Union Pacific Corporation (UNP), Continental Resources, Inc. (CLR): Declining Spreads Are a Big Concern for Oil and Rail Companies

How to play this move
I certainly wouldn’t suggest trying to fight this shrinking spread, nor would I suggest abandoning your rail investments, either, since crude transport represents, in most cases, only a small (but growing) portion of their income. I also don’t think, without a major surge in WTI, that we’ll see a big price difference in the oil drillers themselves. I mean, what they lose from the Brent difference they gain from cheaper shipping costs, since they can sell at the wellhead or in Cushing, which is often a lot closer than Louisiana.

The smart way to play tightening Brent-WTI spreads is by investing in midstream companies that have the pipelines and storage network to handle a boom in oil production. There are frankly too many to list, so consider this a “to be continued” for a few days, when I’ll name a few midstream companies that have my undivided attention.

The article Declining Spreads Are a Big Concern for Oil and Rail Companies originally appeared on Fool.com.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of, and recommends, Berkshire Hathaway. It also recommends Canadian National Railway.

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