Guernsey Space Tightens as Brent Surges

Marcus Hayes

Monday brief, covering since Friday morning. December nominations are locked and the rig count printed flat at six hundred and three, so the focus shifts from deadline scrambles to who actually gets space.

Marcus Hayes

Global first. Brent gained three dollars fifty five, or three point one four percent, on Friday. Trading Economics has it between a hundred sixteen dollars seventy two cents and a hundred sixteen ninety one depending on the feed. That's the highest since June twenty twenty two, and up more than six percent on the week. The driver is Iran. President Trump said Washington is not negotiating with Tehran and that something happens fairly soon. Reports say the U.S. and Israel have drawn up strikes for after the midterms. Iran's army chief says the military is ready for asymmetric warfare. Houthi attacks on Saudi Arabia continue, the State Department ordered nonessential personnel out, and Aramco told Dhahran headquarters staff to evacuate and work remotely.

Marcus Hayes

On supply, O P E C plus quotas are unchanged going into the November first ministerial. JODI data via OilPrice has Saudi August output at six point two four million barrels per day, with exports of four point four five million sustained by drawing domestic stocks, not new drilling. The point for your book is freight. RBN reports supertanker fixtures from the Gulf Coast to Asia above eighty million dollars, and Goldman puts waterborne freight near twenty dollars a barrel against three historically. That wedge is why inland light sweet isn't capturing the Brent premium.

Marcus Hayes

North America. Western Canadian Select for November at Hardisty settled at a dollar twenty five fifty five under W T I, per CalRock via Reuters. That's thirty five cents wider than Thursday's twenty five twenty. The implied outright is about seventy seven seventy two on Friday's W T I, and that figure is calculated, not a physical trade. Freight and soft Gulf Coast fuel oil are behind the blowout. Western Canadian export pipes are running around ninety three percent. T M X is throttled near sixty percent, about four hundred twenty five thousand barrels per day, because the trans Pacific arbitrage is shut, which pushes Canadian barrels toward P A D D two. Enbridge's Express is full at two hundred eighty thousand barrels per day into Casper and Guernsey. Mexico, nothing material.

Marcus Hayes

United States. No new E I A release since Wednesday, so that report is still the baseline. Commercial crude fell three point zero six one million barrels to about four hundred twelve and a half million, a bigger draw than the one point three million consensus. But the draw was coastal. P A D D three drew five point oh four one million on storm shut ins. Inland built. P A D D four, the Rockies, added seven hundred eighty six thousand barrels to twenty three point five million, and Cushing added one million to twenty seven point six million, a fourth straight weekly build. Output was thirteen point two seven million barrels per day, refinery runs slipped to ninety three point four percent, and the S P R is at two hundred eighty two point seven million, the lowest since nineteen eighty two.

Marcus Hayes

W T I settled at a hundred and three dollars twenty seven cents, up three eighty, or three point eight two percent, from Thursday's ninety nine forty seven. Baker Hughes had the total flat at six hundred and three for a second week, up fifty three year over year. Oil rigs rose one to four hundred sixty, gas fell one to one thirty two. Triple digit crude and no added rigs tells you producers are holding to discipline. Don't underwrite basin volume growth off this price. Corporate: Devon is selling its Eagle Ford assets to Crescent Energy for four point two two billion cash. Antitrust reviews continue on Enbridge's two point five five billion dollar Tallgrass crude deal, including seventy five percent of Pony Express, and on Hess Midstream's roughly two hundred million dollar purchase of Chevron's D J Basin gathering plus a twenty percent Saddlehorn stake.

Marcus Hayes

Uinta Basin. These netbacks are market desk figures, so treat them as indicative. Yellow wax wellhead is holding ten to fourteen dollars under Cushing. Delivered Gulf Coast wax is W T I plus three twenty, about a hundred six forty seven. Less sixteen to eighteen dollars of heated railcar freight, the netback is roughly eighty eight forty seven to ninety forty seven, twelve eighty to fourteen eighty under Cushing. Spot rail is underwater against Salt Lake City postings. The five Salt Lake refiners are running around eighty thousand barrels per day of wax, which is their ceiling. Uinta rail loadings are near a hundred fifteen thousand, all anchored by minimum volume commitments, with spot racks idle. Wildcat's Helper terminal is expanding toward a hundred thousand. Energy Transfer's Price River rail terminal is in state review, targeting a fourth quarter decision.

Marcus Hayes

The Uinta Basin Railway has zero track laid. After the Supreme Court ruling, the D.C. Circuit formally remanded the case to the Surface Transportation Board in October. The Board's approval stays intact, but deeper review is required on downstream emissions and accident risk, and the Forest Service right of way is paused until the revised order. Operators including Ovintiv, XCL, Scout, Veren, Berry, Caerus and SM Energy are on steady schedules.

Marcus Hayes

Bakken. The Director's Cut has state output near one point one five three million barrels per day, thirty three rigs, ninety six percent gas capture, and about a hundred thirty million cubic feet per day flared. Dakota Access is fully subscribed at an effective seven hundred fifty thousand barrels per day, with walk up tariffs at nine seventy five against five sixteen to seven fifty six committed. The Double H conversion to N G L service removed sixty five to eighty eight thousand barrels per day of crude takeaway, so egress is concentrating on D A P L and Bridger. All in rail to the coast is ten to fifteen dollars before car leases and rack tariffs, and spot crude by rail is closed. Rail loadings are M V C only. Chevron drops one Williston rig by December, down to two, to pursue longer laterals. Hess Midstream sees gathering volumes down about five percent by twenty twenty seven before leveling off. Chord, Continental, Devon, Grayson Mill and ConocoPhillips are steady.

Marcus Hayes

Powder River. Anschutz, Continental, Devon, EOG and Peak are drilling steadily. Gathering has room, but congestion sits at the receipt manifolds feeding the Guernsey headers. Plains is integrating the Silver Creek system.

Marcus Hayes

Now GERN-zee, the one that matters. Guernsey Sweet was flat over the last twenty four hours at eighty five cents over Cushing, about a hundred four twelve outright. Clearbrook sits a dollar fifty to two ten under Guernsey, or sixty five cents to a dollar twenty five under Cushing. Inflows are heavy. Express brings two hundred eighty thousand barrels per day, and Bridger and Belle Fourche add over three hundred thousand of Bakken.

Marcus Hayes

The squeeze is on the way out. Pony Express is limited to about two hundred thirty thousand barrels per day against a four hundred thirty thousand nameplate, on refinery limits and allocations. Platte, at a hundred forty five thousand eastbound to Wood River and Patoka, is heavily prorated. Saddlehorn and Grand Mesa are full of D J barrels bound for Cushing. With December nominations closed Friday, secondary market allocations decide flows. An uncommitted barrel without space on a southbound pipe either takes the dollar fifty to two ten discount to go northeast to Clearbrook, or sits in Guernsey tankage.

Marcus Hayes

Longer term, Bridger's proposed five hundred fifty thousand barrel per day, thirty six inch line from the Canadian border, targeting July twenty twenty seven, adds a lot of receipts. East Daley's point is that Guernsey can't absorb them without downstream looping on Pony Express, which makes the Bridger and Tallgrass open season the one to watch. That's the brief.