Cenovus Energy, a major Canadian oil producer, has signed a deal to move more crude with the Canadian National Railway Co, a source with direct knowledge of the matter told Reuters.

 

The deal is one of many being quietly signed that, along with the expedited deliveries of new locomotives, will help boost Canada's crude-by-rail shipments 50 per cent by year end, a government consultant told Reuters separately.

 

The source said the Cenovus-CN deal was inked days before a Canadian court last week overturned the approval of the Trans Mountain oil pipeline expansion. 

 

Shipper commitments put CN and smaller rival Canadian Pacific Railway Ltd in position to collectively move more than 300,000 barrels per day by December, said Greg Stringham, a consultant who mediated talks among oil producers and railways for the Alberta government this year.

 

Stringham did not directly address the Cenovus deal, but said new crude-by-rail "contracts are being signed. Not all of those been disclosed yet, but it is continuing."

 

The railways, burned a few years ago when booming demand for crude-by-rail vanished as oil prices fell and pipeline space opened, are now seeking rich multi-year, take-or-pay deals from producers. The 300,000 bpd would be 50 per cent higher than June's record 200,000 bpd and double 150,000 bpd achieved in December 2017. It is expected to further increase in 2019 as locomotive orders start to catch up with demand.

 

The two railways and Cenovus declined to comment. The source declined to be identified as the deal is not public.

 

Cenovus CEO Alex Pourbaix said in July that he was considering a multi-year commitment to move 50,000 to 60,000 bpd by rail.

 

Cenovus shares rebounded to trade up as much as 0.86 per cent soon after the news. Earlier in the day, they had fallen 6.4 per cent after Goldman Sachs downgraded the stock to sell. -- Reuters