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Crude Plumbing: Bakken Bottlenecks and Guernsey Apportionment · The Gathering Line

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  Saturday, October tenth.
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  Here's what moved since Friday's open, and what it means for Rockies and Bakken
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  barrels.
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  Global first.
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  Brent settled Friday at a hundred and four dollars and seventy two cents,
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  up forty four cents, or point four two percent, after trading lower earlier in the
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  session.
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  Reuters said the morning weakness came from President Trump calling Iran talks
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  productive, pledging no strike before the November third midterms,
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  and from reports that China will resume refined fuel exports after Golden Week.
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  The recovery came from the Gulf.
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  Iran's foreign minister, per Tasnim, said Tehran is reviewing the American response
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  to a proposal that would reopen the Strait of Hormuz within seven days.
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  That's a headline, not a deal.
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  Washington also sanctioned individuals, networks and seventeen vessels carrying
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  Iranian crude and products, and Houthi strikes across the Arabian Peninsula keep
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  shipping risk alive.
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  On the offset side, the G7 and I E A are pushing a hundred million barrels of
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  emergency diesel and crude, though Reuters noted analysts and some governments don't
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  read that as a fresh hundred million.
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  OPEC plus has nothing new: November baselines unchanged, and the provisional hundred
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  and eighty thousand barrel per day December increment is still tied to compensation
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  cuts from Iraq and Kazakhstan.
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  North America.
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  Western Canadian Select for November delivery at Hardisty settled at twenty five
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  dollars and fifty five cents under W T I, per CalRock.
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  That's wider than Thursday's twenty twenty, more than ten dollars wider than this
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  point last month, and the widest since twenty twenty three.
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  Rory Johnston at Commodity Context blames a heavy fuel oil glut on the Gulf Coast
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  and surging marine freight.
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  On the plumbing, Canadian export lines are running near ninety three percent full,
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  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
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  nameplate, and Trans Mountain sits near sixty percent.
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  Winter diluent blending will tighten effective heavy capacity.
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  Canadian rigs rose six to two hundred twenty two.
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  Mexico: nothing material beyond the Financial Times report,
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  relayed by Reuters, that Washington wants more cross border tie ups between energy
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  companies.
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  United States.
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  W T I settled at ninety one eighty five, up thirty six cents.
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  The Brent to W T I spread widened to twelve eighty seven from twelve sixty three
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  Thursday, and a spread that wide pulls barrels toward Gulf Coast docks.
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  Hurricane Isaias is the swing factor.
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  Reuters, citing the Marine Minerals Administration, had about one point three
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  million barrels per day, sixty two point nine percent of Gulf output,
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  shut in as of Thursday.
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  By Friday operators had shut in more than seventy percent.
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  Baker Hughes, released Friday: the total rig count rose five to six hundred and
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  three, the highest since May twenty twenty four, and fifty six above a year ago.
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  Oil rigs gained six to four hundred sixty two, gas dropped one to a hundred thirty
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  two, and the Permian added four to two hundred seventy four.
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  I don't have a consensus figure, so I won't call it a surprise.
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  Wednesday's E I A data is the baseline, not news.
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  Commercial crude drew about three point two million barrels to four hundred twenty
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  four point one million, against a Reuters poll expecting a one point seven million
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  build.
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  Cushing built four hundred forty thousand barrels to twenty four point seven
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  million, 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 fall turnarounds,
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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 was ninety two point seven percent.
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  On policy, Reuters reports three sources saying the administration will push use of
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  the Defense Production Act to lift oil and fuel output.
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  Details are thin.
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  Uinta Basin.
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  The railway has nothing new.
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  The D.C.
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  Circuit remanded the case to the Surface Transportation Board,
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  which leaves the original approval in place.
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  The supplemental environmental review and Forest Service permits are still pending,
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  Senator Bennet and Representative Neguse still oppose it, the roughly two point two
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  to two point five billion dollar financing isn't finalized,
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  and construction hasn't started.
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  Now the arithmetic that matters.
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  Indicative yellow wax is ten to fourteen dollars under Cushing at the wellhead.
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  Gulf Coast refiners are indicating about three twenty over W T I for waxy.
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  Heated, insulated rail to the Gulf runs sixteen to eighteen dollars a barrel,
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  so spot rail nets twelve eighty to fourteen eighty worse than selling locally.
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  Rail stays limited to term commitments.
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  Those are indications, not posted prices.
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  Salt Lake's five refineries, about two hundred five thousand barrels per day of
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  capacity, are taking roughly eighty thousand of waxy.
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  Operators, Veren, Ovintiv, Scout, XCL, Berry, Caerus and SM,
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  are in normal course development.
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  Bakken.
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  Williston crude is holding around one point nineteen to one point two million
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  barrels per day, North Dakota near one point one four.
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  Gas capture is ninety five point five percent despite a high gas oil ratio of three
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  point oh nine M C F per barrel.
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  Wells with three to four mile laterals are sixty three percent of recent
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  completions.
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  The big item is Hess Midstream and Chevron.
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  Hess Midstream acquires Chevron's DJ Basin gathering and storage and a twenty
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  percent Saddlehorn stake, and Chevron gives up its forty percent equity in Hess
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  Midstream.
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  For the Bakken, commercial agreements are extended through twenty forty five with
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  lower fees, converted to fixed fees with an eighty percent minimum revenue
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  commitment.
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  Chevron also plans to drop from three rigs to two in December,
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  which is projected to trim Hess Midstream Bakken throughput five percent in twenty
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  twenty seven before volumes plateau in twenty twenty eight.
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  Dakota Access is near capacity with little spot room south.
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  Kinder Morgan's eighty eight thousand barrel Double H line is converting to N G L
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  service, pushing crude toward Bridger's Belle Fourche system.
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  Coastal rail at ten to fifteen dollars a barrel keeps spot rail out of the money.
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  Powder River.
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  Drilling and completions look steady across Anschutz, Continental,
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  Devon, EOG and Peak.
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  Gathering is feeding Bridger and Belle Fourche headers bound for Gernzee,
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  and Plains continues folding the Silver Creek assets, a five hundred eighty five
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  million dollar deal, into its Gernzee delivery terminals.
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  Now Gernzee, which is the section that matters.
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  Light sweet is holding at an indicative premium of about eighty five cents over
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  Cushing, and Clearbrook trades one fifty to two ten under Gernzee.
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  Both are steady over the last twenty four hours.
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  The story is space, not price.
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  Pony Express, about four hundred thirty thousand barrels per day as a system and
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  roughly two hundred thirty thousand out of Gernzee, and Enbridge's Platte,
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  a hundred forty five thousand to Wood River and Patoka, are both heavily
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  apportioned.
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  On the open season: Tallgrass and Bridger launched thirty day binding seasons on
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  August twenty first for Pony Express and Seahorse out of Gernzee,
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  offering incentive rates on existing capacity.
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  This is not new pipe.
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  No volumes, rates or term were disclosed, that window has closed,
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  and I haven't seen results.
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  So a shipper has three choices.
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  Take proration on Pony or Platte and capture the twelve eighty seven Brent spread
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  toward the Gulf, which still gives the best netback even with volume shaved.
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  Sell east into Clearbrook at a dollar fifty to two ten under,
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  into a PADD two market already carrying that one point eight seven million barrel
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  turnaround build.
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  Or rail to the coast at ten to fifteen dollars, which erases the arb.
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  Allocation at Gernzee is the bottleneck.
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  That's the tape.
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  Watch Isaias and the Hormuz headlines Monday.