Canadian Oil Weakest in 2 Weeks as CN Rail Strike Traps Barrels
Union See Progress in Talks; Announcement Possible: CN Update
(Bloomberg) -- Canadian heavy oil prices weakened on Monday as a week-long rail strike forced transport terminals to take reduced volumes of crude with tanks filling up.
Oil sands-benchmark Western Canadian Select’s discount to West Texas Intermediate futures grew 35 cents to $19.25 a barrel, the widest since Nov. 11, data compiled by Bloomberg show. Prices weakened as a strike of about 3,200 workers at Canadian National Railway Co. neared its second week, disrupting commodities shipments.
The labor action is taking an increasingly heavy toll on the Canadian economy. The world’s biggest fertilizer producer, Nutrien Ltd., said Monday that it would curtail production at its largest potash mine due to the strike and shut the facility for two weeks on Dec. 2. Inter Pipeline Ltd. said it may have to shut its Redwater fractionator if rail services aren’t restored.
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The Teamsters Canada Rail Conference union, which has been without a contract since July, says that CN wants to make it more difficult to take time off and make employees work longer hours. On Monday it realeased what it said was a recording CN supervisor telling fatigued workers to continue working. CN said it was looking into the recording.
The strike has hit hard at Canadian oil, the country’s biggest export.
Altex Energy Ltd. filled all the rail tanker cars on site but is still taking oil from producers at reduced volumes, John Zahary, chief executive officer, said on Monday. The company’s CN-serviced terminals in Western Canada, including Lashburn, Lynton, Unity and Falher, have about 200,000 barrels of storage.
“We will be full in a couple of days,” Zahary said by text.
CN said Friday a “small pool of qualified managers” allow the company to fulfill about 10% of normal services. Some oil and other commodities are moving on larger trains, operating with limited-sized crews, according to a person familiar.
Western Canadian oil companies must rely on shipping some oil by rail after pipelines filled to capacity nearly two years ago. CN moved 180,000 barrels a day in September, making up more than half of Canada’s total crude-by-rail exports that month. Alberta’s government has been seeking to encourage rail usage by exempting oil shipped on trains from production limits imposed on the province’s biggest companies early this year to alleviate a glut caused by too few pipelines.
Not all oil companies are equally affected by the strike. Imperial Oil Ltd. owns one of Western Canada’s largest terminals near Edmonton, Alberta. The majority of the oil they ship by rail goes on the Canadian Pacific Railway Ltd. sytem, not CN’s, said spokesman Jon Harding. Cenovus Energy Inc.’s Bruderheim terminal is also served by CP and CN. The Hardisty terminal of USD Group Llc. and Gibson Energy Inc. is served by CP.
--With assistance from Jacqueline Thorpe, Kevin Orland and Sandrine Rastello.
To contact the reporter on this story: Robert Tuttle in Calgary at rtuttle@bloomberg.net
To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net, Catherine Traywick
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