Reduced oil demand and enough space on typically congested pipelines sent Canada’s crude-by-rail exports plummeting to their lowest levels in four years in May, data from Canada Energy Regulator showed.
In May, Canadian exports via rail plunged by 63 percent compared to April, to just 58,048 barrels per day (bpd). The crude-by-rail exports had also plunged in April compared to the previous month, to 156,242 bpd from 350,567 bpd in March, and from an all-time high of 411,991 bpd in February 2020.
Canada’s crude-by-rail exports in May were at their lowest level since the summer of 2016, when wildfires near many oil sands operations shut in a large part of Canadian heavy oil production.
This year, the crash in oil demand in Canada’s main export market, the United States, led to shut-ins of around 1 million bpd of Canadian production, so pipelines were not as overwhelmed with carrying crude out of Canada as they typically are. With crude-by-rail the more expensive option to ship oil to the market, some producers stopped crude-by-rail shipments when they curtailed their production in April and May in response to the low oil prices.
Enbridge (TSX:ENB), the operator of the Mainline—the largest pipeline network in North America—said that throughput via the Mainline system was down by around 400,000 bpd in April, compared to average Q1 throughput of 2.84 million bpd.
“We expect similarly lower utilization rates will likely continue through the end of the second quarter,” Enbridge said in early May.
Despite the fact that some Canadian oil producers have started to restore part of the production they had curtailed earlier this year, the pipelines carrying heavy oil to the market are not overflowing as they were a few months ago, according to estimates from analysts and pipeline operators.
Due to the price and demand crash in the second quarter, Canada’s oil production slumped to 4.4 million bpd in May – the lowest output since the middle of 2016 when wildfires crippled oil sands production, the U.S. Energy Information Administration (EIA) said last week.
By Tsvetana Paraskova for Oilprice.com
