Latest / The Gathering Line / Rockies Morning Call: Paper Swings, Guernsey Bottlenecks, and Uinta Rail

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Rockies Morning Call: Paper Swings, Guernsey Bottlenecks, and Uinta Rail · The Gathering Line

• 0:00
  Morning.
• 0:01
  Paper came off a little, physical didn't budge, and that gap is the story.
• 0:06
  Global first.
• 0:08
  December Brent was down about eight tenths of one percent early Tuesday,
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  around a hundred fourteen dollars and eighty one cents on Reuters at oh four
• 0:16
  eighteen G M T, and a hundred fourteen ninety three in the Wall Street Journal's
• 0:20
  print.
• 0:21
  Then it bounced.
• 0:22
  By oh nine eighteen G M T, Reuters had Brent up forty five cents at a hundred
• 0:27
  sixteen twenty six.
• 0:29
  So the pullback was real but shallow, and it was bought.
• 0:33
  Brent touched a hundred seventeen on Monday, after surging past that level last week
• 0:38
  for the highest print since April.
• 0:40
  Reuters called this profit taking.
• 0:42
  The driver was Monday's meeting in Tehran.
• 0:44
  Saudi Arabia, Turkey and Pakistan sat down with Iranian officials,
• 0:49
  and according to Iranian state media all four agreed to keep talking.
• 0:54
  Oman separately said its discussions with Iran produced an outline for a temporary
• 0:59
  arrangement to restore free navigation through Hormuz.
• 1:02
  That's an outline, not a deal.
• 1:04
  The floor is firm for a reason.
• 1:06
  The Houthis launched renewed attacks on Saudi Arabia, and Reuters reports they say
• 1:11
  they targeted the Ras Tanura refinery.
• 1:14
  That's a Houthi claim, so treat it as one.
• 1:17
  Separately, Saudi Arabia reported destroying three drones over Riyadh.
• 1:22
  October has been the worst month for attacks on commercial shipping around Hormuz
• 1:26
  since that think tank began tracking in 2017.
• 1:30
  ANZ Research says Gulf crude exports fell a fourth straight week,
• 1:35
  Hormuz flows are about sixty percent of normal, and global distillate inventories
• 1:39
  sit nearly five percent under the five year average.
• 1:43
  Today's Israeli election, the Fed decision, and the November third midterms are all
• 1:48
  on the calendar as event risk.
• 1:50
  North America.
• 1:52
  Nothing new printed overnight on Canadian barrels.
• 1:55
  The structural picture is unchanged: W C S discounts stay wide,
• 2:00
  and heavy Canadian volumes are competing for outbound space at Casper and Guernsey.
• 2:05
  I have no fresh W C S number to give you, so I won't invent one.
• 2:09
  United States.
• 2:11
  December W T I fell roughly nine tenths of one percent early to about a hundred
• 2:15
  dollars and eighty eight cents, a hundred ninety on the Journal's print,
• 2:19
  then recovered to a hundred two sixteen on Reuters.
• 2:22
  Prompt cash W T I is holding just above the hundred dollar line.
• 2:27
  The E I A weekly report lands Wednesday, so there are no new inventory numbers to
• 2:31
  read you yet.
• 2:32
  I'll flag Cushing: storage remains tight, which leaves takeaway sensitive to
• 2:36
  refinery demand and turnaround timing.
• 2:39
  And the Enbridge deal for Tallgrass's crude assets is the backdrop to keep in view:
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  seventy five percent of Pony Express, a stake in Powder River Gateway,
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  and eight point four million barrels of storage, at two point five five billion
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  dollars.
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  That's consolidation of Rockies to Cushing egress under one owner.
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  Uinta Basin.
• 2:57
  Nothing new in the last twenty four hours, but the economics stay stubborn,
• 3:02
  so here they are.
• 3:03
  Waxy crude output is steady.
• 3:05
  Salt Lake refiners run roughly eighty eight thousand barrels per day of local wax
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  against about a hundred eighty nine thousand barrels per day of total capacity,
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  and with no local competition they hold a discount of ten dollars or more under W T
• 3:19
  I.
• 3:19
  The way out is rail, and spot rail to the Gulf Coast is closed.
• 3:23
  Tariff plus heated, insulated car leases run fifteen to eighteen dollars a barrel,
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  which is wider than the spread to Gulf clearing values.
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  Only contracted unit trains are loading.
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  The Uinta Basin Railway is still working through federal and state appellate
• 3:37
  proceedings, so trucking to railheads near Price and to Salt Lake remains the
• 3:41
  operating reality.
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  Bakken.
• 3:44
  Production steady, operators inside the gas capture rules, no Director's Cut out and
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  no D A P L news.
• 3:51
  Dakota Access to Patoka and the coast takes the bulk of the barrels,
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  with Clearbrook as the default valve for northern barrels.
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  Spot rail to the East Coast or the Pacific Northwest doesn't pencil for uncommitted
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  barrels, so your loadings are baseload contract traffic.
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  Powder River Basin: steady drilling from Devon, E O G and Continental,
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  with barrels feeding Casper and Guernsey and competing with Canadian and Williston
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  crude for feeder space, including Powder River Gateway.
• 4:18
  No new rig or completion figures to report.
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  Now Guernsey, which I'll say GERN zee, and the part that matters most to you.
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  Light Sweet Guernsey is indicated around twenty five to forty five cents under C M A
• 4:31
  Nymex.
• 4:32
  I don't have a confirmed direction for the last twenty four hours,
• 4:35
  so I won't tell you it tightened or widened.
• 4:39
  Clearbrook offers little relief once you net out the pipe tariff.
• 4:42
  The point is that the headline pullback in paper doesn't touch the number you
• 4:47
  actually live on, which is whether a barrel gets out.
• 4:50
  And it still can't, easily.
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  Southbound egress from Guernsey toward Cushing, Pony Express and the Platte system
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  most notably, remains heavily apportioned.
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  Uncommitted spot space is prorated.
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  So when W T I dips a dollar on Tehran headlines, or pops it back on Houthi drones,
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  a prorated Guernsey barrel can't chase either move.
• 5:13
  The paper is volatile, and the pipe is the constraint.
• 5:16
  That's the thread from our earlier look at tight Guernsey exits.
• 5:20
  Same shape today.
• 5:21
  A diplomatic dip in Brent and W T I doesn't loosen a single barrel of Guernsey
• 5:27
  takeaway, and the Uinta closed rail spread is the same picture at the other end of
• 5:31
  your portfolio: a hundred dollar outright price doesn't help when freight and car
• 5:36
  leases eat the spread.
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  So what are shippers choosing between?
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  Three options.
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  Pay up to get space south.
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  Push barrels north toward Clearbrook at steep local discounts.
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  Or put barrels into Guernsey tankage and wait.
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  I have no confirmed open season, tariff filing, or maintenance notice on Pony
• 5:56
  Express, Platte, Grand Mesa, Saddlehorn, Bridger, Belle Fourche or Double H in this
• 6:03
  window, so I'm not going to speculate on one.
• 6:06
  My read, and it's interpretation, not a print: this tape rewards committed terminal
• 6:11
  storage, batch segregation and firm pipeline rights over chasing paper spikes.
• 6:18
  Watch Wednesday's E I A numbers and Cushing stocks next.
• 6:21
  That's the brief.