Middle East Tensions Surge as Guernsey Pipeline Chokepoints Tighten

Marcus Hayes

Tuesday, October thirteenth. Here's what moved.

Marcus Hayes

Global first. Prompt Brent settled up two percent Monday at one hundred six dollars and seventy nine cents, per Reuters. That's the highest since September twenty ninth, and it extends the rally from the one hundred five dollars and forty one cents we had Monday morning. The driver is the Houthis. They claimed Saturday's strike on King Khalid International Airport in Riyadh, and Reuters has the toll at thirteen dead and more than three hundred injured, with further attacks Sunday. Houthi leadership repeated its threats against Saudi oil facilities. The bearish offset got ignored. I C E gasoil fell two point three percent to fourteen hundred forty nine dollars a metric ton after the U S administration said Russia would supply more than three hundred thousand metric tons of diesel, roughly two point two five million barrels. Crude desks looked past it and priced supply security.

Marcus Hayes

Today is the OPEC Monthly Oil Market Report. I haven't seen the document, so treat this as the lead in. Secretary General Haitham Al Ghais told the World Petroleum Congress in Riyadh that OPEC now sees 2026 demand growth at four hundred thousand barrels per day, down from one point four million at the start of the year. He expects the deferred demand to show up in 2027, and he warned that underinvestment in refining and upstream is already causing bottlenecks.

Marcus Hayes

Also from Riyadh, the Saudi energy minister said the kingdom wants pipeline capacity of ten million barrels per day within two to three years, mostly through pumping station upgrades on the East West line. He also described temporarily converting a gas pipeline to carry about one point two million barrels per day of crude for seven to eight weeks, returning to gas by May, with more investment potentially taking it to three million. The East West line restarted September twenty second and reached nearly six million barrels per day by early October, about four and a half million exportable, per Reuters. Aramco's Amin Nasser said onshore commercial inventories globally are below six billion barrels, which he called the last line of defense.

Marcus Hayes

North America. The Canadian heavy discount is the story. Western Canadian Select for November at Hardisty settled Friday at twenty five dollars and fifty five cents under W T I, per CalRock. It was twenty dollars and twenty cents under on Thursday, and it's the widest since 2023. That's the latest print I have. The drivers are soft Gulf Coast heavy fuel oil margins, elevated tanker freight, export pipes running near ninety three percent full, and winter diluent blending, which adds volume to every barrel moved. Express into Casper is full at two hundred eighty thousand barrels per day. Trans Mountain is near sixty percent of capacity, about four hundred twenty five thousand barrels per day through Westridge. Mexico had nothing material.

Marcus Hayes

United States. W T I gained one dollar and sixty nine cents, or one point eight percent, to settle at ninety three dollars and fifty four cents. Brent to W T I widened to thirteen dollars and twenty five cents, from twelve ninety nine. Goldman raised its December Brent forecast to ninety dollars from eighty five, citing a risk premium a bit over twenty dollars. It sees W T I at eighty one in December and seventy three in 2027, pointing to high shipping costs between the U S and Europe.

Marcus Hayes

No E I A release in this window. The Weekly Petroleum Status Report comes tomorrow. Last week's baseline: commercial crude drew three point two million barrels to four hundred twenty four point one million, against an expected build of one point seven million. Cushing built four hundred forty thousand to twenty four point seven million, still one point eight four million under the five year average. Midwest stocks built one point eight seven million on refinery turnarounds. The Rockies drew one hundred forty four thousand barrels to twenty two point three five million. Utilization averaged ninety two point seven percent. Baker Hughes Friday showed total rigs up five to six hundred three, oil rigs up six to four hundred sixty two. On corporate news, shippers are still digesting Hess Midstream's two hundred million dollar purchase of Chevron's D J Basin gathering system, which carries a twenty percent stake in Saddlehorn and extends Bakken contracts through 2045.

Marcus Hayes

Uinta Basin. Yellow wax is indicated ten to fourteen dollars under Cushing. Delivered waxy bids at the Gulf Coast are around three dollars and twenty cents over W T I, or ninety six dollars and seventy four cents. Heated railcars to Gulf refiners run sixteen to eighteen dollars a barrel. That leaves a wellhead netback of seventy eight dollars and seventy four cents to eighty dollars and seventy four cents, twelve eighty to fourteen eighty under Cushing. By my math, that's worse than selling local at the indicated wax discount. So spot rail is shut, and only committed minimum volume term contracts are moving. Salt Lake's five refineries are taking their ceiling of about eighty thousand barrels per day. Rail loadings hold near one hundred fifteen thousand. Energy Transfer's Price River expansion is targeting fourth quarter completion, pending final Utah D E Q permits, and Wildcat is still growing Helper from twenty thousand to one hundred thousand. The Uinta Basin Railway is stalled with no physical construction. The S T B remand is pending, Forest Service right of way is unresolved, and Seven County financing isn't final. Operators are drilling in the normal course.

Marcus Hayes

Bakken. Williston production is steady around one point one five to one point two million barrels per day. The latest Director's Cut from Nathan Anderson has North Dakota at one point one five three million, up two point five percent month over month, with thirty three rigs. Gas capture is ninety six point three to ninety six point six percent, roughly one hundred thirty million cubic feet per day flared. Dakota Access is full with negligible spot room. Double H's conversion to N G L service removed sixty five to eighty eight thousand barrels per day of crude egress toward Guernsey, pushing barrels onto D A P L and the Bridger and Belle Fourche systems. Bakken rail to the Pacific Northwest or East Coast costs ten to fifteen dollars, which leaves spot rail netbacks behind pipe even with Brent this wide. Chevron plans to go from three rigs to two in December, and Hess Midstream sees Bakken throughput down roughly five percent in 2027 before it plateaus.

Marcus Hayes

Powder River. Anschutz, Continental, Devon, EOG, and Peak are steady, with no new takeaway constraints reported. Plains continues integrating its five hundred eighty five million dollar Silver Creek gathering acquisition into its Guernsey footprint.

Marcus Hayes

Now Gern zee, the part that matters. Light sweet is indicatively steady at eighty five cents over Cushing. Clearbrook is assessed one fifty to two ten under Gern zee, which is sixty five cents to a dollar twenty five under Cushing. The problem isn't price, it's space. Pony Express is heavily apportioned, moving about two hundred thirty thousand barrels per day out of Gern zee on a four hundred thirty thousand system. The thirty day binding open season by Tallgrass and Bridger added no incremental capacity. Platte, about one hundred forty five thousand to Wood River and Patoka, is also heavily prorated. Saddlehorn and Grand Mesa keep moving D J barrels south.

Marcus Hayes

Here's why it bites. A thirteen dollar and twenty five cent Brent W T I spread pulls every barrel toward the Gulf, and Cushing is the only pipeline route to it. A barrel that can't get space on Pony or Platte has two bad options. Clearbrook puts it into a Midwest market that just built one point eight seven million barrels on turnarounds. Rail costs ten to fifteen dollars, which eats the arbitrage. Apportionment is the bottleneck setting Rockies netbacks.

Marcus Hayes

That's the brief. Back tomorrow after the E I A.