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Buckeye Partners export Bakken crude out of NJ terminal -sources

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(Adds prices, quotes, background, details on exports)

By Jarrett Renshaw and Devika Krishna Kumar

NEW YORK, Nov 29 (Reuters) - Buckeye Partners LP has begun exporting small volumes of Bakken crude out of its terminal in Perth Amboy, New Jersey, four sources told Reuters on Thursday, in what they believe is the first such shipment ever from the U.S. East Coast.

The new shipments come as Houston-based Buckeye Partners is preparing to export larger volumes of heavy Canadian crude oil early next year. The company has begun converting seven tanks at the terminal into crude storage in preparation for the higher volumes, one of the sources said.

The U.S. East Coast has long been an importer of crude oil, but steep discounts for crude from North Dakota and Canada has made it economical to haul barrels via mile-long unit trains into the East Coast for export, traders said.

Bakken crude at Clearbrook, Minnesota was bid at about $12.75 a barrel below the calendar month average of front-month U.S. crude futures on Thursday, dealers said.

Prices plunged to the weakest level on record early this month as production in the region surged to a new peak above 1.3 million barrels per day (bpd), largely outpacing pipeline takeaway capacity.

The Bakken is currently the third-largest U.S. shale play.

The Bakken shipments are small, equating to less than 10,000 barrels-per-day, one of the sources said, and are likely headed to Canada and Europe.

Buckeye did not respond to multiple inquires regarding the shipments, but earlier this month executives told analysts the company was preparing to sign a long-term contract to move heavy Canadian barrels through the terminal for export.

"In New York Harbor, we are nearing completion of negotiations on the restart of crude by rail, which we expect will be supported by a long-term contract from a customer planning to export crude oil to supply its refinery operations with price advantage Canadian heavy crude," Buckeye CEO Clark Smith said in a November 2 earnings call with analysts.

Philadelphia-area refineries would have been a likely buyer of Bakken crude, but the shipments would require the use of expensive Jones Act vessels, which are more expensive to charter than foreign-flagged vessels.

"Economics don't work to Philly. It's the absurdity of the Jones Act on full display," said one trader. (Reporting by Jarrett Renshaw and Devika Krishna Kumar; Editing by Richard Chang and Diane Craft)