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OilMonster

Crude Oil February 07, 2019 12:30:09 AM

Imperial Cutting Crude Oil Rail Shipments to the U.S.

Anil
Mathews
OilMonster Author
Those December shipments covered about half of the company’s total production. It shipped only 90,000 Bpd by rail in January.
Imperial Cutting Crude Oil Rail Shipments to the U.S.

OILMONSTER.COM- One Canadian oil producer is cutting its rail shipments to U.S. markets, blaming the Alberta government for curtailing oil production and making such shipments uneconomic, Kallanish Energy reports.

Imperial Oil Ltd. said it will cut rail shipments of crude from 168,000 barrels per day in December to near zero barrels in February, CEO Rich Kruger told analysts and the media on a recent earnings call.

Those December shipments covered about half of the company’s total production. It shipped only 90,000 Bpd by rail in January.

The collapse of discounts on western Canadian crude oil prices since the cuts were announced last December has ruined the economic case for shipping oil by rail to customers in the U.S., Kruger said.

“Crude by rail should be helping to alleviate this situation in the province,” he said in a report by The Canadian Press.

“But now, because of the drastic, dramatic manipulation and impact on differentials, take-away capacity is now being idled. That is a sad state, a very tangible example of what we believe is ill-advised, ill-informed, negative consequences of this curtailment order.”

He added, “With the stroke of a pen, the government began picking winners and losers.”

The differentials need to be higher than $15 to $20 per barrel, to support the higher cost of rail over pipelines, Kruger said.

He said Alberta oil storage is lower because of the growth of crude-by-rail. Imperial accounted for 50% of such shipments and its decision to idle its rail terminal near Edmonton will likely affect whether storage levels continue to fall, he said.

On Jan. 1, Alberta imposed a 325,000 Bpd production cuts on the 28 largest producers in Alberta in an effort to reduce price differentials on Canadian crude. Effective Feb. 1, Alberta reduced the cuts by 75,000 Bpd.

Those differentials had been as high as $52/Bbl last fall, but have been under $10/Bbl in December and January.

Refiner Imperial had opposed the Alberta cuts from the very beginning, as had Suncor Energy and Husky Energy.

Courtesy: www.kallanishenergy.com

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