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Hormuz Risk, Rockies Bottlenecks, and the Gernzee Premium · The Gathering Line

• 0:00
  Monday, October fifth.
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  Here's what moved since Friday morning, and what it means for Rockies and Bakken
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  barrels.
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  Global first.
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  The seven core OPEC Plus members met online Sunday and agreed to hold November
• 0:12
  production targets unchanged.
• 0:14
  That matched expectations, so there's no surprise to price.
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  OPEC's September report had the group at about twenty five million barrels per day
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  in August, up six hundred thirty thousand from July.
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  The next planned increment, one hundred eighty thousand barrels per day,
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  is aimed at December, and it depends on overproducers like Iraq and Kazakhstan
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  submitting compensation cuts.
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  Treat that as a conditional, not a promise.
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  Futures reopened without drama.
• 0:40
  December Brent traded between a hundred and one dollars and forty two cents and a
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  hundred and two dollars and twenty five cents Monday morning,
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  down about eight tenths of a percent, per CNBC.
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  W T I eased to ninety dollars and fifty cents, off Friday's settle of ninety one
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  eleven.
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  That leaves the Brent to W T I spread somewhere between ten ninety two and eleven
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  seventy five depending on which pair of prints you use.
• 1:02
  Either way, call it about eleven dollars of pull toward the Gulf Coast docks.
• 1:07
  The supply risk is in Hormuz.
• 1:09
  Kpler shows Gulf crude exports back at prewar levels, a seven day average of
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  eighteen point three million barrels per day on September thirtieth,
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  with Vortexa's fourteen day figure at eighteen point six.
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  Saudi Arabia is driving that, and its East West line to Yanbu has been flowing again
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  since September twenty second.
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  Roughly forty percent of regional exports now bypass the strait.
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  But Marisks counts at least seven tanker incidents in the past week,
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  including the Aframax Lipsi on October fourth, engine room damaged,
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  crew safe.
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  The Kuwaiti supertanker Kazimah III was hit October first.
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  Marisks suggests Iranian forces may be firing into a kill box.
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  That's their read, not a confirmed pattern.
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  The G7 and EU release of one hundred million barrels is the cap on the upside.
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  North America.
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  The headline is Cenovus agreeing to buy Athabasca Oil for an enterprise value of
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  five point seven billion Canadian dollars, about four billion U.S.,
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  cash and stock, at twelve Canadian dollars a share, a thirteen point four percent
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  premium per Reuters.
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  It adds about forty five thousand barrels of oil equivalent per day of thermal
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  production at Leismer and Corner, plus full ownership of Duvernay Energy.
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  Cenovus targets a hundred and fifteen thousand barrels per day of thermal output by
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  twenty thirty two, and closing is expected in December.
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  Thermal heavy barrels, so the relevance is long dated supply into the Canada to
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  Rockies flow.
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  On the desk's numbers, W C S at Hardisty widened to sixteen sixty five under W T I
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  over the weekend, tied to Midwest refinery maintenance.
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  Express into Casper is full at two hundred eighty thousand barrels per day.
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  Trans Mountain is steady near sixty percent.
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  Maya flows to Mexico remain curtailed.
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  United States.
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  No E I A release since Friday.
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  The next report is Wednesday.
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  The last one showed a commercial crude build, but the size varies by table,
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  anywhere from nine hundred twenty two thousand to one point eight million barrels,
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  so I won't hand you a single number.
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  Refinery utilization fell to ninety one point four percent.
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  The part that matters to you: the Rockies, PADD Four, drew eight hundred twenty
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  three thousand barrels to twenty two point five million, while the Midwest built.
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  Cushing remains thin, near operational bottoms, which keeps prompt barrels firm.
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  Baker Hughes Friday: total rigs down one to five hundred ninety eight,
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  oil rigs up four to four hundred eleven.
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  The market is also positioning around a reported Enbridge deal for Tallgrass crude
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  assets, including Pony Express.
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  I haven't seen the terms confirmed in a primary source, so treat it as reported.
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  Uinta Basin.
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  Waxy output is steady, and nothing new from Veren, Ovintiv,
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  Scout, Uinta Wax, Berry, or SM Energy's XCL position over the weekend.
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  Yellow wax carries about a three dollar and twenty cent premium at Gulf Coast
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  refineries, but railcar freight runs sixteen to eighteen dollars a barrel.
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  That premium doesn't come close to covering it.
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  Salt Lake City refiners cap out around eighty thousand barrels per day,
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  so everything above that goes by heated truck or rail.
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  On the Uinta Basin Railway, the Supreme Court affirmed the environmental review and
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  the D.C.
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  Circuit remanded to the Surface Transportation Board, with the approval left in
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  place.
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  But remand proceedings and Forest Service right of way reviews are still open,
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  the two point two to two point five billion in private financing hasn't closed,
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  and no ground has been broken.
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  Your terminal remains the basin's egress for now.
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  Bakken.
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  North Dakota output is holding near one point nineteen to one point two million
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  barrels per day.
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  No new Director's Cut over the weekend.
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  Gas capture is above ninety five percent.
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  Dakota Access is running near full, so there's essentially no spot space south.
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  Rail to the coast costs ten to fifteen dollars a barrel, which keeps it uneconomic
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  for barrels that can reach a pipe.
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  Rail is confined to committed refinery and utility contracts.
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  Clearbrook trades a dollar fifty to two ten under Guernsey.
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  Chevron and Hess Midstream keep leaning on longer laterals,
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  and Hess Midstream is guiding to at least five percent volume growth in the second
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  half.
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  Powder River.
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  Anschutz, Continental, Devon, EOG, and Peak are running steady programs.
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  Plains' five hundred eighty five million dollar purchase of Silver Creek's gathering
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  system keeps consolidating the front end.
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  The headwind is downstream: Kinder Morgan's conversion of Double H,
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  eighty eight thousand barrels per day, to N G L service takes a Dore to Gernzee
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  crude conduit off the board.
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  Now Gernzee, the piece that matters most.
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  The desk has light sweet holding at about eighty five cents over Cushing and roughly
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  two ten over Clearbrook.
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  Holding is the word.
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  I can't confirm a directional move over a longer window from what I have,
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  and these are desk quotes, not a published assessment, so check them against your
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  own prints.
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  Why the premium?
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  Tanks at the hub are full of Canadian, Powder River, and Bakken barrels competing
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  for scarce southbound space.
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  Pony Express, about four hundred thirty thousand barrels per day,
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  and Platte are both heavily constrained.
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  Apportionment is so tight that scheduled pipeline space is trading at a premium to
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  physical barrels in the tank.
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  That's the signal.
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  The scarce asset is the slot, not the crude.
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  The Tallgrass and Bridger thirty day binding joint open season for incentive rates
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  from Gernzee to Cushing still governs commitments.
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  Bridger's proposed five hundred fifty thousand barrel per day cross border line
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  remains in planning, so no relief there.
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  The netback math has three paths.
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  Take proration on Pony or Platte.
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  Dump into Clearbrook at a two dollar and ten cent penalty.
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  Or pay rail rates that don't work.
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  With the Brent arb near eleven dollars, a barrel that gets a pipeline slot through
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  Gernzee to Cushing and on to the Gulf captures far better netbacks than one stranded
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  in a turnaround heavy Midwest.
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  That's the brief.
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  Next E I A report is Wednesday.