Movements of crude oil by rail in the US averaged 443,000 b/d in the first 5 months of 2016, down 45% from the same period last year, according to the US Energy Information Administration’s energy-by-rail data methodology report. Fewer shipments of crude oil by rail from the Midwest (PADD 2) to the East Coast (PADD 1) account for about half of the decline.
The decrease in crude oil shipments by rail since last summer has been mainly attributable to narrowing price differences between US and imported crude oil, the opening of crude-oil pipelines, and declining production in the Midwest and Gulf Coast onshore regions.
“The economics of crude-by-rail transportation depend largely on the relationship between the prices of domestic and international crude oils. Domestic crude oils priced in the Midwest and West Texas are no longer heavily discounted relative to imported crude oils priced in the North Sea. The narrower the spread between domestic and imported crude oils, the more likely coastal refiners will choose to run imported crudes rather than domestic supplies shipped by rail,” EIA said.
Crude oil carried by rail from the Midwest to the East Coast remains the country’s largest crude-by-rail movement at 176,000 b/d, or 45% of the total crude oil moved by rail in the US in May. Crude oil imports processed by East Coast refineries have generally increased since early 2015, averaging 760,000 b/d in May, up from 666,000 b/d in May 2015.