ahead. 

As an asset manager dispatching units in eastern PJM, it is also relevant to know the status of Brandon Shores. As seen above on a contour map of PJM, BGE congestion results in substantial pricing separation between zones North and South of the constraint. If one anticipates strong congestion in BGE, it would be prudent to schedule less generation into the Day-Ahead and more into the Real-Time in zones such as BGE and DOM, while zones in northern Mid-A should avoid scheduling into the RT as they receive strong downside from congestion.

One powerful indicator for predicting BGE congestion in the real time is line flows on the Conastone-Brighton line on Transmission RT. It is the contingency for most constraints in BGE, and it is common to see congestion once flows are elevated around 1200 MWs or more. Less generation output at nearby plants such as Morgantown, Chalk Point, and Remington are all bullish indicators for BGE congestion; Genscape can often see a corresponding change in flows as some of these plants ramp. However, Brandon Shores is the most important of all due to its close proximity to the line and high shift factor for Conastone-Northwest congestion.

Genscape believes that with this new monitor on Brandon Shores, there will be much greater visibility as this unit has long been a missing piece of the puzzle for BGE congestion and West Hub volatility.

Used by power market participants for over a decade, Power RT gives unrivaled visibility into the main U.S. power markets. The larger the number of plants that Genscape monitors, and the greater the varieties of fuel types, the more transparency Genscape can provide across all generation types on the grid in real time, including notifications of generation outages and changes, helping to better inform trading strategies, analyze production, and optimize asset utilization. Click here to learn more or request a trial of Genscape's Power RT service.

A number of incoming tanker cargoes of clean petroleum products have changed their intended destination to French ports, as product supply disruptions continue amid the ongoing industrial dispute involving oil refineries in France. At least 232,000 MT of middle distillate cargo shipments have recently changed their destination from non-French to French destinations, mainly heading to Le Havre.

For example, German-flagged product tanker Seashark changed destination for its 23,000 MT cargo of ultra-low sulphur diesel (ULSD) loaded at Russia’s Baltic load terminal of Primorsk from the Thames to Dunkirk and berthed there May 25, 2016.

Similarly, UK-flagged CPO Italy changed destination for its 30,000 MT of ULSD away from Hamburg to Le Havre and is due to arrive there May 27, 2016. Two further cargoes also thought to be ULSD – Seaturbot with around 23,000 MT and RN Privodino with 24,000 MT – have this week changed destination from Hamburg to Le Havre.

Avalon has also changed destination for its 22,000 MT St. Petersburg gasoil cargo from Hamburg to Le Havre, also to arrive May 27, 2016, while Sealing was initially bound for Bremen with its 22,000 MT of ULSD from Primorsk but is now bound for Le Havre, ETA May 29, 2016.

As well as diesel, the Front Cougar’s 88,000 MT cargo of jet fuel, which loaded at Saudi Arabia’s Ruwais refinery, changed destination from Rotterdam to Le Havre and arrived at offshore anchorage on May 24, 2016.

Northern France generally imports middle distillates such as diesel and jet fuel from the Baltic Sea, U.S. Gulf and Middle East refineries while, along with most North European refineries, exports gasoline cargoes, mainly to North America and West Africa.

Genscape tracks product tanker shipments involving European load ports and destinations to their final destination as part of its European Waterborne Products Report coverage. To learn more or request a free trial of the report, click here.

The report is produced using Genscape Vesseltracker data, which boasts the most comprehensive and accurate data feed of global shipping, in order to follow cargoes loading in Europe and the Baltics to their final destinations. To learn more or request a free trial of Genscape Vesseltracker, click here.

U.S. crude producers could soon activate drilled but uncompleted wells if West Texas Intermediate prices hover in the $50/bbl to $60/bbl range, according to Genscape.

There are a total of between 3,000 to 3,500 DUCs in the United States, according to Genscape. About 650 of those uncompleted wells are in North Dakota, which “currently has one of the higher levels of DUCs of the shale plays,” said Jodi Quinnell, an oil product manager for Genscape.

But, even if some of those DUCs move into the production phase, it would take at least three months before new output comes online, Quinnell said. There is generally a lag of about four to six months between a price signal, such as the $50/bbl-mark, and production impact, according to Genscape.

The NYMEX July Light Sweet Crude futures contract price briefly breached the $50-bbl mark early last week but traded near $49/bbl on Friday. The NYMEX crude contract has a locational basis of Cushing, OK, where U.S. benchmark crude WTI is stored. Storage utilization reached above 80 percent last month for the first time since Genscape began monitoring the hub in 2009. Crude has moved into storage due to a global glut and a contango price environment. Cushing stocks hit a record high for the week ending May 13, of near 71mn bbls. Since, stocks fell due in part to supply disruptions in Western Canada, where a wildfire has caused production outages. Inventories at Cushing were near 69mn bbls during the week ending May 27, according to Genscape.

Market sentiment swayed toward supply rebalance

The WTI price has strengthened since hitting a low near $26/bbl in the first quarter of 2016, and the sentiment that the global oil supply and demand complex has moved into a rebalancing pattern is growing among market participants, according to Dominick Chirichella, senior partner at New York's Energy Management Institute. 

Prices “are likely at a level where economics make sense to move into a production stage” for DUCs, he said, noting that new output from DUCs could affect U.S. production rates as early as the second half of 2016.

But, expected well completions are variable between producers and are likely “to be spread out and will not have the effect of starting to grow production again this year,” Quinnell said. U.S. production should fall through 2016 even if some uncompleted wells are activated. Total U.S. crude production is expected to average 8.752mn bpd in 2016 and 8.491mn bpd in 2017, according to data released last week by Genscape.

‘Abnormal’ wells untapped possibility

About 1,000 of the existing U.S. DUCs are considered “normal,” meaning the wells are part of untapped inventory generally due to pad drilling and will always be there at this level of rig activity. The remaining 2,000 to 2,500 wells are considered “abnormal” inventory, or wells that were uncompleted due to economics.

In recent years, some producers invested in drilling oil wells to take advantage of relatively cheap drilling costs, which have declined 50 percent since mid-2014 along with crude prices. Completion costs generally consist of up to 60 to 70 percent of total well costs.

It’s likely that about 500 of the abnormal DUCs are lower quality wells that would be completed at a higher price range of $80-$90/bbl, Quinnell said.

“Some of the uncompleted inventory could be from end of 2014 or beginning of 2015 from wells that were drilled outside the core areas” and would yield lower output, Quinnell said. “Producers could also be intentionally holding these wells because the anticipated return will not cover completion costs in the current price environment.”

In addition, skilled labor resource constraints could slow the pace of bringing uncompleted wells online should the WTI price stay within the $50/bbl to $60/bbl range. The well completion industry “has been hit hardest in this lower price environment…getting the completion crew back to work may be the biggest constraint,” Quinnell said.

Last week, Genscape hosted a North American Oil Market Review webinar, which discussed supply, demand, movements, and inventory. If you missed the live webinar, check out the on-demand recording and download the slides here.

Genscape's U.S. Crude Oil Production Report provides the most detailed, accurate five-year U.S. oil production forecast in the industry. To learn more, click here.

The past three summers have featured the strongest warm anomalies along the West Coast with seasonal to below normal temperatures frequenting the Midwest and East. As El Niño influences dissipate and La Niña attempts to emerge, this bearish streak is forecast to come to an end with above normal temperatures expected across a large portion of the United States.

Summer 2015 Recap

Summer 2015 started off with record-breaking heat in the West. California, Washington, and Oregon were among the states that recorded their all-time hottest June while being baked by a strong ridge of high pressure in the upper levels of the atmosphere. Farther east, seasonal to below normal conditions in the Midwest and Northeast drove bearish energy demand levels. Despite some lingering heat in the Pacific Northwest, warm anomalies became more isolated in July with near seasonal conditions observed across the major population centers of the Midwest, Northeast, and Mid-Atlantic. Bearish trends continued through the month of August with below normal temperatures observed across a large portion of the Plains, Midwest, and East Coast, limiting the intensity of cooling demand.

Summer 2016 Forecast Drivers

The driving forces behind Genscape’s summer outlook include an emerging La Niña as well as a positive Pacific Decadal Oscillation (PDO). While correlations between summertime temperatures and La Niña conditions are generally rather modest across most of the country, several historical analog years (1983, 1998, 2007, and 2010) have shown that a transition from El Niño into La Niña typically offers above normal temperatures across much of the Plains, Midwest and East. Since El Niño has only recently dissipated, the speed with which La Niña conditions develop later this summer is expected to play a major role in how quickly we see the associated hot signal develop. For this reason we favor back-loaded summer heat with the latter half of July into August favoring the strongest warm anomalies from the Plains to the East Coast.

Another driving force behind the summer outlook is the presence of a positive Atlantic Multidecadal Oscillation (AMO). A strong warm signal for the Mid-Atlantic and Northeast, this teleconnection clashes with cooler signals associated with the +PDO. Ultimately, the degree with which the warm AMO signal competes with the cooler PDO signal will dictate how much warmth is able to evolve across the region. The result is increased forecast risk in the Northeastern U.S. with stronger forecast confidence focused in the Plains and Midwest.

East Coast (ISO-NE, NYISO, PJM)

Above normal temperatures are forecast across a majority of the eastern U.S. A volatile start to the summer is expected through June, with bouts of both above and below normal temperatures anticipated. As we transition to July, a more sustained warm pattern is expected to unfold with monthly average temperatures reaching above normal levels across the region. This warmth should continue to build into August, leading to the warmest month of the summer anomaly wise.

Although August is expected to feature the strongest warm anomalies, summer demand peaks are expected to follow a typical pattern and occur in late July. Peaks of 26.1, 33.5 and 154.1 GW are expected in ISO-NE, NYISO, and PJM, respectively. This is an increase of 7-8% in each region over last summer’s demand peaks.

Midwest and Lower Mississippi Valley (MISO)

Last summer, warm anomalies were restricted to southern portions of the footprint with widespread below normal temperatures across the Midwest from June through August. This summer, Genscape's forecast is diametrically opposed, with the strongest warm anomalies focused across the Upper Midwest with near seasonal conditions across MISO South. Additionally, heat will increase in intensity through the course of summer with anomalies approaching 2-3 degrees above normal in places such as St. Louis and Minneapolis by August.

With respect to demand, a 3% year-over-year increase in peak load is currently forecast, projected to reach 123.3GW. This demand peak is historically favored to occur in late July. However, due to the expectation for back-loaded summer heat, unseasonably strong demand levels should persist into the first few weeks of August.

Plains (SPP, ERCOT)

In contrast to last summer, above normal temperatures are forecast across the Central and Northern Plains, driving stronger year-over-year energy demand. While warm anomalies are initially expected to be rather modest in June, heat will increase markedly from late July through August as the La Niña atmospheric response strengthens. As a result, SPP peak summer load is expected to reach 52GW, a 2% increase year-over-year. Forecast risks lie in the warmer direction, particularly in July and August.

Across the Southern Plains, near normal temperatures and precipitation are expected. Significant springtime soil moisture is forecast to play a role in modulating the intensity of summertime heat, with near normal rainfall chances through summer helping maintain these elevated soil moisture levels. Despite our relatively seasonal temperature outlook, warmer risks are evident for the latter half of summer, with ERCOT peak summer load expected to reach 71GW, a 2% year-over-year increase.

West (CAISO, WECC)

Similar to last year, summer 2016 will commence with above normal temperatures in the Pacific Northwest and northern California. Frequent ridging will again be a factor, bringing prolonged heat events that will drive strong cooling demand across the Western footprint. The Pacific Northwest stands the highest drought risk this summer due to below normal precipitation and temperatures that will remain above normal from June through August.

In contrast, California and the desert Southwest can expect near normal conditions through summer. Despite the strong presence of El Niño since 2014, exceptional drought levels will continue to persist in California as the equatorial Pacific transitions to the La Niña phase by late summer. The severe drought has the potential to exacerbate summer heat and create prolonged periods of robust cooling demand.

In summary, Summer 2016 will contrast heavily with the past few summers. Warm anomalies will pay a visit to the Pacific Northwest, Plains, Midwest and East Coast, with the strongest warm anomalies favored to impact the Plains and Midwest. This warmth will become the most pronounced in late summer as La Nina conditions strengthen. Seasonal conditions are favored along the southern tier where La Niña correlations are the weakest. Lastly, below normal precipitation is forecast across portions of the Southeast and Northwest with above normal precipitation limited to the Ohio Valley region.

Weather can have a large impact on power demand and generation, especially with the seasonal extremes seen across the U.S. in the summer and winter months. Being able to anticipate weather patterns for the season ahead can help market participants make more informed trading or business decisions. Click here to learn more about the full range of Genscape's Power Market services. 

As Brexit reminds us of inherent uncertainty in the financial markets, the question of company indebtedness and financial stability comes again to the forefront. In the past couple of months, Genscape's Equity Insights team has seen a handful of major E&P bankruptcies despite rallying crude and gas prices, suggesting that the balance sheet pressure for some operators wasn’t escapable even with higher market prices. Companies entered chapter 11 bankruptcy with varying amounts of debt, ranging from nearly $10 billion for LINN Energy down to roughly $475 million for Goodrich, benchmarked below on a per flowing boe/d basis. Companies which have filed for bankruptcy are represented as explosions in the charts below.

Looking broadly across the Lower 48,  Appalachian producers are in comparatively good positions, with all companies at or below the median for debt per boe. This financial health helps support continued growth in production despite low gas prices. Permian producers, with the exception of Clayton Williams Energy, all have fairly reasonable debt metrics, but many of these companies have funded their growth this year by way of equity issuances as opposed to loading their balance sheets with additional debt. 

Companies that chased oil growth and pricey acquisitions in the 2013-2015, namely Energy XXI and Halcon, topped Genscape's normalized debt metrics as they were unable to bring up their production levels relative to the debt the companies took on. This led to a situation with good assets, but bad balance sheets. Halcon for instance, after having ventured unsuccessfully into the Tuscaloosa Marine Shale which Genscape calculates as having a breakeven for Halcon of ~$69.50, was left with a smaller footprint of other plays. According to Genscape's recent economics report, its Fort Berthold Bakken acreage is quite economic at current prices, breaking even ~$30.50, but the company lacked the cash flow and financial flexibility to fully develop the asset.

Ultra is the only company to file for bankruptcy that is near the median debt per boe metric, but there were other company-specific factors at play. The company was facing near term debt maturities, had recently drawn down nearly its entire credit line, and at 2015 year end was on the verge of breaching debt covenants, specifically its debt to EBITDA covenant. Also, with most of Ultra’s production in the Rockies, it is not advantaged price-wise. In February, Ultra guided to opex per mcfe of $2.25-2.42, which after subtracting out depletion, leads to cash opex of 1.85-1.97 per mcfe. Local gas prices at Kern in the preceding two months before Ultra filed for bankruptcy averaged as low as $1.51/mcf. With prices being below the company’s own cash opex guidance and the above mentioned liquidity issues, it’s not a total surprise the company looked to restructure its balance sheet.

While some E&Ps will continue to feel pain, others are well insulated thanks to hedge books which protect cash flow, or have breakeven prices that are far below even the current market prices for oil and gas. This and more is available through Genscape’s Equity Production Insight product. Question now is: are those companies still living now dying, or will they survive and perhaps thrive with a little patience. 

Genscape’s Equity Insight Service combines production, historical hedging, capex and guidance data, with company conference call insights and a proprietary company play level economic model, to deliver a new piece of the equity puzzle to improve efficiency and confidence in decision making. Click here to learn more. 

On Friday, June 24, 2016, The National Oilseed Processors Association (NOPA) revised downward its soybean crush statistic from 152.8 to 152.3, nine days following the original NOPA data release. “We applaud the National Oilseed Processors Association for revising the number to more accurately reflect the lower crush in May,” said Susan Olson, Managing Director of Agriculture & Biofuels at Genscape.

“Revisions to market moving numbers demonstrate the importance of independent, actual measurements of soybean crush from Genscape’s proprietary monitoring network,” said Olson.

Genscape uses proprietary monitoring along with other data to monitor the real-time processing rates and outages at major soybean crushing facilities in the U.S. Subscribers receive real-time alerts of outages, a daily report of downtime of monitored facilities, and a weekly report of processing rates on a facility-by-facility basis with daily granularity. In addition, Soybean Processing Monitor subscribers receive Genscape’s NOPA outlook the Monday before the monthly NOPA release, providing them with important insight ahead of other sources. Commercial trials of the Soybean Processing Monitor are now available.

After working on this product development for about 16 months, Genscape is excited to provide independent, monitored supply insight never seen before in the crush and soybean markets. There is a broad, demonstrated interest from the financial and physical sectors, both in the U.S. and internationally.

Unplanned outages at processing facilities happen more often than one would think. Whether they last a few hours or are extended for a day or more, these outages have a cumulative impact on the crush.

Genscape monitors many important facilities, including the Bunge Council Bluffs facility in Iowa. At 5:43 AM on June 2, Genscape's proprietary monitors indicated that Council Bluffs was experiencing an outage. At 7:46 PM on June 17, Genscape's monitors indicated that the facility came back online. While there were industry reports speculating about when the facility was coming back online, this level of precision, specificity, and granularity is only available with real-time monitoring. Genscape's monitoring provides clients with an independent source of actuals not available elsewhere.

Genscape covers about 20 percent of the U.S. processing capacity with its reporting and a dozen facilities for its outage alerts and reports. “We are just getting started,” said Olson. “Our plans are to add several additional U.S. facilities over the summer. Continued industry traction, and input from customers, guides and propels Genscape to continue expanding our monitoring coverage.”

For more information about the product and to start your trial now, please contact Robert Limp, Global Head of Sales, at rlimp@genscape.com. 

Enables Genscape Vesseltracker™ ship tracking service clients to leverage ORBCOMM’s extensive satellite AIS data

Louisville, KY, June 30, 2016 – Genscape, a leading global provider of energy information for commodity, shipping, and financial markets, today announced that it will begin providing customers of its Vesseltracker service with the ability to receive satellite AIS data from ORBCOMM (Nasdaq: ORBC), a global provider of Machine-to-Machine (M2M) and Internet of Things (IoT) solutions.

Genscape Vesseltracker provides extensive coverage of global shipping activities with the largest and fastest growing AIS network in the world. With its proprietary monitoring methodologies and technologies and advanced analytics capabilities, Genscape is able to provide unique, accurate, and actionable insights into the global flows of energy commodities.

Through its second generation constellation of low-Earth orbit (LEO) satellites, ORBCOMM provides AIS data services to assist in vessel tracking and improve maritime safety for government and commercial customers worldwide. ORBCOMM’s advanced satellite network provides revisit rates of eight to 15 minutes over most of the world, with average vessel reporting latency of just under 10 minutes worldwide, and as short as one minute in many areas. Coupled with an established and robust network operations and global ground infrastructure, ORBCOMM provides unsurpassed data services.

“Genscape is committed to providing world-class products and services that enable transparency and actionable decision making for participants in global shipping, commodities, and energy supply chains,” said Matthew Burkley, Chief Executive Officer of Genscape. “Our partnership with ORBCOMM reflects the needs and requests of our customers, as it expands access to Genscape’s market-leading terrestrial AIS coverage alongside ORBCOMM’s resilient, reliable, and comprehensive satellite AIS data to provide real-time visibility into ship movements across the globe.”

“We are very pleased to be selected by Genscape as a preferred industry partner for satellite AIS data services,” said Marc Eisenberg, ORBCOMM’s Chief Executive Officer. “ORBCOMM’s AIS service provides the most comprehensive global coverage and the highest refresh rates of any satellite-based AIS data system. We look forward to helping Genscape deliver an even greater level of service to its customers by offering a complete situational picture of vessel activity worldwide.

”With a global network of terrestrial AIS antennas, combined with other data sets and advanced analytics capabilities, Genscape is able to provide customers with actionable insights ranging from ship position information to commercial information about vessel events, voyages, and cargoes.

To learn more about Genscape Vesseltracker or to request a free trial, please visit: http://info.genscape.com/genscape-vesseltracker-orbcomm-pr

To read the full press relase, visit: Genscape Expands AIS Satellite Network with ORBCOMM Partnership

About Genscape

Genscape is a leading global provider of real-time data and intelligence for commodity and energy markets, driven to improve market transparency and efficiency. With a network of thousands of patented monitors, sensors, and satellites strategically deployed worldwide, Genscape is unique in its ability to collect and report proprietary market fundamentals in real-time or near real-time. Genscape delivers innovative solutions across a number of asset classes including: Oil, Power, Natural Gas and LNG, Agriculture, Petrochemical and NGLs, Maritime, and Renewables. Genscape clients often gain important insights, improve risk management, and increase operational efficiency. For more information, please visit: www.genscape.com

About ORBCOMM

ORBCOMM Inc. (Nasdaq: ORBC) is a leading global provider of Machine-to-Machine (M2M) communication solutions and the only commercial satellite network dedicated to M2M. ORBCOMM’s unique combination of global satellite, cellular and dual-mode network connectivity, hardware, web reporting applications and software is the M2M industry’s most complete service offering. Our solutions are designed to remotely track, monitor, and control fixed and mobile assets in core vertical markets including transportation & distribution, heavy equipment, industrial fixed assets, oil & gas, maritime, mining and government. In addition, ORBCOMM provides Automatic Identification System (AIS) data services for vessel tracking to improve maritime safety to government and commercial customers worldwide.

With nearly 20 years of innovation and expertise in M2M, ORBCOMM has more than 1.6 million subscribers with a diverse customer base including premier OEMs such as Caterpillar Inc., Doosan Infracore America, Hitachi Construction Machinery Co., Ltd., John Deere, Komatsu Ltd., and Volvo Construction Equipment, as well as end-to-end solutions customers such as C&S Wholesale, Canadian National Railways, CR England, Hub Group, KLLM Transport Services, Marten Transport, Swift Transportation, Target, Tropicana, Tyson Foods, Walmart and Werner Enterprises. For more information, visit www.orbcomm.com.

Forward-Looking Statements

Certain statements discussed in this press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally relate to our plans, objectives and expectations for future events and include statements about our expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. Such forward-looking statements, including those concerning the Company’s expectations, are subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from the results, projected, expected or implied by the forward-looking statements, some of which are beyond the Company’s control, that may cause the Company’s actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. In addition, specific consideration should be given to various factors described in Part I, Item 1A. “Risk Factors” and Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2015, and other documents, on file with the Securities and Exchange Commission. The Company undertakes no obligation to publicly revise any forward-looking statements or cautionary factors, except as required by law.

For all press inquiries please contact:

Caitlin Mann
Marketing Manager
Genscape, Inc.
Office: +1 617 790 0963
cmann@genscape.com

On June 25, 2016, the “Castoro 7” – one of the world’s most efficient pipe-laying barges, with a record of successful operations around the world – was scrapped in Alang, India, after 41-years of service. By tracking the ship’s AIS signals, Genscape Vesseltracker was able to shed light on its history and its final six-month voyage from the Caribbean Island of Curaçao to Alang, one of major shipbreaking centres in the world today.

The Castoro 7 was built in 1975 in the Netherlands, in the IHC Gusto Schiedam shipyard. Its first name was the “Viking 200,” and over the years it changed names as it was bought and sold by different owners.

The Genscape Vesseltracker ShipDB ship database shows a history of the names the vessel has been referred to through the years (such as the “McDermott Lay Barge NO. 200” and the “Acergy Piper”), as well as the dates when a given ship’s name became inactive.

The “Castoro 7” was 79.97m long, 59.09m wide and a transit draft of 11.5m. As one of the world's most efficient semi-submersible pipe-layers, it had an excellent global track record of performance, including successful pipe-laying and trunkline operations in the North Sea, West Africa, the Mediterranean, Brazil, and the Gulf of Mexico.

In the mid-2000s, under the name “Acergy Piper” and with 400 workers on board working around the clock, the vessel laid the majority of the 1,200km/746 mile-long Langeled Pipeline between Norway and the United Kingdom, which supplies 20 percent of Britain’s peak gas demand, and was the longest underwater pipeline in the world until the Nord Stream pipeline between Russia and Germany was opened in 2012. 

Using Genscape Vesseltracker’s long-term tracking tool for historical AIS position data, you can see that the “Castoro 7” was active in the in the North Sea, the Mediterranean Sea, the Caribbean Sea, and West Africa from 2011 to 2015.

By early 2015, the “Castoro 7” was lain idle in the Caribbean Sea near the island of Curaçao. Eventually, the decision was made to scrap the vessel, and the Norwegian-built “Skandi Admiral”, one of the world’s most powerful tugboats, was chosen to tow the “Castoro 7” on its final 23,000 km (12,600 nautical mile) voyage to Alang.

With an average speed of just 3.0 knots (5.5km/h or 3.5mph), progress was slow and the “Skandi Admiral” stopped at Ascension Island (a small British territory in the South Atlantic Ocean) to change the crew and give them a break from their monotonous work. The vessel stopped again at Saint Helena to take on provisions, where Genscape Vesseltracker’s AIS antenna partner Bruce Salt took some dramatic pictures of the two vessels. 

The Genscape Vesseltracker long-term tracking tool shows the exact route that the “Skandi Admiral“ took, as well as the vessel’s speed and draught profile:

Once the ship arrived in Alang, the Genscape Vesseltracker data quality team verified that the vessel had been fully taken out of commission before marking the vessel as “scrapped” and removed it from the active vessel database: 

The final voyage and decommissioning of the “Castoro 7” will no doubt bring back many memories for the thousands of men and women who worked aboard the vessel throughout its 41 years of service. Meanwhile, the Genscape Vesseltracker long-term tracking tool shows that the “Skandi Admiral” has travelled southward to Male, Maldive, on to its next job.

Vesseltracker provides the tools to monitor the changing trade patterns with a combination of ship schedules containerized ships and traffic analysis tools for monitoring other current and historic traffic. Genscape Vesseltracker currently runs one of the largest privately owned AIS receiver networks on the planet, combined with the largest AIS Satellite constellation currently available, over 144,000 vessels are tracked daily in near real-time. To learn more or request a free trial of Genscape Vesseltracker, please click here.

Genscape Team Builds Creative Learning Tools for Metro United Way Early Education Program

Genscape’s headquarters recently made an office move to Old Louisville (Read about us here) and we are, now more than ever, looking to get more involved in our local community.  In order to jumpstart these efforts, we had been seeking a local charity for our Agriculture and Biofuels team to partner with.  Our Managing Director, Agriculture and Biofuels, contacted Metro United Way to see how we could get involved and to learn more about the goals and needs of their organization.

Among the many programs provided by Metro United Way, the Excellence Academy provides quality pre-school education for local neighborhood children and is also a part of the Louisville YMCA. Their philosophy is that the first five years of schooling sets the foundation for a lifetime of learning. Physical, social, and intellectual stimulation during this time period is critical to helping children adapt to their school years and will carry them through adulthood. Genscape is committed to supporting educational efforts for children; so this was not only an excellent charity to support, but it would provide a fun and rewarding project for everyone involved. 

The Excellence Academy is in the process of renovating their facilities at the Chestnut Branch YMCA (930 West Chestnut) and they provided us with a wish list of donation items and learning tools which we could build. Two of the learning tools really caught our attention and we knew that we could get creative.  A typical ‘busy board’ is a sheet of wood featuring many objects that can move or be manipulated, and ideally teaches the child about how everyday objects work, such as locks, latches and switches. This seemed like a great option that would allow everyone to contribute and would encourage fun and creativity. The other project was a light table, essentially an illuminated box that children can use to play with clear plastic toys or any other creative applications that manipulate light, color, and shadow.

After planning, the team gathered to assemble the learning tools from various parts donated by individual members of the Genscape team. The entire process was a blast. It was a great opportunity to come together and make something that will not only bring delight to the children, but would awaken the child inside each of us. There were many exciting applications of everyday objects on the busy boards. A few additions that were especially fun were a pair of shoelaces that allowed children to practice tying and a light switch attached to a battery powered propeller that spins and makes noise. What better way to encourage creativity in young minds.

We presented the finished products to the group at the Academy and the team was thrilled with our support and creativity.  The ‘busy boards’ are to be mounted in the hall leading to the restrooms to provide activities while waiting in line and the light tables are to be used in open learning spaces. The curiosity and delight which we saw in the staff will no doubt be doubled in the kids who get to play with these new additions.  This was such a fun way for us to give back to the community and we are looking forward to continuing these efforts throughout each Genscape location.

Click here to learn more about Genscape’s charitable initiative and community involvement. 

Partnership focuses on building and delivering next generation services and datasets

July 11, 2016, Louisville, KY - Genscape announced today that it is expanding its AIS and maritime data services collaboration with exactEarth (TSX: XCT). For more than three years, the two companies have had a successful collaboration combining their respective industry-leading capabilities in satellite and terrestrial AIS data services to offer a range of global AIS products to governments and commercial markets around the world.

The extended partnership focuses on building and delivering the next generation services and datasets required by financial information services and trading firms. exactEarth is now offering exactShipDB, a new, enhanced vessel information service utilizing the Genscape Vesseltracker Ship Database.  Additional solutions under exploration are port information, event history, and vessel movement prediction. These new, differentiated, and value-added solutions will extend and grow existing multi-year relationships with financial markets-focused customers.

 “We are pleased to continue our successful relationship with exactEarth as a preferred industry partner for satellite AIS data services,” said Genscape CEO Matthew Burkley. “The addition of exactShipDB to exactEarth’s data service product line will benefit both companies and will continue to expand our relationship.”

 “Our collaboration with Genscape has allowed both companies to offer a range of highly reliable and high performing maritime data products to the global market,” said exactEarth CEO Peter Mabson. “We are pleased to be able to build on this successful, long-term relationship and to be able to expand our data offering to the marketplace.”

About Genscape

Genscape is a leading global provider of real-time data and intelligence for commodity and energy markets, driven to improve market transparency and efficiency. With a network of thousands of patented monitors, sensors, and satellites strategically deployed worldwide, Genscape is unique in its ability to collect and report proprietary market fundamentals in real-time or near real-time. Genscape delivers innovative solutions across a number of asset classes including: Oil, Power, Natural Gas and LNG, Agriculture, Petrochemical and NGLs, Maritime, and Renewables. Genscape clients often gain important insights, improve risk management, or increase operational efficiency. For more information, please visit: www.genscape.com

About exactEarth

exactEarth is a leading provider of global maritime vessel data for ship tracking and maritime situational awareness solutions. Since its establishment in 2009, exactEarth has pioneered a powerful new method of maritime surveillance called Satellite-AIS (“S-AIS”) and has delivered to its clients a view of maritime behaviours across all regions of the world’s oceans unrestricted by terrestrial limitations. exactEarth has deployed an operational data processing supply chain involving a constellation of satellites, receiving ground stations, patented decoding algorithms and advanced “big data” processing and distribution facilities. This ground-breaking system provides a comprehensive picture of the location of AIS equipped maritime vessels throughout the world and allows exactEarth to deliver data and information services characterized by high performance, reliability, security and simplicity to large international markets.  For more information, visit exactearth.com.

For all press inquiries please contact:

Caitlin Mann
Marketing Manager
Office: +1 617 790 0963
cmann@genscape.com

Total crude flows from Middle East and West African producers dropped 31.2mn bbls month on month reaching 645.7mn bbls or 21.52mn bpd in June, after averaging 22.3mn bpd since February.

Flows from all major exporters declined during June. Saudi Arabia and Iraq exports dropped 15.5mn bbls (7 percent) and 11.4mn bbls (11 percent), respectively. Iran’s exports also fell 4.7mn bbls (10 pecent) for the first time after the sanction relief in February. In the WAF region, shipments from Angola and Nigeria fell 6.6mn (12 percent) and 2mn (4 percent) bbls, respectively. 

During June, flows to East Asian and Indian destinations declined the most, falling 26.8mn bbls 5.2mn bbls, respectively. But, meanwhile, flows to the United States increased 8.6mn bbls compared to May. 

Genscape monitors Middle East and West African Crude exports daily using its Genscape Vesseltracker data together with market intelligence sources to identify the loadport of each departing crude tanker and track it through to its final destination. The weekly Middle East Waterborne Crude Report  and West African Waterborne Crude report published on Mondays and Wednesdays includes complete details on every departing shipment and will continue to track the dynamics on oil flows as it happens to help market participants assess the impact of any changes in flow on regional markets.

Genscape and Vesseltracker have combined their extensive proprietary energy monitoring networks to launch the world’s most comprehensive and accurate picture of global shipping. To learn more about Genscape Vesseltracker, or request a free trial, please click here.

Using Genscape Vesseltracker data, the Middle East Waterborne Crude Report  and West African Waterborne Crude report illuminates the flows coming out of the Middle East producing countries so that traders and analysts can better gauge markets in Asia, Europe, and the Americas. It provides traders and analysts with insight and analysis to better forecast short-term price shifts by enabling them to anticipate the arrival of crudes from the Middle East. This weekly report offers new transparency and helps market participants inform market positions, improve decision making, and gain insight on key market drivers.

Encompassing the majority of Texas, the ERCOT footprint experiences a wide variety of weather conditions through the course of a year, with the summer offering volatile conditions for energy demand. Due to its location in the Southern Plains, summertime heat frequently reaches oppressive levels, driving a strong need for air conditioning, which in turn results in strong energy demand. Additionally, its location to the lee of the Rockies results in a favorable wind pattern that drives some of the most reliable wind generation in the United States. In the paragraphs that follow we’ll examine the seasonality of ERCOT weather and how it impacts energy demand and wind generation. 

Summer

Starting with the most active season, meteorological summer (June – August) features persistent, intense heat across the footprint. The key demand centers of Dallas, Houston, and San Antonio frequently peak in the 90’s with both July and August featuring average highs in the range of 94°F-96°F. As a result of this strong heat and often elevated humidity, air conditioning plays a key role in the demand for electricity. 

Known as “cooling load”, the need for air conditioning correlates strongly with temperature. As a result, air conditioning and energy demand peak when temperatures are at their hottest. Over each of the past five years, peak summer demand has occurred during the month of August, averaging out to 67.8GW (2011-2015). The all-time peak demand record was recorded on August 10, 2015, at an impressive 69.8GW. ERCOT’s population-weighted maximum temperature on this particular day was 102 degrees!

This strong relationship between temperatures and energy demand is illustrated in the graph below. With such a strong dependency on temperatures, temperature forecast errors can have major consequences for the prediction of energy demand. It should then come as no surprise that thunderstorms can wreak havoc on energy demand forecasts, causing abrupt and often significant swings in temperature. Summertime thunderstorms are most common in coastal regions, including Houston, where moisture is most available. However, areas farther inland, including Dallas, are the most prone to outbreaks of strong and severe thunderstorms, which can lead to widespread power outages. 

Although not nearly as common as thunderstorms, Tropical Storms and Hurricanes can, and do, impact the ERCOT footprint during summer and fall. Historically speaking, August and September feature the highest risk for tropical systems impacting the region, posing numerous downside demand risks due to power outages, closures, and the cooler temperatures associated with heavy rainfall and cloud cover. Hurricane Ike is the most recent storm to impact the footprint, making landfall in Galveston as a category two hurricane on September 13, 2008.

Winter

Meteorological winter (December – February) features weaker overall electricity demand compared with summer due to a more comfortable range of temperatures. Shown in the table below, average day-time highs range from the 50’s to near 60 in Dallas to the middle to upper 60’s in Houston and San Antonio. However, on average, morning lows dip into the 30’s across northern Texas with 40’s across central and southern areas. 

These cold morning temperatures increase the demand for heating. This “heating load” correlates strongly with temperatures, as shown in the graphic below. It should then come as no surprise that the coldest days of winter yield the strongest wintertime energy demand.

Another key variable that plays into electricity demand during winter is cloud cover. Because the sun angle is already low in winter, days featuring heavy cloud cover can increase the need for daytime “lighting load”. Heavy cloud cover also reduces incoming energy from the sun, keeping temperatures colder which can lead to increased heating load.

While heavy cloud cover during the daytime has a bullish impact on electricity demand, this influence becomes bearish during the overnight hours. More specifically, when cloud cover is present during the overnight hours, it can lead to warmer temperatures compared to a clear night. As a result, this warmer effect reduces the need for heating load. This demand sensitivity to cloud cover makes accurate cloud cover forecasts an integral part of the demand forecasting process in winter.

Shoulder Seasons (Spring & Fall)

The shoulder seasons of meteorological spring (March – May) and meteorological fall (September – November) typically feature comfortable temperatures and moderate levels of electricity demand. The strongest springtime demand days are usually focused in early March, with unseasonably cold days driving strong heating demand. Meanwhile, the strongest fall demand days usually occur in early September when lingering heat can result in strong cooling demand. Since the shoulder seasons represent a period of transition, the strength of electricity demand as well as the shape of the electricity demand curve can vary significantly from one day to the next, helping drive forecast volatility. However, since the majority of spring and fall days feature a relatively comfortable range of temperatures (Highs in the 60’s - 80’s, lows in the 40’s - 60’s), overall demand strength is limited compared with summer and winter.

Wind Generation 

Driving a significant portion of ERCOT’s wind variability, the Great Plains low-level jet (LLJ) is the name of the wind phenomenon responsible for making the Plains one of the most favorable locations for renewable wind generation in the United States. Most common in the spring and summer, the low-level jet is a fast moving ribbon of air in the lower levels of the atmosphere. The proximity of the Plains to the Rocky Mountains allows for a strong nocturnal pressure gradient to develop, causing air to flow from east to west. However, due to the effects of Earth’s rotation, these winds are deflected to the north, resulting in a southerly wind across western Texas. These winds peak during the late evening and early overnight hours before weakening or even dissipating by the following afternoon as the pressure gradient reverses. 

As evidenced in the above graph, the diurnal pattern of the low-level jet heavily impacts the shape of ERCOT’s wind generation curve. When the LLJ is at its peak in spring, wind generation in western Texas is at its strongest, with an average spring day featuring a strong overnight wind ramp with a deep valley occurring in the early afternoon hours. While the LLJ often persists into summer, the lack of large-scale weather systems typically associated with the warm season allows for weaker wind and a deeper midday generation valley, in contrast to the other three seasons of the year. This deep generation valley frequently coincides with a steep upward ramp in electricity demand, making it more difficult to achieve a balance of the supply and demand of electricity.

In summary, the ERCOT footprint experiences a wide variety of weather conditions in a given year. Ranging from extreme heat and thunderstorms in summer to bitter cold in the depths of winter, the impacts on the demand for electricity are significant. Additionally, ERCOT’s favorable geography makes it one of the most reliable locations for wind production in the United States. The accurate prediction of these complex weather events is necessary for the production of accurate wind and demand forecasts, a challenge which Genscape’s in-house team of meteorologists is tasked with.  

Weather can have a large impact on power demand and generation, especially with the seasonal extremes seen across the U.S. in the summer and winter months. Being able to anticipate weather patterns for the season ahead can help market participants make more informed trading or business decisions. Click here to read Genscape's Summer 2016 forecast now. 

Genscape's Power Market services provide accurate, timely data on capacities, flow, and utilization for power. Clients gain increased market transparency to make more informed daily business decisions. Click here to learn more or request a free trial of Genscape's suite of Power Market services.

On June 29, 2016, the Ardmore Seahawk delivered its second load of Argentine biodiesel to Jacksonville, FL. The shipment of 35,000 barrels capped off an unusually active June in what is shaping up to be an unusually active year for biodiesel imports. For the full month, Genscape’s Biodiesel Imports Monitor tracked 1,460,000 barrels (61 million gallons) of biodiesel imports into the U.S. (this value includes only vessels; there could also be additional imports from Canada shipped via rail). That brings the total for the first six months of the year to a record 4,500,000 bbls (189 million gallons). Typically, the majority of biodiesel import activity occurs in the later months of the year. If this pattern holds in 2016, there is a very good chance that this year will surpass 2013 to have the highest volume of biodiesel shipments on record.

The ArdmoreSeahawk was not the only vessel bringing soy-based Argentine biodiesel to the U.S. In total, 769,000 bbls, or just over half of June imports, originated in Argentina. While Argentina continues to be the largest importer, shipments from Asia are becoming increasingly significant. The 443,000 bbls of June imports that originated in Indonesia is a monthly record. D6 RIN prices are only a few cents below D4 prices, which makes it increasing attractive for Indonesian producers to ship their palm-based biodiesel to the U.S. At current prices, their RIN premium is an incredible $1.84/gallon. On top of this, producers usually share in the $1/gal blender’s tax credit that was renewed earlier this year. 

Interestingly, the drivers for increased imports seem to be almost entirely related to the RFS, and not California’s LCFS. Of the 26 biodiesel shipments, only two were destined for California. Renewable diesel imports, which are also tracked in Genscape’s Biodiesel Imports Monitor, continue to play a much larger role in the LCFS market. Palm-based Indonesian biodiesel cannot generate credits in the LCFS market, and Argentine soy-based biodiesel has a carbon intensity score that makes it uncompetitive with other diesel substitutes. Meanwhile, RFS RVOs for 2016 and 2017 require significant increases in biodiesel consumption. If this trend continues to keep RIN prices high, it’s unlikely that imports will slow down any time soon.   

Using Genscape Vesseltracker AIS data and proprietary ship tracking, the Global Biodiesel Monitor provides stakeholders with access to key international shipment information to deliver a more complete picture of biodiesel and renewable diesel flows worldwide. To be in the know about U.S. imports of biodiesel and renewable diesel in this pivotal year for advanced biofuels, contact Genscape for a free trial to the Global Biodiesel Imports Monitor. With your trial subscription, you will discover the consignee that received the Australian shipments and all other biodiesel and renewable diesel imports. Click here to learn more or request your free trial now.

New York Harbor gasoline inventories decreased 1.2mn bbls to 17.5mn bbls between June 24 and July 8 on additional demand, but remained 4.6mn bbls higher than the same week in 2015 as a nationwide refined products glut persists. NYH gasoline stocks would need to fall at a similar rate for about a month to reach the year-ago volume.

Barrels were pulled from storage last week in connection with the Fourth of July weekend, and as some U.S. East Coast refiners operated at reduced rates.

Pick your poison: crude or products oversupply

Total U.S. crude inventories have been in a gradual decline since peaking in late April. However, the trend is reversed when refined product are included in the stock total. Total U.S. crude and petroleum product stocks continued climbing, reaching a record high week ending July 8, according to the U.S. Energy Information Administration. This would suggest that the national oil oversupply has not started to dissipate, but may be shifting downstream from crude to refined products markets.

This fundamental change could cause a pendulum effect, however, and in time, crude may again become oversupplied if refined product prices deflate.

In a potential market scenario: excessive stockpiles of gasoline and distillates could eventually lead to a price devaluation of the products in the NYMEX RBOB and ULSD futures contracts. Next, narrower refinery margins on weaker prices may cause reduced refinery run rates, decreasing refined product supply and potentially alleviating the glut of products. But, in turn, reduced refinery run rates would decrease demand for crude feedstock, and the oversupply could back into crude markets.

Whether storage tanks are filled with crude or gasoline, the global oil glut can only be resolved by a long-term rebalancing of production and demand. The EIA detailed their expected timeline for this stabilization in a report on July 12: “The pace of inventory builds [for global petroleum and other liquid fuels] is expected to slow to an average of 0.9 million b/d in 2016. The market is expected to reach balance in 2017, with inventory draws during the second half of the year averaging 0.3 million b/d.”

The flood reaches the Harbor

The products glut is evident in NYH gasoline stocks, which increased nearly 2mn bbls to 18.8mn bbls between June 3 and June 24. Inventories on June 24 were 6.4mn bbls higher than the same week in 2015 and 7.2mn bbls higher than the same week in 2014. The summer months are peak driving season, which typically causes increased gasoline demand and drawdowns in inventories. So far this summer, the oversupply has been substantial enough to satisfy the high seasonal demand and drive stocks to unseasonably high levels.

In response to increased NYH inventories, several tankers carrying gasoline components have parked in New York Harbor, unable to discharge due to lack of tank capacity availability, according to ClipperData and Reuters. Although Genscape data indicates that less than 60 percent of storage capacity was used on July 8, it is unclear how much of the available capacity was already leased.

Nine Clean Products tankers were parked in the New York Harbor region during the week ending July 1, according to Genscape. The majority were able to make their deliveries and depart after being delayed by as much as two weeks. One Clean Products ship, the British Integrity, was moored off the coast of Long Island as of July 13. The 332,000-bbl ship arrived from Immingham, UK, on July 8 and was scheduled to discharge on July 12.

July 4th holiday provides relief valve

NYH gasoline stocks decreased for the two weeks surrounding the Independence Day holiday after building through June. Higher demand and reduced refinery run rates contributed to storage draws.  Inventories in the region would need to continue decreasing at the same rate for five more weeks to coincide with the corresponding 2015 level, and lower supply and/or steady demand would need to persist for a significant destocking pattern to take place.

Demand for gasoline at retail locations increased in the days leading up to the holiday weekend as gas stations prepared for the annual spike in driving, according to Genscape’s Supply Side Monitor rack-level data. Rack loadings in PADD1B (New York, New Jersey, Pennsylvania, Maryland and Delaware) increased 195,000 bbls or 28,000 bpd to 6mn bbls or 862,000 bpd during the week ending July 1 compared to week ending June 24. The volumes for week ending July 1 reached the highest level of 2016.

For week ending July 1, levels were 341,000 bbls higher than the week leading up to July 4, 2015 and 1.2mn bbls higher than the same week in 2014.

Refiners face weaker margins, reduce run rates

The glut of refined products has led to weaker refinery margins, further contributing to the two weeks of storage decreases. The gasoline inventory build began after refinery margins widened in early March. At that time, the economic feasibility of producing gasoline likely compounded with the need to prepare for summer driving demand. The 3:2:1 crack spread for the NYMEX Light Sweet Crude Oil, RBOB and ULSD futures contracts widened $6.78/bbl to $17.49/bbl between Feb. 29 and March 1, and did not drop below $14/bbl until July 5.

Some refineries that feed the NYH region have recently reduced run rates.

Delta Air Lines cut production at their 185,000 bpd Trainer, PA, refinery by 16 percent, Reuters said on July 5. A news story published by Reuters the following day said that Philadelphia Energy Solutions cut rates at their 335,000 bpd Philadelphia refinery by 10 percent. Representatives were not immediately available to comment on the production cuts at either refinery.

The 3:2:1 crack spread has been on a gradual decline, closing at $12.74/bbl on July 8. This was the lowest spread since February and is particularly low for the time of year. The spread was $28.33/bbl on July 8, 2015 and $20.07/bbl on July 8, 2014.

Genscape’s New York Harbor Product Storage Report delivers critical storage level insight for refined product physical inventories aligned with the NYMEX, RBOB, and HO futures contracts. Subscribers to the report can compare inventories for 26 terminals and develop a custom view of the gasoline, ethanol, jet fuel, and distillate markets a full day ahead of EIA data releases. To request a free trial of the report, please click here. 

The Natural Gas Infrastructure Intelligence team is bringing you a new product: Natural Gas Liquids (NGL) Data! This new database tracks upcoming NGL Pipelines, Fractionators, Gas Processing Plants, Propane De-Hydrogenation (PDH) Plants, Liquefied Petroleum Gas (LPG) Export Facilities, and Ethylene Cracker projects. Genscape aims to provide a framework for a better understanding of NGL infrastructure development, and thus production and market price volatility.

Developed internally to support Genscape's Lower 48 NGLs Production Forecast, this data will now allow subscribers to analyze constraints over time and understand the location and timing of new NGL infrastructure meant to alleviate those same constraints. As oil prices recover from historic lows, IRR on liquids-rich wells will improve, increasing NGL production to fill up existing pipeline and fractionation capacity that has recently come on-line.

The demand for new NGL infrastructure, like that for natural gas, varies widely from region to region. In areas with liquids-rich production growth, NGL processing capacity becomes key – the timing and capacity of each new processing plant added to a region can directly affect NGL recovery potential. With the downturn in oil prices and resulting focus on efficient production practices, midstream companies are working closely with E&P companies to delay new processing facilities until the capacity is necessary to avoid significant constraints.

Although natural gas production has slowed in some areas, new and more efficient NGL processing plant additions are still allowing growth in NGL recovery. New cryogenic processing plants can extract a deeper cut of NGLs from the gas stream than older plants, incenting producers to reroute gas flows from old to new plants upon start-up. Lack of processing plant availability was causing excess gas to be flared and all NGLs to be lost. As new plants come online, flared gas is increasingly recoverable, and existing NGL infrastructure increasingly utilized to move product to fractionation hubs such as Mont Belvieu.

Downstream of production, fractionator capacity has been in a similar situation, where constraints in total fractionator capacity have restricted increases in purity-product output and required additional transportation or storage of y-grade. This has at times limited the availability of ethane, propane, butanes, and natural gasoline at certain locations to feed growth in demand infrastructure such as ethylene crackers, PDH and LPG export facilities. However, as fractionator capacity continues to grow at complexes such as Mont Belvieu, this constraint may be alleviated for periods of time, as is addressed in Genscape’s June Regional Fractionator Balance Report, and fractionator utilization may be limited by available y-grade supply.

As NGL production expectations shift with changes in drilling economics and NGL pricing, detailed knowledge on the location and timing of infrastructure projects to produce, deliver, and consume NGLs will continue to be key to understanding market dynamics.

Click here to learn more about Genscape's new NGL Infrastructure Data.

Last quarter, ONEOK described Bakken volumes as a key driver to their Q1'16 performance. Indeed, ONEOK volumes are ~45 percent of the natural gas production in the region. Broadly speaking, even though Bakken oil production fell from Q4’15 to Q1’16, natural gas production rose; lower flaring was possible for North Dakota thanks to the added compression and processing with the ONEOK Lonesome Creek processing plant coming online; Whiting Petroleum was able to capture 96 percent of its natural gas for Q1’16 .

This quarter, the underlying dynamics appear to have changed. Genscape's data shows a quarter on quarter slowdown in Bakken natural gas processed by ONEOK in Q2. From Q1'16 to Q2'16, Genscape's estimate processed volume falling by roughly four percent, though still up 26 percent vs the same quarter last year. In the earnings call last quarter, ONEOK stated that they added 115 wells to their system during Q1'16 and estimate adding another 185 wells to their system over the remainder of the year, again, suggesting a slowdown after Q1. Genscape’s data suggests that ONEOK’s residue gas peaked late Q1 on March 9, 2016 at 743 MMcf/d and has dropped by 130 MMcf/d as of June 30, 2016.

While Genscape sees Q/Q declines, not all hope is lost. In Q1'16 earnings call, ONEOK suggested that there is still about 185 MMcf/d of natural gas being flared in the region, and that this flared volume will come down by 70-80 MMcf/d when ONEOK brings its Bear Creek processing plant online in Q3. Genscape's Infrastructure team estimates the plant to come online in September 2016, so we anticipate a slight bump to Q3 volumes due to just one month being accounted in the quarter. Perhaps, Q4'16 will realize full effect of Bear Creek processing plant. We shall see, or rather, we shall monitor it.

Genscape's Equity Insight monitors daily crude oil and natural gas production of 27 E&P companies, using both Genscape proprietary monitors and other data. We have begun expanding our coverage universe to include industry critical midstream assets. In addition to ONEOK, our current midstream portfolio includes three other companies: Markwest (MPLX), Rice Midstream (RMP) and CONE Midstream (CONE). Genscape’s estimate of RMP’s and CONE’s throughput volumes have produced an R-square of 0.9811 and 0.9972, respectively, compared to company reported volumes. Our plan is to continue expanding our coverage. For more information on Genscape’s Equity Insight click here.

Genscape’s Equity Insight monitors daily residue natural gas from ONEOK's processing plants in the Bakken. Genscape’s daily processing volumes, when compared with ND state reported residue gas for ONEOK's processing plants, have performed with an R-Square of 0.9975.

Genscape’s Equity Insight Service combines production, historical hedging, capex and guidance data, with company conference call insights and a proprietary company play level economic model, to deliver a new piece of the equity puzzle to improve efficiency and confidence in decision making. Click here to learn more.