No Pipeline Space Results in Record Crude-by-Rail Loads as Canadian Oil Hits the Tracks

Heavy Canadian crude isn’t getting any cheaper — but that hasn’t stopped companies from splurging on costly rail shipments.

Rail-car loadings hit a record 356,000 barrels a day in the week ended Jan. 11, up from a daily average of 296,000 barrels in December, according to Genscape Inc., which monitors some of the larger crude-by-rail terminals in Western Canada. The surge comes even as Western Canadian Select’s discount to the U.S. benchmark reaches a level that makes rail transport inefficient.

Government-imposed production cuts totaling 325,000 barrels a day aren’t keeping oil from rolling down the tracks amid a pipeline bottleneck. Enbridge Inc., operator of the largest crude-export pipeline network in Canada, said Monday it would ease pipeline rationing somewhat in February. Meanwhile, Canadian Pacific Railway Ltd., one of two rail companies operating in Western Canada, may aim for 120,000-car annual load rate, John Brooks, senior vice president, said on Wednesday in an investor call.

U.S. imports of Canadian crude surged to a record 4.06 million barrels a day last week, according to the preliminary Energy Information Administration data.

In the U.S., demand for heavy Canadian crude could rise as a crisis between the U.S. and Venezuela worsens. Western Canadian Select crude’s discount to futures narrowed $1.75 to $9.25 a barrel on Wednesday amid the possible imposition of U.S. sanctions on Venezuelan crude, which is similar to heavy Canadian oil and competes with it on the U.S. Gulf Coast.