​Canadian crude by rail to the U.S. Gulf Coast approaches record

Image: Joey Podlubny/JWN

The uptick in crude by rail traffic out of the Western Canada Sedimentary Basin over the last six months has a clear preferred target: the U.S. Gulf Coast refining cluster.

Data from the U.S. Energy Information Administration shows the U.S. Gulf Coast, or PADD III, received 6.25 million barrels of oil from Canada via rail in July, the second-highest month on record after January 2019’s 6.30 million barrels.

Receipts dropped off dramatically in February to 2.50 million barrels, as Alberta’s oil curtailment shrunk the light-heavy oil differential to a level that did not support the extra cost of rail, but traffic has since been trending upward as the curtailment has been eased.

Demand for heavy oil on the U.S. Gulf Coast has never been higher, as the rapid deterioration of Venezuelan output tightens the supply of heavy sour crude globally, IHS Markit vice-president Kevin Birn said in a recent report.

Overall Canadian crude oil exports to PADD III averaged 835,515 bbls/d in July, after peaking at 858,268 bbls/d in April.