“We have started a small amount of shipments that are economic under current conditions.” – Imperial spokesman Jon Harding

Canadian crude producer Imperial Oil has recently resumed shipping crude oil by rail from its terminal in Edmonton, Alberta, because of a marginal improvement in rail economics, a company spokesman said last week.

The pickup in volumes is good news for the Alberta government, which is relying on rail to help draw down crude storage inventories in Canada’s main oil-producing province.

“We have started a small amount of shipments that are economic under current conditions,” Imperial spokesman Jon Harding told Reuters by email, declining to give exact volumes.

Calgary-based Imperial slashed rail shipments from nearly 170,000 barrels per day in December to near zero in February after the government imposed mandatory production cuts on oil companies.

Alberta curtailed production to help narrow the discount on Canadian crude, which last year widened to record levels because of congestion on export pipelines. However, the differential between Canadian heavy barrels and US crude tightened so sharply, rail shipments were no longer economical.

Canadian crude traders say a discount of around $15 a barrel on Canadian heavy oil versus US crude is generally needed to make rail economical, although that can be narrower depending on destination market prices and what transportation deals shippers have in place.

Analysts at TPH Energy Research estimate March volumes of crude by rail so far are in the 160,000-175,000 bpd range but said activity is picking up.

“Public data for weekly carloads from the two major Canadian rail operators points to the latest week’s data being the highest level (a whopping 10,600 carloads for the week) since late January when the wheels started to fall off and rail volumes fell precipitously,” they wrote in a note.

The Alberta government is planning to start moving 120,000 bpd of crude by rail later this year. Imperial has been critical of curtailments and this month delayed an oil sands project citing uncertainty caused by government intervention, but was positive about boosting crude by rail volumes.

“We support efforts to expand rail shipments in order to reach higher-value markets and to help alleviate industry pipeline constraints, to the benefit of Albertans,” Harding said.