North America - The 13 Jun 2018 report from PFL Petroleum Services, a full-service railcar company covering the North American rail market (sales, leasing, loaded/empty storage, mobile railcar cleaning, blasting, scrapping, and mobile repair) says that Crude By Rail (CBR) traffic is growing in the U.S. and Canada, albeit with some short-term headwinds.
 
"The biggest news that will create headwinds for CBR in the short term is that Canadian basis for heavy crude tightened last week," PFL said.
 
"Canadian crude oil surged by nearly $13 a barrel after Enbridge, the country's biggest oil export pipeline operator, said it will not make oil producers stick to crude allocation limits.
 
Enbridge told oil producers that, beginning in July, they would have the right to allocations based on a 12 month rolling average, plus an additional 15 percent for heavy crude and 40 percent for light crude, but for any volumes above that they would have to present physical proof that they have the volumes.
 
"After discussions with its shippers (the week of 4 Jun 2018), Enbridge decided to drop the new rule and leave producers to reserve as much pipeline capacity on the main line as they wish.
 
Enbridge's main line system continues to be over subscribed.
 
The Western Canada Select (WCS) - West Texas Intermediate (WTI) spread * is now 37 percent tighter than it was the previous week.
 
We view this as an incremental negative for Canadian CBR opportunities in the short term, with new production continually coming on line we anticipate that basis to widen yet again and rail as the only viable option until new pipeline capacity is added.
 
"CBR out of Canada on Canadian Pacific (CP) is up 35 percent and continues to climb as does Canadian National's (CN) crude volume.
 
CBR in the U.S. also continues to grow, and we are seeing demand for cars pretty much everywhere across the board.
 
"Is rail inflation on the way? You betcha! Higher fuel costs and higher wages across the board due to a tight labor market for specialty trades is going to hit the pocketbook of all shippers as those costs, in our opinion, will soon be passed on. Our advice, lock in your prices today, it certainly is not going to get any cheaper."
 
For its lease fleet, PFL said it is looking for 31,800 gallon tank cars with mag rods (magnetic measuring rods) for natural gas, DOT-117s "any size, any location", CPC-1232 C/I cars 25,500 gallons or larger, and 6,000 cf-plus covered hoppers with gravity gates for purchase or lease.
 
PFL is offering DOT-111 25,500 gallon coiled and insulated cars and 31,800 gallon cars "clean and ready to go in Colorado", 31,800 gallon cars "clean and ready to go with a free move on Norfolk Southern", and 3,250 cf 286K GRL hoppers for lease.
 
* WTI is a benchmark crude oil for the North American market, and Edmonton Par and WCS are benchmarks crude oils for the Canadian market. Both Edmonton Par and WTI are high-quality, low-sulphur, crude oils.
 
William C. Vantuono.