After moving record-large Canadian oil volumes by rail just five months ago, shippers have hit the brakes, idling thousands of cars and tens of millions of dollars' worth of infrastructure.
WINNIPEG, Manitoba - After moving record-large Canadian oil volumes by rail just five months ago, shippers have hit the brakes, idling thousands of cars and tens of millions of dollars’ worth of infrastructure.
Rail was Canada’s oil lifeline in recent years when cheaper pipelines ran full and crude had no other exit from landlocked Alberta. But oil production cuts this year opened pipeline space and eliminated demand for trains, leaving producers like Cenovus Energy Inc with high fixed expenses and monthly payments still owing to railways.
Prospects of a longer-term rail recovery also look dim as long-planned pipeline expansions enter service in each of the next two years. Canadian heavy crude in Alberta traded this week for around $10 per barrel below the U.S. benchmark CLc1 for September delivery, according to NE2 Group, well below the $15-$20 industry estimate for economic rail shipments. Trades for later delivery show the differential widening to just $13 in the fourth quarter.
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