Enbridge’s Tallgrass Deal Reshapes Inland Crude Flows

Marcus Hayes

So, Enbridge just dropped a massive two point five five billion dollar cash deal to buy Tallgrass Energy's crude oil transportation business. And, uh, if you're watching inland flows, this is a total game changer. Enbridge gets a seventy-five percent controlling stake in the four hundred sixty thousand barrel per day Pony Express Pipeline, plus a fifty-one percent stake in the Powder River Gateway system, and roughly eight point four million barrels of terminal storage capacity.

Marcus Hayes

Now, let me set the backdrop here. We are looking at a macro environment where Brent crude futures are hovering right around seventy-four dollars per barrel, and W T I is holding near seventy dollars and fifty cents. Up north, Canadian W C S differentials at Hardisty are sitting at twelve dollars and fifty cents under W T I, while down at the mega hub, U S Cushing crude inventories drew down by three hundred thousand barrels this past week.

Marcus Hayes

But the real pressure point on the ground stems from Kinder Morgan's plan to convert its eighty-eight thousand barrel per day Double H Pipeline from crude service over to N G L service. Bakken shippers know those crude barrels are getting displaced, so they are rushing to secure alternative takeaway. Many are jumping on the joint tariff open season launched by Bridger and Pony Express to lock in incentive rates from Guernsey down to Cushing, while others are trying to pivot south toward D A P L.

Marcus Hayes

You know, looking back over my twenty years of tracking Rockies crude logistics, I, I, I keep thinking about twenty fourteen. That was when Tallgrass converted the original natural gas line into the Pony Express crude pipeline. It completely reshaped Williston Basin netbacks almost overnight. And today, seeing Enbridge step in and commit to the three hundred million dollar P X P two expansion, which will boost Pony Express capacity to five hundred fifteen thousand barrels per day by late twenty twenty-seven, well, that is exactly the long-term structural relief Guernsey terminal operators have been begging for.

Marcus Hayes

Let's zoom in on physical pricing at Guernsey, pronounced GERN-zee. Spot differentials there recently flipped to a fifty cent premium over Cushing. Why? Because P A D D four refinery demand is humming, and heavy line space apportionment on southbound pipes is squeezing every drop of available tankage in Wyoming.

Marcus Hayes

Meanwhile, out in the Bakken, North Dakota crude production is holding steady at about one point two two million barrels per day. With Clearbrook differentials trading around a dollar fifty under W T I, crude by rail economics remain, er, pretty marginal for major Bakken producers like Chord Energy and Continental Resources. Unless local pipeline bottlenecks worsen dramatically, moving barrels by rail just doesn't offer an attractive arbitrage right now.

Marcus Hayes

Contrast that with the Powder River Basin, which is pouring about two hundred forty thousand barrels per day into Guernsey via the Iron Horse and Powder River Express pipelines. Then look over at Utah's Uinta Basin. Uinta yellow and black waxy crude is trading at roughly a three dollar discount to W T I. That steep discount is driven by seasonal Salt Lake City refinery turnarounds and ongoing legal delays surrounding the proposed eighty-five mile Uinta Basin Railway project.

Marcus Hayes

So, if you're a terminal development manager preparing for your morning operational call, here is your direct action plan. First, audit your tank storage and optimize throughput right now while Guernsey trades at a premium. Second, keep close tabs on rail loading economics, but don't commit capital to spot rail contracts while pipeline tariffs remain competitive. And third, re evaluate your firm transport capacity agreements immediately to protect your netbacks ahead of the upcoming winter refinery turnaround season. That is the play.