Release date: December 6, 2018 | Next release date: December 12, 2018
Crude oil imports from Canada by rail now exceed rail movements from Bakken
Between 2010 and 2017, most of the crude oil moved by rail in the United States came from the Midwest (Petroleum Administration for Defense District, or PADD, 2), driven by production out of the Bakken region and the price differential between Brent and West Texas Intermediate (WTI) crude oils. Since 2017, however, crude oil imports by rail from Canada have increased and, in recent months, exceeded volumes originating from PADD 2 (Figure 1). The recent increase in Canadian crude oil imports by rail is driven by growing Canadian production combined with pipeline constraints out of Canada. A steep price discount of Western Canadian Select (WCS) to WTI is associated with these developments. WCS crude oil is typically priced lower than other crude oils because of differences in crude oil quality, although increasing production of WCS and pipeline capacity constraints in Western Canada have resulted in even lower prices of WCS compared with Brent and WTI.
Growth in Canadian crude oil production has outpaced expansions in pipeline takeaway capacity, dampening Canadian crude oil prices and increasing movement of Canadian crude oil exports by rail. The increase in production along with the costs associated with moving crude oil out of Canada by rail are reflected in the price spread between WCS in Hardisty, Alberta, and WTI in Cushing, Oklahoma. The crude oil spot price difference between WCS and WTI reached -$50.00 per barrel (b) on October 11, 2018, the largest difference in more than 10 years, and settled at -$33.25/b on November 28, 2018 (Figure 2). The price spread narrowed recently because of the announcement by the Alberta government that it will implement crude oil production cuts in January 2019.
The U.S. Energy Information Administration (EIA), in its November Short-Term Energy Outlook (STEO), projects that total liquids production in Canada will increase to 5.2 million barrels per day (b/d) in 2018, up approximately 250,000 b/d from 2017. Because of the cancellation or delay of pipeline projects—some to the United States and others across Canada to its Atlantic and Pacific Coasts for export—volumes of Canadian crude oil exported to the United States by rail from January through September increased 67,000 b/d compared with the same time last year.
Of the 67,000 b/d January-through-September year-over-year increase in U.S. imports of Canadian crude oil by rail in 2018, more than half (37,000 b/d) went to the U.S. Gulf Coast (PADD 3). All parts of the United States, except the West Coast, have seen an increase in deliveries of Canadian crude oil by rail since the beginning of the year and trade press reports indicate this trend should continue through the fourth quarter of 2018 (Figure 3).
Despite increased U.S. demand for Canadian crude oil, the outlook for increased volumes of Canadian crude oil by rail to the United States is highly uncertain. Trade press reports indicate that construction of the Trans Mountain pipeline may resume by fall of 2019, which would add a non-U.S. export outlet for Canadian crude oil.
U.S. average regular gasoline and diesel prices decrease
The U.S. average regular gasoline retail price decreased nearly 9 cents from last week to $2.45 per gallon on December 3, 2018, down nearly 5 cents from the same time last year. Midwest prices fell nearly 12 cents to $2.20 per gallon, Gulf Coast prices decreased more than 9 cents to $2.12 per gallon, Rocky Mountain and East Coast prices each fell nearly 8 cents to $2.72 per gallon and $2.42 per gallon, respectively, and West Coast prices decreased nearly 7 cents to $3.24 per gallon.
The U.S. average diesel fuel price decreased more than 5 cents from last week to $3.21 per gallon on December 3, 2018, almost 29 cents higher than a year ago. Midwest prices fell nearly 7 cents to $3.12 per gallon, while West Coast, Rocky Mountain, East Coast, and Gulf Coast prices each decreased nearly 5 cents to $3.69 per gallon, $3.29 per gallon, $3.23 per gallon, and $2.99 per gallon, respectively.
Propane/propylene inventories decline
U.S. propane/propylene stocks decreased by 1.3 million barrels last week to 79.8 million barrels as of November 30, 2018, 2.8 million barrels (3.4%) lower than the five-year (2013-2017) average inventory level for this same time of year. Midwest and East Coast inventories decreased by 0.8 million barrels and 0.5 million barrels, respectively, while Rocky Mountain/West Coast inventories dipped slightly and Gulf Coast inventories rose slightly, each remaining virtually unchanged. Propylene non-fuel-use inventories represented 5.6% of total propane/propylene inventories.
Residential heating oil prices decrease, propane prices remain flat
As of December 3, 2018, residential heating oil prices averaged $3.20 per gallon, 7 cents per gallon less than last week's price but 33 cents per gallon higher than last year's price at this time. The average wholesale heating oil price for this week averaged almost $1.97 per gallon, 8 cents per gallon less than last week and almost 7 cents per gallon lower than a year ago.
Residential propane prices averaged nearly $2.43 per gallon, less than 1 cent per gallon higher than last week but almost 3 cents per gallon lower than a year ago. Wholesale propane prices averaged $0.84 per gallon, almost 2 cents per gallon less than last week and nearly 27 cents per gallon lower than a year ago.
For questions about This Week in Petroleum, contact the Petroleum Markets Team at 202-586-4522.
Retail prices (dollars per gallon)
| Retail prices | Change from last | ||
|---|---|---|---|
| 12/03/18 | Week | Year | |
| Gasoline | 2.451 | -0.088 | -0.049 |
| Diesel | 3.207 | -0.054 | 0.285 |
| Heating Oil | 3.201 | -0.073 | 0.332 |
| Propane | 2.426 | 0.003 | -0.026 |
Futures prices (dollars per gallon*)
| Futures prices | Change from last | ||
|---|---|---|---|
| 11/30/18 | Week | Year | |
| Crude oil | 50.93 | 0.51 | -7.43 |
| Gasoline | 1.441 | 0.050 | -0.301 |
| Heating oil | 1.846 | -0.030 | -0.095 |
| *Note: Crude oil price in dollars per barrel. | |||
Stocks (million barrels)
| Stocks | Change from last | ||
|---|---|---|---|
| 11/30/18 | Week | Year | |
| Crude oil | 443.2 | -7.3 | -4.9 |
| Gasoline | 226.3 | 1.7 | 5.4 |
| Distillate | 125.6 | 3.8 | -3.8 |
| Propane | 79.806 | -1.337 | 5.336 |