Crude Brief: Guernsey Chokepoints, Freight Surges, and Rockies Bottlenecks

Marcus Hayes

Monday, October twenty sixth. Here's what moved since Friday morning.

Marcus Hayes

Screens first. Brent settled Friday at one hundred sixteen dollars and seventy two cents, the highest settlement since April twenty ninth, per CNBC. This morning, Reuters has Brent down a dollar ninety at one hundred fourteen eighty two as of nine fifty nine GMT, and W T I down two dollars and eight cents at one hundred one nineteen. The catalyst is diplomacy. Qatari mediators traveled to Tehran Sunday, coordinating with Washington, and officials from Saudi Arabia, Turkey and Pakistan meet Iran's leaders today. Now the physical side. Over the weekend the Houthis claimed strikes on pumping stations on Saudi Arabia's East West crude pipeline and on Riyadh airport, and Saudi Arabia said it intercepted more missiles and drones. PVM's John Evans told Reuters any dip back toward last week's lows will find grateful buyers. So the paper pulled back. December pipeline nominations are still locked, and the logistics bottlenecks are still binding.

Marcus Hayes

On freight, RBN reports the cost of a very large crude carrier from the Gulf Coast to Asia topped eighty million dollars in early October. Cosmo Oil chartered one on October eighth for eighty one million to move two million barrels. That's roughly forty dollars a barrel against a historical four to five. It was still sixty five point three nine million as of October nineteenth. RBN's framing is that freight, not crude price, is now the swing cost for Atlantic Basin barrels going east. My read: that keeps a lot of crude at home.

Marcus Hayes

Quick global housekeeping. IEA chief Fatih Birol said in Singapore today he doesn't expect markets in twenty twenty seven to return to prewar levels. Aramco will start storing crude in Singapore in the second half of twenty twenty seven. OPEC plus quotas are unchanged heading into the November first ministerial. The strategic petroleum reserve sits at two hundred eighty two point seven million barrels, the lowest since nineteen eighty two.

Marcus Hayes

North America. November W C S at Hardisty settled Friday at twenty five fifty five under W T I, per CalRock via Reuters, thirty five cents wider than Thursday. Against this morning's screen, that's my arithmetic, not a posted price, about seventy five sixty four outright. Desk figures have Trans Mountain around sixty percent full, which fits the freight story, so heavy barrels are pushed south. Enbridge's Express is pinned at its two hundred eighty thousand barrels per day capacity into Casper and GERN zee. Nothing material from Mexico.

Marcus Hayes

United States. No new E I A report since Friday, so the latest weekly numbers stand. Commercial crude drew three point oh six one million barrels to four hundred twelve point five one seven million, bigger than the consensus draw of one point three million. But the draw was coastal. The Gulf Coast fell five million barrels on storm shut ins. Inland built. Cushing rose one million to twenty seven point six million, a fourth straight weekly build. The Rockies, PADD four, built seven hundred eighty six thousand barrels to twenty three point four nine six million. Production is thirteen point two seven million barrels per day, and refinery utilization eased to ninety three point four percent.

Marcus Hayes

Baker Hughes Friday: total rigs flat at six hundred three, a second straight week unchanged. Oil rigs rose one to four hundred sixty, gas fell one to one hundred thirty two. A hundred dollar screen is not accelerating drilling. Corporate: Devon is selling its Eagle Ford assets to Crescent for four point two two billion dollars in cash, per RBN, to concentrate capital on the Delaware and the Rockies. Regulatory reviews continue on Enbridge's two point five five billion dollar Tallgrass crude deal, which includes seventy five percent of Pony Express and the GERN zee terminals, and on Hess Midstream's roughly two hundred million dollar purchase of Chevron's D J Basin gathering plus a twenty percent stake in Saddlehorn.

Marcus Hayes

Uinta Basin. Treat these as indicative desk postings, not assessments. Yellow wax holds ten to fourteen dollars under Cushing at the wellhead. Delivered Gulf Coast waxy trades three dollars and twenty cents over W T I. With insulated railcar freight at sixteen to eighteen dollars a barrel, the delivered netback lands twelve eighty to fourteen eighty under Cushing. Spot crude by rail is deeply underwater against Salt Lake City postings. The five refiners are near their waxy processing cap of about eighty thousand barrels per day. Rail loadings average about one hundred fifteen thousand, all under long term minimum volume commitments, and spot racks are dark. Wildcat's Helper expansion toward one hundred thousand continues. Energy Transfer's Price River terminal is under Utah review, decision expected in the fourth quarter.

Marcus Hayes

The Uinta Basin Railway has no track laid. The D C Circuit remanded the approval to the Surface Transportation Board this month over environmental review gaps, and the Forest Service right of way through Ashley National Forest stays halted pending that supplemental review. Operators are drilling to match their commitments and local refinery quotas.

Marcus Hayes

Bakken. Output holds near one point one five three million barrels per day on thirty three rigs, with ninety six percent gas capture and roughly one hundred thirty million cubic feet per day flared. No new Director's Cut over the weekend. Dakota Access is full at about seven hundred fifty thousand barrels per day, and the walk up spot tariff is nine seventy five against committed rates of five sixteen to seven fifty six. Double H's conversion to N G L service took sixty five to eighty eight thousand barrels per day of crude takeaway out permanently, pushing barrels to DAPL and south on Bridger and Belle Fourche. Spot rail is closed at ten to fifteen dollars before car and unloading costs. Chevron drops a Williston rig by December, three to two, and Hess Midstream guides twenty twenty seven gathering volumes down about five percent.

Marcus Hayes

Powder River. Operators are on steady schedules and gathering is unconstrained. The choke is downstream, at the receipt manifolds and transfer pumps into GERN zee storage.

Marcus Hayes

Now GERN zee, the one that matters. Guernsey Sweet held flat over the weekend at eighty five cents over Cushing, about one oh two oh four outright on this morning's screen. Clearbrook sits one fifty to two ten under GERN zee, sixty five cents to a dollar twenty five under Cushing. Inflows are heavy. Express pushes two hundred eighty thousand barrels per day of Canadian crude, and Bridger and Belle Fourche bring over three hundred thousand of Bakken. Egress is the problem. Pony Express is moving about two hundred thirty thousand out of GERN zee against four hundred thirty thousand nameplate, held back by Midcontinent refinery limits and upstream proration. Platte, at one hundred forty five thousand eastbound, is heavily prorated. Saddlehorn and Grand Mesa are full of D J Basin barrels bound for Cushing.

Marcus Hayes

With December nominations locked, barrels cut out of prorated southbound lines have two choices: dump northeast into Clearbrook at that one fifty to two ten discount, or take GERN zee tankage and pay carry. Meanwhile, enforce minimum volume commitment deficiency charges on shippers apportioned down by downstream constraints. That's contract execution, not a concession. And with Express at full rate into the headers, heavy Canadian barrels raise gravity and sulfur contamination risk at shared manifolds. Downstream refiners will reject off spec sweet batches, so hold strict cut points and segregation.

Marcus Hayes

Watch for filings after the Tallgrass and Bridger open seasons on Pony Express and Seahorse, launched August twenty first with no rates or volumes disclosed. Bridger's proposed five hundred fifty thousand barrel per day line to GERN zee, targeted July twenty twenty seven, can't be absorbed without Pony expansion or new southbound steel. That's the brief.