Crude Rally Meets a Rockies Egress Bottleneck

Marcus Hayes

Saturday, October seventeenth. Here's what moved since Friday morning.

Marcus Hayes

Global first. Brent touched one hundred ten dollars for the first time since May, then settled up three dollars and ninety four cents, or three point seven percent, at one hundred nine dollars and eighty six cents. That's a four point nine percent gain on the week and the highest settlement since May nineteenth. Paper isn't even the tight part. North Sea Dated is holding near one hundred thirty four dollars, so wet barrels remain well above futures. The drivers were geopolitical. A Saudi led coalition said it intercepted and destroyed a ballistic missile launched toward Yanbu, the Red Sea port that serves as the Hormuz bypass. Rapidan Energy Group confirmed no structural damage. UKMTO reported another commercial tanker hit by an unknown projectile off the Saudi coast, and Kpler says intensified Iranian attacks have pushed Gulf tanker flows sharply lower. In Russia, drone strikes forced the Ryazan refinery to suspend a primary crude unit. ExxonMobil said surging refining margins will lift third quarter downstream profit by four point five billion dollars over the prior quarter. OPEC plus targets stay frozen through November, with the ministerial meeting on November first. And the IEA confirmed plans to release more than twenty million barrels of emergency fuels.

Marcus Hayes

North America. Western Canadian Select for November delivery at Hardisty closed at twenty five dollars and fifty cents to twenty five fifty five under WTI, anchored near multi year discount lows. High tanker freight rates keep trans Pacific exports uneconomic, so Trans Mountain is running at roughly sixty percent, about four hundred twenty five thousand barrels per day to Westridge. Overall Canadian egress is ninety three percent utilized, and the Express Pipeline into Casper is at one hundred percent, two hundred eighty thousand barrels per day. Winter diluent blending adds roughly thirty percent in volume to heavy batches, which crowds pipe space further. Mexico, nothing material.

Marcus Hayes

United States. There was no scheduled EIA release since Thursday, so that report is still our baseline. Front month WTI jumped three dollars and forty four cents, three point five percent, to settle at one hundred one dollars and forty one cents. That's the first close above one hundred since September seventeenth, and a ten point four percent gain on the week. The Brent WTI spread narrowed slightly to eight dollars and forty five cents.

Marcus Hayes

On the Strategic Petroleum Reserve, the pending tranche we flagged Friday morning landed. Friday afternoon the Department of Energy issued a request for proposals for an exchange of up to seventeen million barrels, for November and December delivery. Energy Aspects says that confirms roughly twenty three million barrels were quietly awarded from the forty million barrel September offer. That leaves the reserve near two hundred eighty three million barrels, the lowest since October of 1982.

Marcus Hayes

On the rig count, I can't give you a confirmed headline number for the October sixteenth print, so I won't guess. The last figures I can verify are from October ninth: six hundred three total rigs, four hundred sixty two oil, one hundred thirty two gas. The read is discipline. No aggressive drilling spike, even with WTI at a hundred.

Marcus Hayes

From Thursday's EIA report: commercial crude is at four hundred fifteen point five seven seven million barrels, an eight point five five seven million barrel draw, against a Reuters poll that expected a draw of just two hundred eighty eight thousand. The draw was concentrated in PADD three, tied to five hundred thousand barrels per day of Hurricane Isaias shut ins. PADD four, the Rockies, built three hundred fifty eight thousand barrels to twenty two point seven one zero million. PADD two built twenty three thousand to one hundred seven million, with autumn turnarounds under way. Refinery utilization is ninety two point seven percent. Cushing was last confirmed at twenty four point seven million barrels. Two deals still pending close: Enbridge's two point five five billion dollar purchase of Tallgrass crude assets, and Hess Midstream's two hundred million dollar acquisition of Chevron's DJ Basin gathering system, which carries a twenty percent Saddlehorn stake.

Marcus Hayes

Uinta Basin. Yellow wax wellhead postings are flat at ten to fourteen dollars under Cushing. Delivered yellow wax into the Gulf Coast is indicated near WTI plus three dollars and twenty cents, roughly one hundred four dollars and sixty cents. Heated coiled railcar freight to the Gulf runs sixteen to eighteen dollars per barrel, which puts basin netbacks between eighty six sixty and eighty eight sixty, or twelve eighty to fourteen eighty under Cushing. That does not beat local Salt Lake City postings, so spot crude by rail stays shut and loadings are limited to minimum volume commitments. Salt Lake's five refiners are at their technical wax ceiling, about eighty thousand barrels per day, and basin rail loadings hold near one hundred fifteen thousand. On infrastructure, Energy Transfer's Price River terminal awaits final air permitting for a late fourth quarter start. Wildcat Midstream keeps phasing Helper from twenty thousand toward one hundred thousand barrels per day. The Uinta Basin Railway has laid zero track, with Surface Transportation Board remand proceedings, Forest Service right of way reviews, and Seven County bond structuring all still dragging. Operators report steady field work.

Marcus Hayes

Bakken. Per the Director's Cut, production is one point one five three million barrels per day on thirty three active rigs. Gas capture is ninety six percent, with flaring averaging one hundred thirty million cubic feet per day. Dakota Access is full at seven hundred fifty thousand barrels per day, committed tariffs five sixteen to seven fifty six, uncommitted nine seventy five. Crude by rail to the East Coast or Pacific Northwest runs ten to fifteen dollars all in, and that wipes out spot margins even with an eight forty five Brent WTI spread. Chevron is taking its Williston rigs from three to two by December to drill three mile laterals, and Hess Midstream projects 2027 gathering volumes down roughly five percent before leveling off. Chord, Continental, and Devon, with Grayson Mill, are steady.

Marcus Hayes

Powder River. Activity is stable across Anschutz, Continental, Devon, EOG, and Peak. Gathering has room. The choke point is downstream at Guernsey. Plains is integrating its five hundred eighty five million dollar Silver Creek gathering purchase.

Marcus Hayes

Now Gernzee, the one that matters. Screen postings are steady at eighty five cents over Cushing, around one hundred two twenty six outright. Clearbrook trades one fifty to two ten under Gernzee, which is sixty five cents to a dollar twenty five under Cushing. Both steady. Southbound capacity is the story. Pony Express is prorationed, with two hundred thirty thousand barrels per day of its four hundred thirty thousand total leaving Gernzee. Platte, at one hundred forty five thousand to Wood River and Patoka, is heavily apportioned. Saddlehorn and Grand Mesa are full of DJ barrels headed to Cushing. And the Double H conversion to NGL service permanently stripped sixty five to eighty eight thousand barrels per day of crude inflow.

Marcus Hayes

Here's the problem, and it's interpretation, not a number. Hundred dollar WTI doesn't reach inland barrels. Express is landing two hundred eighty thousand barrels per day of Canadian crude at a twenty five fifty discount into Casper, right above Gernzee. The seventeen million barrel SPR exchange serves Gulf refiners on the water, which blunts coastal pull on inland crude. Midwest refiners are in turnaround and southbound pipes are prorationed. So pipeline arbitrage isn't your edge. The value sits in basin tankage margin and quality blending at Gernzee, where cheap Canadian barrels meet domestic sweet streams.

Marcus Hayes

That's the brief. Good luck on the call.