We've written before on The Barrel about the revival of rail transportation of crude. It's been made possible largely by the blown out spread between Brent and WTI. It means that crude out of the Bakken that would otherwise go by pipeline to the depressed market of Cushing, Oklahoma, can instead profitably assume the burden of rail transportation costs and go to the US Gulf Coast. Or California.
Or apparently anywhere.
In yet another sign that the combination of the spread, the creativity of traders and the gigantic reach of the American rail system are proving to be a terrific match, Platts' Robert Mayer and Matthew Cook reported Thursday that crude from North Dakota's Bakken fields is now headed toward Philadelphia.
It won't get there by rail the entire way. Instead, trains will take the crude as far as Albany, New York, and then it will be barged to Sunoco's 330,000 b/d Philadelphia refinery and its 175,000 b/d nearby Marcus Hook refinery. The barges will go down the Hudson and then make their way up the Delaware to the Sunoco refineries.
The basic facts reported by Robert and Matt are that Global Partners, usually a wholesale products distributor, put the deal together. One unit train of crude is on its way; a unit train can carry as much as 100,000 barrels, though 60,000 barrels is a more frequent figure.
How many different ironic things can we find in this transaction? First of all, the Sunoco refineries are on the sales block and may eventually be closed as Sunoco pulls out of the refining business. Sunoco is finding it difficult to operate profitably for a variety of reasons, but one of them is that it is as an East Coast refiner, it's buying crudes that are priced against the higher-value Brent benchmark.
So now, in what might be some of the last months of the refineries' existence (until somebody comes along and sweeps them up for a low price, which often happens), the company is turning to the middle of the country, away from the Brent benchmark, for some supply.
Secondly, this is like the Erie Canal in reverse. The canal had its heyday taking products from the East Coast up the Hudson River, westward through the canal into the Buffalo area for offloading into the Great Lakes system. In this case, one of the heartland's new products--the growing flow of Bakken crude--is using at least part of that old route to get product to the East Coast; it's just going the other way.
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