Executive Summary: Rigs: The total rig count decreased by 10 for the October 20 week, down to 561 from 571. Infrastructure: The Uinta Basin in northeastern Utah is on pace to produce 193 Mb/d by YE24, according to East Daley’s latest Uinta Basin Supply & Demand Report. Storage: East Daley expects a 250 Mbbl injection in commercial and Strategic Petroleum Reserve (SPR) inventories for the week ending November 1.
Rigs:
The total rig count decreased by 10 for the October 20 week, down to 561 from 571. Liquids-driven basins declined by 4 rigs W-o-W.
- Anadarko (+1): Stephens & Johnson Operating Co. (+1).
- Bakken (-1): Phoenix Capital Group (-1).
- DJ (+1): Prairie Operating Co. (+1).
- Eagle Ford (+1): Hurd Enterprises (+1).
- Permian – Delaware (-6): Devon Energy (-1), EOG Resources (-1), Chevron (-1), Matador Resources (-1), Circle-S Energy (-1), Lario Oil and Gas (-1).
Infrastructure:
The Uinta Basin in northeastern Utah is on pace to produce 193 Mb/d by YE24, according to East Daley’s latest Uinta Basin Supply & Demand Report. Increased development and new markets for the basin’s unique crude have driven double-digit annual production growth since 2021, essentially doubling output since 2019.
Despite recent rail infrastructure setbacks, refineries in the Uinta have proven there is more than one way to skin a cat and developed additional markets for the basin’s waxy crude. On average, ~93 Mb/d of Uinta crude was shipped by rail in 2Q24. Operators have made steady deliveries to the Gulf Coast (PADD 3) since 2021, but in late 2023 found new markets in PADDs 1, 2 and 4. April 2024 saw a current rail export high at 114 Mb/d delivered to PADD 3.
The Uinta Basin produces a crude oil differentiated as a ‘yellow wax’ (38-44 API) or ‘black wax’ (30-34 API) crude. Both qualities have low sulfur, low metal and low nitrogen, making them valuable to refiners, but the high paraffin content makes Uinta crude difficult to transport. With a pour point between 105° and 120° F, the waxy crude is similar to a shoe polish consistency and must be heated to enable flow.
Aside from crude quality, the Uinta’s biggest challenge is moving barrels to markets outside the basin. Salt Lake City has five refineries that consume ~205 Mb/d. But once their demand is met, rail is the only option to reach other markets. No pipelines reach outside the basin, and trucking is difficult since the closest markets in Guernsey and DJ are 500+ miles away and require traversing two mountain ranges.
Earlier this year, the Supreme Court agreed to hear Seven County Coalition v Eagle County, CO, a case addressing a proposed Uinta rail project. In August 2023, the Federal Appeals court halted the Transportation Board’s permitting of the Uinta Basin Railway. The project would enable unit trains to rail up to 350 Mb/d of crude from the Uinta through western Colorado to a Denver rail hub, then on to Gulf Coast refiners. The Supreme Court has put the case on its docket for December ’24.
Four producers drive activity in the Uinta: SM Energy (SM; formerly XCL Resources), Ovintiv (OVV), Uinta Wax Operating, and Crescent Energy. These producers account for ~127 Mb/d, or ~70% of Uinta production. See the monthly Uinta Basin Supply & Demand Report for more information.
Storage:
East Daley expects a 250 Mbbl injection in commercial and Strategic Petroleum Reserve (SPR) inventories for the week ending November 1. We expect total US stocks, including the SPR, will close at 814 MMbbl.
The US natural gas pipeline sample, a proxy for change in oil production, decreased 0.69% W-o-W across all liquids-focused basins. Samples increased 1.93% in the Permian and decreased 6.83% in the Gulf of Mexico and 4.78% in the Eagle Ford Basin. The Gulf of Mexico has a high correlation between gas volumes and crude oil volumes, whereas the Permian and Eagle Ford basins correlation is less than 45%.
We expect US crude production to remain flat at 13.5 MMb/d. According to US bill of lading data, US crude imports increased by 375 Mb/d W-o-W to 6.35 MMb/d. More than 60% of the supply originated from Canadian pipelines and vessels into the US, with the remainder largely coming from vessels carrying crude from Mexico, Venezuela and Nigeria.
As of November 1, there was ~753 Mb/d of refining capacity offline, including downtime for planned and unplanned maintenance. EDA expects gross crude inputs into refineries to increase by ~200 Mb/d W-o-W, coming in at 16.25 MMb/d.
Vessel traffic monitored by EDA along the Gulf Coast increased W-o-W. There were 25 vessels loaded for the week ending November 1 and 27 the prior week. EDA expects US exports to be 3.95 MMb/d.
The SPR awarded contracts for 4.85 MMbbl to be delivered in October 2024. The SPR has 386 MMbbl in storage as of October 25, 2024.
Regulatory and Tariffs:
Presented by ARBO
Tariffs:
Grand Mesa Pipeline, LLC The rates applicable to the 2023 Open Season Committed Interruptible Rates and Incremental Interruptible rates have been decreased. FERC No 2.11.0 IS25-32 (filed Oct 1, 2024) Effective October 1, 2024.
Seaway Crue Pipeline Company LLC. The temporary volume incentive rate was extended through November 30, 2024. FERC No 2.90.0 IS25-18 (filed Oct 7, 2024) Effective November 1, 2024.
The above information is provided by ARBO’s Oil Pipeline Tariff Monitor. For more information on regulatory proceedings or tariff rates, please contact please contact Corey Brill via email at corey@goarbo.com or phone at 202-505-5296. https://www.goarbo.com/
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