Oil falls as production hits 22-year high

Power House!

U.S. oil (NYMEX:CLU13) production is soaring, hitting the highest level in 22 years at 7.55 million barrels a day!  Oh sure U.S. oil supplies fell by 2.8 million barrels but that was mainly because U.S. refiners went on a tear producing product. Refineries operated at a sizzling 92.3% producing 9.2 million gallons of gasoline a day. Oil going back to feed the Whiting Refinery that would normally sit in storage in Oklahoma is going to help juice our economy and keep America on the move.  The Energy boom is driving our economy, creating jobs and reducing our reliance on oil from folks that don't like us and increasing our national security.

So what’s the best thing to do? Launch an investigation! According to The Wall Street Journal, the U.S. Department of Justice has started an antitrust investigation of the pressure-pumping business, a key component of the oil and gas industry practice of hydraulic fracturing, Baker Hughes Inc. said in a filing with the Securities and Exchange Commission Wednesday. The Baker Hughes said it received a "civil investigation demand" from the DOJ under the Antitrust Civil Process Act. The request sought information relating to the U.S. pressure-pumping market beginning May 29, 2011. Pressure pumping, the process of injecting water and other materials into a well to break apart rock formations and unleash oil and gas, is the main step in the hydraulic-fracturing process. That technique, coupled with other advances in drilling, helped spur a boom in U.S. oil and natural-gas production.  In the early days of the shale boom, demand for pressure pumping work outstripped supply of equipment available to do it, and oil-field services companies struggled to keep up.

But as demand grew, new companies entered the business and others expanded their capacity. The surge in activity, coupled with lower prices for natural gas, has led to excess pressure-pumping capacity in recent quarters and lower prices for the work. Though their market share has declined in recent years, three companies still dominate the pressure-pumping market in North America: Halliburton Co., the top provider of pressure-pumping services in the U.S., Schlumberger Ltd. and Baker Hughes. The three companies accounted for 63% of the North American pressure-pumping market in 2012, according to Barclays.

Baker Hughes didn't provide additional details about the scope of the investigation or the information requested by the federal agency. "We are working with the DOJ to provide the requested documents and information," Baker Hughes said in the filing. We are not able to predict what action, if any, might be taken in the future by the DOJ or other governmental authorities as a result of the investigation."

The Energy Information Administration reported that U.S. crude oil refinery inputs averaged over 16.0 million barrels per day during the week ending July 19, 2013, 206 thousand barrels per day below the previous week's average. Distillate fuel production decreased last week, averaging 5.0 million barrels per day. U.S. crude oil imports rebounded averaging over 8.0 million barrels per day last week; up by 327 thousand barrels per day from the previous week. Over the last four weeks, crude oil imports averaged about 7.7 million barrels per day, 1.3 million barrels per day below the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 322 thousand barrels per day. Distillate fuel imports averaged 168 thousand barrels per day last week.

Of course we are on storm watch as tropical storm Dorian is on an energy disturbing course. Bloomberg News is reporting "Tropical Storm Dorian moved across the Atlantic on a westward path that may take it to the Caribbean Sea, the U.S. National Hurricane Center said. The system, with top winds of 50 miles (80 kilometers) per hour, was about 615 miles west of the Cape Verde Islands, an advisory issued at 11 p.m. New York time yesterday showed. It was moving west-northwest at 20 mph.

Atlantic weather systems are followed by traders because they can affect operations in the Gulf of Mexico, home to about 23% of oil output and more than 40% of petroleum refining capacity, according to the Energy Department. The Bay of Campeche at the southern end of the Gulf is where Petroleos Mexicanos, Mexico's state-owned oil company, has most of its production.

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