Crude-by-rail is running out of track as the economics behind it lose steam

, Canada

Crude shipments by rail fell to just over 95,000 barrels a day in February, the lowest level since July and much lower than the 161,000 bpd on average in 2014

The crude-by-rail phenomenon that had led to the rapid build-up of new rail terminals in Western Canada is losing steam.

A few years ago, energy producers and midstream companies piled into the rail business as an insurance against pipeline constraint and as heavy oil benchmark Western Canada Select (WCS) traded at a discount of as high as US$40 per barrel against Western Texas Intermediate.

It made sense at the time to haul barrels on rail, paying US$16-US$20 per barrel to reach Gulf Coast and still turning a profit, and in the process elbowing out the more expensive Maya Mexican crude. It takes around US$7 to pipe a barrel from Alberta to the Gulf Coast.


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