Guernsey’s Pipe Squeeze: Brent Rises, Spot Rail Stays Shut

Marcus Hayes

Wednesday, October twenty first. Here's what moved overnight and what it means for your barrels.

Marcus Hayes

Global first. Brent is up two dollars and six cents, one point nine percent, at a hundred and ten dollars and eighty five cents as of mid morning London, per Reuters. That's hovering just under five month highs. The driver is Iran. President Pezeshkian told state media the U S cannot expect dialogue while it blockades and threatens Iran, and Foreign Minister Araqchi told the Financial Times Iran is fully prepared to defend itself. That undid Tuesday's pullback, when talk of Pakistani mediation took some air out of the market. Kpler counts at least eighteen vessel attacks over two weeks, and LSEG warns the targeting now reaches the Gulf of Oman, which puts regional loadings and ship to ship transfers at risk. Separately, the Houthis claimed strikes on Aramco's Yanbu site and the Shaybah field. Saudi officials haven't confirmed operational damage, so treat that as a claim.

Marcus Hayes

Freight is the piece that touches you. R B N reports a very large crude carrier from the Gulf Coast to China hit a record of about eighty one million dollars earlier this month, and has eased to just over sixty five million as of Monday. Still extreme. On policy, O P E C plus baselines stay frozen through November ahead of the November first ministerial. The I E A agreed to speed up a stock release of up to a hundred million barrels, diesel first, though analysts said earlier that figure isn't necessarily fresh supply. France is putting ten million barrels of diesel into the market.

Marcus Hayes

North America. Western Canadian Select for November at Hardisty is flat, twenty five dollars and fifty to fifty five cents under W T I. Export trunklines out of Canada run near ninety three percent full. Trans Mountain is capped near sixty percent, about four hundred twenty five thousand barrels per day, because trans Pacific tanker freight shuts the arbitrage to Asia. My read: that is the same freight number I just gave you, showing up as a Canadian egress problem. And Enbridge's Express is full at two hundred eighty thousand barrels per day into Casper. Remember that number, it matters at Gern zee. Mexico, nothing material.

Marcus Hayes

United States. The E I A Weekly Petroleum Status Report lands at ten thirty Eastern. Market sources citing A P I data reported a crude draw of four point nine three million barrels for the week ending October sixteenth, against a consensus of a one point three million draw, with gasoline and distillate down too. A P I is not the official number, so hold your view until E I A prints. For reference, last week's E I A showed commercial crude down eight point five five seven million to four hundred fifteen point five seven seven million, versus an expected draw of three tenths of a million. Cushing built one point eight six two million. The Rockies, PADD four, built three hundred fifty eight thousand barrels to twenty two point seven one zero million.

Marcus Hayes

On price, picking up from yesterday: the November W T I contract expired Tuesday at a hundred and three sixty six, and the new prompt month is up two dollars and thirteen cents at ninety nine ninety five. Brent over W T I is about ten ninety. The Department of Energy is offering to loan up to three hundred fifteen thousand barrels from the one million barrel Northeast heating oil reserve, with diesel above six fifty a gallon, per Reuters. The Strategic Petroleum Reserve sits near two hundred eighty three million barrels, the lowest since nineteen eighty two. Friday's Baker Hughes count was flat at six hundred three, with Uinta gains offsetting the Permian and Haynesville. Pending regulatory review: Enbridge's two point five five billion dollar Tallgrass crude deal, which includes Pony Express, and Hess Midstream's two hundred million dollar purchase of Chevron's D J Basin gathering, with a twenty percent Saddlehorn stake.

Marcus Hayes

Uinta Basin. Yellow wax wellhead postings hold at ten to fourteen dollars under Cushing. Delivered Gulf Coast wax is indicated around W T I plus three twenty. Take insulated railcar freight of sixteen to eighteen dollars and the basin netback is eighty five fifteen to eighty seven fifteen, twelve eighty to fourteen eighty under Cushing. Salt Lake City postings match or beat that, so spot rail stays shut. Five Salt Lake refineries are running full on wax, about eighty thousand barrels per day. Loadings are flat near a hundred and fifteen thousand, held up by minimum volume commitments. Energy Transfer's Price River terminal still awaits Utah air permits, targeted late in the fourth quarter. Wildcat's Helper terminal keeps expanding toward a hundred thousand. The Uinta Basin Railway has zero track laid, still tied up in the S T B remand, Forest Service review and bond financing. Operators are steady.

Marcus Hayes

Bakken. North Dakota holds at one point one five three million barrels per day, thirty three rigs, ninety six percent gas capture, flaring near a hundred and thirty million cubic feet per day, per the latest Director's Cut. Dakota Access is full at seven hundred fifty thousand, walk up tariff nine seventy five against committed rates of five sixteen to seven fifty six. Double H's conversion to N G L service is pulling sixty five to eighty eight thousand barrels per day of southbound egress, which pushes barrels onto Dakota Access, Enbridge and Bridger. Rail to the Pacific Northwest and East Coast runs ten to fifteen dollars all in, and even with Brent near a hundred and eleven, lease costs, diesel surcharges and discharge fees keep spot rail closed. Chevron is going from three Williston rigs to two by December for three mile laterals. Hess Midstream sees twenty twenty seven volumes down five percent before flattening.

Marcus Hayes

Powder River. Steady drilling from Anschutz, Continental, Devon, EOG and Peak. Gathering has room. The bottleneck is downstream, getting into Gern zee. Plains continues integrating Silver Creek.

Marcus Hayes

Now Gern zee, which is where the day gets decided. Guernsey Sweet is unchanged at eighty five cents over Cushing, about a hundred dollars and eighty cents outright. Clearbrook sits a dollar fifty to two ten under Gern zee, sixty five cents to a dollar twenty five under Cushing. Static overnight. These are desk indications, not exchange prints.

Marcus Hayes

Static does not mean healthy. Pony Express is moving about two hundred thirty thousand barrels per day against four hundred thirty thousand nameplate, because of heavy apportionment. The Tallgrass Bridger open season offered volume tariff incentives, but no physical expansion. Platte, one forty five thousand capacity, is severely prorated toward Wood River and Patoka. Saddlehorn and Grand Mesa are full with D J barrels headed to Cushing.

Marcus Hayes

Here is the squeeze. Gern zee takes two hundred eighty thousand barrels per day of Canadian heavy off Express, plus over three hundred thousand of Bakken crude south on Bridger and Belle Fourche. Southbound space is locked by proration, and Midwest refinery maintenance limits what PADD two can absorb. So uncommitted barrels can't reach the Gulf Coast premium, and the overflow goes north into Clearbrook at that discount. The Gulf price is real. The pipe is the problem.

Marcus Hayes

For your call. Brent over a hundred and ten with W T I back under a hundred will tempt producers to test spot receipts or ask for transloading. Say no to spot rail barrels without a committed refinery off take, because the netbacks are underwater. With Express full into Casper, watch gravity and sulfur at the manifold so heavy batches don't touch light sweet storage. And audit nominations and bill deficiencies on unfulfilled commitments, since proration is squeezing everyone uncommitted. That's the brief.