The Rockies’ Pipeline Choke Is Capping Crude Netbacks

Marcus Hayes

Thursday, October fifteenth. Here's what moved since yesterday morning.

Marcus Hayes

Global first. Brent slipped two dollars and twenty eight cents, or two point two percent, to a hundred and three dollars and seventy eight cents in early trading. Reuters says Washington is weighing a partial easing of sanctions on shadow fleet tankers to bring down record freight rates and ease the diesel shortage. The slide was checked by two commercial ships, a container vessel and a dry bulk carrier, sinking near Hormuz after being struck by projectiles. Physical is a different world. The IEA's October report has North Sea Dated trading around a hundred and thirty four dollars.

Marcus Hayes

On Aramco, Reuters now confirms Tuesday night's strike on the Dhahran complex caused extensive structural damage across floors six through ten, with ceilings down on the executive floor that houses Amin Nasser's office. Field, pipeline and export terminal operations are running normally, and administrative work has shifted to Aramco's offices elsewhere. The Houthis say Saudi oil facilities and airports remain targets.

Marcus Hayes

The IEA report, out yesterday, sees 2026 global demand falling two point six million barrels per day, with the fourth quarter down two point five year over year. Diesel is a quarter of that drop. September supply rose two point five million barrels per day to a hundred and two point three million, led by Saudi Arabia, but 2026 supply still averages five point eight million below last year. Observed global stocks are five hundred and nine million barrels below pre war levels. OPEC plus targets are unchanged through November, and the next meeting is November first.

Marcus Hayes

North America. Western Canadian Select for November at Hardisty is holding at twenty five fifty to twenty five fifty five under W T I, near multi year lows. The drivers are high tanker freight shutting export arbs, soft Gulf Coast heavy margins, and winter diluent blending that adds roughly thirty percent to batch volumes. Express into Casper is full at two hundred and eighty thousand barrels per day. Trans Mountain is around sixty percent, roughly four hundred and twenty five thousand barrels per day to Westridge, and Canadian egress overall is near ninety three percent utilized. Mexico, nothing material.

Marcus Hayes

United States. W T I fell a dollar thirty four, one point four percent, to ninety three seventy five. Brent minus W T I narrowed to ten dollars and three cents, from roughly twelve fifty to thirteen twenty five yesterday. Still a strong pull toward the Gulf Coast.

Marcus Hayes

The E I A report is not out yet. The Columbus Day holiday pushed it to noon Eastern today, ten Mountain. What we have is the A P I, and it's a shocker: commercial crude down eleven point one two million barrels for the week ending October ninth. Distillates fell one point five million, gasoline built one point one million. I haven't seen a firm consensus for today, so I can't give you the surprise yet. Remember the A P I and the E I A routinely disagree on size. Last week the A P I showed a draw of two point oh nine million, and the E I A printed three point one eight six.

Marcus Hayes

Baseline from that last E I A print: commercial crude at four hundred and twenty four point one million barrels, Cushing at twenty four point seven million, up four hundred and forty four thousand. P A D D four, the Rockies, drew a hundred and forty four thousand barrels to twenty two point three five million. Refinery utilization was ninety two point seven percent. Hurricane Isaias has shut in an estimated five hundred thousand barrels per day of Gulf output, about a quarter of the region, and that will bleed into today's and next week's balances.

Marcus Hayes

Deals still pending: Enbridge's two point five five billion dollar Tallgrass crude logistics purchase, and Hess Midstream's two hundred million dollar buy of Chevron's D J Basin gathering, which includes a twenty percent stake in Saddlehorn.

Marcus Hayes

Uinta Basin. Yellow wax wellhead pricing is steady at ten to fourteen dollars under Cushing. Gulf Coast delivered wax bids are around W T I plus three twenty, about ninety seven dollars. Heated rail from Utah to the Gulf runs sixteen to eighteen dollars, so basin netbacks land at seventy eight to eighty one dollars, twelve seventy five to fifteen seventy five under Cushing. That does not beat local postings. Spot rail stays shut, and only minimum volume commitment barrels are moving. Salt Lake's five refineries are at their technical wax limit near eighty thousand barrels per day, and basin rail loadings hold near a hundred and fifteen thousand. Energy Transfer's Price River terminal is targeting a late fourth quarter start, pending Utah air permits. Wildcat continues phasing Helper from twenty thousand toward a hundred thousand barrels per day. The Uinta Basin Railway is stalled, no physical construction, pending the D C Circuit remand at the S T B, Forest Service right of way reviews and bond structuring by the Seven County coalition. Operators report planned completions, no interruptions.

Marcus Hayes

Bakken. The Director's Cut has North Dakota at one point one five three million barrels per day on thirty three rigs. Gas capture is about ninety six percent, flaring near a hundred and thirty million cubic feet per day. Dakota Access is effectively full at seven hundred and fifty thousand barrels per day. Committed tariffs run five sixteen to seven fifty six, uncommitted is nine seventy five. Rail to the Pacific Northwest or East Coast is ten to fifteen dollars all in, which eats the arb even with Brent this wide, so spot Bakken rail stays subdued. Chevron is cutting Williston rigs from three to two by December, and Hess Midstream guides throughput down about five percent in 2027 before flattening, as Chevron favors longer laterals over new wells.

Marcus Hayes

Powder River. Anschutz, Continental, Devon, EOG and Peak are drilling and completing steadily. In basin gathering has room. The constraint sits downstream at GERN zee. Plains is still integrating its five hundred and eighty five million dollar Silver Creek gathering purchase.

Marcus Hayes

Now GERN zee, the one that matters. The screen holds at eighty five cents over Cushing. Clearbrook is indicated a dollar fifty to two ten under GERN zee, sixty five cents to a dollar twenty five under Cushing. Unchanged. But that eighty five cents is not what an uncommitted barrel nets, because of proration.

Marcus Hayes

Pony Express has four hundred and thirty thousand barrels per day of capacity, moves about two hundred and thirty thousand from GERN zee to Cushing, and remains heavily apportioned. The Tallgrass and Bridger open season offered incentive rates but added no physical pipe. Platte, around a hundred and forty five thousand to Wood River and Patoka, is under severe proration. Saddlehorn and Grand Mesa are full with D J barrels headed to Cushing. And the Double H conversion to N G L service has permanently removed sixty five to eighty eight thousand barrels per day of crude takeaway into GERN zee, pushing northern barrels onto Bridger, Belle Fourche, and Enbridge's North Dakota system to Clearbrook, which runs above ninety percent.

Marcus Hayes

So here's the netback picture. A ten dollar Brent premium wants barrels on the Gulf Coast. Cushing is the only pipe south, and GERN zee is the choke. A barrel apportioned off Pony or Platte can't reach Cushing. It either goes north and east to Clearbrook, into a PADD two market already carrying maintenance builds, or it takes rail at ten to fifteen dollars, which absorbs the spread. Apportionment, not the published differential, is capping Rockies and Williston netbacks. Watch the noon E I A print for PADD two and Cushing.

Marcus Hayes

That's the brief. Good luck on the call.