Riyadh Airport Strike, Hurricane Isaias Shut-Ins, and Crude Market Turmoil

Marcus Hayes

Sunday, October eleventh. Cash desks are shut and futures reopen tonight, so here's what moved since Friday morning.

Marcus Hayes

Global first. The overnight catalyst is Riyadh. Saturday afternoon a missile hit the domestic terminals at King Khalid International Airport. Saudi civil aviation authorities say twelve dead and more than three hundred wounded, the deadliest attack in any Gulf Arab state since the Iran war began, per the Associated Press. It's the latest in a week of strikes on that airport, and the Houthis are the focus, though the Saudi statement assigned no blame. The piece that matters for crude is that Houthi leadership has reportedly warned workers to evacuate Saudi energy facilities. That's a threat, not an attack on oil infrastructure, and I'd treat it that way until something is hit. President Trump said Saturday the U.S. is looking at joining Saudi strikes on the Houthis. His words were, we may, we're going to look at it. Riyadh still plans to open its energy conference today.

Marcus Hayes

On Hormuz, Tasnim reports Tehran is reviewing Washington's terms for reopening the strait within seven days, while the U.S. sanctioned seventeen vessels tied to Iranian trade. Shipping risk stays acute. The tape going in: Brent settled Friday at one hundred four dollars and seventy two cents, up forty four cents. OPEC plus is unchanged. November baselines are flat, and the provisional hundred and eighty thousand barrel per day December increase still depends on Iraqi and Kazakh compensation cuts. The IEA and OPEC monthly reports land later this week, and the G7 and IEA plan to release a hundred million barrels from emergency stocks is still under review by member states.

Marcus Hayes

North America. Physical markets were closed, so the Friday print is the last one. Per CalRock, November Western Canadian Select at Hardisty settled at twenty five dollars and fifty five cents under W T I. Thursday was twenty dollars and twenty cents under. That's the widest discount since twenty twenty three, with heavy fuel oil weakness and high Gulf Coast marine freight cited. Canadian export lines are around ninety three percent utilized, with roughly three hundred fifty thousand barrels per day spare. Enbridge's Express into Casper is full at its two hundred eighty thousand barrel per day nameplate, and Trans Mountain is near sixty percent. Baker Hughes had Canadian rigs up six to two hundred twenty two. Nothing material from Mexico.

Marcus Hayes

United States. W T I settled Friday at ninety one dollars and eighty five cents, up thirty six cents, so the Brent W T I spread closed at twelve dollars and eighty seven cents. That's a wide pull from inland barrels toward the Gulf Coast docks.

Marcus Hayes

The Gulf is the weekend's physical story. Reuters, citing the Marine Minerals Administration, put Hurricane Isaias shut-ins at about one point five million barrels per day of oil, nearly seventy two percent of Gulf output, and one point three billion cubic feet per day of gas, fifty nine percent. One hundred twenty nine platforms were evacuated, thirty five percent of the staffed total. Energy Aspects estimates about five hundred thousand barrels per day of refining capacity sits in the storm's path, including Pascagoula. Isaias was a Category three heading for the Florida Panhandle. Less Gulf supply keeps the pull on inland crude strong, but I'm not calling a differential move from that. Nothing has traded yet.

Marcus Hayes

Baker Hughes Friday: U.S. rigs up five to six hundred three. Oil rigs up six to four hundred sixty two, gas down one to one thirty two, Permian up four to two seventy four. The latest EIA weekly, from Wednesday: commercial crude drew three point two million barrels to four hundred twenty four point one million. Cushing built four hundred forty thousand to twenty four point seven million, which is still one point eight four million under the five year average. PADD two built one point eight seven two million on refinery maintenance, PADD four drew a hundred forty four thousand to twenty two point three five million, and utilization averaged ninety two point seven percent. Corporate: the Chevron and Hess Midstream deal from last Tuesday remains the story. Hess Midstream takes Chevron's DJ Basin gathering and storage plus a twenty percent stake in Saddlehorn, which runs to Cushing, for two hundred million dollars cash and cancellation of Chevron's shares.

Marcus Hayes

Uinta Basin. East Daley published on Energy Transfer's Price River terminal expansion. Energy Transfer owns fifty five percent, and it's due in the fourth quarter. It adds a loop track, a rail load rack for a hundred forty thousand barrels per day, nine loading arms, four truck offload lanes, and about a hundred twenty thousand barrels of heated storage. Utah permitting is still in final review, so that start date isn't locked. FourPoint Resources has committed fifty thousand barrels per day. Wildcat is expanding its Helper terminal from twenty thousand to a hundred thousand. Uinta rail volumes hit a hundred fifteen thousand barrels per day in June, and rigs went from eleven in April to fifteen in August.

Marcus Hayes

Now the economics, and these are indications, not firm bids. Wellhead yellow wax is indicated ten to fourteen dollars under Cushing. Gulf Coast refiners are bidding about three dollars and twenty cents over W T I delivered. But heated rail from Utah runs sixteen to eighteen dollars, which leaves spot rail twelve eighty to fourteen eighty out of the money against local sales. Salt Lake refiners, two hundred five thousand barrels per day across five plants, keep absorbing around eighty thousand of waxy. New rail capacity is arriving, but at these numbers it's optionality, not a flow. The Uinta Basin Railway is unchanged: Surface Transportation Board remand pending, Forest Service permits and supplemental environmental review open, the two point two to two point five billion dollar financing unfinalized, no construction.

Marcus Hayes

Bakken. Williston output holds at one point one nine to one point two million barrels per day, about one point one four in North Dakota. Gas capture is ninety five point five percent, and long laterals are sixty three percent of recent completions. The structural story is Double H. Kinder Morgan is converting it to NGL service as Hiland Express, displacing roughly sixty five thousand barrels per day that went from Dore to Guernsey. Plainview Energy Analytics expects that to spread across DAPL, Enbridge and Bridger, with Bridger taking three to five thousand from Montana. DAPL is near full. Coast bound rail at ten to fifteen dollars can't compete with pipe netbacks. Chevron goes from three rigs to two in December, and Hess Midstream guides about five percent lower Bakken throughput in twenty twenty seven. Continental, Chord, Devon and Conoco are normal course.

Marcus Hayes

Powder River. Steady completion activity from Anschutz, Continental, Devon, EOG and Peak, feeding Bridger and Belle Fourche south to Guernsey. Plains continues folding its five hundred eighty five million dollar Silver Creek assets into its Guernsey footprint. No new bottlenecks.

Marcus Hayes

Guernsey, the one that matters. Indicative light sweet is flat at roughly eighty five cents over Cushing, and I stress indicative, since cash was closed. Clearbrook trades one fifty to two ten under Guernsey. Proration is extreme. Pony Express carries about two hundred thirty thousand barrels per day out of Guernsey on a four hundred thirty thousand system, and Platte moves a hundred forty five thousand to Wood River and Patoka. Both are heavily apportioned. The Tallgrass and Bridger open season for incentive rates on Pony and Seahorse has closed, with no incremental steel and no disclosed volumes.

Marcus Hayes

So shippers have three choices. One: take the haircut on Pony or Platte, reach Cushing and capture that twelve eighty seven spread to the Gulf. Even prorated, that's the best realized netback. Two: sell east to Clearbrook at a dollar fifty to two ten under, into a Midcontinent market digesting refinery turnarounds. Three: rail to the coast at ten to fifteen dollars, which erases the Gulf margin. Pipe space out of Guernsey is the pricing bottleneck for Rockies and Williston barrels. Watch it when futures open tonight.