Rail shipments of crude from the landlocked and oversupplied Midwest to refiners in the Gulf Coast appear set to surge next year, to nearly double the volume now flowing in congested pipelines between the regions.
The shipments, which were rare until this year, have already grown to around 100,000 barrels per day (bpd) in recent months, industry sources told Reuters. Two rail terminals in St. James, Louisiana are receiving much of the crude, while other sites like Houston are taking additional crude.
The daily cargoes between the Midwest (PADD 2) and the Gulf Coast (PADD 3) could triple to 300,000 bpd by late 2012, industry sources said. Logistics firms unveiled plans for several new crude-by-rail terminals over the last four months.
Since the Department of Energy does not track crude-by-rail, there's no official data on how much is moving.
But logistics firms say volumes are growing fast, a trend that could slash discounts of $24 a barrel on U.S. oil futures relative to oil in the Gulf Coast or Europe.
Delays in southbound pipeline construction and insufficient existing capacity have resulted in midwestern crude gluts, the main reason cited by oil traders for the unusual discounts. Railroads are emerging as a viable option for inland oil producers to get crude to coastal areas and maximize profits.
"We're maxed out right now," said Bill Swann of US Development Corp., referring to his crude-by-rail terminal at St. James that receives around 65,000 barrels per day, mostly from the booming Bakken Shale oilfield in North Dakota.
Source: Reuters
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