The web of crude-related infrastructure in the Permian Basin continues to expand as West Texas regional production climbs to record levels. Several midstream companies are building out gathering systems which will carry crude barrels from production regions to major West Texas storage hubs, such as Midland, TX. The new pipelines and associated storage tanks will accommodate increased output from the top production play in the United States and provide connectivity to downstream markets at Cushing, OK, and the U.S. Gulf Coast.

Production Rebounds to Record High

Crude production flows in the Permian reached a record high of 1.98mn bpd for week ending August 26, surpassing the previous high from week ending February 5, according to Genscape. Production in the region has been steadily climbing since at least 2010, but plateaued in 2015 as crude prices plummeted. A recovery in prices since February has rekindled the building pattern in production.

The Permian Basin is one of the most cost-effective oil plays in the United States, with relatively low breakeven prices averaging around $40 a barrel. Therefore, production in the Permian has been particularly responsive to the improving market environment. If crude prices stay above $40 a barrel, a trend that has persisted since early August, flows are likely to continue growing out of the West Texas region.

Permian production is forecast to increase 800,000 bpd over the next two years to 2.7 million bpd in September 2018, according to Genscape. Rig counts in the region have also been on the rise as production becomes more economical. Permian rigs increased by 79 to 204 rigs between May 13 and September 16, the highest count so far in 2016.

What Comes Up, Must Go Down: Moving Barrels from the Well to Downstream Markets

Increased production in recent years has increased demand for infrastructure to accommodate the additional barrels leaving West Texas. Several pipelines have been built or reversed from the Permian Basin to transport crude directly to Gulf Coast markets. Previously, barrels had to flow 500 miles northeast to Cushing before backpedaling southward to reach the Texas coast. The Gulf Coast contains the largest refining complex in the world, as well as marine docks which provide connectivity to international markets.

In 2013, Magellan reversed its 275,000 bpd Longhorn Pipeline to deliver crude to Houston from delivery points in Crane, TX, and Barnhart, TX. In 2014, Magellan completed construction on its 300,000 bpd Colorado City, TX,-to-Houston BridgeTex Pipeline.

In 2015, Plains All American’s 330,000 bpd McCamey, TX,-to-Gardendale, TX, Cactus Pipeline became operational. From Gardendale, Cactus Pipeline has connectivity to Corpus Christi, TX. The same year, Sunoco completed construction on its 230,000 bpd Colorado City, TX,-to-Corsicana, TX, Permian Express II Pipeline. 

Genscape monitors the connected storage for these pipelines in Colorado City, Crane, McCamey, and Houston.

Midstream investments are being backed by increased production and the need for greater pipeline connectivity to downstream markets. Several pipeline systems are being constructed and expanded to gather crude from production sites and deliver it to West Texas storage hubs. Expected upcoming expansions include Medallion’s Wolfcamp Gathering System, Oryx’s Trans Permian Pipeline System, Rangeland’s RIO System, EnLink’s Greater Chickadee Gathering System, and Navigator’s Big Spring Gateway System. This trend will likely continue as companies cash in on infrastructure opportunities caused by climbing supply.

Many companies are also investing in the growing demand for storage tanks in the region. In 2016, crude storage capacity increased nearly three million bbls at Genscape-monitored West Texas locations (Midland, Colorado City, Crane, McCamey, Odessa, Wichita Falls, and Wink). Since 2010, storage capacity at Midland increased 3.6 million barrels to 9.2 million barrels, with another 800,000 barrels under construction.

In the past two years, Genscape has added several owners to its coverage of West Texas storage terminals. Several of these have been smaller-name midstream companies. Storage owners added since 2014 include Genesis, Magellan, Medallion, Navigator, Oryx, Rangeland, SunVit, and Western Refining. Below are highlights from a small portion of the gathering systems being built in the Permian region.

Medallion

Medallion’s Wolfcamp Connector Crude Oil Gathering System is a 456 mile system that stretches across Mitchell, Howard, Glasscock, Reagan, Upton, and Midland counties. Initial operations began in October 2014, but new expansions to the system are being completed. Earlier this year, Medallion announced the successful close of an open season for a new pipeline that connects the system to a new terminal at Crane, TX.

The Crane Extension connects Medallion’s existing Midkiff Station to Magellan’s 275,000 bpd Crane-to-Houston Longhorn Pipeline via a 100,000 bpd bi-directional pipeline. The Wolfcamp gathering system currently feeds into the Colorado City Hub, and Medallion has plans to provide connectivity to Midland in 2016. Genscape monitors the Medallion storage terminals at Crane and Colorado City.

Oryx

Oryx recently completed the first phase of construction on its Trans Permian Pipeline System, a gathering system that will provide transportation from the southern Delaware Basin to markets at Crane and Midland. The system will have an initial capacity of 160,000 bpd and can potentially be expanded to 220,000 bpd based on customer demand.

The system will provide inter connectivity to Magellan’s Longhorn Pipeline at Crane and Enterprise’s storage terminal at Midland. Genscape monitors the Oryx Crane terminal, which has one operational tank and two more in the early stages of construction.

Rangeland

Rangeland’s RIO System is designed to transport crude production from the Delaware Basin. The system includes terminals in Loving, NM, the Texas-New Mexico border, and Midland. The company recently brought into service its 125,000 bpd RIO Pipeline, which will carry crude 110 miles from the State Line terminal to the Midland terminal. From there, market participants will have access to Cushing, East Texas, and the Gulf Coast via the Plains Midland terminal.

In a press release issued on September 7, Rangeland CEO, Chris Keene said, "the Delaware Basin is the most active and prolific basin in the United States, and we don’t expect that to change in the foreseeable future. ...For this reason Rangeland has placed a very high priority on providing takeaway service and optionality to all customers active in the basin.

Genscape’s U.S. Gulf Coast Pipelines Reports provide real-time, proprietary insight into crude oil flows across the U.S. Gulf Coast region for over 3.6 million bpd of capacity. The reports provide flow data and insight into new infrastructure developments in the region. To learn more, or to request a free trial, please click here.

Genscape's Midland-Basin Crude Oil Storage Report provides granular crude oil storage measurements for key terminals connecting Permian Basin production to the Gulf Coast and Cushing, two days before EIA estimates. To learn more, or to request a free trial, please click here.

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The United States Department of Agriculture (USDA) National Agricultural Statistics Service (NASS) Fats and Oils Report with statistics related soybean processing will be released on Monday, October 3. Genscape’s outlook for the NASS statistic for August processing is 140.7 million bushels. Genscape’s NASS outlook for July processing was 153.4 million bushels crushed, predicting the NASS statistic with 99.4 percent accuracy.

Genscape monitoring coverage is currently focused on large soybean processors in the Midwest, and includes two plants that are not National Oilseeds Processors Association (NOPA) members. Outages at these two plants totaled about 688,000 bushels missed during August. These outages would not be reflected in the NOPA statistics. 

Soybean Processing Outlook

Genscape’s Soybean Processing Monitor outlook directionally agreed with the NOPA statistic released on Thursday September 15, indicating a decrease in the crush rate from July to August 2016. Genscape indicated a 12 percent decline in processing rate in the Indiana-Kentucky-Ohio-Michigan region, which matched NOPA statistics. Additionally, Genscape noted a three percent increase in the processing rate for Iowa, which also matched NOPA statistics. In Illinois, the processing performance in August was similar to the performance in July, while the Minnesota and Southeast regions ticked down. 

The NOPA Southwest region registered a 25 percent drop in processing rate from July to August 2016 based on NOPA statistics. Genscape’s tracking of this region indicated that the 7.6 million bushels were missed in the Southwest alone, and based on Genscape analysis, over and above the outages, the baseline processing rate dropped about eight percent. 

August Plant Outages

Genscape accounted 15.8 million bushels of missed processing in August. One key example, the Bunge facility in Destrehan, LA, was not processing for 25.7 days out of the 31 days in August. This facility alone translated to 3.4 million missed bushels. The image below at left shows the facility in operation on August 1 and the image at right shows the facility shut down on August 15 with a crane present in the background.

The next NOPA statistical release will be on Monday, October 17, and Genscape’s outlook to clients will be released on Monday, October 10. To provide some broad color on outages over and above scheduled maintenance, Genscape has observed 14 outages in September so far. Some of these were intraday outages while others spanned multiple days, such as an outage at Louis Dreyfus – Claypool, IN that began on September 7, and an outage at Bunge – Council Bluffs, IA that began on September 14.

Genscape’s Soybean Crush Report and new Soybean Crush Outages Monitor provide insight with proprietary, real-time monitoring of a strong statistical sample of the U.S. soybean processing. The crush report is available up to seven days ahead of the NOPA report, and up to three weeks ahead of the NASS report, providing timely, impactful data that assists our clients in making better-informed decisions. The outages monitor provides intraday alerts when plants go offline and summarizes outages and plant statuses in a daily report. To learn more about the services, or to request a copy of the full report for this month, please click here. 

In the southeastern United States, No. 2 diesel rack activity recently declined following an outage on Colonial Pipeline’s Line 1 refined products pipeline earlier this month, according to Genscape Supply Side data. The movement was unseasonable, as diesel demand typically rises in the early fall. 

During the 12-day Line 1 outage that started September 9, Colonial re-purposed its Line 2 pipeline to move gasoline, edging out some distillate barrels into southeast states. While Line 1 flows mostly gasoline, Line 2 is traditionally designated for distillate. After the outage rack activity declines were initially focused on gasoline demand in the same market. 

Colonial Pipeline shut parts of Line 1 due to a 252,000 gallons (6,000 barrels) leak, affecting deliveries in Alabama, Tennessee, Georgia, North Carolina, and South Carolina, and restarted the line on September 21 with a line that bypassed the leak, according to a company press release. During the outage, Colonial used Line 2, a 1.1 million bpd distillate line, to pump gasoline. Colonial did not say in the release how much diesel capacity was displaced, but market sources suggested that nearly all of Line 2 was used for gasoline movements during the outage. 

Typically, diesel demand in September and October increases during harvest season, with additional fuel needed for farm equipment and trucking. The lack of diesel deliveries off Colonial into key southeastern rack cities has caused a significant reduction in diesel rack activity for several locations in Georgia, Tennessee, North Carolina, and South Carolina on a weekly and monthly basis. 

In Georgia, Athens diesel rack activity for September 23 to September 27 was seven percent below the previous week. As of September 27, total September diesel rack volumes were 5.956 million gallons, five percent below August and four percent below July. In Albany, September rack activity was 9.366 million gallons, 15 percent below August and nearly seven percent below July. Bainbridge rack activity was also affected by the Line 2 switch to gasoline, with September rack activity seven percent below August. 

Tennessee diesel rack activity also showed declines for September 23 to September 27. In Knoxville, diesel rack volumes were 14 percent below the previous week. As of September 27, monthly diesel rack volumes were six percent below August. In Nashville, diesel rack activity for September 23 to September 27 was five percent below September 16 to September 20. September diesel rack volumes in Nashville were less than one percent above August, relatively small growth during the fall harvest season. Chattanooga diesel rack activity for September was 15 percent below August.

South Carolina diesel volumes also fell during the decline in Line 2 diesel shipments this month. In Belton diesel rack activity for September 23 to September 27 was 78 percent below the previous week. September rack activity for diesel was just two percent above August, relatively small growth during the fall diesel season. In North Augusta, no. 2 diesel rack volumes between September 23 and September 27 were 11 percent below September 16 to September 20. For the month of September, total diesel rack activity was seven percent below August. 

The declines in diesel rack volumes also extended north to North Carolina along Line 2’s path. For September, Fayetteville total rack volumes were 34 percent below August and 18 percent below July. In Raleigh/Apex, diesel rack activity during September 23 and September 27 was 44 percent below the previous week, and total September volumes were four percent below August. Charlotte weekly diesel rack volumes for September 23 to September 27 were 35 percent below the previous week, and total September activity was four percent below August. 

The Line 1 outage severely affected gasoline rack activity in the southeastern United States in September, though activity levels have started to recover in most cities with the Line 1 restart. Gasoline rack activity in Tennessee, North Carolina, and South Carolina for September 23 to September 27 showed double digit gains compared to the same time period the previous week. But, Georgia gasoline rack volumes remained weak, with September 23 to September 27 activity nine percent below the previous week. 

Genscape's Supply Side Analyst and Supply Side Monitor provide analysts and traders with daily or hourly volumes and prices for regular gasoline, midgrade gasoline, premium gasoline, jet fuel, kerosene, and diesel. Receive the industry’s only insight into PADD and rack city related volumes and average prices for wholesale transactions of refined products. To learn more, or request a free trail of Genscape's Supply Side Analyst and Supply Side Monitor, please click here.

A recent unplanned French nuclear plant outage at Golfech’s Unit 2 (1,310 MW) neatly demonstrates how the time advantage of Genscape’s PowerRT solution secures traders a head start for intraday trading. The PowerRT time advantage enables profitable trading strategies to capitalize on price spikes of 5-10 Euro/MWh, such as were seen around the time of this outage.

The outage took place on September 26, 2016 when French nuclear plant availability was already rather tight. At 2:10PM CET, Genscape’s proprietary monitors registered a significant drop in output of the Golfech nuclear power station. A PowerRT alert was immediately issued, followed shortly thereafter (at 2:18PM) by a frequency event alert triggered by the associated network frequency disturbance. This further confirmed the high probability of an unplanned single-unit outage event at Golfech.

Golfech consists of two identical units of 1,310 MW each and (as became clear later) Unit 2 had tripped. The relevant REMIT message was published by RTE, the transparency platform operator, at 2:28PM CET – a full 18 minutes after PowerRT users were already alerted about the event.

French power prices were already under pressure prior to the event, due to tight nuclear availability, and the day-ahead baseload price in France had cleared for this delivery day at 43.25 EUR/MWh. As a consequence of the outage, intraday traded hours H17 through H21 spiked to highs of 61-76 EUR/MWh (see chart).

This specific outage event is another example how PowerRT users can benefit from Genscape’s timely and insightful data ahead of the curve. The 10-18 minute time advantage allowed positions to be re-considered before the curve, leveraging the outage’s 5–10 Euro/MWh impact on intraday prices (H17 through H21).

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Since 2012, New York’s Zone A has transformed from one of the calmest zones in the state to one of today's most volatile. While there are many factors that are driving this volatility on a daily basis, the primary driver has been linked to generation retirements. In combination with other factors that affect the zone, generation retirements have resulted in the difficulty to predict and forecast when and where the volatility will occur. This blog, we will examine Zone A’s recent history, upgrades made by the NYISO, market drivers of price separation including congestion, and what this means for its future. 

Recent History

Zone A used to be traded as a "base price" zone because volatility remained low. Low load, a surplus of generation, and large power imports from PJM and Ontario kept the volatility at this level. As a result of the low prices, a significant amount of supply was sent towards New York City to meet the high demand. However, the following generation retirements significantly increased volatility:

1. Dunkirk retired 2 units in 2012

2. Dunkirk retired remaining 2 units in January 2016

3. Huntley retired in March 2016

NYISO’s Efforts to Maintain Reliability

NYISO conducted studies focusing on the impact that several 2016 generator retirements would have on Zone A and implemented upgrades to avoid reliability issues. Though, some benefits derived from these upgrades, this blog will explore many of the problems that still linger.

Western NY Reinforcement Project:

Following NRG’s request to retire Huntley, both NYISO and NRG performed a coordinated analysis to determine the reliability impacts on both the local transmission system and the Bulk Power System. NYISO published the results of the analysis, showing necessary upgrades to be implemented in western New York, which will maintain a reliability until 2020. Some of those upgrades include:

• Install capacitor banks at the Huntley 230 kV station by June 1, 2016
• Possible system configuration changes and relay adjustments associated with the 23 kV load station
• Adding series reactors to the most constraining 230 kV lines north of Huntley, with a planned in-service date of June 1, 2016

After all the implementations were complete, congestion continued to remain strong during high demand days in Western New York. However, congestion in the zone has decreased during low load days, likely as a result of the recent upgrades. 

Impacts in Zone A

The market dynamics rapidly changed beginning with the generation retirement at two Dunkirk coal units in 2012. Four years later in 2016, Dunkirk then mothballed its remaining units in January and the Huntley coal unit retired in March, increasing Zone A volatility.

Since the Dunkirk retirements in 2012, congestion on the 230 kV system became a significant volatility driver in Zone A as a result of low 230 kV generation in southern Buffalo.

Zone A volatility was somewhat manageable while Huntley and remaining Dunkirk units were still operating on the 230 kV system in Buffalo, avoiding most of the Zone A congestion when they were dispatched.

The dilemma rose for Huntley and Dunkirk when they did not run during high load days, resulting in high prices at their node (usually the highest in NYISO), which caused Huntley (and/or Dunkirk) to be dispatched as a marginal unit. However, when they did ramp up, they would significantly decrease the congestion and receive low LMP at their node. The result was that these generators were unable to capture any value from Zone A congestion, ultimately forcing them to retire due to financial reasons in 2016.

The 2016 retirements of Huntley and Dunkirk have significantly increased the volatility amount in Zone A, as they were the biggest congestion-eliminating plants left in the area. Their retirements limit the system operator’s ability to reduce volatility in the zone, resulting in stronger congestion and volatility than before. The following image shows Genscape's NYISO Spring 2016 Outlook Presentation capture the DA power prices for three days following Huntley’s retirement. After Huntley retired, Zone A started to clear above Zone G, while before it was trending below. This graph also exemplifies how we called for Zone A's expensive trend to continue in 2016, despite the western New York Reinforcement Project.

New Congestion Drivers after Retirements: 

Zone A Transmission System

Prior to the retirements, Zone A power used to flow towards the southwest portion of the state (Zone J). To meet load requirements some of that power now flows towards southern Buffalo. Since the western New York transmission system was not designed for this purpose it causes congestion on the lines that flow towards southern Buffalo, increasing the Zone A volatility. This is why many upgrades on the western New York transmission grid were deemed necessary by the ISO (Western NY Reinforcement Project).

Ontario Imports and Somerset Coal Plant Generation (345 kV connections)

With weak southern Buffalo generation, a portion of power on the 345 kV lines in northern Buffalo now flows down on the 230 kV lines towards southern Buffalo, resulting in strong Niagara-Packard congestion on the 230 kV system. When the Niagara-Packard congestion occurs, it reduces flows from Ontario imports and output from the Somerset coal plant, which are connected to the 345 kV in Zone A. Therefore, strong flows from Ontario and generation strength from Somerset increase the risk for Niagara-Packard congestion. In the past, Ontario and Somerset had bearish impact on Zone A, but they now drive Zone A congestion.

Niagara Hydro (230 kV injection only)

The Niagara Hydro project connects to the western New York grid with both 230 and 115 kV lines. As mentioned above, the transmission system in Zone A is heavily congested, especially on the 230 kV lines. Added generation on the 230 kV lines from Niagara Hydro exacerbate this congestion on the Niagara-Packard 230 kV lines, whereas the generation on the 115 kV lines can feed southern Buffalo, resolving congestion.

Due to its design, Niagara Hydro plant is only able to inject on the 115 kV if they are already injecting on the 230 kV lines. This means that Niagara Hydro cannot resolve congestion without adding to congestion

One of the many rule changes applied by NYISO was concerning Niagara Hydro’s settlement. Niagara Hydro receives different prices for 230 kV and 115 kV injection points and due to congestion, the 230 kV node is usually cheaper than their 115 kV node. Originally, they would settle at their 230 kV price, completely disregarding the 115 kV price. In other words, Niagara Hydro would receive all the blame for Zone A congestion (230 kV generation), but none of the credit for resolving it (115 kV generation).

Similar to many power plants, when they received downside at their 230 kV node they would either lower their generation (at both 115 and 230 kV) or operate at a loss. When they lowered their generation on 115 kV, Zone A congestion would also increase, meaning their lowering did not assist with the zone's congestion.

With the new rule change, NYISO acknowledges Niagara’s 115 kV injection’s impact on resolving congestion in Zone A and they now settle Niagara’s node at an average of 115 kV and 230 kV nodal prices in order to pay them fairly. This new rule resulted in increased revenue for Niagara Hydro, and (likely) helped with lowering Zone A volatility.

PJM imports and strong Wind generation in western New York

Similarly, strong PJM imports along with strong wind generation can sometimes drive additional Zone A congestion on the Wethersfield and Meyers 230kV lines. 

South Ripley – Dunkirk 230 kV line

Another congestion driving line after the retirements is the South Ripley – Dunkirk 230 kV line. This transmission line is part of a larger one that connects southern Buffalo to PJM. Flows on this line usually move from southern Buffalo to PJM, exporting precious power from the city out of Zone A, which in return creates need for more power to flow towards southern Buffalo. Naturally, this creates even more stress on the already-congested Niagara-Packard and other 230 kV lines in Zone A. We suspect that NYISO puts this line on outage whenever they expect strong Zone A volatility, and brings the line back in-service when the volatility is low. NYISO brought the South Ripley – Dunkirk line back in service as of October 3, 2016. Genscape suspects the main reason for this line to come back in-service before December 5, 2016 as scheduled, is driven by the lack of Zone A volatility in the recent weeks. As the line came back in-service, Zone A congestion increased due to southern Buffalo exporting power to PJM.This is an example of how unpredictable and difficult it is to foresee Zone A congestion drivers ahead of time. Even though this line is not scheduled to be on outage again anytime soon, Genscape expects the line to be on outage once Zone A volatility increases.

Overall, Zone A became price-sensitive to multiple factors following generation retirements, making it difficult to predict congestion occurrence. Highlighted areas in the map below have direct impact on Zone A congestion.

Just how volatile is it?

Volatility is good for the markets when it is predictable. Predicting is easier when the drivers are known and few. However in Zone A, there are simply too many price driving factors, such as load and generation forecasts, Ontario imports, PJM imports, wind forecasts, Somerset coal plant generation , the South Ripley to Dunkirk line outage, 230 kV line outages near Niagara or Packard, changes in virtual load and generation, and any derates on Dysinger East or Central East interfaces.

All of the aforementioned drivers are equally important, which makes this zone very hard to forecast. If one of these drivers is not accurately forecasted, it will result in a large error in forecast accuracy. In other words, forecasting ‘almost everything’ correctly will generate a good forecast for other zones, but this will not apply to Zone A.

As there are multiple drivers for Zone A congestion, it can be challenging at times to find out the primary driver of change in congestion day–over-day. For example, Zone A congestion has quadrupled from $3.80 to $14.00 from June 8 to June 9 2016, even though cleared demand decreased by 0.7 GW and no other major changes had occurred in the market.

Results

Genscape expects Zone A congestion to remain strong in the near future despite the recent market implementations in the summer of 2016.This is mainly because the implementations only limit certain congestion drivers, but not all. Day-over-day changes in the zone will remain a challenge to forecast due to many variables impacting the zonal price. The volatility should vanish once new generation is added to the southern part of Buffalo, such as possibility of Dunkirk re-firing on natural gas in 2018.

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On October 4, 2016 Genscape noticed an increase in southbound flow on TETCO as a result of Phase One of the Gulf Markets Expansion project coming online. This project allows for an incremental 350 MMcf/d southbound on TETCO from the constrained Appalachian production area to the MidCon and Gulf markets, where prices are higher. Three shippers (Mitsubishi, Range Resources, and Equitrans) have contracted for the full capacity.

Phase One of this project involved modifications at Wheelersburg, Owingsville, Egypt, Mt. Pleasant, Union Church, and Opelousas compressor stations on TETCO. Phase Two, which is expected in late 2017, adds additional capacity to the southern portions of TETCO through modifications at Gillis and Opelousas compressors and the addition of the new Provident City Compressor Station in Texas.

Prices in TETCO M2’s 30” receipt zone have already shown improvement as a result of the expansion. The price spread between TETCO’s M1 region and the southern markets of Tennessee, Kentucky, and Mississippi, which trade at a seven-day average cash price of $2.95, strongly incentivizes southbound flow. Before the project came online, the seven-day average for TETCO M2’s cash price was $0.69.  Now the hub is trading at ~$0.83, and Genscape anticipates this uplift in local prices will persist. 

Genscape has confirmed with Spectra that Phase One of the Gulf Markets Expansion is online and available for nominations.

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As Q3 results soon rollout, with many first looks toward 2017, we are reminded of the longer term value proposition: namely that capital can be invested with returns above the marginal cost of debt. Genscape currently analyzes over 250 individual company play breakevens, defined as NPV > 0 at 10 percent cost of capital, covering substantially all of the United States horizontal drilling. In the Permian, we cover 24 companies and 42 company plays, and find an average breakeven of $36-$39.

The horizontal rig count in the Permian has rebounded 49 percent from its May low adding 57 rigs (now down 51 percent verses year ending 2014), while the Eagle Ford has only recovered two rigs (now down 84 percent from year ending 2014). This does not come as much of a surprise to us, as the Permian has been a magnet for M&A activity this year – over eight billion dollars in deal value during Q3 alone, driven by relatively low breakevens, a diverse set of operators, and a deep inventory of future drilling locations. 

Turning to the financials of Permian companies, over the past 10 quarters, the market has punished those whose debt increased relative to production levels. Companies that have grown production and kept debt down have been rewarded. Diamondback, Callon, and RSP Permian, have demonstrated the ability to improve debt and production metrics, which unsurprisingly rank favorably in our economics report verses many of their peers.

Oil prices have ticked significantly higher in the past couple of weeks on hopes that OPEC will announce a production cut at next month’s meeting. With the Q3 earnings season on the horizon, we expect announcements of companies putting even more rigs back to work. Now this clearly does not mean every company will benefit to the same degree as the range of breakeven prices and well results are disparate, and even in the Permian there are some company type curves that do not breakeven until reaching $60 or more.

Genscape's Equity Insight includes a comprehensive breakeven report updated on a quarterly basis which covers every active unconventional play in the Lower 48 and is based on over 200 distinct company specific type curves. In addition, Equity Insight tracks both actualized and forward guidance for both CAPEX and production volumes of over 70 E&P companies who are active in the Lower 48. Our E&P coverage universe represents essentially all publicly traded names. Genscape's Equity Insight also tracks daily volumes by company by region for 28 E&P and 6 midstream companies, for a near real time look on production results. To learn more, or request a free trial, please click here

During the week ending October 11, total inventories at Cushing, OK, slid to below 63 million barrels, marking the largest weekly decline in a seven-day period since September 2009, according to Genscape. Stocks hit a 10-month low between October 4 and October 11 at the hub, as inbound and outbound crude pipeline flow volumes supported an inventory decline.

On October 11, more than 80 percent of Canadian-to-United States pipeline capacity was shut after climate activists disrupted movements on a number of pipelines. TransCanada’s 590,000 bpd Keystone Pipeline, which originates in Hardisty, Alberta, was shut on October 11 for about eight hours. Genscape data showed on October 6, volumes on the pipe declined to below 100,000 bpd during a planned outage.

In addition, crude flows on the 450,000 bpd Wichita Falls, Texas,-to-Oklahoma segment of Plains All American’s Basin pipeline fell to below 150,000 bpd on October 5 through October 8. According to Reuters, Basin was undergoing hydrotesting during this time period.

While Cushing inflow fell, outflow rose, and increased volumes were monitored on TransCanada’s 700,000 bpd Gulf Coast pipeline and BP’s 180,000 bpd BP1 pipeline, which serves BP’s 405,000 bpd Whiting, Indiana, refinery.

Flows on the Gulf Coast pipeline increased about 29 percent during the week ending October 11 to reach a nine-month high. Higher volumes were likely used to supplant lower Basin pipe flows from the West Texas Permian Basin to the Gulf Coast. TransCanada's Gulf Coast pipeline delivers to Nederland, Texas, or Houston.

BP1 flows more than doubled during the week ending October 11. The Whiting refinery has been undergoing planned maintenance since September 19, which may be altering the crude slate and sourcing processes.

The large Cushing draw during the week ending October 11 followed a sustained period of low volatility in inventories at the NYMEX Light Sweet Crude delivery point, where stocks hovered between 65 million barrels and 68 million barrels since June 2016.

During fall 2015, a similar destocking pattern occurred at Cushing, where inventories fell five million barrels between August 21, 2015 and October 30, 2015. Stocks rebounded to reach a record high of 70.9 million barrels on May 13, 2016.

Prior to the stock decline week ending October 11, the largest weekly Cushing draw this year was for week ending April 8, when Cushing inventories fell about 1.5 million barrels due to an eight-day outage on the Keystone pipeline caused by a leak. West Texas Intermediate crude front month prices gained $0.64/bbl on April 11, when the week ending April 8 data point was published by Genscape. WTI gained $0.44/bbl on October 13, when the October 11 draw was published, according to the NYMEX light sweet crude contract.

Cushing stocks are expected to increase toward the end of the year as barrels remain in Oklahoma to avoid ad valorem taxation in Texas.

Genscape's Cushing Crude Oil Storage data is collected using infrared cameras, aerial diagnostics, and other proprietary measurement techniques. This approach translates into highly accurate, advance notice of the actual oil storage levels at Cushing. To learn more or request a free trial of Genscape's Cushing Crude Oil Storage Report, please click here.

Genscape's soon-to-launch Canadian Pipeline Service provides unprecedented insight into critical crude oil pipeline flows traversing the Canada-United States border. Market participants can use this data to gain insight into U.S. crude imports by pipeline from Canada, as well as crude flows from the U.S. By providing transparency in this area, Genscape has altered the trading landscape, offering market participants an unmatched platform for use in trading and hedging strategies. To learn more about Genscape's Pipeline Service, please click here.

On the morning of October 11, a handful of climate activists cut the fences of valve stations and proceeded to disrupt more than 80 percent of the crude oil pipeline capacity crossing from Canada into the United States. In quick succession, Enbridge’s 2.66 million bpd Mainline, TransCanada’s 590,000 bpd Keystone pipeline, and Spectra’s 193,000 bpd Express pipeline began showing decreased activity at approximately 9:00 a.m. (EST), according to Genscape. Keystone and Mainline eventually shut entirely. Spectra’s 145,000 bpd Platte pipeline, which shares a tariff with Express, showed decreased activity as the effects of upstream flow being taken offline trickled through the supply chain. Flows on Mainline Keystone and Express would remain down for seven, eight, and five hours respectively. As of October 18 the Platte pipeline remains at low flow volumes for maintenance.

Starting October 24, events like this can be tracked real time with the launch of Genscape’s Canadian Pipeline product, which will provide increased transparency of crude oil movements by pipeline to and from Canada. The featured pipelines entering the United States from Canada represent approximately 87 percent of United States-inbound capacity, and include Enbridge Mainline, Keystone, Express, and Inter Pipeline Fund’s 129,000 bpd Bow River pipeline. Monitored United States outgoing pipes to Canada make up 75 percent of total takeaway pipe capacity, and include Enbridge’s 540,000 bpd Line 5 and 500,000 bpd Line 6B/76, and Kinder Morgan’s 95,000 bpd Cochin. 

Prior to its subscriber-based release, the Canadian pipeline data provided Genscape ​with unparalleled insights into the inner workings of Canadian crude shipments by pipeline. Cumulatively, the data has depicted a particularly volatile season influenced dramatically by the recent climate activist disruptions in October, the Keystone pipeline spill in April, and the Fort McMurray wild fires in May.

On May 1, the most destructive wildfire in Canadian history tore across Fort McMurray, Alberta. The decrease in crude oil production was approximately 600,000 bpd, May versus April with 340,000 bpd of that coming from planned maintenance, according to Genscape’s Canadian Production Forecast. Pipeline imports into PADD 2 and PADD 4 fell from 2.4 to 2.1 million bpd from April to May, a 10 percent decrease, according to Genscape pipeline data. For that same time period, the U.S. Energy Information Administration reported that imports from all sources into PADD 2 and PADD 4 declined six percent (Fig. 1).

Prior to the wildfire outbreak, the Keystone pipeline unexpectedly ruptured on April 2, dumping nearly 400 barrels of oil into Hutchinson County, SD. In an instant, more than 15 percent of Canadian crude oil pipeline capacity into the United States was taken offline. On April 2 at 1:30 a.m. EST, Genscape reported to its customers corresponding decreased flow volumes on the Keystone pipeline, which would remain shut for another eight days (Fig. 2).

The week prior to the spill, the EIA reported imports from Canada of 2.6 million bpd. Imports fell to 2.0 million bpd the week of the spill, a decrease of nearly 24 percent. During the week of the spill, Genscape reported a corresponding 22 percent decrease in imports from Mainline and Keystone (Fig. 3). Prior to any public notice of a restart, Genscape alerted customers to Keystone’s return to service at 3:00 p.m. (EST) April 11. Using data and alerting from Genscape’s Canadian pipeline product, the direction and magnitude of the decline in Canadian imports was successfully captured, and advance notice of pipeline shuts and restarts was provided.

While a number of market participants may have access to daily volumes on Enbridge’s Mainline, Genscape’s Canadian pipeline alerting service renders daily information out-of-date. In September, for example, Mainline flow rates unexpectedly plummeted more than one million bpd on September 14 (Fig. 4), an event which would have triggered a near real-time alert. Real-time alerting provides critical insights into the marketplace when compared with infrequent regulatory data.

Furthermore, Canadian pipeline customers will better anticipate Western Canadian Select (WCS) price movements, given Genscape’s extensive coverage of pipeline capacity into PADD 2 and PADD 4, and the inverse correlation seen between those crude pipeline movements and WCS prices (Fig. 5).

Genscape's soon-to-launch Canadian Pipeline Service provides unprecedented insight into critical crude oil pipeline flows traversing the Canada-United States border. Market participants can use this data to gain insight into U.S. crude imports by pipeline from Canada, as well as crude flows from the U.S. By providing transparency in this area, Genscape has altered the trading landscape, offering market participants an unmatched platform for use in trading and hedging strategies. To learn more about Genscape's Pipeline Service, please click here.

The Port of Singapore is the second busiest port in the world in terms of total tonnage, transporting a fifth of the world’s shipping containers and half of the world’s annual supply of crude. As such, it is an incredibly important port for bunkering activity, and understanding the need and market there is critical for bunkering and fuel oil companies.

With real-time, global data from Genscape Vesseltracker’s terrestrial and satellite AIS data, Genscape translates over 500 million raw AIS messages per day into useful, meaningful information and insights. Using proprietary algorithms to identify ships delivering bunkers, Genscape separates bunker deliveries from other ship-to-ship interactions, providing the most accurate time measurement of bunker deliveries.

Identifying and analyzing bunkering activity provides many useful data points. With most of the world’s trade moving over the ocean, bunkering activity can provide early indicators into regional and global economic fluctuation. This is critical for bunkering and fuel oil companies, so that they can proactively target their business development efforts, offer pricing that directly reflects market supply and demand, and understand the competitive landscape. Additionally, tracking bunkers can provide transparency to climate change and carbon emissions. Shipping is responsible for 3.5 percent to four percent of all climate change emissions, and one containership creates the same pollutants as 50 million cars. Furthermore, rises and falls in bunkering activity can significantly affect the energy markets as it reacts to changes in supply and demand.

Using this Genscape Vesseltracker AIS data, one can also visualize bunkering activity very clearly using a density map. Over the four-week period from September 16 – October 7, 2016, Genscape tracked the movements of 265 bunkering vessels in the Port of Singapore, which you can see on the map below.

Visualizing bunkering activity in the Port of Singapore over a four-week period shows a number of important analytics, including the most frequently travelled routes and most frequently visited bunkering locations.

Additionally, the precise nature of the BunkerPeriscope™ data shows which ships have been supplied by which bunkers and from which supply points.

Genscape's Global BunkerPeriscope is a powerful tool for bunkering and fuel oil companies who need to understand the trends surrounding fuel oil and bunkering services, including regional and global demand and inventories. Powered by Genscape Vesseltracker™ AIS data, BunkerPeriscope also allows traders, research analysts, and business development professionals to cut straight to their analysis, using a wide range of common tools, from Excel to BI reporting. Click here to learn more and request a sample set of data from Genscape BunkerPeriscope.

The Amsterdam-Rotterdam-Antwerp (ARA) set of ports make up the most important hub for maritime activity in northern Europe and form a key component of the European oil supply chain, accounting for more than 25 percent of Europe’s total crude inflows, for example.

Pure AIS data can show what ships are doing but in order to understand more fully what type of activity they are carrying out (and how these actions affect supply and demand for commodities, including bunker fuels) a more advanced level of analysis is required.

Genscape’s analysis of the region uncovered some interesting insights about bunkering activity there. Of the three ports, Rotterdam bunkers the most, followed by Antwerp and finally Amsterdam. The number of gas tankers in Antwerp is higher than in Rotterdam, but the number of container ships and general cargo ships is about the same. Rotterdam has more bulk carriers and chemical tankers.

Using Genscape Vesseltracker AIS data, one can clearly visualize bunkering activity taking place by using a density map. Genscape’s Global BunkerPeriscope offers the algorithms needed in order to make sense of the kind of trends and patterns found within raw AIS data.

Amsterdam

Amsterdam, Netherlands, located on the North Sea Canal, is the fourth largest port in Europe in terms of metric tons of cargo handled and an important port for both cargo and cruise shipping.

Rotterdam

Rotterdam, Netherlands, is the largest port in Europe, and the fourth busiest port in the world after Shanghai, Singapore, and Hong Kong and is, along with Singapore, one of the world’s busiest ports for bunkering activity.

Antwerp

Antwerp, Belgium, on the upper end of the tidal estuary of the Scheldt, is connected to a network of rail, road, river, and canals and is Europe’s second busiest port after Rotterdam.

Genscape's Global BunkerPeriscope is a powerful tool for bunkering and fuel oil companies who need to understand the trends surrounding fuel oil and bunkering services, including regional and global demand and inventories. Powered by Genscape Vesseltracker™ AIS data, BunkerPeriscope also allows traders, research analysts, and business development professionals to cut straight to their analysis, using a wide range of common tools, from Excel to BI reporting. Click here to learn more and request a sample set of data from Genscape BunkerPeriscope.

Recent reports in the news have brought to light a few instances of ships flagged to countries that they are not associated with. On October 20, 2016, the Tanzanian news service, The Citizen, reported that Tanzanian authorities recently seized two ships suspected to have connections to North Korea, but flying the flag of Tanzania. The Tanzanian Government was taking action to investigate and determine the association of the ships, as their actual identities remained unclear. Flag registers have rules for registration which generally make efforts to identify and ensure clearly the commercial connections of the companies registering ships. However commercial arrangements entered into by ship operators can be completely hidden from the flag registries of the ships. 

By analyzing historical and current AIS data from Genscape Vesseltracker, governments and authorities can identify ships and their flag registries, as well as their positions reported through AIS within waters or ports of the countries they visit.

The AIS reports received by Genscape Vesseltracker to track ships contain a unique identity called the MMSI number, which is issued by a ship’s flag registry. The MMSI number received is intended to indicate a ship’s flag association. For instance, ships registered to the Tanzanian register are expected to transmit their positions with MMSI numbers that are associated to Tanzania; these specific numbers start with 674, 675, 676, or 677.

Many ships are observed to report incorrect information through the AIS system, either by an accident of misconfiguration or deliberate action. The information a ship transmits over AIS can be configured by the crew on board, and is therefore beyond the control of any maritime authority.

It may be that some ships are hiding their true identify or even transmitting MMSI and call-sign information that they have never been or are no longer registered to use. However, for ships that do not misconfigure their AIS reports, AIS does provide a good indication of the ships’ registrations. 

Detailed investigation using Vesseltracker’s ShipDB database of information about ship registration and ownership can highlight the flag identities, including current or historic management information linked to a country of interest. Additionally, using Vesseltracker’s Long-Term Tracking Tool, activities of the ships in question can be identified through their travels to the country of interest and frequent destinations.

AIS Reports of Destinations

The destinations that ships report over AIS can also provide indications of their expected trade locations. However, some ships report certain ports as their destinations, but do not actually transmit AIS position reports within those ports or the country’s waters. These ships are suspected to have turned off their AIS while in or approaching a country where they do not want to be observed trading.

Hiding Links through the Flag Register is Not New

This is not the first time that ships linked to an internationally sanctioned regime have tried to continue trading by registering to a foreign flag. In 2012, Iranian tankers operated by IRISL did exactly the same. While imposed sanctions prevented trading in Iranian oil, the Iranian fleet was forced to change the registration of their ships. Some ships moved from large foreign registers that they had been on for many years to smaller ship registers with less publicly available information on membership. By the end of 2012, some Iranian ships had changed their flags multiple times before international action caught up with them. This forced Iranian ships to revert to flying the Iranian flag and openly admitting their identity and Iranian connection. 

Reflagging happens frequently because many open registers, sometimes referred to as flags of convenience, are easy to join. While many require corporate registration within the flag country, this registration is often a quickly purchased company for which the ultimate owner or controlling body is not clear. Some registers can even be joined online, making it challenging to conduct detailed background checks. 

Companies registering ships with a flag register must meet certain conditions to qualify, however some could meet these conditions without a thorough investigation into the registering company’s other commercial links (i.e. trade with certain countries). Additionally, flying a flag does not prevent ship owners from breaking the rules of their flag register. Flag specific rules are normally to do with the registering company being based or having commercial connections in the country of registration along with compliance of the ship owners with international rules of operation. 

Leading Investigations

When conducting the investigation of ships visiting areas that contravene certain sanctions, or operate in locations that break the rules of their registration, charter, or insurance, reviewing their current and historic AIS reports using Genscape Vesseltracker can be a great place to start. Genscape Vesseltracker provides the tools to monitor the changing trade patterns with a combination of ship destination history, containerized ships schedules, and traffic analysis tools for monitoring current and historic ship traffic. Genscape Vesseltracker owns and operates the largest privately owned AIS receiver networks in the world, which is combined with the largest AIS Satellite constellation in existence to track  over 144,000 vessels daily in near real-time. To learn more or request a free trial of Genscape Vesseltracker, please click here.

Motor gasoline rack activity in the U.S. Southeast reacted to an outage on Colonial Pipeline’s 1.3 bpd million Line 1 between October 31 and November 6, with volumes declining in cities exclusively or predominately supplied by the pipeline, according to Genscape Supply Side data. Meanwhile, rack activity in cities with waterborne access, such as in Savannah, GA, and Charleston, SC, jumped after the outage. 

On October 31, an explosion occurred in Shelby County, AL, along Line 1, where repair efforts have continued since a September 9 gasoline spill that previously shut the pipeline. The explosion forced Colonial to shut Lines 1 and 2 on October 31. Line 2, a 1.1 million bpd distillate line, was restored to service the night of October 31. Line 1 restarted November 6, according to a statement from Colonial Pipeline. In September, Line 1 was shut for 12 days, significantly affecting gasoline racks in the southeastern U.S. During that outage, Colonial allowed gasoline to move on Line 2.  

The declines in Southeast rack city level volumes during the most recent outage were not as significant as those seen during the Line 1 outage in September. The mitigating factor, along with a shorter outage duration, appeared to be truck resupply to inland rack terminals from waterborne ports (see graph 2).

Savannah rack activity increased greatly after the outage, jumping as high as 423 percent above week-ago levels on November 6. Savannah gasoline rack activity averaged just more than 340,000 gallons per day in the week prior to the October 31 Line 1 explosion. Since that event, Savannah gasoline rack activity has averaged 1.3 million gpd. Charleston, SC, gasoline rack activity also increased following the Line 1 outage on October 31, jumping as high as 126 percent above week-ago levels on November 5. 

Other cities most affected by the most recent Line 1 outage were those in Georgia, Tennessee, North Carolina, and South Carolina that are mainly supplied by Line 1. Kinder Morgan’s 700,000 bpd Plantation pipeline runs parallel to Colonial, and provides gasoline deliveries to several cities that also have Colonial connectivity. The impact of this outage does not appear to be as significant in cities that have access to both lines.

In Georgia, the rack cities most affected by the Line 1 October 31 outage were Albany, Atlanta, Bainbridge, and Macon. Albany rack activity was as much as 32 percent below week-ago levels on November 6. In Atlanta, gasoline rack volumes dipped as much as 45 percent below levels during the previous week on November 5. Bainbridge gasoline rack volumes dropped to 19 percent below week-ago levels on November 4. In Macon, rack activity fell 24 percent week-on-week on November 3. 

Tennessee gasoline rack activity declined most significantly in Nashville, one of the state’s largest gasoline rack cities. Nashville is supplied by a spur off Line 1 and does not have Plantation connectivity. Nashville gasoline rack volumes dipped as much as 30 percent week-on-week on November 5. Chattanooga rack activity also fell nearly 30 percent below the previous week on November 5 and 6. 

South Carolina gasoline rack demand fell significantly in North Augusta, where terminals are supplied by a spur line off Line 1. North Augusta gasoline rack activity dropped as much as 73 percent below the previous week on November 6. 

In North Carolina, rack activity also declined week-on-week in Fayetteville and Charlotte. Fayetteville gasoline rack volumes fell as much as 53 percent below the previous week on November 5. In Charlotte, gasoline rack activity dipped week-on-week by 27 percent on November 6. 

Genscape's Supply Side Analyst and Supply Side Monitor provide analysts and traders with daily or hourly volumes and prices for regular gasoline, midgrade gasoline, premium gasoline, jet fuel, kerosene, and diesel. Receive the industry’s only insight into PADD and rack city related volumes and average prices for wholesale transactions of refined products. To learn more, or request a free trail of Genscape's Supply Side Analyst and Supply Side Monitor, please click here.

Genscape's Gasoline and Distillate Supply Chains Webinar will be on November 16 at 2:00pm (EST). Topics will include Colonial Pipeline's Line 1 outages, what's ahead for diesel diemand, the current state of affairs for distillate, rack activity, distillate storage, translatlantic movements, and more! To learn more, or to register for the webinar, please click here.

During the week ending November 11, three vessels, used for floating storage in Iran, left the Persian Gulf for destinations in India and South Korea, according to Genscape. Floating storage is often used to leverage a rising oil price. 

However, Iran’s decision to start exporting from floating storage may indicate the country’s wish to take advantage of oil prices at current levels. As crude output continues to rise in parts of the world, the move may signify the country is preparing for backwardation in the oil price, where prompt prices are higher than those for future delivery.

Continuing oil production challenges are threatening Organization of the Petroleum Exporting Countries attempts to stabilize the crude prices. Meanwhile, Iran’s Ministry of Petroleum’s news service Shana said last week that the country had increased output in its attempts to recover its pre-sanction market share. 

President Hassan Rouhani recently opened three new oil fields in Western Iran. The development of the oil fields in North Azadegan, Yadavaran, and Yaran came a lot sooner than expected and will add 250,000 bpd to the volume of Iranian oil available for export, according to Shana citing the official opening ceremony.

All eyes are on OPEC and other major oil producing nations to finalize an agreement regarding oil supply during a meeting planned for November 30 in Vienna. Should a deal not be reached and the physical market remain oversupplied, it’s possible that the price of West Texas Intermediate could drop to the mid-$30/bbl range, said Again Capital Partner John Kilduff in commentary posted November 3 on CNBC.com.

Iran Exports Up Going East

Iranian exports to the India Subcontinent and East Asia have grown steadily from the start of the year and make up the majority of exports from the Persian Gulf state. Iranian daily exports increased from 1.3 million bpd at the start of the year to around 2.9 million bpd, the highest level since sanctions were lifted. 

On November 8, Devon (IMO 9218454), a VLCC, which was sitting off Kharg Island, Iran, since the end September 2014, began heading toward Paradip, India. The vessel is carrying almost two million bbls of crude and is expected to arrive on November 18, according to Genscape. During it’s time in berth, the Devon changed its flag from Tanzania to Panama.

Furthermore, Dore (IMO 9357717), a VLCC, came to Kharg Island from Assalouyeh, Iran, where it was berthed since March 23, 2015. There, it loaded oil and began to move toward New Mangalore, India, on October 26, carrying roughly 2 million bbls of oil.

Finally, Destiny (IMO 9177155), a VLCC, left Assalouyeh, where it was berthed since January 20, 2015. It moved toward South Korea on October 26, carrying roughly 2 million bbls of oil.

Make better informed trading decisions with insight into where the marginal barrel of oil is going by referencing Genscape's Middle East Waterborne Crude Report. Genscape provides a weekly overview of U.S. Jones Act vessel & waterborne crude import volumes moving in the West, East & Gulf Coasts with market analysis & freight cost assessments. To learn more or request a free trial, please click here.

Genscape 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, with over 144,000 vessels tracked daily in near real-time. To learn more or request a free trial of Genscape Vesseltracker, please click here.

The ability to visualize maritime activity over time is an important tool for gaining a new level of understanding of the global flows of commodities, both from a historical trend perspective and a forward-looking perspective. By plotting Genscape Maritime data, powered by Genscape Vesseltracker™ on a map, one can easily visualize the frequently (or infrequently) traveled shipping routes, locations that are highly concentrated with maritime activity, and gain a visual understanding of the global flow of goods and commodities worldwide, a key part in the supply chain.

What is Vessel Density?

For commodity traders, who need a clear picture of major trade flows, congestions outside of ports, and approximate freight availability in different regions of the world, understanding vessel density is crucial.

Vessel density is the measure of how many ships are concentrated in a certain geographic area during a specific period of time. Genscape Maritime measures vessel density by collecting data from global vessels equipped with AIS transmitting beacons. With a private, proprietary terrestrial AIS antenna network, partner antenna networks, and partner satellite providers, Genscape has one of the most comprehensive databases of global ship positions available.

By plotting all the messages received with historical vessel tracks, a vast spider web of maritime activity emerges, providing insight into how and where global trade exists on a grand scale. When density is analyzed on a smaller scale, in shorter time durations or more specific geographic areas, even minor vessel route deviations or activities can indicate unusual behavior that can have significant impact on markets and prices. 

What Can We See from a Vessel Density Analysis?

By plotting all AIS messages and vessel tracks, the world’s global fleet historical movement is captured over time, revealing many different behavioral patterns. The most obvious results from analyzing vessel density show the areas of the globe that are the most congested or most highly trafficked. Clear vessel track lines indicate well organized vessel “highways” such as in the English Channel.   

Areas without distinct lines are more congested, and possibly dangerous as vessels move in more directions at once.  

The density plots also reveal the most frequently traveled trade lanes, or port-to-port pairs. Highly active areas can show where vessels may congregate for ship-to-ship activities, such as bunkering activities, or anchorages. Finally, analysts can also find popular routes that may be illegal shortcuts to save time and money.

Why is Understanding Vessel Density Important?

One of the most obvious benefits to analyzing density plots is to determine the most likely routes vessels may travel, which is helpful in predicting things such as estimated times of arrival for shipments. Other interesting results from density analysis include finding patterns in the vessel tracks. These patterns can reveal floating storage, anchorages, and even bunkering activities. For example, in shorter duration density analysis, half-moon tracks or complete circles can show where vessels are at anchor, and for what periods of time.

Exploring all historical vessel tracks in smaller areas can also greatly assist in port planning, development, and safety. Similar to land-based vehicle traffic analysis, development of new terminals, dredging or coastline construction, much like the planning for new roads or traffic patterns, historical tracks must be taken into account to determine the effects of future congestion or safety.

If a vessel stays at anchor for a single tide, or multiple tides (12-hour or 24-hour, respectively) these tracks can identify when a vessel is actually stopped, even if the AIS transponder reports otherwise.

How is Genscape Utilizing Vessel Density?

Genscape Maritime has committed to providing the industry with the most complete, timely and insightful data possible for our customers. To that end, Genscape has invested heavily in expanding its privately-owned terrestrial antenna network to get as close as possible to the global fleet without setting foot on board. Data is only as good as what it can reveal, and Genscape is committed to investing in advanced analytics to take full advantage of the abundant, accurate data gathered within our networks.

Genscape utilizes machine learning, historical activity analysis, and density plotting to help identify expected and anomalous vessel behavior. Machine learning’s importance and application has expanded recently, as global data sets have continued to grow in size and understanding “big data” becomes more critical.

With 500 million messages processed every day, more than 98 percent of Genscape’s information originates from our privately-owned terrestrial AIS antenna network. To that end, Genscape utilizes this unique, large dataset to better identify vessel stops, delays and accurate vessel status. Activity analysis of all of this allows Genscape to create compelling products on top of raw AIS data, such as tracking global commodity movement and storage to a high degree of accuracy.

Operationally, this data can be used for route planning or forecasting, among other things. Outside of the obvious operational benefits, keeping a pulse on global vessel fleet activities can be an early indicator to industry trends.

On a vessel-by-vessel basis, Genscape can proactively provide notifications about ETA adjustments and delays that impact the downstream supply chain, and on a macro basis, the data helps support the industry’s most accurate waterborne commodity flow and bunkering reports.

Big data advancements make it possible to aggregate and process vast amounts of data. Density maps are a great statistical tool allowing users gain understanding, insights, and analysis more quickly, without having to run costly data processing on their side.

Genscape Maritime, powered by the industry-leading Vesseltracker AIS network, delivers exceptional transparency and insight into global vessel movements and activities, providing the market with an unrivaled understanding of the global commodity supply chain. Click here to learn more or request a free trial of Genscape Vesseltracker.

U.S. Gulf Coast refinery utilization has nearly recovered from fall maintenance season with only two units left in restart mode following planned work as of November 21. 

The 124,500 bpd fluid catalytic cracker and associated 26,600 bpd alkylation unit remained below normal operating levels since being shut late September at Marathon's 464,000 bpd Garyville, LA, refinery. October was the heaviest month of maintenance in the Gulf Coast this year, according to Genscape. 

The largest maintenance projects this fall were at Valero's 292,000 bpd Port Arthur, TX, refinery, which completed after the restart of a hydrocracker on November 6, and Marathon's Garyville refinery, where units are restarting. Valero's plant-wide overhaul was expected for completion in late October, according to Reuters. 

During the maintenance season, at least 11 percent of Gulf Coast FCC capacity was shut in October. Monitored FCCs that shut for planned work in October include Shell's 70,000 bpd unit in Deer Park, TX, Petrobras' 56,000 bpd Houston unit, Valero's 96,000 bpd unit in Corpus Christi, TX, and Marathon's 124,500 bpd unit in Garyville, LA. 

Marathon's Garyville FCC will be down for the longest period, shut for 56 days as of November 21. The Garyville FCC was also the only FCC monitored by Genscape that was shut in October 2015 for planned work. The 2015 work was completed in 19 days, according to Genscape. 

Fall maintenance in the U.S. Gulf Coast increased in 2016, reaching a maximum capacity offline of 11 percent on October 10. Maintenance in 2015 was uncharacteristically low with companies running units to capture relatively healthy refining margins and relatively weak crude prices. The maximum capacity offline monitored by Genscape in fall 2015 was 2.46 percent, or 226,000 bbls, on November 3, 2015. The U.S. benchmark West Texas Intermediate (WTI) price closed that day at $47/bbl. In 2014, the maximum outage was 8.22 percent, or 550,000 bbls, on November 1.

Genscape's North American Refinery Intelligence Service combines observations obtained from infrared cameras with in-house analytical and technological expertise to provide an unrivaled view into real-time operations at U.S. and Canadian refineries. Genscape currently monitors 80 percent of overall refinery capacity in the United States, including 92 percent of East Coast refineries, 84 percent of Midcontinent refineries, and 91 percent of Gulf Coast refineries. To learn more, or request a free trial of the North American Refinery Intelligence Service, click here.

With two satellite partnerships and one of the largest privately-owned and operated global terrestrial antenna networks, Genscape Vesseltracker™ tracks more than 144,000 vessels around the world in near-real-time daily.

Why do 98 percent of the messages collected by Genscape come from the terrestrial antenna network?

Satellites only pass over an area every 30-90 minutes, which means that the frequency of the messages they can receive and transmit is fairly low. In dense areas, the way that AIS messages are broadcast can also make it quite difficult for satellites to retrieve them.

Additionally, because of satellite locations, atmospheric conditions, and other factors, a strong AIS signal is required to ensure that a vessel’s location is picked up by the satellite. The AIS antennas on vessels are not equally strong, so there is always a chance that a vessel’s location isn’t picked up when satellite alone is used.

When is terrestrial coverage particularly important?

The differences in satellite versus terrestrial AIS coverage are extremely evident in inland waterways where there is heavy vessel density, especially with a large number of smaller, more nimble vessels. 

“Every year, Louisiana ships more than $100 billion worth of commodities and finished goods to the rest of the United States while simultaneously receiving an almost equal amount of agricultural produce, machinery and other products from factories, farms and urban areas in the Mississippi River Valley and other sections of the country. Many of these inbound shipments are destined for international markets: In 2010 alone, more than $30 billion in exports passed through the Port of New Orleans on their way to important trade destinations such as China, Japan and Mexico.” - The Mississippi River Delta

In the case of the Mississippi and Gulf of Mexico watershed, heavy vessel density requires a high frequency of messages to make sense of activity and monitor it in near-real-time. With a large number of small vessels making frequent turns to navigate the waterways, timely, accurate information is especially critical.

Genscape Vesseltracker has invested heavily in developing visibility for inland waterways as part of a larger global coverage expansion initiative. With the terrestrial network alone, an extreme level of detail is available for all commercial and non-commercial activities on rivers.  

Genscape Maritime, powered by the industry-leading Vesseltracker AIS network, delivers exceptional transparency and insight into global vessel movements and activities, providing the market with an unrivaled understanding of the global commodity supply chain. Click here to learn more or request a free trial of Genscape Vesseltracker.

The French power market is under significant pressure due to limited nuclear availability, low reservoir levels, and an unusually cold start to the winter season. Forward power prices have jumped to high levels not seen for several years, but is the market pricing in too much of a risk premium?

Genscape’s fundamental analysis of the north-west European market shows clear strains, as reflected in current spot prices. Not only do we see nuclear outages in France (see table below), but also in Belgium, Switzerland, and Spain. The wildcard is Germany, with rolling refueling outages scheduled for seven out of eight reactors through January and February 2017, itself a decision not usually seen for winter in previous years, and not without further risk.

A broader analysis of the fundamentals of surrounding power markets is required to fully understand the current situation. Using the Genscape EPSI fundamental analysis platform, we have explored it across the length of the forward curve (to 2018). The results are presented in Genscape's Market Update Report. Some highlights:  

• The coal forward curve has lifted significantly, in turn lifting the German power forwards. However, in the short term this is being drowned out by the moves in the French market.
• German summer forwards have still been trading below 30 €/MWh – the fundamentals indicate that this is overly bullish.
• What is driving the French forward prices? The chart below presents a fundamental scenario (green) that appears to match the French forward curve (blue). A fairly cold winter and some pessimistic nuclear outage assumptions are needed to drive prices to these levels. Are the risk premiums overdone? The report explains this in detail.

• The latest French forward curve anticipates greater tension in February 2017, the coldest month of the year, than in December 2016. However, EPSI Platform analysis clearly reveals that the risk of high prices is higher in December 2016, driven by constrained nuclear availability in neighboring countries and modest water reserves.

Genscape’s Market Update Report is one report within the European Quarterly Market Insights Report, and provides clear insights into the evolution of key spot and forward markets in the content of supply and demand fundamentals. This report bundle also includes the Infrastructure Update Report, which provides an outstanding perspective on the rapidly evolving power plant infrastructure across Europe. To learn more, or to subscribe to Genscape's European Quarterly Market Insights Report, please click here.

Genscape's EPSI Platform uses a combination of market insight, thorough data research, relevant data streams, and rigorous quality control to provide unparalleled depth and quality of data focused on the fundamentals of the European power markets. To learn more, or to request a call, please click here.

Following Winter 2015-16's record-breaking warmth, the upcoming winter is expected to offer considerably more variability. Weak La Niña conditions should drive more sustained cold, particularly during the latter half of winter, resulting in stronger energy demand across much of the United States east of the Rockies.

Winter 2015-16 Recap

Winter 2015-16 started off on an exceptionally bearish note. December 2015 verified as the warmest on record, posting an incredible average national temperature anomaly of +6°F. January 2016 featured increased variability with warm anomalies retreating to the northern tier of the United States. A notable event was the January 22-24 blizzard that unleashed crippling snowfall totals in the Mid-Atlantic region. February 2016 closed meteorological winter on a warmer note, with warm anomalies overspreading the bulk of the major population centers. Despite this warmer shift, a transient yet powerful Valentine’s Day cold outbreak impacted the Northeast. Temperatures in Boston tumbled below zero with wind chills approaching -30°F, driving a sharp boost in energy demand.

Winter 2016-17 Forecast Drivers and Key Risks

One of the driving forces behind Genscape’s 2016-17 winter outlook is the expectation for a weak La Niña to persist through the winter months. Historically speaking, La Niña patterns correlate with below-normal temperatures across the northern U.S. along with above-normal temperatures across the southern U.S. Complicating this signal is the presence of anomalously warm Atlantic sea surface temperatures, known as a +AMO (Atlantic Multidecadal Oscillation), which correlates to warmer temperatures across a sizeable portion of the continental U.S. 

Due to the fact that very few analog years match the current distribution of sea surface temperatures in the Pacific and Atlantic, Genscape's analog years consist of a blend of these conditions. Among the top years used in this outlook are the winters of 1983-84, 2005-06, 2013-14, and 2014-15. These analog years favor back-loaded winter cold with a mild December, followed by increased coverage of below-normal temperatures from January into February and March. Below-normal North American snow cover to start winter along with the potential for a strong Pacific Jet Stream to persist pose warmer risks to Genscape's outlook. Additionally, a small subset of La Niña winters feature a substantially warmer look to February, adding risk that a back-weighted winter cold may underperform. 

East Coast (ISO-NE, NYISO, PJM)

Generally below normal temperatures are expected across the East when looking at the winter as a whole. Despite the overall cold signal, it is expected to be a slow transition from the prolonged warmth experienced this fall. The December pattern looks to be volatile, with above-normal temperatures followed by brief cold snaps throughout the month, before the cold air outbreaks increase in both frequency and longevity for January and February. This leads to expectations of higher peak demand year-over-year for ISO-NE, NYISO, and PJM.

Midwest and Lower Mississippi Valley (MISO)

The Upper Midwest is expected to be the focus for colder-than-average temperatures as the winter unfolds this year. While the winter is expected to be volatile, colder-than-average temperatures are expected to take time to develop. MISO peak demand expectations are significantly higher (7.5 percent) than last year’s weak winter peak. Significant cold is expected to hold off until January, and the winter peak is expected to occur during the second half of the month as cold deepens heading into February. The South is expected to remain closer to seasonal temperature levels through the winter, which should keep MISO demand from reaching the all-time winter peak levels seen in January 2014. 

Plains (SPP, ERCOT)

After experiencing an exceptionally warm winter last year, the upcoming winter is expected to offer colder temperatures and more pattern variability. This should lead to stronger year-over-year demand for both ERCOT and SPP. More specifically, Genscape's peak winter load forecast for ERCOT and SPP calls for year-over-year demand increases of 7.5 percent and 5.1 percent, respectively. While winter is expected to get off to a rather slow start in December, an increasingly amplified Polar Jet Stream should bring more sustained cold to the Plains from January into February. Forecasts risks generally lean warmer across the Southern Plains, including ERCOT, if a more pronounced warm La Niña signal becomes established.

West (CAISO, WECC)

While most of the country anticipates a bearish start to Winter 2016-2017, CAISO begins the season with an anomalous cold pattern with peak heating demand occurring in the first half of December. In contrast to last year, weak La Niña shifts the subtropical jet into Northern California and the Pacific Northwest, where a continuation of anomalous fall 2016 precipitation continues through December. Warm anomalies then return to California by late December and persist through the end of winter. Healthy water and snowpack levels return to Northwest Hydro after a record-setting fall, with seasonal conditions returning through winter.  

In summary, Winter 2016-17 will offer a much colder outcome than Winter 2015-16. Cold temperature anomalies will be focused across portions of the Upper Midwest, Great Lakes, and Northeast, with warm anomalies stretching from the Desert Southwest northward along the West Coast. Above-normal precipitation is expected along the Eastern Seaboard, resulting from an active storm track. Meanwhile, below-normal precipitation is forecast for portions of the Desert Southwest into Southern California. 

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.