Brent - North Dakota Sweet Oil - NYMEX Spread -- There May Be a Solution

This is really, really cool.

I had noted the increased number of oil loading terminals being built and the rumors that oil loadings were increasing.

I was also very aware of the reason for the Brent - NYMEX spread (something that some of the talking heads on CNBC have not figured out, by the way).

And I posted a story earlier that shipping by rail has been more expensive than by pipeline historically, but due to peculiarities of the process, shipping by rail is now competitive, or nearly competitive, with pipeline. I will try to find the link.

But I never connected all the dots.

According to a great Reuters story (sent to me by a reader), the producers are now increasing their rail loadings to ship highly sought after Bakken crude to points east and west to avoid Cushing, Oklahoma, where there is a glut. Highly sought after Bakken sweet oil? Enbridge announced recently it will ship only sweet oil going forward.

For a relatively short article, much of it was devoted to the Bakken:

• Industry sources and government officials in North Dakota and Montana say that as many as 10 crude-by-rail terminals are planned in the Bakken area, adding to existing crude-by-rail capacity from the region of about 115,000 bpd.
• EOG Resources began early this year to ship crude between its two new crude-by-rail terminals in Bakken and Stroud, Oklahoma, near Cushing. The company has said the terminals will allow it to ship a unit train per day, or 60,000 barrels. The terminals segue into BNSF's railroad network.

I forgot (or did not know that EOG had two (2) crude-by-rail terminals.

Warren Buffett bought BNSF a couple years ago. He is either the smartest investor, the luckiest investor, or a little of both. I started buying shares in BNI in 1984 and accumulated shares for 30 years until Mr Buffett bought BNI. Drat.

Speaking of glut, could there be a short term huge sell-off of oil? I think a fair amount of price of oil must be do to expectations of global economic recovery. I'm just not seeing enough of the recovery yet to the extent necessary to take this excess oil off the market. Analysts are confused. For every talking head "long" on oil, there is a talking head "short" or neutral on oil.

By the way, there is a nice discussion of this very issue -- the Brent - WTI spread -- over at the Bakken Shale Discussion Group. It was nice to seem them reference this blog without stating outright.