Triple-Digit W-T-I, but GERN-zee Barrels Still Face a Bottleneck

Marcus Hayes

Sunday, October eighteenth. Futures reopen tonight, and the message for the desk is simple: triple digit WTI is a headline, not a bid for your uncommitted barrels.

Marcus Hayes

Global first. Front month Brent settled Friday at one hundred nine dollars and eighty six cents, up four point nine percent on the week, after touching one hundred dollars and ten cents... correction, an intraday high of one hundred ten dollars. That's the highest close since May nineteenth. Physical North Sea Dated is assessed near one hundred thirty four, so wet barrels sit at a steep premium to paper. Over the weekend, Saudi air defenses intercepted a ballistic missile aimed at Yanbu, the Red Sea terminal that bypasses Hormuz. Rapidan Energy Group says no structural damage. UKMTO reported a commercial tanker hit by an unknown projectile off the Saudi coast, and Kpler reports Persian Gulf tanker transits dropping sharply amid Iranian threats. In Russia, drone strikes suspended a primary distillation unit at Ryazan. ExxonMobil says stronger refining margins add four point five billion dollars to third quarter downstream earnings, quarter on quarter. OPEC plus targets stay frozen through November, ahead of the November first ministerial, and the IEA confirmed plans for an emergency stock release of more than twenty million barrels.

Marcus Hayes

North America. Western Canadian Select for November at Hardisty closed Friday at twenty five fifty to twenty five fifty five under WTI, near multiyear discount lows. High dirty tanker freight keeps trans Pacific exports out of Westridge uneconomic, so Trans Mountain throughput stays capped near sixty percent, roughly four hundred twenty five thousand barrels per day. The part that touches you: Enbridge's Express into Casper is running at one hundred percent, two hundred eighty thousand barrels per day, pushing heavy Canadian crude into Wyoming. Canadian export pipeline utilization is ninety three percent, and winter diluent adds roughly thirty percent by volume to heavy batches, crowding line space. Mexico, nothing material.

Marcus Hayes

United States. Front month WTI settled Friday at one hundred one dollars and forty one cents. That's up three forty four on the day, three point five percent, and up ten point four percent on the week, the first settlement above a hundred since September seventeenth. The Brent WTI spread closed at eight forty five.

Marcus Hayes

The latest EIA Weekly Report, week ending October ninth, released Thursday the fifteenth, showed a national commercial crude draw of eight point five five seven million barrels, to four hundred fifteen point five seven seven million. Reuters consensus was a modest draw of two hundred eighty eight thousand. Big surprise, but read the regions. The whole draw was PADD 3, down nine point two three nine million barrels, on five hundred thousand barrels per day of Hurricane Isaias shut ins and heavy exports. PADD 4, the Rockies, built three hundred fifty eight thousand barrels to twenty two point seven one zero million. PADD 2 rose twenty three thousand to one hundred seven point zero zero four million, with autumn turnarounds underway. Utilization is ninety two point seven percent. Cushing was last confirmed at twenty four point seven million barrels.

Marcus Hayes

On the SPR, the DOE issued an RFP for up to seventeen million barrels of exchanges for November and December delivery. Energy Aspects says about twenty three million barrels were awarded from September's forty million barrel offer, leaving the reserve near two hundred eighty three million, the lowest since October 1982. My read, and it is interpretation: that waterborne Gulf supply satisfies coastal refiners and removes the coastal pull on inland rail barrels. Baker Hughes had six hundred three total rigs as of October ninth, four hundred sixty two oil, one hundred thirty two gas. The October sixteenth count I have not confirmed, so I won't give you a number. Deals still pending: Enbridge's two point five five billion dollars for Tallgrass crude assets, and Hess Midstream's two hundred million dollar purchase of Chevron's DJ Basin gathering system, which carries a twenty percent Saddlehorn stake.

Marcus Hayes

Uinta Basin. Yellow wax wellhead postings are flat at ten to fourteen dollars under Cushing. Delivered yellow wax into the Gulf Coast is indicated near WTI plus three twenty, roughly one hundred four sixty. Heated coiled railcar freight holds at sixteen to eighteen dollars per barrel. Do the math and the basin netback is eighty six sixty to eighty eight sixty, twelve eighty to fourteen eighty under Cushing. That does not beat local Salt Lake City postings, so spot wax by rail stays shut. Salt Lake's five refiners are at their technical wax ceiling, eighty thousand barrels per day. Basin rail loadings are flat near one hundred fifteen thousand, moving under legacy minimum volume commitments. Energy Transfer's Price River terminal still awaits final Utah air permitting for a late fourth quarter start. Wildcat's Helper terminal keeps expanding in phases toward one hundred thousand barrels per day. The Uinta Basin Railway has laid zero track, stuck in the STB remand, Forest Service right of way reviews, and Seven County bond structuring. Operators report steady field work. Don't underwrite spot wax expansions off this tape.

Marcus Hayes

Bakken. The North Dakota Director's Cut holds state output at one point one five three million barrels per day, on thirty three rigs. Gas capture is ninety six percent, flaring near one hundred thirty million cubic feet per day. DAPL is full at seven hundred fifty thousand barrels per day. Committed tariffs run five sixteen to seven fifty six per barrel, uncommitted is nine seventy five. Rail to the East Coast or Pacific Northwest costs ten to fifteen dollars all in, which wipes out spot margins even with that eight forty five Brent WTI spread, so loadings stay at contracted baselines. Chevron is taking its Williston rigs from three to two by December to focus on three mile laterals, and Hess Midstream projects 2027 gathering throughput down five percent before leveling off. Chord, Continental and Devon with Grayson Mill are steady.

Marcus Hayes

Powder River. Anschutz, Continental, Devon, EOG and Peak are stable. Gathering has room. The choke point is downstream at GERN-zee. Plains continues integrating its five hundred eighty five million dollar Silver Creek gathering acquisition.

Marcus Hayes

Now the one that matters. GERN-zee sweet is steady at eighty five cents over Cushing, about one hundred two twenty six outright. Clearbrook trades a dollar fifty to two ten under GERN-zee, sixty five cents to a dollar twenty five under Cushing. That premium looks attractive, and it's uncapturable for uncommitted barrels, because the exits are prorated. Pony Express is moving two hundred thirty thousand barrels per day out of GERN-zee against four hundred thirty thousand total capacity, and it's heavily prorated. The Tallgrass and Bridger open season offered incentive tariffs without incremental pipe steel. Platte, at one hundred forty five thousand to Wood River and Patoka, faces severe apportionment. Saddlehorn and Grand Mesa are full of DJ crude bound for Cushing. And Double H's conversion to N-G-L service permanently removed sixty five to eighty eight thousand barrels per day of inbound crude takeaway.

Marcus Hayes

Meanwhile, Express lands two hundred eighty thousand barrels per day into Casper at that twenty five fifty discount, and Bridger and Belle Fourche funnel over three hundred thousand barrels per day of Bakken crude toward the hub. With PADD 2 refiners in maintenance, surplus barrels get pushed to Clearbrook instead of south or to the coast. So expect producers to shop uncommitted spot volume into your racks on the strength of a hundred dollar screen. Match receipts to confirmed pipeline nominations, defend your M-V-Cs, and police the manifolds. That's the brief. Back tomorrow.