EIA: crude oil shipments by rail from Midwest to coastal regions decline

According to the US Energy Information Administration (EIA), the movement of crude by rail within the US, including within Petroleum Administration for Defense Districts (PADDs), reached a high of 928 000 bpd in October 2014, with most of the shipments originating in the Midwest and going to the East Coast, West Coast, and Gulf Coast regions. Since October 2015, crude-by-rail volumes have declined as production has slowed, as crude oil price spreads have narrowed, and as more pipelines have come online.

Sources: EIA.

The economics of moving crude by rail depend largely on significant domestic crude discounts compared with international crudes and as domestic crudes are no longer priced significantly less than waterborne crudes such as North Sea Brent, there is less of a cost advantage for costal refineries to run the domestic crudes.

Crude supplies carried by rail from the Midwest to the East Coast (PADD 2 to PADD 1) continue to be the largest rail movement. However, this flow has been decreasing since reaching 465 000 b/d in April 2015.

The next largest crude-by-rail movement is from the Midwest to the West Coast, which typically goes to refineries in the Pacific Northwest. Although movements from the Midwest to the West Coast fell in the early part of 2015 during planned and unplanned refinery outages, deliveries resumed when refineries restarted in late spring. The West Coast received an average of 139 000 bpd of crude oil by rail from the Midwest in 2015, roughly comparable with 2014 levels.

Source: EIA.

Movements of crude by rail from the Midwest to the Gulf Coast (PADD 2 to PADD 3) formed the largest inter-PADD rail movement from 2011 to 2013. Midwest-to-Gulf Coast rail movements started to decline in the second half of 2013 as new and expanded pipeline capacity came online. As additional pipeline capacity was added throughout 2013–15, crude-by-rail movements to the Gulf Coast from the Midwest continued to decline, dropping to 38 000 bpd in December 2015, 75 000 bpd less than in the previous year. Other crude oil-producing regions, such as the Niobrara in the Rocky Mountains (PADD 4) and the Permian Basin in Texas and New Mexico (part of PADD 3) also experienced growth in pipeline takeaway capacity.

Continued pipeline takeaway expansions and interconnections with existing pipelines in crude-producing regions will reduce the need for intra-PADD rail flows within the Midwest and the Gulf Coast, as well as inter-PADD rail flows from the Midwest to the Gulf Coast, the EIA press release concluded.

Edited from press release by Angharad Lock

Read the article online at: https://www.hydrocarbonengineering.com/refining/14032016/eia-crude-oil-shipments-by-rail-from-midwest-to-coastal-regions-decline-2751/