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Thursday, June 13, 2013

Thursday Morning News And Links; RBN Energy Talks About Risk Of A CBR Bust

Active rigs: 188 (up one from yesterday; had been ad 187 for quite some time; range is expected to be between 190 and 210 later this summer)

Wells coming off the confidential list have been posted.

RBN Energy: last train to Bakkenville?
Narrowing price differentials between inland crudes tied to West Texas Intermediate (WTI) and coastal crudes tied to Brent are resulting in a move away from rail shipments and back towards pipelines by producers in North Dakota. The switch away from rail is already having an impact on the lease rates for rail tank cars. Which could call into question the huge backlog of orders for new tank cars. Today we ponder the possibility of a bust in crude-by-rail shipments.
A significant move away from crude-by-rail transportation back onto pipelines – and we believe that there are signs that it is already happening – will likely have some unpleasant consequences for the rail industry and crude shippers using rail. Those with long memories in the rail business have been conscious throughout the recent boom in crude-by-rail of the bust in the ethanol-by-rail tank car market in 2008. That bust followed a boom in ethanol-by-rail movements after Energy Policy Act regulations in 2005 mandated increased ethanol blending into gasoline and diesel.
Since ethanol cannot be carried by pipeline after it has been blended with gasoline (because it attracts water), it is shipped by rail to final blending terminals. The sudden demand for ethanol led to a boom in rail tank car lease rates and a boom in tank car manufacture. When ethanol demand leveled off as US consumers used less gasoline in the recession, the ethanol-by-rail boom turned to bust in 2008 and lease rates for tank cars fell through the floor. [See also, Reuters, June 14, 2013: surge in CBR slows down as WTI/Brent narrows.]
WSJ Links

Section D (Personal Journal):

Section C (Money & Investing):
Say 50 million barrels were liquidated over the second half of the year, which would simply bring U.S. inventories down to around their five-year average. That would amount to almost 274,000 barrels a day. To put that in perspective, it equates to about a third of the IEA's expectation for global oil-demand growth this year. 
The past few weeks have seen yields rise globally as bond investors raise their expectations of the Fed taking its foot off the gas. Oil investors won't be immune. 
Section B (Marketplace):
Section A:

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