Guernsey Bottlenecks and the $100 Brent Rebound

Marcus Hayes

Wednesday, October seventh. Here's what moved overnight and what it means for Rockies and Bakken barrels.

Marcus Hayes

Global first. Brent rebounded back over one hundred dollars this morning, trading between one hundred one twenty six and one hundred one seventy. That's up a dollar twelve on the day, and it erases Tuesday's drop to ninety eight sixty two. The catalyst is physical transit risk in the Gulf. U K M T O now counts nine tanker incidents in the Strait of Hormuz so far this month, up from seven yesterday. Separately, the Saudi led coalition said it intercepted and destroyed a Houthi ballistic missile aimed at Khamis Mushait.

Marcus Hayes

The counterweight is on the supply side. Saudi Arabia's Ministry of Energy says the East West pipeline is back to five point eight million barrels per day of pumping capacity after repairs. And EIA estimates Middle East shut ins fell to four point eight million barrels per day in September, down from five point eight in August and ten point nine at the May peak. On OPEC plus, core members kept November targets unchanged. December's provisional increase of one hundred eighty thousand barrels per day stays contingent on Iraqi and Kazakh compensation cuts.

Marcus Hayes

North America. Western Canadian Select at Hardisty is indicatively around sixteen sixty five under W T I, still wide, and the reported driver is Midwest refinery turnaround schedules. Express Pipeline into Casper remains fully allocated at two hundred eighty thousand barrels per day. Trans Mountain is steady at roughly sixty percent utilization. Mexico: Maya exports remain curtailed, and the Esentia pipeline integration linking Permian gas to the Pacific coast is getting attention. Nothing there changes your day.

Marcus Hayes

United States. Lead item is yesterday afternoon's October Short Term Energy Outlook from EIA. Brent is forecast to average one hundred five dollars in the fourth quarter, fourteen dollars above last month's outlook. EIA cites persistent transit volatility and extreme tightness in diesel markets. Full year 2026 Brent is ninety six dollars, falling to eighty four in 2027. U.S. crude production is raised to thirteen point nine million barrels per day for 2026, up a tenth, and fourteen point three million for 2027. Global inventories drew one point nine million barrels per day in the third quarter, with another point seven million projected for the fourth, before big builds in 2027. East Coast distillate sat thirty two percent below the five year average in September, and EIA sees it twenty to thirty percent below through winter. Retail diesel averaged six twenty nine in September and stays above six dollars in October.

Marcus Hayes

W T I front month climbed to ninety dollars and eighteen cents, up seventy four cents, recovering from Tuesday's eighty seven sixty settle. That leaves Brent over W T I at eleven dollars fifty two, and that spread is the economic pull sending inland barrels toward Gulf Coast export docks. A P I reported a commercial crude draw of two point one million barrels last night. The official EIA weekly report lands at ten thirty Eastern, so I'll hold the print for tomorrow. I don't have a consensus number in front of me, so I won't characterize a surprise. For reference, last week P A D D four stocks drew eight hundred twenty three thousand barrels to twenty two point five million, and P A D D four refinery utilization was ninety one point four percent.

Marcus Hayes

Two more items. RBN says record crack spreads in 2026 eased slightly in early October after September's spike, but the Gulf Coast three two one is still more than two and a half times last October's average. And the market is still digesting Enbridge's two point five five billion dollar purchase of Tallgrass crude assets, including seventy five percent of Pony Express, plus Energy Transfer's two point six three billion dollar Vaquero Midstream deal.

Marcus Hayes

Uinta Basin. The math on yellow wax still doesn't work for spot rail. Wax commands a three dollar twenty premium at Gulf Coast refineries, but insulated, heated rail car transport runs sixteen to eighteen dollars a barrel. Uncommitted spot crude by rail is deeply negative against local sales. Salt Lake City refiners remain capped at about eighty thousand barrels per day of regional wax intake, so that's the ceiling on the local outlet.

Marcus Hayes

On the Uinta Basin Railway, nothing new. After the D.C. Circuit remand, the Surface Transportation Board's supplemental review and the Forest Service right of way reviews are pending. The two point two to two point five billion dollar private financing package isn't finalized, and construction hasn't begun. Operator activity from Crescent Point and Veren, Ovintiv, Scout, XCL, Uinta Wax, Berry, Caerus and SM Energy is steady, with no disruptions or pivots overnight.

Marcus Hayes

Bakken. Williston production holds in the one point one nine to one point two zero million barrels per day band, and gas capture is above ninety five percent. Dakota Access is effectively full, with minimal spot capacity south. Rail to coastal refiners costs ten to fifteen dollars a barrel, which keeps movements to contracted baseline volumes. Chord continues Williston development after its Marcellus non operated divestment, and Hess Midstream maintains guidance for at least five percent second half volume growth.

Marcus Hayes

Powder River. Rig activity is steady from Anschutz, Continental, Devon, EOG and Peak, and gathering integration continues after Plains' five hundred eighty five million dollar Silver Creek deal. The more structural point: Kinder Morgan's eighty eight thousand barrel per day Double H line is converting to N G L service. That leaves local crude takeaway leaning harder on Belle Fourche and gathering into Guernsey.

Marcus Hayes

Now, the section that matters. Guernsey. Say it GERN zee. Light sweet is holding steady at about eighty five cents over Cushing, and roughly a dollar fifty to two ten over Clearbrook. No change on Cushing from yesterday. The story is the pipe, not the molecule. Pony Express, at roughly four hundred thirty thousand barrels per day, and Platte are both heavily prorated. Scheduled space continues to trade at a premium to crude in the tank. Guernsey tanks are full of Bakken, Powder River and Canadian barrels, all competing for southbound egress to capture that eleven fifty Brent W T I arb. Space on the pipe is the scarce commercial asset.

Marcus Hayes

So shippers have three choices. One, take severe apportionment on Pony or Platte and realize the Gulf Coast export netback on the barrels that get through. Two, divert east into Clearbrook at roughly a two dollar discount, into Midwest refinery turnaround slack, which is the same slack weighing on W C S. Or three, pay ten to fifteen dollars or more in crude by rail costs. At those numbers, rail stays the last resort, and apportioned pipe space is still the better deal.

Marcus Hayes

On open seasons, one clarification. The Tallgrass and Bridger binding open season finished in early twenty twenty five. Bridger's proposed five hundred fifty thousand barrel per day line from Canada to Guernsey remains a multi year proposal with no near term operational impact. That's the brief. Back tomorrow.