CP Rail strike may end before oil slumps
By Jeffrey Jones
CALGARY, Alberta (Reuters) - A strike at Canadian Pacific Railway Ltd (CP.TO: Quote) is unlikely to drag on long enough to prompt a return to bargain-basement price discounts for Canadian crude oil, growing volumes of which is moving to market by train as pipelines run nearly full.
In addition, far greater volumes move on trains from North Dakota's booming Bakken shale oil region, where the carrier's workers remain on the job, another factor that should prevent a price collapse, at least for awhile, analysts said.
About 4,800 CP Rail locomotive engineers, conductors and traffic controllers represented by the Teamsters Canada Rail Conference walked off the job on Wednesday after contract talks broke down.
Canadian Labour Minister Lisa Raitt said the government could legislate employees back to work as early as Monday. The Conservative government of Prime Minister Stephen Harper has been quick to step in to halt work stoppages involving transport companies, citing the potential to harm the economy.
While railroads including CP Rail and Canadian National Railway Co (CNR.TO: Quote) still move a relatively small portion of Canada's roughly 3 million barrels a day of oil output, they have provided a release valve as efforts to boost the capacity of major pipelines run into regulatory and political obstacles.
So far, the CP Rail dispute has not affected price differentials for key crude types derived from the Alberta oil sands such as light synthetic and Western Canada Select heavy, a trade source said.
"CP would have to be out for weeks for it to take any effect," the source said.
The strike began in the normally slow trading period for Canadian crude in the last week of the month before business for July deliveries will begin in earnest. Continued...