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Crude-by-rail flows from US Midwest to West Coast drop 33% on month in May: EIA

Highlights

Westbound rail flows fall as West Coast refiners cut runs

Canadian rail shipments to US at lowest since September 2016

Washington — Crude-by-rail shipments from the US Midwest to the West Coast declined further in May to 103,000 b/d, down 33% from April and the lowest level since August, amid lower refining runs and plunging North Dakota oil production.

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May shipments were down from 203,000 b/d a year earlier, according to the latest monthly data from the US Energy Information Administration.

The East Coast edged out the West Coast as the top destination for Midwest crude-by-rail flows in May, taking 105,000 b/d, but eastbound flows fell from 121,000 b/d in April and 160,000 b/d in May 2019.

Midwest crude-by-rail shipments to the Gulf Coast totaled 11,000 b/d in May, up from 5,000 b/d a month earlier, but down from 13,000 b/d a year earlier.

Canadian crude-by-rail flows to the US fell to 80,000 b/d in May, the lowest since September 2016. The West Coast took the largest share of the May volumes at 34,000 b/d, above the Gulf Coast at 22,000 b/d and East Coast at 20,000 b/d.

North Dakota saw its sharpest oil production drop on record in May, as output totaled 858,395 b/d, down 30% from April and the lowest level since June 2013, according to the latest North Dakota Pipeline Authority data.

State regulators predicted May would be the rock bottom for production shut-ins as a result of the pandemic, but the court-ordered shutdown of the 570,000 b/d Dakota Access Pipeline presents new uncertainty for the outlook. Pipeline owner Energy Transfer secured a temporary stay of that order while an appellate court considers the ruling.

DAPL alternatives

About 300,000 b/d of North Dakota oil would need to move out of the state by rail if DAPL is forced to shut in August and all alternative pipelines max out their capacity, according to Justin Kringstad, director of the state's Pipeline Authority.

He said crude-by-rail barrels would head first to the West and East coasts, with anything else heading to Cushing, Oklahoma, and the Gulf Coast, if economics allowed.

Moving crude on DAPL to the Gulf Coast costs $6-$8/b, plus around $1/b for gathering, Kringstad said, compared with about $10/b for all the costs associated with moving crude by rail from North Dakota to the West Coast. Routes to the East Coast and Gulf Coast run about $1-$2/b above that, he said.

Helms said the state's oil output may return above 1 million b/d by July.

Low oil prices and weak demand because of 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.

Declining rail shipments to the west come despite US regulators in May blocking Washington state's crude-by-rail vapor 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.