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Riyadh Airport Strike, Hurricane Isaias Shut-Ins, and Crude Market Turmoil · The Gathering Line

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  Sunday, October eleventh.
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  Cash desks are shut and futures reopen tonight, so here's what moved since Friday
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  morning.
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  Global first.
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  The overnight catalyst is Riyadh.
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  Saturday afternoon a missile hit the domestic terminals at King Khalid International
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  Airport.
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  Saudi civil aviation authorities say twelve dead and more than three hundred
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  wounded, the deadliest attack in any Gulf Arab state since the Iran war began,
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  per the Associated Press.
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  It's the latest in a week of strikes on that airport, and the Houthis are the focus,
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  though the Saudi statement assigned no blame.
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  The piece that matters for crude is that Houthi leadership has reportedly warned
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  workers to evacuate Saudi energy facilities.
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  That's a threat, not an attack on oil infrastructure, and I'd treat it that way
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  until something is hit.
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  President Trump said Saturday the U.S.
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  is looking at joining Saudi strikes on the Houthis.
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  His words were, we may, we're going to look at it.
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  Riyadh still plans to open its energy conference today.
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  On Hormuz, Tasnim reports Tehran is reviewing Washington's terms for reopening the
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  strait within seven days, while the U.S.
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  sanctioned seventeen vessels tied to Iranian trade.
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  Shipping risk stays acute.
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  The tape going in: Brent settled Friday at one hundred four dollars and seventy two
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  cents, up forty four cents.
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  OPEC plus is unchanged.
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  November baselines are flat, and the provisional hundred and eighty thousand barrel
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  per day December increase still depends on Iraqi and Kazakh compensation cuts.
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  The IEA and OPEC monthly reports land later this week, and the G7 and IEA plan to
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  release a hundred million barrels from emergency stocks is still under review by
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  member states.
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  North America.
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  Physical markets were closed, so the Friday print is the last one.
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  Per CalRock, November Western Canadian Select at Hardisty settled at twenty five
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  dollars and fifty five cents under W T I.
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  Thursday was twenty dollars and twenty cents under.
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  That's the widest discount since twenty twenty three, with heavy fuel oil weakness
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  and high Gulf Coast marine freight cited.
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  Canadian export lines are around ninety three percent utilized,
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  with roughly three hundred fifty thousand barrels per day spare.
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  Enbridge's Express into Casper is full at its two hundred eighty thousand barrel per
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  day nameplate, and Trans Mountain is near sixty percent.
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  Baker Hughes had Canadian rigs up six to two hundred twenty two.
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  Nothing material from Mexico.
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  United States.
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  W T I settled Friday at ninety one dollars and eighty five cents,
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  up thirty six cents, so the Brent W T I spread closed at twelve dollars and eighty
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  seven cents.
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  That's a wide pull from inland barrels toward the Gulf Coast docks.
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  The Gulf is the weekend's physical story.
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  Reuters, citing the Marine Minerals Administration, put Hurricane Isaias shut-ins at
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  about one point five million barrels per day of oil, nearly seventy two percent of
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  Gulf output, and one point three billion cubic feet per day of gas,
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  fifty nine percent.
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  One hundred twenty nine platforms were evacuated, thirty five percent of the staffed
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  total.
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  Energy Aspects estimates about five hundred thousand barrels per day of refining
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  capacity sits in the storm's path, including Pascagoula.
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  Isaias was a Category three heading for the Florida Panhandle.
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  Less Gulf supply keeps the pull on inland crude strong, but I'm not calling a
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  differential move from that.
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  Nothing has traded yet.
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  Baker Hughes Friday: U.S.
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  rigs up five to six hundred three.
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  Oil rigs up six to four hundred sixty two, gas down one to one thirty two,
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  Permian up four to two seventy four.
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  The latest EIA weekly, from Wednesday: commercial crude drew three point two million
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  barrels to four hundred twenty four point one million.
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  Cushing built four hundred forty thousand to twenty four point seven million,
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  which is still one point eight four million under the five year average.
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  PADD two built one point eight seven two million on refinery maintenance,
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  PADD four drew a hundred forty four thousand to twenty two point three five million,
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  and utilization averaged ninety two point seven percent.
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  Corporate: the Chevron and Hess Midstream deal from last Tuesday remains the story.
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  Hess Midstream takes Chevron's DJ Basin gathering and storage plus a twenty percent
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  stake in Saddlehorn, which runs to Cushing, for two hundred million dollars cash and
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  cancellation of Chevron's shares.
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  Uinta Basin.
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  East Daley published on Energy Transfer's Price River terminal expansion.
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  Energy Transfer owns fifty five percent, and it's due in the fourth quarter.
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  It adds a loop track, a rail load rack for a hundred forty thousand barrels per day,
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  nine loading arms, four truck offload lanes, and about a hundred twenty thousand
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  barrels of heated storage.
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  Utah permitting is still in final review, so that start date isn't locked.
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  FourPoint Resources has committed fifty thousand barrels per day.
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  Wildcat is expanding its Helper terminal from twenty thousand to a hundred thousand.
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  Uinta rail volumes hit a hundred fifteen thousand barrels per day in June,
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  and rigs went from eleven in April to fifteen in August.
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  Now the economics, and these are indications, not firm bids.
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  Wellhead yellow wax is indicated ten to fourteen dollars under Cushing.
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  Gulf Coast refiners are bidding about three dollars and twenty cents over W T I
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  delivered.
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  But heated rail from Utah runs sixteen to eighteen dollars,
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  which leaves spot rail twelve eighty to fourteen eighty out of the money against
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  local sales.
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  Salt Lake refiners, two hundred five thousand barrels per day across five plants,
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  keep absorbing around eighty thousand of waxy.
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  New rail capacity is arriving, but at these numbers it's optionality,
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  not a flow.
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  The Uinta Basin Railway is unchanged: Surface Transportation Board remand pending,
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  Forest Service permits and supplemental environmental review open,
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  the two point two to two point five billion dollar financing unfinalized,
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  no construction.
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  Bakken.
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  Williston output holds at one point one nine to one point two million barrels per
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  day, about one point one four in North Dakota.
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  Gas capture is ninety five point five percent, and long laterals are sixty three
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  percent of recent completions.
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  The structural story is Double H.
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  Kinder Morgan is converting it to NGL service as Hiland Express,
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  displacing roughly sixty five thousand barrels per day that went from Dore to
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  Guernsey.
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  Plainview Energy Analytics expects that to spread across DAPL,
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  Enbridge and Bridger, with Bridger taking three to five thousand from Montana.
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  DAPL is near full.
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  Coast bound rail at ten to fifteen dollars can't compete with pipe netbacks.
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  Chevron goes from three rigs to two in December, and Hess Midstream guides about
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  five percent lower Bakken throughput in twenty twenty seven.
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  Continental, Chord, Devon and Conoco are normal course.
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  Powder River.
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  Steady completion activity from Anschutz, Continental, Devon,
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  EOG and Peak, feeding Bridger and Belle Fourche south to Guernsey.
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  Plains continues folding its five hundred eighty five million dollar Silver Creek
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  assets into its Guernsey footprint.
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  No new bottlenecks.
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  Guernsey, the one that matters.
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  Indicative light sweet is flat at roughly eighty five cents over Cushing,
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  and I stress indicative, since cash was closed.
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  Clearbrook trades one fifty to two ten under Guernsey.
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  Proration is extreme.
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  Pony Express carries about two hundred thirty thousand barrels per day out of
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  Guernsey on a four hundred thirty thousand system, and Platte moves a hundred forty
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  five thousand to Wood River and Patoka.
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  Both are heavily apportioned.
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  The Tallgrass and Bridger open season for incentive rates on Pony and Seahorse has
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  closed, with no incremental steel and no disclosed volumes.
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  So shippers have three choices.
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  One: take the haircut on Pony or Platte, reach Cushing and capture that twelve
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  eighty seven spread to the Gulf.
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  Even prorated, that's the best realized netback.
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  Two: sell east to Clearbrook at a dollar fifty to two ten under,
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  into a Midcontinent market digesting refinery turnarounds.
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  Three: rail to the coast at ten to fifteen dollars, which erases the Gulf margin.
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  Pipe space out of Guernsey is the pricing bottleneck for Rockies and Williston
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  barrels.
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  Watch it when futures open tonight.