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PADD 4 Inventory Surge as Guernsey Egress Saturates · The Gathering Line

• 0:00
  Thursday, October twenty ninth.
• 0:02
  Here's what moved.
• 0:04
  Start with the benchmarks.
• 0:06
  Brent fell a dollar twenty seven, or one point one percent,
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  to settle at one hundred fourteen dollars and five cents.
• 0:13
  W T I gave back a dollar fifty one, one and a half percent,
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  to one hundred one dollars and twenty seven cents.
• 0:20
  That pares most of Wednesday's three percent rally, so it's a one day retreat,
• 0:24
  not a trend.
• 0:26
  The downside driver is diplomacy.
• 0:28
  There are reports of communication between Vice President Vance and Mohsen Rezaei,
• 0:33
  who heads Iran's Security Council, plus draft mediator proposals moving through
• 0:38
  Qatar.
• 0:39
  Those are reports.
• 0:41
  I haven't seen a confirmed outcome, and the market is trading the headline,
• 0:45
  not a deal.
• 0:46
  The floor under price is security risk, and it's still active.
• 0:50
  Saudi led forces intercepted a Houthi ballistic missile aimed at Saudi Arabia's
• 0:55
  Eastern Province, following a strike on Aden airport and claimed strikes on refining
• 0:59
  assets.
• 1:01
  The Revolutionary Guard reported that three tankers hit sea mines and caught fire
• 1:05
  south of the Strait of Hormuz in the past twenty four hours.
• 1:08
  That's the Guard's account, and I don't have independent confirmation.
• 1:12
  On the refining side, JPMorgan says Russian refinery runs recovered three hundred
• 1:17
  fifty thousand barrels per day to four million barrels per day after a lull in
• 1:21
  strikes.
• 1:22
  Nothing new from OPEC plus in what I have, and no I E A or OPEC monthly report
• 1:27
  landed in this window.
• 1:28
  Hold onto one thing from that.
• 1:31
  Waterborne crude is priced for Middle East risk.
• 1:34
  Inland Rockies crude is priced for pipe.
• 1:37
  We'll see how far apart those two have drifted when we get to Guernsey.
• 1:41
  North America.
• 1:42
  Western Canadian Select discounts remain wide because of the pipeline bottlenecks
• 1:47
  leaving Alberta.
• 1:48
  I don't have a confirmed W C S print to quote, so I'll just give you the direction:
• 1:53
  wide, and not tightening.
• 1:56
  The consequence is cross border pipe that's saturated, which pushes excess Canadian
• 2:00
  barrels into northern tier and Rocky Mountain systems.
• 2:04
  That's more competition for the same space you're trying to fill.
• 2:08
  Nothing material on Mexico.
• 2:10
  United States.
• 2:12
  The E I A weekly report came out Wednesday for the week ended October twenty third,
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  and the headline hides the story.
• 2:19
  Commercial crude drew one point eight nine two million barrels to four hundred ten
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  point six two five million.
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  Consensus was flat to a fifteen thousand barrel build, so that's a draw against an
• 2:31
  expectation of nothing.
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  Now look at where the barrels came from.
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  PADD three drew one point five four two million to two hundred twenty seven point
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  seven seven six million.
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  PADD five drew one point four nine five million to forty two point zero one nine
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  million.
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  PADD two built a modest two hundred forty five thousand barrels.
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  And PADD four, the Rockies, built one point four one nine million barrels,
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  to twenty four point nine one five million.
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  This is the same pattern we flagged in recent desk updates.
• 3:03
  The national draws keep landing on the coasts and keep bypassing PADD four.
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  Last week's draw of three point zero six one million had the same issue.
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  This week the Rockies didn't just miss the draw.
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  They went the other way.
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  The rest of the report.
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  Cushing drew six hundred twenty four thousand barrels, after building nine hundred
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  eighty seven thousand the week before.
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  Gasoline built three point eight seven million barrels, which was a surprise.
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  Distillates drew one point four six two million.
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  Refinery crude inputs slipped one hundred twenty three thousand barrels per day.
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  The Strategic Petroleum Reserve sits near two hundred eighty two point six million
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  barrels.
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  Uinta Basin.
• 3:45
  The figures here are desk estimates, so treat them as soft.
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  Production is near one hundred eighty thousand barrels per day.
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  Salt Lake City refiners are full on waxy crude, somewhere between seventy thousand
• 3:58
  and eighty thousand barrels per day.
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  The excess has to go through heated truck to rail transloading,
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  with Wildcat as the example.
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  Spot rail to the Gulf Coast stays shut.
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  Freight and heating costs run fifteen to eighteen dollars a barrel,
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  and that's more than the destination arbitrage pays.
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  So uncontracted barrels depend on heavily discounted local sales.
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  Nothing new today on the Uinta Basin Railway.
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  Bakken.
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  North Dakota production is holding steady above one point two million barrels per
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  day.
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  Dakota Access is running near peak rates.
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  Spot crude by rail isn't competitive against the mainline pipes,
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  so rail is limited to committed term volumes.
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  Spot barrels get pushed toward discounted Clearbrook or Guernsey routes.
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  No Director's Cut in this window.
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  Powder River Basin.
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  Active programs from EOG, Devon, and Continental keep the corridors to Casper and
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  GERN zee full.
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  That volume goes straight into the choke point we're about to cover.
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  GERN zee.
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  Guernsey Light Sweet differentials to Cushing are flat to softening.
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  I don't have a confirmed number to give you, so I'm giving you direction only.
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  And that softness is disconnected from elevated waterborne benchmarks,
• 5:14
  which is the gap I mentioned earlier.
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  The reason is egress.
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  Pony Express is flowing over its three hundred thousand barrel per day nameplate,
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  around three hundred twelve thousand.
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  East Daley Analytics had it averaging about that in the third quarter of last year,
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  so this isn't new.
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  Platte, at roughly one hundred forty five thousand barrels per day,
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  remains severely prorated.
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  East Daley's Crude Hub Model puts spare downstream capacity out of GERN zee at just
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  over one hundred thousand barrels per day.
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  Now put proposed volume against that.
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  Bridger has filed in Montana for a five hundred fifty thousand barrel per day,
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  thirty six inch line from Phillips County to GERN zee, targeting a July twenty
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  twenty seven construction start.
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  East Daley's read is that the hub can't take it without new downstream capacity,
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  and that twinning Pony is the likely fix.
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  Tallgrass and True Companies announced a joint open season on February twenty fourth
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  for Bridger and Pony, and for Bridger and Seahorse.
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  That's East Daley's interpretation of the intent, not a filed commitment.
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  So here is the takeaway.
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  A one point four two million barrel build in PADD four is what the structural limit
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  of pipeline nominations looks like on a weekly report.
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  Barrels are choosing to sit, not to move.
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  The value is shifting away from spot throughput.
• 6:35
  It's in term contracted storage fees, batch blending, and injection priority.
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  That's the brief.
• 6:42
  Check the nominations before the call.