PADD 4 Inventory Surge as Guernsey Egress Saturates

Marcus Hayes

Thursday, October twenty ninth. Here's what moved.

Marcus Hayes

Start with the benchmarks. Brent fell a dollar twenty seven, or one point one percent, to settle at one hundred fourteen dollars and five cents. W T I gave back a dollar fifty one, one and a half percent, to one hundred one dollars and twenty seven cents. That pares most of Wednesday's three percent rally, so it's a one day retreat, not a trend.

Marcus Hayes

The downside driver is diplomacy. There are reports of communication between Vice President Vance and Mohsen Rezaei, who heads Iran's Security Council, plus draft mediator proposals moving through Qatar. Those are reports. I haven't seen a confirmed outcome, and the market is trading the headline, not a deal.

Marcus Hayes

The floor under price is security risk, and it's still active. Saudi led forces intercepted a Houthi ballistic missile aimed at Saudi Arabia's Eastern Province, following a strike on Aden airport and claimed strikes on refining assets. The Revolutionary Guard reported that three tankers hit sea mines and caught fire south of the Strait of Hormuz in the past twenty four hours. That's the Guard's account, and I don't have independent confirmation. On the refining side, JPMorgan says Russian refinery runs recovered three hundred fifty thousand barrels per day to four million barrels per day after a lull in strikes. Nothing new from OPEC plus in what I have, and no I E A or OPEC monthly report landed in this window.

Marcus Hayes

Hold onto one thing from that. Waterborne crude is priced for Middle East risk. Inland Rockies crude is priced for pipe. We'll see how far apart those two have drifted when we get to Guernsey.

Marcus Hayes

North America. Western Canadian Select discounts remain wide because of the pipeline bottlenecks leaving Alberta. I don't have a confirmed W C S print to quote, so I'll just give you the direction: wide, and not tightening. The consequence is cross border pipe that's saturated, which pushes excess Canadian barrels into northern tier and Rocky Mountain systems. That's more competition for the same space you're trying to fill. Nothing material on Mexico.

Marcus Hayes

United States. The E I A weekly report came out Wednesday for the week ended October twenty third, and the headline hides the story. Commercial crude drew one point eight nine two million barrels to four hundred ten point six two five million. Consensus was flat to a fifteen thousand barrel build, so that's a draw against an expectation of nothing.

Marcus Hayes

Now look at where the barrels came from. PADD three drew one point five four two million to two hundred twenty seven point seven seven six million. PADD five drew one point four nine five million to forty two point zero one nine million. PADD two built a modest two hundred forty five thousand barrels. And PADD four, the Rockies, built one point four one nine million barrels, to twenty four point nine one five million.

Marcus Hayes

This is the same pattern we flagged in recent desk updates. The national draws keep landing on the coasts and keep bypassing PADD four. Last week's draw of three point zero six one million had the same issue. This week the Rockies didn't just miss the draw. They went the other way.

Marcus Hayes

The rest of the report. Cushing drew six hundred twenty four thousand barrels, after building nine hundred eighty seven thousand the week before. Gasoline built three point eight seven million barrels, which was a surprise. Distillates drew one point four six two million. Refinery crude inputs slipped one hundred twenty three thousand barrels per day. The Strategic Petroleum Reserve sits near two hundred eighty two point six million barrels.

Marcus Hayes

Uinta Basin. The figures here are desk estimates, so treat them as soft. Production is near one hundred eighty thousand barrels per day. Salt Lake City refiners are full on waxy crude, somewhere between seventy thousand and eighty thousand barrels per day. The excess has to go through heated truck to rail transloading, with Wildcat as the example. Spot rail to the Gulf Coast stays shut. Freight and heating costs run fifteen to eighteen dollars a barrel, and that's more than the destination arbitrage pays. So uncontracted barrels depend on heavily discounted local sales. Nothing new today on the Uinta Basin Railway.

Marcus Hayes

Bakken. North Dakota production is holding steady above one point two million barrels per day. Dakota Access is running near peak rates. Spot crude by rail isn't competitive against the mainline pipes, so rail is limited to committed term volumes. Spot barrels get pushed toward discounted Clearbrook or Guernsey routes. No Director's Cut in this window.

Marcus Hayes

Powder River Basin. Active programs from EOG, Devon, and Continental keep the corridors to Casper and GERN zee full. That volume goes straight into the choke point we're about to cover.

Marcus Hayes

GERN zee. Guernsey Light Sweet differentials to Cushing are flat to softening. I don't have a confirmed number to give you, so I'm giving you direction only. And that softness is disconnected from elevated waterborne benchmarks, which is the gap I mentioned earlier.

Marcus Hayes

The reason is egress. Pony Express is flowing over its three hundred thousand barrel per day nameplate, around three hundred twelve thousand. East Daley Analytics had it averaging about that in the third quarter of last year, so this isn't new. Platte, at roughly one hundred forty five thousand barrels per day, remains severely prorated. East Daley's Crude Hub Model puts spare downstream capacity out of GERN zee at just over one hundred thousand barrels per day.

Marcus Hayes

Now put proposed volume against that. Bridger has filed in Montana for a five hundred fifty thousand barrel per day, thirty six inch line from Phillips County to GERN zee, targeting a July twenty twenty seven construction start. East Daley's read is that the hub can't take it without new downstream capacity, and that twinning Pony is the likely fix. Tallgrass and True Companies announced a joint open season on February twenty fourth for Bridger and Pony, and for Bridger and Seahorse. That's East Daley's interpretation of the intent, not a filed commitment.

Marcus Hayes

So here is the takeaway. A one point four two million barrel build in PADD four is what the structural limit of pipeline nominations looks like on a weekly report. Barrels are choosing to sit, not to move. The value is shifting away from spot throughput. It's in term contracted storage fees, batch blending, and injection priority.

Marcus Hayes

That's the brief. Check the nominations before the call.