Oil

ast week UGI Energy Services announced plans to build a liquefied natural gas production facility in Wyoming County, Pennsylvania.

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The facility will draw Marcellus Shale gas from UGI’s Auburn gathering system, then chill it to produce up to 120,000 gallons per day in liquid form. While we have regularly reported the slowdown in both new shale oil and LNG projects in the US this year — and the subsequent cutbacks in oil country tubular goods production — investments are still being made, in the US and overseas, in drilling.

Plants, Projects Planned

Bloomberg Business reported this week that Anadarko Petroleum Corp. selected a group of developers including Chicago Bridge & Iron Co. for a potential $15 billion LNG project in Mozambique.

CBI’s joint venture with Japan-based Chiyoda Corp. and Saipem SpA, based in Italy, will work on the onshore project that includes two LNG units with 6 million metric tons of capacity each, Anadarko said Monday. Construction plans also include two LNG storage tanks, each with a capacity of 180,000 cubic meters, condensate storage, a multi-berth marine jetty and associated utilities and infrastructure, according to Texas-based Anadarko, which says it will make a final investment decision by the end of the year.

Last week, the Department of Energy gave Cheniere Energy Inc. final approval for the nation’s fifth major export terminal at Corpus Christi in Texas, which will ship the fuel from 2018.

What’s Driving Infrastructure Investment?

While oil prices have bounced back from lows seen earlier this year, it’s certainly not the market that’s driving these investments. While high-cost projects, such as those in Canada’s oil sands, have been canceled by oil exploration companies, relatively inexpensive projects with a quicker path to payback, such as these LNG projects, are still being funded.

The payback is diverse and not confined to domestic home heating. LNG has been priced at a fraction of diesel prices for the last four years. Domestic trucking (18-wheelers and other heavy consumers of diesel) have yet to make a large-scale commitment to LNG, and most places where fuel is dispensed have yet to put in expensive infrastructure to handle the product, but there has been enough success for UGI to justify committing resources to its adoption.

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MetalCrawler is covering the labor issues beat today and they might affect your metal purchases.

Century Hints at Lockout

Century Aluminum will invoke a lockout of unionized workers at its Hawesville, Ky., smelter starting on May 11 if the union does not approve a final offer on a labor deal, according to a letter posted on Century’s website on Friday.

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United Steelworkers Local 9423 is set to vote on the proposed contract today, according to a post on the union website. If workers go on strike, it would be the first industrial action at a US aluminum smelter in more than a decade.

Train Drivers Strike in Germany

A seven-day strike by German train drivers could cost the German economy €500 million ($556.70 million), Germany’s DIHK Chambers of Commerce said on Monday.

The strike, the eighth in a dispute between the GDL train drivers union and state-owned Deutsche Bahn over work conditions, began today for freight trains and will be extended to passenger trains from Tuesday.

BP Refinery Strike Could Soon End

Workers and management at BP have reached a tentative agreement that would end a months-long strike at the multinational’s refinery in Whiting, Ind.

The United Steel Workers employees must still ratify the contract, and officials expect a vote to occur in the next few days.

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Ontario, Canada just decided to undertake a cap-and-trade approach in reducing their greenhouse gas emissions, joining its Frenchier neighbor Quebec and the US state of California under the so-called Western Climate Initiative and its cap-and-trade program, to invest further in a green future.

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It remains to be seen how Canada’s oil sector – and a host of other industrial sectors, especially those with operations in Ontario – will fare under the cap-and-trade scheme.

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Oil prices went up today. Tariffs were also placed on durable steel containers in today’s MetalCrawler.

Crude Oil Rising

Crude oil rose today after a forecast that US shale oil output would record its first monthly decline in more than four years and also on tensions in Yemen, where top oil exporter Saudi Arabia is embroiled in a civil war.

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Brent crude was up 32 cents at $58.25 a barrel this morning, while US crude was up 57 cents at $52.48.

The US Energy Information Administration (EIA) said on Monday it expected US shale production to fall by 45,000 barrels per day to 4.98 million bpd in May.

Shale production has helped boost US oil output by more than 4 million bpd since 2010 and has been a key factor behind the collapse in world oil prices over the last year. A collapse in oil prices from above $115 a barrel last June has now begun to hit exploration.

Commerce Places Tariffs on Shipping Containers

The Dept. of Commerce determined that imports of steel shipping containers from China have been sold in the US at dumping margins ranging from 107.19% to 111.22%. Commerce also determined that imports of containers from China have received countervailable subsidies ranging from 17.13% to 28%. The products covered by these investigations are 53-foot domestic dry containers, which are durable, reusable, weatherproof, closed van containers approximately 53 feet in exterior length, designed for the intermodal transportation via container ship, rail or trucking. Wisconsin-based petitioner Stoughton Trailers LLC filed the initial complaint against the Chinese manufacturers.

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US Construction spending fell in February, pulled down by a drop in single-family home building. Private spending on construction of single-family homes declined 1.4%.

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Seasonally adjusted construction spending fell 0.1% after a revised 1.7% drop in January, the Commerce Department reported on Wednesday.

The annual rate of spending fell to $967.2 billion, Commerce said. January’s outlays were also revised downward to show a 1.7% decline instead of the previously reported 1.1% drop. The numbers are seasonally adjusted so it can’t be the oft-blamed winter weather that’s dragging down construction spending.

These losses, rather, are more likely the result of restricted spending in the energy sector as the plunge in crude oil prices is affecting future shale oil, natural gas and other drilling projects. Major companies slashing expansion budgets in the US and abroad include ConocoPhillips, Chevron, Hess and BP. The US Energy Information Administration recently said it expects global oil inventory to build to an average of 1.3 million barrels per day in the first half of 2015. EIA believes these builds will moderate in the second half of the year as non-OPEC supply, particularly in the US, slows due to low prices and increasing demand.

What Does this Mean for Construction Spending?

Commerce breaks construction spending down via its statistics agency, the US Census Bureau. The “power” category of the census bureau figures — which include oil and gas facilities — is down by 17.2% year-on- year and 4.5% for the month. That sector of the construction industry is going to have to wait until energy prices rise again.

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Spring has sprung here at MetalCrawler and beleaguered commodity markets are hoping for a renewal themselves as steel production is predicted to fall in Japan, the once-mighty aluminum industry in Brazil faces another shutdown and new shipment rules could cause even larger back-ups in transportation of North Dakota oil.

New Oil Shipment Rules

Following a spate of explosive accidents involving North Dakota crude oil, the state on Wednesday began requiring companies to remove certain liquids and gases from oil before it’s loaded onto rail cars, a move industry and state regulators believe will make for safer shipments.

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The rules, developed over the past year, require all crude from the oil patch to be treated by heat or by pressure to reduce its volatility before being loaded onto train cars. The new rules require North Dakota crude to have vapor pressure below 13.7 pounds per square inch, which is less than the 14.7 psi threshold national standard recognized as stable. Winter-blend gasoline that contains 10% ethanol is rated at 13.5 psi.Industry officials initially balked at the regulations, saying the state’s crude was being unfairly singled out and the new standards would slow production and increase costs.

Japanese Steel Production Falls to 6-Year Low

Japan’s crude steel output for April-June is forecast to drop 7.8 percent from a year earlier to the lowest for the quarter in six years, the Ministry of Economy, Trade and Industry (METI) said on Thursday.

The fall would mark the latest in a series of signs of economic slowdown, clouding the outlook for Prime Minister Shinzo Abe’s drive to reflate the economy and spurring calls for more monetary stimulus.

South American Aluminum Production Wanes

US aluminum producer Alcoa announced this week the full shuttering of its Alumar smelter in Brazil.

Alcoa and minority partner BHP Billiton curtailed two potlines at the 440,000-metric-tons-per-year plant over the course of 2013 and 2014. Now the third and last will also be mothballed.

It’s the fifth, and largest, Brazilian smelter to be shuttered since 2009 – a major retreat for what was once one of the world’s top producing countries.

Reuters’ Andy Home writes that’s it’s symptomatic of a broader decline in primary aluminum production in South America.

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Crude oil prices keep falling. Prices slid to a fresh 6-year low this week, the lowest price since March 2009, despite the minor comeback they had recorded in the previous weeks.

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We commented last month that nothing guaranteed that oil had found a bottom and this week things are starting to look bad again. While that losing skid was snapped Wednesday afternoon after the Federal Reserve downgraded its growth outlook, weakening the dollar, there is still no guarantee prices will not start falling again.

Stored supplies of crude oil in the US are at their highest level in about 80 years, according to the Energy Information Administration, and supply just keeps growing. Domestic crude production rose to a new weekly record of 9.4 million barrels this week. In monthly data, production last exceeded that level in November 1972.

Concerns are mounting that the nation’s crude-oil storage facilities will hit full capacity in some locations, according to government figures. That has the potential to push prices even lower. For nine straight weeks, US crude stocks have been rising as traders put more and more oil in storage tanks waiting for prices to rebound.

Stockpiles in Cushing, Okla., a key hub and the delivery point for a major Nymex contract, rose by 2.9 million barrels to 54.4 million barrels, the highest level on record in data going back to April 2004.

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If you think miners or developers on land struggle with environmental legislators, spare a thought for those looking to develop resources via seabed mining.

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The International Seabed Authority, a UN agency, has so far issued 26 exploration licenses to governments and companies enabling them to operate in international waters but none of them have reached commercial realization. Even in national waters governments are coming down on the side of the environmental lobby when new applications are being put forward. After leading the way in supporting early proposals, the New Zealand environmental regulators have recently turned down an application from an ocean mining firm Chatham Rock to develop a site off the coast, some 450 kilometers southeast of Wellington, the FT reports.

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The decline in oil prices has come to an end….or not?

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At this point, I think we can all agree that no one knows what’s going to happen to oil throughout the balance of 2015. Although prices have stabilized since January, calling for a bottom right now would just be a guess. It would be no more reliable than flipping a coin, especially since it’s in a period of extreme volatility where the psychology of market participants is what determines the price. In the chart, the recent rise is still just a bounce that could fall to succeed.

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Just 2 short weeks into 2015 the metals are experiencing major losses, mostly because of the continuing fall in the price of oil.
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Copper and steel were the biggest victims but aluminum, stainless and the other metals took a hit, too.

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