With last year's crash in oil prices, less crude is moving by train, creating a surplus of idle rail cars that have become opportunistic vessels for some traders storing petroleum until prices recover.

"There are a lot of people looking to do it," said Dennis A. Hoskins, managing partner of crude marketing at Energy Midstream, a Texas trading company that recently stored a light crude-oil derivative called condensate in rail cars for 15 days before shipping it to Canada.

Though no government agency maintains data on the practice, the use of so-called rolling storage for crude oil does not appear to be widespread. But it has gotten some attention this year, much as "floating storage" of crude oil in barges and tankers was a hot topic last year.

"There's definitely a lot of rail cars that are idle right now," said Philip Rinaldi, chief executive of Philadelphia Energy Solutions, which operates the South Philadelphia refining complex. He said most East Coast refiners, including PES, have cut oil-train deliveries since foreign crude imported on ships became more competitively priced.

Still, Rinaldi said, "I don't know of anybody who's storing crude oil in rail cars." PES has plenty of crude-storage capacity at its Point Breeze refinery, where it can hold 1.8 million barrels, about as much as 25 oil trains combined.

With oil prices rising in recent weeks after more than a year on the skids, the arithmetic might favor stashing some crude into storage: This week's barrel is likely to fetch a higher price next week.

But storage is not free. And many owners of rail sidings don't want the liability of storing a hazardous material like crude oil.

While the cost of leasing rail cars has plummeted in the last year, the price of leasing track to store the loaded rail cars has increased, according to Genscape, an industry news service.

Storage of loaded tank cars was recently being offered at prices from $11 per day per car in Snowflake, Ariz., up to $52 per day in Cedar Rapids, Iowa, according to a Genscape blog post. A crude-oil tank car typically holds about 700 barrels.

"It's really more of an opportunistic play if you're sitting on a bunch of rail cars," said Ernie Barsamian, a principal of The Tank Tiger, a Princeton broker of oil and fuel storage.

"If you are looking to lease the cars or have to lease the track, it's not as attractive," he said. It could cost up to $5 a barrel per month to store crude oil in a rail car, which means that a trader would lose money if the price failed to rise enough to cover the storage costs.

Fully laden tank cars can't be stored just anywhere. "If you want to leave a train sitting in a neighborhood, it's probably not a good idea," said Barsamian.

Major railroads, which do not own the tank cars, say they will move cars containing hazardous materials, but not store them.

"CSX does not provide storage for crude-oil trains," said Rob Doolittle, a spokesman for the rail line, one of the major carriers in the region.

Under federal regulations, rail cars loaded with hazardous materials like crude oil can only be stored on "private track," not railroad main lines or switching yards. The federal rules require the owners of private tracks to have security plans that prevent unauthorized access to the materials.

While in storage, the materials also would come under state or federal environmental controls. But Fred Millar, a hazardous-materials consultant in Virginia, suspects that some transporters escape regulatory oversight by claiming the cargoes are "storage in transit."

The Federal Railroad Administration said it is alert to the issue. "FRA is closely monitoring the transportation of crude oil and other energy products, and if we find that additional steps are necessary to address safety concerns, we will take them," said Matthew Lehner, an agency spokesman.

Last year, rail car manufacturers delivered 36,065 new tank cars to shippers, according to the Railway Supply Institute. At the same time, the number of carloads of crude oil fell by 16.8 percent, according to the Association of American Railroads. That means there are more railcars chasing less business.

Empty oil cars began turning up on sidings of some short-line railroads last year, attracting the attention of local media. Wayne Michel, president of the Reading & Northern Railroad, told the Reading Eagle in October that the railroad had 2,000 cars parked on a Berks County siding along the Schuylkill between Leesport and Hamburg.

Michel declined to respond to questions this week about whether the short line was storing loaded cars.

Brokers estimate there are about 20,000 idle rail tank cars in the country now, which would represent a potential storage capacity of about 14 million barrels. It's a relatively small amount compared to the nation's crude-storage capacity of 650 million barrels at refineries and tank farms, and the 727 million barrels in the Strategic Oil Reserve.

"It's not of any significance," said Hoskins of Energy Midstream.

Most of the loaded oil cars, he noted, are stored on sidings in oil-producing areas or at oil terminals along the Gulf Coast.


215-854-2947 @maykuth