Almost a million barrels per day of crude oil loading capacity was not built for nothing. At a time when Canada's railroads are set to recover from the weak performance seen shipping grain over the 2017/18 season, crude oil by rail movement is set to grow at a rapid pace.
In the month of June, the National Energy Board reports a record 204,558 barrels per day of crude oil shipments by rail. Weekend news points to Cenovus Energy inking a deal with the railroads, with more expected to follow. That will see movement climb by roughly 50% by December to 300,000 barrels per day or more and to keep growing in 2019. This would represent a roughly 100% growth from the 151,940 barrels/day shipped in December 2017.
According to media sources, this deal was signed prior to the federal court's decision to overturn the Trans-Mountain pipeline expansion project, which points to a growing demand for rail movement made only worse given the delays faced in expanding the country's pipeline capacity. The Calgary Herald reports Canada's crude oil inventories reached a record 36.3 million barrels for the week ending Aug. 31, while reporting Syncrude's Fort McMurray plant continues to move toward full capacity following a June power outage while other new production capacity is added.
A shortage of railway engines is noted as a major factor in moving crude oil, while CN Rail's Grain Plan for 2018/19 points to the delivery of new locomotives as one of the initiatives that will lead to more efficient grain movement. The list also includes new hopper cars, the hiring and training of train staff and capacity-enhancing construction projects.
As of week 5, the AG Transport Coalition's Weekly Performance Update shows cumulative hopper car demand for the two railways at 34,562 cars, up 2.2% from the same period in the previous crop year. CN supplied 92% of the cars wanted in week 5, down 6% from the previous week but above the 84% reported for the same week in 2017/18. CP Rail spotted 85% of the cars asked for loading in week 5, up from 84% in the previous week and below the 89% reported this time last year.
Unfulfilled shipper demand (outstanding orders + rejected cars + railway cancellations + shortened supply + denied orders) for week 5 totals 1,911 cars, up 44.7% from the 1,321 cars reported for week 4 and up from the 1,705 cars reported as of this week last year. Of this volume, 918 cars, or 48%, is classed as outstanding orders, which are almost entirely viewed as current demand, or unfilled cars for week 5.
Of the 1,911 cars classed as outstanding orders, the largest volume of cars is reported for the Vancouver bulk-shipping corridor of 767 hopper cars, while Thunder Bay is next at 526 cars. When viewed as a percentage of total cars ordered, the largest percentage of outstanding orders by shipping corridor is seen in the U.S./Mexico movement, with the 237 cars outstanding representing 12.9% of the total cars ordered for movement south.
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Cliff Jamieson can be reached at email@example.com
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