Railways cutting shipping rates 25% for oil !

[Guest]

heard it on the news today , can you believe this shit . trying to get back market share so they can keep us waiting for cars when they want to, and they probably will raise our rates for grain

[bucket]

Yup the CTA rubber stamp the increases.

[Jdhot]

That move says to me that they are trying to keep workers and pulling power/rolling stock busy. Could be encouraging for us in a way.

[riders2010]

Sounds to me like someone else is gonna pay more to make the difference up.

[TOM4CWB]

Riders,

100's of Millions have been spent by RR building the infrastructure to haul crude. The Caption Topic you posted is misleading as well... as not all shippers enjoy a price reduction,,, some only if they prebook trains for months ahead and guarentee future crude oil movement by train.

Background:

Reuters Exclusive: Business News | Thu Oct 15, 2015 5:14pm EDT
Canada railroads cut crude freight rates to lure shipments
CALGARY, ALBERTA/NEW YORK | BY NIA WILLIAMS AND JARRETT RENSHAW

Canadian rail companies are slashing rates for shipping crude in their first serious effort to revive an industry rocked by the rout in global oil prices, according to shippers and terminal operators who are seeing discounts of as much as 25 percent.

The move highlights how railroads are struggling to compete with pipelines for a share of shrinking crude shipments across North America, particularly in Canada, where a long hoped-for boom in oil sands traffic has fizzled with the oil bust.

Canadian National Railway and Canadian Pacific Railway, which together account for the vast majority of crude-by-rail cargoes shipped across the country, are dropping prices, four people familiar with the cuts told Reuters. The size of the cuts varied among sources, leading one source to suggest that railroads may be working with individual shippers to give some bigger discounts than others.

Canadian National said it does not publicly discuss its freight rates. Canadian Pacific said it does not comment on individual customer relationships.

Canadian Pacific has offered discounts of around 15-25 percent, but in exchange wants shippers to commit to firm volumes, for example one 70,000 barrel unit train, made up entirely of oil tanks cars, per month for three months, said one source with a Calgary-based midstream company.

Another shipper said his company had been offered a single digit discount giving them a "small amount of relief".

Shipments from Canada to the United States have plunged by more than a third this year to 112,000 barrels per day in July, according to the latest U.S. data, undermining industry forecasts made before the oil price crash that total Canadian crude by rail volumes could hit 700,000 bpd by end-2016.

"They have cut their rates to help attract volumes. All the railways are doing it," said John Zahary, chief executive of Altex Energy Ltd, which operates five rail loading terminals in Canada and whose customers are shippers. "It's certainly helpful in getting volumes, but it's still tough out there."

Zahary's company has also taken a haircut, trimming costs where possible, and loads about 100 cars a day at Altex terminals, less than full capacity, he said.

A senior executive at another Canadian rail terminal operator said over the last four months freight rates had come off around 10 to 20 percent and as a result rail volumes had picked up slightly since August.

Canadian oil sands producers that ship their crude by rail include Cenovus Energy, which also owns a unit train loading terminal in Alberta, and Suncor Energy. Cenovus declined to comment on its commercial agreements, while Suncor did not immediately respond to a request for comment.

Rates vary according to whether the crude is being shipped on dedicated unit trains or alongside other cargoes, and whether the barrels are under contract or one-time spot shipments.

The rate for committed manifest barrels to the U.S. Gulf or East Coast now costs around $13-$15 a barrel, down from $15-$17 earlier this year, according to one of the people.

Even so, crude by rail economics remain challenging, with the narrow spread between international Brent and U.S. benchmark inland crude making it difficult for Canadian barrels to compete with overseas imports into U.S. markets.

Canadian differentials, another factor in determining the viability of crude by rail, are also relatively narrow. Heavy crude was last trading at around $15 per barrel below U.S. benchmark crude, having ranged between $9 and $20 a barrel below since June.

IS IT WORKING?

At least one Canadian oil producer that has not previously loaded crude onto trains is considering adopting rail transport because of lower rates, said a source at the company who declined to be named.

But the economics of crude by rail are still "considerably underwater," according to one source, and it's too early to tell whether the rate cuts are enough to stimulate more traffic.

The latest data from the U.S. Energy Information Administration hints the tide might be starting to turn, with July volumes up 72 percent from June.

Those numbers do not include volumes shipped within Canada which Taylor Robinson, president of crude by rail advisers PLG Consulting, said would take the total to 175,000 bpd of crude. Just a few years ago, the company estimated Western Canadian crude loadings would be up to 400,000 barrels per day by 2015.

Narrow Canadian crude differentials earlier this year and new pipelines out of Western Canada had contributed to low volumes but if production ramps up as forecast, Robinson said, in spite of low global oil prices, crude by rail could swing back into favor.

"Production should rise, and they are going to run out of pipeline capacity, so there is going to be an increase in rail traffic," Taylor said.

(Reporting by Nia Williams and Jarrett Renshaw, editing by Jessica Resnick-Ault and Andrew Hay)

Also Wells are being drilled... but not finished [fracked and brought into service]... dropping production further.

Reuters; UPDATE 2-North Dakota oil well backlog nears 1,000 amid price slide

By Ernest Scheyder

Oct 13 (Reuters) - The number of North Dakota oil wells that have been drilled but not fracked rose to an all-time high in August of almost 1,000, as producers delayed bringing them online as long as possible in hopes that crude prices would rebound.

It was the latest sign yet that the state's oil industry, the second-largest in the United States, has sharply curtailed spending amid the more than 50 percent drop in oil prices since 2014.

North Dakota now has 993 drilled-but-uncompleted wells, or DUCs, according to data released on Tuesday by the state's Department of Mineral Resources, which reports with a two-month lag.

"That reflects an attitude of leaving the oil in the ground and voluntarily reducing production," Lynn Helms, the DMR's director, said on a conference call with reporters.

Helms said he expects the number to eclipse 1,000 before the end of the year. The increase in DUCs is in part why output in the state is edging down as production from existing wells naturally declines. Only 51 new wells entered service in August, lifting the total well count to 13,016.

Producers have one year to drill, frack and start producing oil from a well. If that window passes, the DMR warns producers they have six months to plug the well or start producing oil. It then moves to confiscate the well if nothing has been done by the end of that six-month window.

Most of the delayed wells have one-year windows that expire in December, Helms said.

Helms said last month that he was open to granting extensions on the one-year timeline, though he would need approval from the North Dakota Industrial Commission to do so.

The commission, which comprises the state's governor, attorney general and agriculture commissioner, will next meet on Oct. 22, at which time Helms said he will ask permission for a blanket policy allowing for extensions.

Extensions for each of the 993 wells must be applied for and reviewed individually, and mineral and land owners have the right to object to any extensions. EOG Resources Inc and Exxon Mobil's have the largest number of DUCs, according to state data.

Objections to extension requests, Helms said, are rare.

OUTPUT DROP

The state's oil production fell slightly in August for the second month in a row, largely because of low crude prices .

North Dakota produced 1,186,444 barrels of oil per day (bpd) in the month, compared with 1,206,996 bpd in July, according to the DMR.

It was the first time since 2003 that output fell in August, normally a very productive month for the industry given warm weather and lack of precipitation.

"This (production drop) is definitely not normal and is a reflection of what's happening in the industry during this price downturn," Helms said, warning that output will continue to decline gradually unless prices rise soon.

In a sign of the industry's resilience, though, the 10 largest oil producers in the state can maintain existing production with U.S. oil prices at or above $50 per barrel, Helms said.

A small part of the decline, roughly 5,000 bpd, is due to voluntary and required curtailments to reduce flaring, the wasteful burning of natural gas. (Reporting by Ernest Scheyder; Editing by Terry Wade and Steve Orlofsky)

[TOM4CWB]

That was caseih... not Riders... that did the topic... my mistake.

[ajl]

Big question: How long will Canuckistan survive with $50 oil before it sinks like Greece? I will say 20 years max. If Harper wins Monday it may survive a couple of more years but it will sink like Greece without oil to pay the bills.

[bucket]

So oil drops in half and they get a rail rate cut.

Wheat drops in half and we get an indexed increase.

Sure sounds like a hunger strike issue to me?

[riders2010]

Well tom you said some get price reduction if
Booked months ahead. Well we ve all had grain contracts not taken for months waiting and waiting. Sure as hell could have been some booking done there.

Farmers are not a priority for the rr because there is no pressure or plan by our government because we don t pull the puppet strings in Ottawa the oil industry does.

[Guest]

Well Tom lucky you're keeping us all inline .the fact of the matter is ,all that oil needs to go back in pipelines.not hauling it cheaper so they can cut more corners and blow more stuff up . Did you have to sign an agreement that you have to stick up for RR's now after you got your bill paid ?

[farmaholic]

Well of course they can drop the rates for oil, look how cheap diesel has become since the collapse in oil prices, it's a direct correlation....

Sarcasm fully Intended.

[westernvicki]

The problem with farmers is we have no negotiating power with our grain: we pay the bill via the industry.

We do pay for inefficiencies demurrage, on railcars, containers an ships costs which are not even monitored by the CTA. Costs which are a measure of efficiency as increased demurrage is indeed a refection of systems inefficiencies. The cost to market for Canadian grain is some of the highest in the world, if not the highest, regrettably we do not even know this, because again; we chose not to monitor cost to market relative to other suppliers, a number I would argue important to monitor from a land locked production base perspective.

We need to be competitive. Transporation is a major input cost in Canada, we should gauge it.

The CTA panel review will wrap up in November, will an instituted efficiency report card this will even get a line on the report. I doubt it.

Do we know our competitive cost to market? Not that I am aware of.

Millions of dollars in WGRF maybe they could do this for us, from the largess of rail revenue.

Go think.