Canadian crude oil train derailments, closing USGC arb threaten rail exports

Many analysts have forecast that strong US Gulf Coast demand will help boost rail shipments of Canadian crude oil to records this year. But recent pricing dynamics and new regulations following the second derailment of a Canadian crude train in two months highlight the risks facing the most optimistic projections. Alberta Premier Jason Kenney estimated in a recent interview with S&P Global Platts that crude-by-rail shipments out of Western Canada would average 500,000 b/d this year, a level that would require strong USGC demand for Canadian barrels. Go deeper: Capital Crude podcast – interview with Jason Kenney, Alberta Premier Western Canadian Select at Hardisty, Alberta, was heard to trade Thursday at WTI CMA minus $16.95/b. WCS at Nederland, Texas, was last assessed at minus $4.30/b, putting the spread between the two locations at about $12.55/b. Because it costs about $12/b to ship crude from Hardisty to the USGC on a committed rail contract, the current spreads are nearly uneconomical. Spot rail, which is what may shippers rely on when they can not get space on pipelines out of Canada, can cost from $15/b to $18/b. Still, simulated coking margins across a spectrum of transport costs suggest WCS remains profitable for… continue reading

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Source: CTRM Center

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