Gulf Draw, Rockies Build: GERN-zee Takeaway Sets the Trade

Marcus Hayes

Friday, October sixteenth. Here's what moved, and what it means for your barrels.

Marcus Hayes

Global first. Brent futures are consolidating near one hundred three dollars and seventy eight cents after Thursday's two dollar twenty eight slide, down two point two percent. Physical is a different story. The I E A's October Oil Market Report put North Sea Dated near one hundred thirty four dollars, so paper is soft while wet barrels stay tight. In the Gulf, Saudi Aramco says field, pipeline, and export operations are fully operational after Tuesday night's missile strike on Dhahran, though floors six through ten of the executive complex took severe structural damage. Houthi leadership repeated threats against Saudi energy assets. In Hormuz, two commercial vessels were sunk after projectile strikes, so transit risk stays critical. The I E A sees twenty twenty six demand contracting by two point six million barrels per day, with fourth quarter down two point five million, and diesel is a quarter of that drop. September supply rose two point five million to one hundred two point three million barrels per day, led by Saudi Arabia, but full year supply is still five point eight million below twenty twenty five, and observed stocks sit five hundred nine million barrels under pre war baselines. OPEC plus targets are unchanged through November. Next ministerial is November first.

Marcus Hayes

North America. Western Canadian Select for November at Hardisty is trading twenty five fifty to twenty five fifty five under W T I, near multi year lows. Tanker freight is shutting the Pacific export arbitrage, so Trans Mountain is running around sixty percent, roughly four hundred twenty five thousand barrels per day to Westridge. Total Canadian egress sits near ninety three percent. Express south into Casper is full at two hundred eighty thousand barrels per day, and seasonal diluent adds about thirty percent to heavy batches, which tightens line space further. Mexico, nothing material.

Marcus Hayes

United States. Thursday's delayed E I A print is the one we flagged yesterday, and here's the answer. Headline: national commercial crude drew eight point five five seven million barrels to four hundred fifteen point five seven seven million. Expectations were flat to a modest change, and the A P I had pointed to a bigger draw, eleven point one two million. But that draw was entirely a Gulf Coast event. PADD Three fell nine point two three nine million barrels to two hundred thirty four point three five nine million, on export pull and Hurricane Isaias shut ins of about five hundred thousand barrels per day offshore. PADD Four, the Rockies, built three hundred fifty eight thousand barrels to twenty two point seven one zero million. PADD Two edged up twenty three thousand to one hundred seven point zero zero four million. PADD Five built six hundred thirty three thousand, and PADD One drew three hundred thirty one thousand.

Marcus Hayes

So if a counterparty waves the national draw at you to argue for a spot rail surge or wider inland basis, the Rockies number says otherwise.

Marcus Hayes

Elsewhere, W T I prompt is around ninety three seventy five, leaving the Brent to W T I spread wide at ten dollars and three cents. The Strategic Petroleum Reserve stands at two hundred eighty three million barrels, lowest since October nineteen eighty two, with the D O E's forty million barrel exchange for November and December delivery still pending. Refinery utilization last logged ninety two point seven percent. Cushing's last read I can confirm is twenty four point seven million, up four hundred forty four thousand the prior week. I don't have a confirmed Cushing number from this print, so I won't guess. Baker Hughes is due at eleven Mountain. The October ninth print was six hundred three total rigs, up five, oil rigs up six to four hundred sixty two. On deals, Enbridge's two point five five billion dollar Tallgrass purchase and Hess Midstream's two hundred million dollar buy of Chevron's D J gathering, including a twenty percent Saddlehorn interest, both remain pending.

Marcus Hayes

Uinta Basin. Yellow wax wellhead postings are steady at ten to fourteen dollars under Cushing. Delivered wax bids on the Gulf Coast are indicated near W T I plus three twenty, about ninety seven dollars. Heated coiled railcar freight to the Gulf runs sixteen to eighteen dollars, which compresses in basin netbacks to roughly seventy eight to eighty one dollars, twelve seventy five to fifteen seventy five under Cushing. That does not beat Salt Lake City postings, so spot crude by rail stays shut. Salt Lake refiners are at their wax processing ceiling of about eighty thousand barrels per day. Basin rail loadings are flat near one hundred fifteen thousand, moving under legacy minimum volume commitments. Energy Transfer's Price River terminal targets a late fourth quarter start, waiting on final Utah air permits. Wildcat keeps phasing Helper from twenty thousand toward one hundred thousand barrels per day. The Uinta Basin Railway has zero track laid. The Supreme Court's May twenty twenty five ruling narrowed N E P A review, but the project is still waiting on Surface Transportation Board remand proceedings, Forest Service right of way approvals, and bond financing. Operators Veren, Ovintiv, Scout, XCL, Berry, and SM Energy report no disruptions.

Marcus Hayes

Bakken. The Director's Cut holds state output at one point one five three million barrels per day across thirty three rigs. Gas capture is ninety six percent, flaring near 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. Rail to the Pacific Northwest or East Coast runs ten to fifteen dollars all in, and even with a ten dollar Brent premium that eats the margin, so spot loadings stay muted. Chevron is dropping Williston rigs from three to two by December, favoring three mile laterals, and Hess Midstream guides twenty twenty seven gathering throughput down about five percent before it levels off. Continental, Chord, and Devon Grayson Mill are steady.

Marcus Hayes

Powder River. Nothing new. Anschutz, Continental, Devon, EOG, and Peak hold their cadence, gathering has room, and the friction is downstream. Plains continues integrating the five hundred eighty five million dollar Silver Creek gathering deal.

Marcus Hayes

Now Gernzee, the section that matters. Gernzee is on screens at eighty five cents over Cushing. I don't have a confirmed direction on that move, so take it as a level. Clearbrook is assessed one fifty to two ten under Gernzee, sixty five cents to a dollar twenty five under Cushing. But that eighty five cents is uncapturable for uncommitted barrels, because the southbound pipes are prorated. Pony Express has four hundred thirty thousand barrels per day of capacity, moving about two hundred thirty thousand from Gernzee, and remains heavily apportioned. The Tallgrass and Bridger open season offered incentive tariffs but no incremental steel. Platte, around one hundred forty five thousand to Wood River and Patoka, faces severe proration. Saddlehorn and Grand Mesa are full of D J production bound for Cushing. And the Double H conversion to N G L service permanently removed sixty five to eighty eight thousand barrels per day of crude takeaway into Gernzee.

Marcus Hayes

So where do barrels clear? Northeast, onto Bridger, Belle Fourche, and Enbridge's North Dakota system into Clearbrook, which is running above ninety percent, feeding PADD Two refiners in fall maintenance rather than a depleted Gulf Coast.

Marcus Hayes

For the call: spot rail is closed in both basins, southbound steel is apportioned, and the draw was Gulf only. Protect revenue with contracted volume commitments and northern pipe clearing, not coastal arbitrage. That's the brief.