Crude-by-rail flows from U.S. Midwest to West Coast fell 28% in April

Crude-by-rail shipments from the US Midwest to the West Coast fell 28% month on month to 157,000 b/d in April, due to lower refining runs and plunging North Dakota oil production, according to data released June 30, 2020 by the Energy Information Administration (EIA).

Outright prices for Bakken crude in the Williston Basin dropped sharply at the beginning of March, following a drop in the NYMEX light sweet crude contract.

Williston Basin crude for injection into the Dakota Access Pipeline dropped from $42.76/b on March 5, to a year to date low of $11.49/b on April 21. So far this year, Williston Basin crude has averaged at an outright value of about $34.15/b. But prices have started to recover in June, averaging $34.40/b.

Values for railed barrels out of the Williston basin often fetch a slight premium of between 25 cents/b and 50 cents/b over those that are injected into pipes, according to market sources.

North Dakota saw its sharpest oil production drop on record in April as output sank to 1.219 million b/d, down 15% from March, according to the latest North Dakota Pipeline Authority data.

The state’s output was projected to drop further in May, with shut-ins likely peaking that month at around 510,000 b/d.

Low oil prices and weak demand due to the coronavirus pandemic have hammered operators in North Dakota, where oil output had set a record high of 1.52 million b/d in November 2019. In mid-June, North Dakota regulators estimated current production at 925,000-970,000 b/d.

The declining rail shipments to the west come despite US federal regulators blocking Washington state’s crude-by-rail vapour limits that had effectively capped Bakken shipments to Puget Sound refineries since last year. The law was seen as blocking as much as 200,000 b/d of Bakken crude when it took effect in July 2019.

• Midwest crude-by-rail shipments also fell to the East Coast, but only by 6% from March to 115,000 b/d in April, EIA data showed.
• Total rail shipments from the Midwest fell to 277,000 b/d in April, down from 371,000 b/d in March and 346,000 b/d in April 2019.
• More Canadian crude moved to the Midwest by rail in April, at 46,000 b/d, up from 31,000 b/d in March and 12,000 b/d in April 2019.
• By contrast, less Canadian crude made its way to the Gulf Coast by rail in April, at 123,000 b/d, down from 190,000 b/d in March and 160,000 b/d in April 2019.
• US crude shipments by rail to the Gulf Coast dropped to just 15,000 b/d in April, down from 45,000 b/d in March and 95,000 b/d in April 2019.

For more information visit www.eia.gov

7th July 2020