To the Pipelines, Robin! – Bakken Producers Come off the Rails as Price Differentials Narrow

Data from Genscape showing rail terminal loading volumes in North Dakota and pipeline receipts into the Enbridge North Dakota pipeline suggest that shippers are switching barrels from rail back to pipeline this month (May 2013). The apparent switching follows a narrowing of crude price differentials between coastal destinations and the Midwest from $17/Bbl in April to less than $9/Bbl last week.  Today we ask whether narrowing differentials are driving a reduction in crude by rail shipments.

Genscape is a provider of all kinds of energy information.  One of their products provides data that shows dynamically what is happening on the ground in North Dakota. The table below shows the volume of crude loaded onto trains in North Dakota at 12 terminals that Genscape monitor remotely around the clock. The Genscape table provides a daily tally of loading data at each terminal as well as monthly averages. The final column in the table shows that loadings at these terminals are mostly down during May versus April (purple oval on the table). Three rail loading terminals at Fryburg (Bakkenlink), Epping (Inergy COLT) and Van Hook (Plains) are loading 30 percent less so far in May 2013 than they did in April. The Musket terminal at Dore is loading 25 percent less and the Global terminal at Stampede 24 percent less. Although the volume shipped at some terminals such as EOG Stanley, Hess Tioga and Lario Dickinson  are basically flat, the general trend would appear to be significant. 

Source: Genscape (Click to Enlarge)

The chart below shows Genscape North Dakota loading terminal data since the start of the year (blue shaded area) and rail terminal receipts at St. James, LA at the Plains and Nustar/EOG terminals (red shaded area). Over the course of the year the general trend has been for crude rail loading volumes to increase (green trend line) up until May 2013 when volumes began to fall off (purple trend line). Over the entire period the receipt volumes at St James were consistent at between 200 Mb/d and 250 Mb/d suggesting that there has been no reduction in flows to that destination. This latter information is somewhat more difficult to interpret because we do not know where the St James receipts are coming from. Some of that crude is certainly inbound from North Dakota but other volumes have been shipped to St James by rail from the Niobrara and from the Eagle Ford or the Permian basins.

Source: Genscape (Click to Enlarge)

The next chart (below) shows the Genscape data for pipeline receipts into the Enbridge North Dakota pipeline since the start of 2013. The pipeline has a capacity of 220 Mb/d and ships crude from the Bakken east to Clearbrook, MN where it joins the Enbridge Lakehead system flowing to Chicago, Cushing, OK and (via Seaway) to Houston. The North Dakota pipeline has been running half full for most of this year because Bakken producers have preferred to use rail transportation to deliver their crude to destinations where prices have been higher on the East, West and Gulf coasts. However, during May the volume shot up to 160 Mb/d (blue arrow) as shippers apparently returned to the pipeline.

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