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Houston — (Updates story originally published Tuesday with comments from Canadian National Railway spokesman Thursday)

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Canadian National Railway's embargo on moving ethanol rail cars to Kinder Morgan's Argo, Illinois, terminal has had little effect on the key North American market so far, sources said Tuesday.

"I think we are going to have to wait a week or so to see what effect it has," one source said.

The embargo, put into effect September 5, was imposed to alleviate congestion in the rail yards at Argo, according to the Association of American Railroads' embargo system website.

CN also invited other railroads to participate in the embargo, including Union Pacific and BNSF, according to the embargo on the AAR's website. CN, however, is the only railroad network that feeds directly into the Argo terminal.

Rail embargoes are uncommon and typically only last a couple of days, according to a second source. The current embargo is unusual in that it lasted through the weekend and looks like it will persist.

"CN put in place an embargo Wednesday, September 5, to manage the number of inbound ethanol cars into Argo. CN is currently working with its supply chain partners and customers to work through the built up inventory at the facility and restore inbound traffic," CN spokesman Patrick Waldron said in a Thursday email to S&P Global Platts. "We have put in place extra service to move cars at the facility and we expect a managed restoration of inbound traffic to resume as soon as tomorrow."

High production rates and inventories in recent weeks have weighed on values at Argo, the most liquid ethanol trading hub in the US.

The embargo is unlikely to support prices in Argo, given the large amount of product sitting in rail cars just outside the terminal.

Platts assessed Argo at $1.2880/gal Monday, compared with $1.2905/gal on Friday. Argo reached a seven-month low of $1.2405/gal at the end of August amid pressure from high inventories across the US and strong production rates.

Another source said the Rule 11 ethanol rail market could see pressure as plants that typically sell into Argo will have to sell cars directly into the rail market.

"R11 will get sloppy for a week or two, plants that have space in Argo will have to sell R11 cars instead," said the second source.

Platts assessed the R11 market at a 1.3-cent discount to the benchmark Argo market Monday, compared with Friday's 2.05-cent discount.

Rule 11 is a railroad accounting term that refers to an ethanol seller shipping freight pre-paid to an intermediate point and the buyer paying for freight beyond that intermediate point.

For the Chicago Rule 11 market, the intermediate point is Chicago.

-- Joshua Pedrick,

-- Edited by Keiron Greenhalgh,