Freight Shock, Tight Takeaway: Rockies and Bakken Crude

Marcus Hayes

Tuesday, October twentieth. Here's what moved, and what it means for your barrels.

Marcus Hayes

Global first. Brent settled down thirty one cents, three tenths of a percent, at one hundred nine dollars and fifty five cents on Monday. That's consolidation after Friday's five month high of one hundred nine dollars and eighty six cents. The physical market is a different animal. North Sea Dated is assessed near one hundred thirty four dollars, a huge cash over paper premium, and the driver is freight. Persian Gulf dirty tanker rates are hovering near one point three million dollars a day, roughly thirty three dollars a barrel. That's a shipping story more than a producer price signal.

Marcus Hayes

On supply, Kpler says Gulf crude flows averaged about eight and a half million barrels per day over the last seven days, down from more than twenty million the week before, after at least ten commercial vessel incidents. Iran's Revolutionary Guard says a tanker caught fire and exploded Sunday after striking a naval mine in the southern Strait of Hormuz. On Monday the Houthis claimed drone and missile strikes on Aramco's Yanbu facility, the Shaybah oilfield, and airports in Riyadh and Abha. Saudi authorities haven't confirmed damage, so treat those as claims. Yanbu matters because it's the Red Sea bypass terminal. A strike in Shabwa province in Yemen killed up to fifty three.

Marcus Hayes

On Russia, President Trump's Friday executive order waived Graham Act sanctions and tariffs. Secretary of State Rubio lands in India today and says a trade deal is very close. Under the arrangement with Moscow, Russian diesel exports start near two point three million barrels this month and scale toward seven point six million barrels monthly. Rubio said the administration will take up to sixty days to assess the impact. That's diesel, not crude, and it does nothing for Hormuz. On the institutions, OPEC plus baselines stay frozen through November ahead of the November first ministerial. IEA members confirmed a release of more than twenty million barrels of fuel. And the EIA's Short Term Energy Outlook has fourth quarter Brent averaging one hundred five dollars, with Middle East shut ins at four and a half million barrels per day.

Marcus Hayes

North America. November W C S at Hardisty holds at twenty five dollars and fifty cents to twenty five fifty five under W T I. Canadian export pipes are running near ninety three percent utilization. Trans Mountain is capped near sixty percent, about four hundred twenty five thousand barrels per day, because high Pacific freight keeps the trans Pacific arbitrage out of Westridge uneconomic. The Rockies angle is Enbridge's Express, running full at two hundred eighty thousand barrels per day into Casper. That's discounted Canadian heavy landing in your corridor every day. Mexico, nothing material.

Marcus Hayes

United States. W T I gained two dollars and twenty five cents, two point two percent, to settle at one hundred three dollars and sixty six cents, the highest settlement since September fifteenth. Volume was thin ahead of front month expiry today. As I said Monday, that's a screen headline, not a physical bid. The number for your rail desk is the Brent W T I spread. It compressed from eight forty five Friday to five eighty nine at Monday's close.

Marcus Hayes

No new EIA report since Friday. The Wednesday release is tomorrow. The last print, week ending October ninth, showed a commercial crude draw of eight point five five seven million barrels to four hundred fifteen point five seven seven million, against a consensus draw of just two hundred eighty eight thousand. All of it was PADD three. The Gulf Coast fell nine point two three nine million barrels on roughly five hundred thousand barrels per day of Hurricane Isaias shut ins plus export pull. PADD four, the Rockies, built three hundred fifty eight thousand to twenty two point seven one oh million. PADD two rose twenty three thousand to one hundred seven point zero zero four million, with refinery utilization at ninety two point seven percent amid autumn turnarounds. Cushing sits at twenty four point seven million.

Marcus Hayes

Baker Hughes had six hundred three rigs, four hundred sixty two oil and one hundred thirty two gas, flat on the week and up fifty five on the year. Canada fell five to two hundred seventeen. The Energy Department has a request for proposals out for up to seventeen million barrels of S P R exchange crude for November and December. Energy Aspects puts S P R inventory near two hundred eighty three million barrels, the lowest since October of nineteen eighty two. On deals, Enbridge's two point five five billion dollar purchase of Tallgrass crude assets, which include Pony Express, and Hess Midstream's two hundred million dollar purchase of Chevron's DJ Basin gathering system, with a twenty percent Saddlehorn stake, both remain pending.

Marcus Hayes

Uinta Basin. Yellow wax wellhead postings are steady at ten to fourteen dollars under Cushing. Delivered Gulf Coast yellow wax is indicated at W T I plus three dollars and twenty cents, about one hundred six eighty six outright. Insulated railcar freight to the Gulf runs sixteen to eighteen dollars a barrel. That puts the basin netback at eighty eight eighty six to ninety eighty six, or twelve eighty to fourteen eighty under Cushing. Salt Lake City postings match or beat that, so spot rail stays shut. The five Salt Lake refineries are at their waxy cap of about eighty thousand barrels per day. Rail loadings are flat near one hundred fifteen thousand, held up by legacy minimum volume commitments. Energy Transfer's Price River terminal still awaits final Utah air permits, with a late fourth quarter target. Wildcat's Helper terminal keeps expanding toward one hundred thousand. The Uinta Basin Railway has laid zero track, stuck in the Surface Transportation Board remand, Forest Service reviews, and bond structuring. Veren, Ovintiv, Scout, XCL, Uinta Wax, Berry, Caerus, and SM Energy are all running steady programs.

Marcus Hayes

Bakken. The Director's Cut holds state output at one point one five three million barrels per day, thirty three rigs, ninety six percent gas capture, and flaring around one hundred thirty million cubic feet a day. D A P L is full at seven hundred fifty thousand barrels per day, with committed tariffs of five sixteen to seven fifty six and a walk up rate of nine seventy five. Rail to the East Coast or Pacific Northwest runs ten to fifteen dollars all in. With the Brent W T I spread at five eighty nine, spot rail is closed and crude by rail is held to contract volumes. The Double H conversion to N G L service took sixty five to eighty eight thousand barrels per day of southbound crude egress off the table, pushing volume onto D A P L, Enbridge Bakken, and Bridger. Chevron is trimming Williston rigs from three to two by December to focus on three mile laterals. Hess Midstream sees twenty twenty seven gathering throughput down five percent before flattening. Chord, Continental, Devon with Grayson Mill, and ConocoPhillips are steady.

Marcus Hayes

Powder River. Anschutz, Continental, Devon, EOG, and Peak keep steady drilling and completions. Gathering capacity is open. The bottleneck is downstream takeaway at Guernsey. Plains continues integrating its five hundred eighty five million dollar Silver Creek gathering asset.

Marcus Hayes

Now the section that matters most. Guernsey, GERN zee, Sweet is steady at about eighty five cents over Cushing, roughly one hundred four fifty one outright. Clearbrook trades one fifty to two ten under Guernsey, sixty five cents to a dollar twenty five under Cushing. No movement to report. But that premium is a headline for uncommitted barrels. They can't capture it.

Marcus Hayes

Pony Express is moving about two hundred thirty thousand barrels per day against four hundred thirty thousand of capacity, under severe apportionment. The Tallgrass and Bridger open season offered incentive tariffs but no incremental pipeline capacity. Platte, at one hundred forty five thousand, is heavily prorated toward Wood River and Patoka. Saddlehorn and Grand Mesa are saturated with DJ Basin crude bound for Cushing. Meanwhile the hub takes in two hundred eighty thousand from Express at Casper, plus more than three hundred thousand of Bakken crude flowing south on Bridger and Belle Fourche. With PADD two turnarounds backing up storage, the surplus goes north to Clearbrook at a discount instead of clearing south.

Marcus Hayes

The commercial read. W T I above one hundred three on expiry will tempt producers to push spot barrels at your racks. Verify firm downstream tickets before you receive anything. Enforce deficiency billings on minimum volume commitments. And police manifold blending, so incoming Canadian heavy doesn't contaminate a pipeline batch. That's the brief. Talk tomorrow, after the EIA.