Middle East Tensions, Heavy Discounts, and Rockies Takeaway Bottlenecks

Marcus Hayes

Monday, October twelfth. Here's what moved since Friday morning, and what it means for Rockies barrels.

Marcus Hayes

Start with the screens. Brent was up sixty nine cents, seven tenths of a percent, at one hundred five dollars and forty one cents by nine twenty three G M T, per Reuters. That retraces an earlier dip, and it sits above Friday's settle of one hundred four seventy two. Sunday's brief said to watch the futures reopen. It opened soft on Russian diesel headlines, then the Saudi news pulled it back up.

Marcus Hayes

On Saturday, Houthi missiles and drones hit King Khalid International Airport in Riyadh. Reuters counts at least twelve dead and more than three hundred wounded, and a later Reuters report says thirteen. It's the deadliest attack on the kingdom in more than a decade. More attacks followed Sunday. Houthi spokesman Yahya Saree says the operations deep inside Saudi Arabia will continue, and he named oil facilities among the targets. BP has pulled out of the Riyadh energy conference. Add two tanker attacks reported by U K M T O, one drone strike near Sohar, Oman, and one vessel damaged transiting Hormuz. Iran also called the U.S. response to its seven day Hormuz reopening proposal insufficient.

Marcus Hayes

The offset is diesel. Trump said Friday that Russia will supply more than three hundred thousand metric tons to U.S. and global markets, and I.C.E. gasoil fell four point three percent to fourteen nineteen fifty a ton. PVM's Tamas Varga questions the immediate impact, since Russian refining capacity is badly reduced. Trump also announced a Russia Ukraine energy ceasefire on Sunday. Zelenskiy says he's waiting on details, and Moscow hasn't commented. So treat that one as unconfirmed.

Marcus Hayes

Two more global items. OPEC cut its 2026 demand growth forecast to four hundred thousand barrels per day, from five hundred eighty thousand in August, and says the deferred demand shows up in 2027. Goldman lifted its December Brent forecast to ninety dollars, citing a risk premium just over twenty dollars.

Marcus Hayes

North America. This is the number I'd flag. Western Canadian Select for November at Hardisty settled Friday at twenty five fifty five under W T I, per CalRock, against twenty twenty on Thursday. That's the widest heavy discount since 2023. The desk notes tie it to soft heavy fuel oil on the Gulf Coast and high ocean freight. Canadian export lines run near ninety three percent full, and Express into Casper is full at two hundred eighty thousand barrels per day. Trans Mountain is near sixty percent. Winter diluent ratios will tighten effective heavy capacity further. Canadian rigs rose six to two hundred twenty two. Nothing material from Mexico.

Marcus Hayes

United States. W T I was at ninety two forty two this morning, up fifty seven cents, after Friday's settle of ninety one eighty five. That leaves Brent about twelve ninety nine over, which is a wide pull toward Gulf Coast docks. Goldman still projects W T I averaging eighty one dollars in December and seventy three in 2027, because of transatlantic freight.

Marcus Hayes

No new E I A release since Friday, so here's Wednesday's baseline. Commercial crude drew three point two million barrels to four twenty four point one million, against a consensus build of one point seven. Cushing built four hundred forty thousand to twenty four point seven million, still one point eight four million under the five year average. PADD two built one point eight seven million on refinery turnarounds. PADD four drew a hundred forty four thousand to twenty two point three five million. National utilization averaged ninety two point seven percent. Baker Hughes Friday had the U.S. count up five to six hundred three, oil up six to four sixty two. Offshore, Isaias shut in roughly one point five million barrels per day, about seventy two percent of Gulf output. Shell, Chevron and BP are now redeploying crews.

Marcus Hayes

One piece of context from last Tuesday. Hess Midstream is buying Chevron's D J Basin gathering assets, including a twenty percent stake in Saddlehorn to Cushing, for two hundred million dollars cash. It also extends the Bakken agreements to 2045 at lower tariffs.

Marcus Hayes

Uinta Basin. Yellow wax is indicated roughly ten to fourteen dollars under Cushing. Gulf Coast refiners are bidding delivered waxy around three twenty over W T I, but heated rail runs sixteen to eighteen dollars a barrel. The desk math puts the spot rail netback at roughly twelve eighty to fourteen eighty under, no better than local sales, so spot rail stays out of the money and only term contracts move. The five Salt Lake refineries keep absorbing about eighty thousand barrels per day.

Marcus Hayes

On capacity, East Daley says Uinta rigs rose from eleven in April to fifteen by late August, and June rail loadings hit a hundred fifteen thousand barrels per day. Energy Transfer's Price River expansion is still slated for the fourth quarter, with Utah permits in final review. Wildcat's Helper terminal is growing from twenty thousand to a hundred thousand. The Uinta Basin Railway hasn't moved. The S T B remand is pending, Forest Service permits are open, financing is unfinalized, and nothing is under construction. Operators are in normal course.

Marcus Hayes

Bakken. Williston output holds around one point nineteen to one point two million barrels per day, with gas capture at ninety five point five percent. D A P L is fully booked with negligible spot space south. Kinder Morgan's Double H conversion to N G L service, now Hiland Express, removes an estimated sixty five to eighty eight thousand barrels per day of crude capacity toward Guernsey, and that crude is pushing onto D A P L and the Bridger and Belle Fourche systems. Coastal rail at ten to fifteen dollars a barrel can't beat pipe netbacks. Chevron drops from three Bakken rigs to two in December, and Hess Midstream sees Bakken throughput down about five percent in 2027 before it plateaus.

Marcus Hayes

Powder River. Anschutz, Continental, Devon, EOG and Peak are steady, with no new takeaway constraints reported. Plains is still integrating its five hundred eighty five million dollar Silver Creek acquisition into its Guernsey footprint.

Marcus Hayes

Now Guernsey, GERN zee. Indicatively, light sweet is holding about eighty five cents over Cushing. Those are desk indications, not a confirmed posted print. Clearbrook sits a dollar fifty to two ten under Guernsey, which is sixty five cents to a dollar twenty five under Cushing. Direction: steady.

Marcus Hayes

The story is outbound space. Pony Express carries about two hundred thirty thousand barrels per day out of Guernsey on a four hundred thirty thousand system, and Platte moves about one forty five thousand to Wood River and Patoka. Both are heavily apportioned. The thirty day binding open season that Tallgrass and Bridger launched August twenty first for Pony Express and Seahorse closed with no incremental capacity added.

Marcus Hayes

So where do barrels go? First choice is any space to Cushing, even after proration, because that's the path to the thirteen dollar Brent pull. Second is Clearbrook, a deeper discount into a PADD two that just built one point eight seven million barrels on turnarounds. Third is rail to the coast, and at ten to fifteen dollars that erases the arbitrage. Apportionment at Guernsey is the bottleneck for every Rockies and Williston barrel.

Marcus Hayes

That's the brief. Watch the Saudi headlines and the Pony nominations.