Surging Brent, Gulf Shut-Ins, and Guernsey Bottlenecks

Marcus Hayes

Thursday, October eighth. Here's what moved, and what it means for Rockies and Bakken barrels.

Marcus Hayes

Global first. Brent traded at one hundred five dollars and seventeen cents, up four point nine six percent, nearly five dollars on the day, per Trading Economics. Fortune had it as high as one oh eight thirty three early this morning. The driver is geopolitical. There are reports that the White House directed the Pentagon to prepare strike options against Iran, with the president saying he no longer seeks a diplomatic agreement. On top of that, the Houthis stepped up drone and ballistic strikes on Saudi infrastructure, and Gulf tanker harassment continues. Then there's the Gulf of Mexico. The Marine Minerals Administration says twenty five point one percent of oil output, more than five hundred ten thousand barrels per day, is shut in ahead of Isaias, along with sixteen point four percent of gas, as BP, Shell, and Chevron evacuate platforms. Two counterweights. Saudi Aramco cut its Asian official selling prices to five dollars below the regional benchmark, and the I E A opened preliminary talks on a coordinated hundred million barrel stock release. Talks only, nothing agreed. Nothing new from OPEC plus.

Marcus Hayes

North America. Western Canadian Select at Hardisty is still around sixteen dollars and sixty five cents under W T I, weighed down by autumn refinery maintenance in the Midwest. Canadian export pipelines have roughly three hundred fifty thousand barrels per day of spare room, about ninety three percent system utilization. Trans Mountain is running near sixty percent, and Express into Casper is fully booked at two hundred eighty thousand barrels per day. Winter condensate blending will tighten effective capacity further. Alberta and Ottawa signed a memorandum of understanding on new oil sands corridors, but midstream analysts say nothing major commissions before twenty thirty. Nothing material from Mexico.

Marcus Hayes

United States, and the official Energy Information Administration numbers confirmed what the A P I hinted at, only steeper. For the week ended October second, commercial crude drew three point one eight six million barrels to four hundred twenty four point one three million. A P I had estimated a two point one million barrel draw. I don't have a confirmed consensus figure, so I won't frame the surprise against one. The regional split matters more. Cushing diverged and built four hundred forty thousand barrels to twenty four point seven million, from twenty four point three, still about one point eight four million under its five year average. The Midwest built one point eight seven two million to one hundred six point nine eight million, on turnaround season. The Gulf Coast fell three point eight nine eight million to two hundred forty three point six million. And the Rockies, PADD four, drew one hundred forty four thousand barrels to twenty two point three five million. The Strategic Petroleum Reserve fell seven hundred eighty thousand barrels to two hundred eighty three million, near multi decade lows. Refinery utilization rose two tenths of a point to ninety two point seven percent. Production held essentially flat at thirteen point nine eight million barrels per day, up twenty four thousand, while net imports fell fifty three thousand to two point zero eight million. W T I is at ninety two dollars and seventy two cents, up four forty four, or five point oh three percent, and the Brent W T I spread widened to twelve dollars and forty six cents. That keeps the incentive pointed at Gulf Coast export docks.

Marcus Hayes

Uinta Basin. Waxy crude is trading ten to fourteen dollars under W T I at the wellhead, which is tighter than the thirteen to seventeen dollar historical range. Gulf Coast refiners will pay an indicative three dollars and twenty cents premium for paraffinic yellow wax. But spot rail freight in coiled, insulated cars runs sixteen to eighteen dollars per barrel, so spot crude by rail doesn't work. Salt Lake City's five refineries take about eighty thousand barrels per day of local waxy crude, out of roughly two hundred five thousand barrels per day of operable capacity, and that caps truck deliveries. The Uinta Basin Railway is still stalled after the D.C. Circuit remand. Surface Transportation Board supplemental review and Forest Service right of way approvals are pending, and the two point two to two point five billion dollar private financing package is not finalized. Operators, from Crescent Point and Veren through SM Energy, are focused on contracted baseline volumes. Nothing new there.

Marcus Hayes

Bakken. North Dakota is steady near one point one four million barrels per day, ninety seven point four percent from the Bakken and Three Forks. Gas capture holds at ninety five point five percent statewide, even with a record gas to oil ratio of three point oh nine M C F per barrel. Long laterals of three to four miles are now sixty three percent of completed wells. Dakota Access is running near capacity with negligible spot room southward. Kinder Morgan's conversion of the eighty eight thousand barrel per day Double H line to N G L service is pushing incremental crude toward Bridger. Steel Reef applied to FERC for a border connection to move unprocessed North Dakota gas into Saskatchewan. Crude by rail to coastal hubs runs ten to fifteen dollars per barrel, so rail is limited to legacy commitments.

Marcus Hayes

Powder River Basin. Anschutz, Continental, Devon, EOG, and Peak showed no material change overnight. With Double H leaving crude service, local gathering, supported by Plains' acquisition of the Silver Creek assets, feeds straight into Gern zee interconnects.

Marcus Hayes

Now Gern zee, the section that matters. Light sweet Gern zee is firm, roughly eighty five cents over Cushing, and holds a premium of one fifty to two ten over Clearbrook. I don't have a confirmed direction of move for either spread, so treat those as levels, not momentum. What's clearer is the pipe. Pony Express, at four hundred thirty thousand barrels per day, and Platte remain heavily apportioned, and pipeline space is trading at a real premium to the barrels themselves, as shippers chase that twelve forty six Brent W T I arbitrage. Bridger filed a tariff offering interim capacity from the Bakken into Gern zee, moving over two hundred fifty thousand barrels per day into Wyoming, while evaluating a downstream expansion of up to two hundred thousand. That is from a filing, not a commissioned project, so watch for an open season.

Marcus Hayes

Here's the netback math a Gern zee shipper is facing. Option one, accept the apportionment on Pony Express or Platte and reach Gulf Coast netbacks. Option two, send barrels east to Clearbrook at that one fifty to two ten discount, into a Midwest already building crude by one point eight seven million barrels on maintenance. Option three, pay ten to fifteen dollars per barrel for rail. Apportionment still delivers the best netback, even with space rationed. Which means the squeeze shows up in pipeline space value, not in the barrel price. That's the brief.