Shipments of U.S. oil by rail have since doubled to more than 1 million barrels a day, sparking a national debate over safety, and volumes may mount if the government allows more exports of crude, easing a four-decade ban. Global and other midstream carriers are preparing themselves for a chance to serve that market.

“The East Coast was left on a figurative island when everyone in the middle of the country got access to low-priced crude coming out of the Bakken, and oil by rail was its lifeline,” Bradley Olsen, managing director at energy investment bank Tudor, Pickering, Holt & Co., said by phone from Houston. “The next challenge is exports.”

Eoin Treacy's view

The entry of US oil onto the world stage would represent a powerful force that would help eliminate the arbitrage between WTI and Brent crudes and would be a net positive for Europe. As a geopolitical tool it would also exert leverage over regimes seeking to further their objectives with the threat of supply disruptions. Considering the escalation of geopolitical tensions currently underway the export of oil to the United States’ allies would add considerably to the goodwill between nations and bolster floundering relationships in some quarters. 

Rail and barge companies which have been among the primary beneficiaries of transporting stranded share oil to refiners represent approximately 33% of the Dow Transports Average and four of its five largest constituents. Yesterday’s downward dynamic suggests the Average has entered at least a period of mean reversion.