Crude by rail rises in March but storage high despite Alberta curtailments

Premier Rachel Notley has rolled out a multi-billion dollar plan to get more Alberta oil onto train cars and off to market. As provincial affairs reporter Tom Vernon explains, she's confident the decision will give Alberta's bottom line a big boost.

Crude-by-rail shipments from Western Canada staged a minor recovery in March after falling in February to their lowest level in nine months, but oil storage levels remain stubbornly high, according to Genscape.

The U.S. company, which monitors western Canadian rail terminals handling about 80 per cent of typical volumes, reported Wednesday that average rail loadings in March were 150,000 barrels per day.

That’s up from an average of 144,000 bpd in February, but down markedly from the 281,000 bpd it recorded in January as Alberta government production cutbacks kicked in.

READ MORE: Crude-by-rail exports fall in January as Alberta started production cuts

“Rail loadings were up in March but only up by 6,000 barrels per day, which is not enough to actually start to draw down inventories again,” said Genscape senior oil analyst Mike Walls.

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“It’s just slowed down the impact of any curtailments.”

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The recovery came as Imperial Oil Ltd. restarted rail shipments from its Edmonton-area terminal after largely shutting them down in February.

Genscape estimates the amount of oil in storage as of March 29 was 35 million barrels, about the same as in early December when the Alberta government announced it would order the industry to produce less to free up export pipeline space and reduce stored barrels.

WATCH BELOW (Dec. 3, 2018): Global’s Scott Fee explains what Alberta’s oil curtailment means and why it’s needed.

What does Alberta’s oil curtailment mean?
What does Alberta’s oil curtailment mean?

The March number is about two million barrels lower than recent peak levels just before the cutbacks began in January, Walls said, and higher than the 33.4 million barrels stored at the end of March 2018.

READ MORE: Oilsands producer MEG Energy posts $199M loss, vows to ship more oil by rail

Imperial said it stopped rail shipments because the curtailment program resulted in narrower differences between prices for crude sold in Alberta compared with those in the U.S.

Price differentials below US$15 per barrel make it less profitable to pay rail fees — which are generally higher than pipeline tolls — to win better prices on the U.S. Gulf Coast, said Walls.

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The difference in price between Western Canadian Select bitumen-blend oil and New York benchmark West Texas Intermediate widened to as much as US$52 per barrel in October, but shrunk to single digits in December and January.

The differential was US$8.15 on Monday, down from an average of US$10.64 in March, according to oil brokerage Net Energy Exchange.

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READ MORE: Alberta investing $3.7B to move oil by rail, leasing cars

Production from the oilsands in northern Alberta should start to fall soon as companies begin spring maintenance shutdowns on their projects, Walls said, which will likely result in lower storage levels.

Alberta’s NDP government is moving ahead with a plan to add rail assets capable of moving 120,000 barrels per day of crude starting by the end of the year but the opposition United Conservative Party says it will cancel that plan if it wins the April 16th election.

READ MORE: Alberta Opposition Leader Jason Kenney says he would shelve oil by rail deal

The Alberta energy department declined comment due to the ongoing provincial general election campaign.

WATCH BELOW (Feb. 15): After oil companies started moving a record amount of Canadian crude using railroads, that’s all come to a screeching halt. As Heather Yourex-West reports, companies say this mode of transportation is just too expensive.

Alberta’s plan to ship oil by rail backfires
Alberta’s plan to ship oil by rail backfires