Crude-by-rail shipments continue at record pace
CALGARY Heavy Canadian crude isn’t getting any cheaper, but that hasn’t stopped companies from splurging on costly rail shipments.
Rail-car loadings hit a record 356,000 barrels a day in the week ended Jan. 11, up from a daily average of 296,000 barrels in December, according to Genscape Inc., which monitors some of the larger crude-by-rail terminals in Western Canada. The surge comes even as heavy Western Canadian Select’s discount to the U.S. benchmark reaches a level that makes rail transport inefficient.
The National Energy Board said Thursday crude-by-rail exports from Canada grew at a slower pace in November, but still reached a new record high.
Canada exported more than 330,000 barrels per day of oil, up about one per cent from October’s total of 327,000 bpd, and more than double the 148,000 bpd moved in November 2017.
The slower November growth came after double-digit monthover-month growth in August, September and October
Production cuts totalling 325,000 barrels a day imposed by the Alberta government aren’t keeping oil from rolling down the tracks amid a pipeline bottleneck. Enbridge Inc., operator of the largest crude-export pipeline network in Canada, said Monday it would ease pipeline rationing somewhat in February. Meanwhile, Canadian Pacific Railway Ltd., one of two rail companies operating in Western Canada, may aim for a 120,000-car annual load rate, John Brooks, senior vice-president, said on Wednesday in an investor call.
The province has also promised to buy as many as 80 locomotives and 7,000 rail tankers to help move oil to markets starting in late 2019.
Oilsands giant Suncor Energy Inc. has warned that the tighter differentials have made crude-byrail shipping “uneconomic.”
Analysts estimate it costs about US$20 per barrel to ship Canadian oil by rail to markets on the U.S. Gulf Coast, so discounts that are lower than that make the option less attractive.
U.S. imports of Canadian crude surged to a record 4.06 million barrels a day last week, according to the preliminary Energy Information Administration data.
In the U.S., demand for heavy Canadian crude could rise as a crisis between the U.S. and Venezuela worsens. Western Canadian Select crude’s discount to futures narrowed US$1.75 to US$9.25 a barrel on Wednesday amid the possible imposition of U.S. sanctions on Venezuelan crude, which is similar to heavy Canadian oil and competes with it on the U.S. Gulf Coast.