Reuters first - Oil returns to US rails to avoid mammoth Midwest glut

Reuters set the agenda on one of the most important oil stories of the year – the growing use of railway lines as a way to break through the logistical logjam that is causing record discounts for inland crude oil versus seaborne supplies. With Europe’s Brent crude oil benchmark having surged to an unprecedented premium above U.S. WTI futures, traders across the globe are wondering when market fundamentals will start to correct the imbalance. The Feb 4th story helped answer that question, looking in detail at the accelerating trend of shipping North Dakota and Canadian crude to the Gulf Coast by rail, bypassing existing pipelines that are already filled to capacity. While shipments are small for now, a host of new projects could help relieve the growing oversupply that is effectively landlocked in the U.S. mid-continent, setting the stage for an eventual correction in the Brent/WTI spread. While reports of such ‘railway arbitrage’ had begun to appear over the past few months, Reuters story was the first to cover it in great depth and with unparalleled authority, citing numerous company officials who are engaged in the trade.