Posts Tagged ‘U.S. Railroad crude oil traffic’

Crude Oil by Rail Also Faces Tough Future

March 14, 2016

Much has been made about falling coal production in the eastern United States and its adverse effect on railroad traffic, yet the shipment of crude oil by rail is also facing a tough future.

Crude oil production in the Niobrara shale region of Colorado and Wyoming is in decline, having peaked in April 2015 and a report by RBN Energy LLC analyst Sandy Fielden predicts that pipelines are going to rob rail of a significant amount of crude oil from that region which now moves by rail.

train image2An Energy Information Administration forecast said that falling crude oil prices and lower drilling activity has meant that crude production in the Niobrara shale region is likely to fall to 388 million barrels a day through March 2016. Peak production in April 2015 was 491 Mb/d.

Fielden told Railway Age magazine that midstream companies continue to add pipeline capacity in the region, which is causing a diversion of crude oil away from rail.

Rail shipments of crude oil peaked in December 2014, but Fielden said that rail terminals to handle crude oil continue to be built.

Fielden has published a report titled Slow Train Coming – Terminal Projects Still Being Built As Rockies Crude-By-Rail Fades that says that crude oil by rail volumes are falling across the United States and Canada.

“The decline is mostly in response to narrower spreads between U.S. domestic crude benchmark West Texas Intermediate and international equivalent Brent,” Fielden wrote. “The lower the spread between these two, the lower the incentive to move crude from inland basins to coastal refineries by rail because the latter is a more expensive transport option compared to pipelines.”

After Congress last December lifted regulations that limited U.S. crude oil exports, West Texas Intermediate crude began to trade at a slight premium to Brent crude, which averaged $0.26/Bbl in January.

Fielden said that the narrowing of prices between West Texas Intermediate and Brent resulted in crude oil by rail volumes in the United States falling by 20 percent between November 2015 and January 2016.

However, Fielden said the decline was slower than expected because shippers and refiners continue to rely on rail to move crude oil out of the Bakken region of North Dakota. This may be, in part, because shippers and refiners have investments in rail infrastructure and because some routes still do not have pipeline access.

Most of the oil being moved out of the Niobrara region by rail is bound for the Gulf Coast, where more than half of the U.S. refinery capacity is located.

Just 20 percent of Niobara region oil was shipped by rail to the East Coast in 2014, a figure that fell to 17 percent in 2015.

In the meantime, construction of new rail loading terminals continues in Wyoming and Colorado.

Fielden’s report said those facilities were planned before the price of oil fell and probably reflect a belief that crude oil by rail will still have a role to play in the longer-term development of Rockies crude takeaway capacity.

Rail Crude Oil Traffic Fell 16.8% in 2015

February 26, 2016

Crude oil traffic on U.S. railroads fell 16.8 percent in 2015, reflecting a slowing of domestic oil production.

The Association of American Railroads said that U.S. railroads moved 410,249 carloads of crude oil last year, which was down by 82,897 carloads from the 2014 figure.

AARIn 2015, crude oil accounted for 1.4 percent of total U.S. carloads, a slight drop from 1.6 percent in 2014.

There was good news, though, for U.S. railroads last week as intermodal traffic posted an 18.2 percent gain for the week ending Feb. 20 compared with the same week in 2014.

Carload traffic volumes, however, were down 5.7 percent with railroads carrying 244,747 carloads during the week.

Five of the 10 carload commodity groups that AAR tracks saw increases. They included motor vehicles and parts, up 30.7 percent; miscellaneous carloads, up 22.5 percent; and nonmetallic minerals, up 6.4 percent.

Commodity groups that posted decreases during the week included petroleum and petroleum products, down 22.1 percent; coal, down 20.2 percent; and farm products (excluding grain) and food, down 5.7 percent.

For the first seven weeks of 2016, U.S. railroads have posted cumulative volume of 1,698,803 carloads, down 14.3 percent from the same point last year; and 1,815,728 intermodal units, up 7.3 percent from last year. The total combined U.S. traffic for the seven-week period was 3,514,531 carloads and intermodal units, down 4.4 percent compared the same period in 2015.