The crude by rail (CBR) business continues to sag from its peaks in 2013 and early 2014, according to the Association of American Railroads (AAR). A new RBN Energy study projects the trend will continue in the near future, although a few markets with a unique blend of circumstances will see better unit train business.

The AAR reported that carload crude oil shipments fell to 63,000 loads in the first quarter—a 25% drop from the final quarter of 2015 and a 44% decline from first-quarter 2015.

For the second week of May, U.S. crude oil and petroleum product rail traffic was down 19% from the year-earlier week. However, it was up by a modest 3% from the previous week, AAR found.

A big part of the weakness in the May numbers stems from the massive fire in Canada that shut in production from Alberta’s oil sands, according to a Seaport Global Securities research report.

“The disruptions from the wildfires … are contributing to weaker numbers across other important activities,” Seaport said. “Canada railcar volumes are down 18.6%, compared to a decline of 11.4% for the U.S.”

However, the fires could actually cause a temporary rebound in U.S. CBR traffic, Seaport added. “There is a moderate chance for a slight uptick in U.S. railcar action due to the Alberta wildfires. U.S. producers and midstream operators may have to work harder to move crude oil from typical regional movements, toward hungry refiners in the Midwest district, in the coming weeks,” the report said.

RBN noted that the price-sensitive Bakken play has dominated rail-shipped crude due to the region’s comparative lack of pipeline capacity. The study added that overall, “the near-term outlook for CBR remains cloudy, particularly if oil prices stay low and continue to hold down production volumes.

“But all is not gloom and doom,” RBN added. “Volumes on some CBR shipping corridors are holding up, and a few terminals continue to be built. Also, it seems likely that the inherent advantages of CBR—destination flexibility, optionality and speed-to-market—will always play a role in continually evolving crude oil markets.”

It said shipments from the Bakken to the East Coast have actually increased slightly in recent weeks, mostly to fulfill existing refiners’ contract obligations. Bakken-to-West Coast volumes have remained somewhat strong as well. Shipments out of the region to the Gulf Coast, and from the Permian to various markets, have been particularly weak.

“It turns out that considering CBR’s economics, rationale and outlook on a local basis is critical,” RBN said. “Each production/loading area and each CBR destination has its own set of unique characteristics and its own dynamics that together will help to determine whether moving crude by rail—a practice that dates to the earliest years of the oil industry but then fell from favor—will be a short-lived phenomenon or a continuing fixture in the midstream landscape.”

The long-term decline in crude traffic comes at a particularly difficult time for the railroads just as shipments of other commodities—particularly coal—have declined sharply, as shown in the May numbers. “The disruptions from the wildfires, in addition to commodity industry weakness in Canada, are contributing to weaker numbers across other important activities: Chemicals carloads are down 13.1% year over year; coal, down 25.1% year over year; and metallic ores and metals railcars are down 29.5% year over year,” Seaport said, quoting AAR’s weekly numbers.

The decline has forced the railroads and car leasing firms to idle thousands of cars—many of which are comparatively new, built in response to the surge in CBR business just three years ago.

“Now, many of the tank cars ordered to meet the demand of CBR sit idle; take-or-pay contracts giving producers and others the right to use loading and unloading terminals are rolling off; and more pipeline capacity is in the works,” the RBN report added.

Paul Hart can be reached at pdhart@hartenergy.com and 713-260-6427.