By Jonathan Leff and Timothy Gardner
NEW YORK/WASHINGTON Feb 28 Oil shipments by
rail from the booming Bakken shale in North Dakota have slowed
over the past two days, data showed on Friday, but a U.S.
regulator knocked down rumors that some terminals have been shut
down due to new rules.
Oil traders are on edge over concerns that an emergency
order from the U.S. Department of Transportation this week
requiring shippers to test all crude before it is carried by
train could cut into deliveries of Bakken crude, as much as
800,000 barrels per day (bpd) of which is shipped by rail.
U.S. crude oil futures prices briefly spiked as much
as 60 cents per barrel, or nearly 1 percent, earlier on Friday
on speculation that two terminals may have been shut down for
The U.S. Federal Railroad Administration said talk of
shutdowns was a rumor. The Pipeline and Hazardous Materials
Safety Administration's has not caused the closure of any
terminals as it carries out a series of unannounced inspections
as part of its "Bakken Blitz" testing push, an agency source
said. Prices held onto earlier gains even after the denials.
However, data from industry intelligence group Genscape did
show that loadings at a dozen major Bakken rail terminals had
fallen to around 345,000 barrels per barrel on average for the
past two days, down from about 550,000 bpd over the previous two
weeks, an unusual but not unprecedented dip.
Genscape, which uses cameras to monitor the number of tank
cars filled with crude at the terminals, provided no explanation
for the dip. Analysts said the ebbing flows could also be due to
other factors, including a shortage of oil tank cars and slower
rail traffic due to severe winter weather.
The DOT's emergency order called for mandatory testing and
also prohibited companies from using the least-hazardous label
for all oil shipments, the latest in a string of measures meant
to ease public and political concerns over the safety of moving
oil by rail after a string of fiery derailments.
Still, many remain concerned. New York Governor Andrew Cuomo
said on Friday that state authorities had begun inspecting some
of the mile-long oil trains that are now bringing some 200,000
bpd of crude to terminals in Albany.
"We are taking action to safeguard our communities from the
potential risk of crude oil shipments by launching more
aggressive and enhanced enforcement of rail safety," Cuomo said.
THREE TERMINALS IDLE FOR DAYS
Operators Enbridge Inc and Dakota Plains Holdings
said their terminals were operating as normal. Other
big operators including EOG Resources Inc and Global
Partners LP did not immediately reply to requests for
The Genscape data, made available to Reuters, showed that
only 220,000 barrels were loaded at the terminals on Wednesday,
the day after the DOT order, an exceptionally low rate.
On Thursday, seven of the 12 terminals monitored by Genscape
loaded a total of 470,000 barrels; five terminals did not load
at all, although two of those had been operating on Wednesday,
according to the data.
One executive with a large North Dakota terminal said the
new testing requirement should not pose a problem for most
operators, who were already testing their crude oil to ensure it
was properly classified prior to shipment.
"None of the big terminals are surprised at the ruling,"
said the executive.
A BLIP OR A WORRY?
A week ago, the DOT and the industry's Association of
American Railroads agreed to another set of measures meant to
restore public confidence, including increased inspections,
better braking systems and slower speeds through urban areas.
That set of rules was expected to limit so-called "takeaway"
or loading capacity of oil-by-rail shipments by some 30,000 to
37,000 barrels per day (bpd), or up to 5 percent of all trade,
according to Bernstein Research.
Other factors are also hindering the thriving oil-train
trade, a trend that emerged abruptly in the past few years as
Bakken shale oil production outpaced pipeline capacity. Such
crude oil shipments, rare prior to 2010, have surged to near
900,000 bpd, more than a tenth of total U.S. production.
This year's exceptionally cold weather has caused a "record
deterioration in service performance" for big U.S. rail
operators, contributing to slower oil-rail volumes since early
December, according to a note this week from PIRA Energy Group.
"The performance deterioration registered in 2014 (so far)
translates to a 1.5-day increase in door-to-door transit time on
a single car move, and about a 12-hour increase on a typical
unit train move," PIRA said.
There are a total of some 15 oil-rail terminals in North
Dakota with a total capacity of 1.2 million bpd, according to
data from the North Dakota Pipeline Authority.