Rail trouble strikes Canada’s oil patch with disrupted shipments

CALGARY (Bloomberg) --Canadian oil shipments are getting snarled once again as protesters block train lines in the latest setback to the nation’s rail-dependent crude industry that was struck by a blazing derailment just last week.

Demonstrations against a Canadian natural gas pipeline shuttered service on the Canadian National Railway Co. network east of Belleville, Ontario, and west of Prince George, British Columbia. The blockades cut off crude-by-rail shipments on the CN network to three Eastern refineries that account for about a third of the country’s refining capacity. The disruptions may get worse as the halt could cascade into slowdowns in other areas of the network as traffic backs up and locomotives and rail cars face congestion, according to CN.

The turmoil comes just about a week after Canadian trains carrying oil were ordered to cut their speed for a month after dozens of crude tanker cars derailed and caught fire in Saskatchewan, the second such derailment on the same stretch of track since December.

Slowdowns and obstructed train traffic highlight a vulnerability for Canada’s oil patch. Crude producers have grown increasingly reliant on rail to get their supplies to market after pipelines out of Alberta filled to capacity two years ago.

Canadian oil prices weakened Wednesday amid the disruptions, with Heavy Western Canadian Select’s discount to West Texas Intermediate futures widening $1.10 to $16.85 a barrel, data compiled by Bloomberg show. Just a day earlier, the gap had narrowed to give Canadian supplies their strongest price in four months. Prices also were pressured by a refinery shutdown in Baton Rouge.

Light synthetic crude prices weakened 25 cents to a discount of $2.75 a barrel to WTI.