Crude Breaks Below $100 and the Bottleneck at Guernsey

Marcus Hayes

Tuesday, October sixth. Here's what moved overnight.

Marcus Hayes

Brent broke under a hundred. Reuters has Brent futures down a dollar seventy, one point seven percent, at ninety eight dollars and sixty two cents around ten thirteen GMT. Earlier in Asia it was ninety nine forty nine, down eighty three cents. Monday it was sitting in the one oh one to one oh two range. The driver is physical. Provisional Kpler data puts the seven day average for Gulf crude exports at eighteen point three million barrels per day on September thirtieth, and flows excluding Iran ran above eighty one percent of prewar levels for September. Vortexa's fourteen day average is eighteen point six million. Saudi is leading the recovery. Aramco cut its Arab Light official selling price into Asia for November loadings, and Kuwait says it's back to seventy five percent of prewar output. ING reads that as an improving supply picture. Add the G seven release of one hundred million barrels of diesel and crude from emergency stocks, and you have a ceiling on paper rallies.

Marcus Hayes

Now, a caveat. Nobody should call this normalization. Marisks reports the Kuwaiti tanker Kazimah III was hit October first, and the Aframax Lipsi was struck October fourth with engine room damage, crews safe. Reuters counts at least seven tanker incidents in the past week. Iranian exports remain effectively blocked by the U.S. And on OPEC plus, the seven core members reaffirmed Sunday that November targets stay flat. December's provisional hundred and eighty thousand barrel per day increase is conditional on Iraq and Kazakhstan compensation cuts.

Marcus Hayes

North America. Cenovus is buying Athabasca Oil for five point seven billion Canadian, about four billion U.S. Good for Canadian supply growth, nothing that moves flows this week. Our desk sheet has Western Canadian Select at Hardisty sixteen dollars and sixty five cents under W T I, wide, tied to the Midwest refinery turnaround schedule. I'd treat that as indicative, not a confirmed settle. Express into Casper is fully allocated at two hundred eighty thousand barrels per day. Trans Mountain is steady near sixty percent utilization. Mexican Maya exports remain curtailed.

Marcus Hayes

United States. W T I eased to eighty seven dollars and sixty cents, down a dollar eighty three, two point one percent. The Brent W T I spread is eleven dollars and two cents, basically flat from Monday. That matters because an eleven dollar spread keeps pulling inland barrels toward Gulf Coast water, and that pull is what's pressing on every Rockies pipe we'll talk about in a minute.

Marcus Hayes

No scheduled EIA release landed since Monday. The Short Term Energy Outlook is out today, and the Weekly Petroleum Status Report comes Wednesday. For reference, the September outlook had U.S. crude output at thirteen point eight million barrels per day this year and fourteen point three next year, second half Brent near ninety, and distillate stocks below one hundred million barrels. Watch whether output gets revised. Last week's data had the Rockies, PADD four, drawing eight hundred twenty three thousand barrels to twenty two point five million, refinery runs at ninety one point four percent, and Cushing near operational bottoms. Baker Hughes Friday showed five hundred ninety eight total rigs, oil rigs up four to four hundred eleven.

Marcus Hayes

Corporate: Energy Transfer agreed to buy Vaquero Midstream for two point six three billion dollars in cash and stock. The market is still digesting Enbridge's two point five five billion dollar purchase of Tallgrass's crude business, including seventy five percent of Pony Express, per RBN. And the administration is expanding access to dyed diesel to ease fuel costs, per Reuters.

Marcus Hayes

Uinta Basin. Waxy crude production is steady. Here's the arithmetic that matters. Yellow wax is fetching a three dollar and twenty cent premium at Gulf Coast refiners, but heated rail freight runs sixteen to eighteen dollars a barrel. So uncommitted rail is deeply negative, and Salt Lake City refineries, capped around eighty thousand barrels per day, can't absorb the rest. The Uinta Basin Railway is still stuck. After the D C Circuit remand, the Surface Transportation Board proceedings and Forest Service right of way reviews are pending. The two point two to two point five billion dollar private financing isn't closed, and no ground has been broken. Operators are on a steady cadence, nothing new.

Marcus Hayes

Bakken. Production is holding between one point one nine and one point two zero million barrels per day. No new Director's Cut in the past day, and gas capture is reported above ninety five percent. Dakota Access is near capacity with little spot room south. Rail to coastal refineries runs ten to fifteen dollars a barrel, so crude by rail stays with contracted buyers. On operators, Chord closed its non operated Marcellus sale to focus on the Williston, and Hess Midstream is guiding to at least five percent volume growth in the second half.

Marcus Hayes

Powder River. Steady rigs from Anschutz, Continental, Devon, EOG, and Peak. Plains' five hundred eighty five million dollar Silver Creek gathering deal is still being integrated. One structural note: RBN had Kinder Morgan's eighty eight thousand barrel per day Double H line slated for N G L conversion by the first quarter of this year. I can't confirm today's status, but once converted, that Dore to Guernsey crude path is gone.

Marcus Hayes

Now the one that matters. Guernsey, GERN zee. Light sweet is holding at about eighty five cents over Cushing, and roughly two ten over Clearbrook. Unchanged on the day. Our sheet quotes Clearbrook anywhere from a dollar fifty to two ten under Guernsey, so that range is soft. Terminal tanks are congested as Bakken, Powder River, and Canadian barrels converge on limited southbound capacity. Pony Express, about four hundred thirty thousand barrels per day, and Platte are both heavily prorated.

Marcus Hayes

Here's the signal. Scheduled pipeline space is trading at a premium to physical barrels in the tank. Think about what that says. The crude is there. The scarce asset is the right to move it. A shipper holding space is worth more than one holding oil. That's why a Guernsey premium to Cushing, which is rare, can coexist with an eleven dollar Brent W T I spread. The spread pulls barrels toward the Gulf, but the pipe south is the gate.

Marcus Hayes

So shippers have three options. Take the apportionment on Pony or Platte and capture the Gulf Coast export margin. Dump into Clearbrook at about a two dollar discount into Midwest refinery turnarounds. Or pay ten to fifteen dollars or more for rail. Space south out of Guernsey is the top commercial priority.

Marcus Hayes

One flag on open seasons. RBN's reporting on the Tallgrass and Bridger thirty day binding joint open season dates to February of twenty twenty five. I can't confirm a live one today. Bridger's proposed five hundred fifty thousand barrel per day line from the Canadian border to Guernsey, per RBN in February, is long term. That's the brief. Back tomorrow.