Page 4 - NorthAmOil Week 47

NorthAmOil COMMENTARY NorthAmOil
Canadian rail strike brought to an end
A tentative agreement has brought a week-long rail strike to an end, allowing crude shipments – among others – on Canadian National Railway trains to resume
CANADA
WHAT:
Normal service resumed on CN Railway on November 27 following a week-long strike.
WHY:
The rail operator has reached a tentative deal with the Teamsters Canada Rail Conference union.
WHAT NEXT:
The end of the strike offers much needed relief to Alberta producers struggling for takeaway capacity.
THE Teamsters Canada Rail Conference union said on November 26 that it had reached a tenta- tive deal with Canadian National Railway (CN) that would allow normal operations to resume following a week-long strike. About 3,200 CN conductors and railyard workers had been on strike since November 19 over issues such as working conditions. It was the longest rail strike in over 10 years, and disrupted shipments of crude, grain and potash.
The deal needs to be ratified by Teamsters members via a secret ballot, which CN said in a statement it expected to take eight weeks. How- ever, normal service resumed on November 27 in the meantime.
The strike had come as a further blow to Alberta’s oil industry, which has been struggling with a lack of takeaway capacity, compounded by a recent outage on the Keystone pipeline. With farmers in the province also affected by the strike, both Alberta’s government and commod- ity producers had warned of the risks the indus- trial action posed to the economy.
Crude by rail
CN – Canada’s largest railway operator – ships over 170,000 barrels per day of Western Cana- dian crude, though this rose to 180,000 bpd in September as producers increasingly turned
to rail to send their oil to market. This figure accounted for over half of Canada’s crude-by- rail exports that month. Over the course of the strike, downward pressure on regional oil prices widened the differential between Western Canadian Select (WCS) and West Texas Inter- mediate (WTI) to $19.25 per barrel. According to Bloomberg, this was the widest differential between the two benchmarks since November 11.
Canadian Energy Minister Sonya Savage had called for Prime Minister Justin Trudeau to recall Parliament immediately to address the strike. This week, Teamsters thanked Trudeau for respecting workers’ rights to walk off the job.
“Previous governments routinely violated workers’ right to strike when it came to the rail industry,” Teamsters Canada’s president, François Laporte, said in a statement. “This gov- ernment remained calm and focused on helping parties reach an agreement, and it worked.”
However, the impact of the strike was felt quickly by industry players while it was underway.
In a letter to the federal Canadian govern- ment dated November 23, Alberta-based Inter Pipeline said the strike was causing produc- tion slowdowns at its operations. The company
Alberta’s producers have been turning to rail in the absence of new pipeline capacity out of the oil sands.
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Week 47 27•November•2019