Oil price falls on pipeline restart
Oil prices fell for a second day on Wednesday on expectations that a key Canada-U.S. crude pipeline will reopen soon from a week-long shut-down, although data showing a drop in U.S. crude stocks limited losses.
Disappointing regional manufacturing data and slower U.S. industrial production growth, coupled with a dive in the Japanese yen, added to pressure, pulling oil prices further down from a one-month high above $78 a barrel hit on Monday.
U.S. crude for October delivery fell $1.20, or 1.56 percent, to $75.60 per barrel at 1:33 p.m. EDT, trading from $74.66 to $76.65, with crude’s losses concentrated at the front end of the price curve as traders factored in a quicker resumption in Canadian exports that would boost supplies.
In London, the expiring ICE October Brent crude contract fell 41 cents to $78.75 a barrel, steepening the discount for U.S. crude futures to Brent to about $3 a barrel. It had hit less than $1.40 earlier this week on the pipeline outage.
Canada’s Enbridge (ENB.TO), hit by three oil pipeline outages since July, said repairs on its U.S.-bound Line 6A crude pipeline were completed on Tuesday and a senior government engineer reportedly said the line might be cleared to restart by the weekend.
“The market driver today is the expectation that Enbridge (pipeline) will come back online sooner rather than later,” Olivier Jakob, consultant with Petromatrix, said.
Crude oil inventories in the United States, the world’s top oil consumer, fell 2.49 million barrels in the week to September 10, mostly in line with analysts’ forecast, weekly data from the Energy Information Administration showed.
Distillate stocks, which include heating oil and diesel fuel, fell 340,000 barrels, against a forecast for about the same size build. Gasoline stocks fell 694,000 barrels, in line with expectations.
“It has been a while since I last saw EIA numbers being spot on with forecasts,” Mike Zarembski, senior commodities analyst for optionsXpress, said.
“Oil traders are looking outside the numbers today and are more focused on Enbridge having repaired its 6A pipeline. We are expecting oil will start to flow into the Midwest again.”
The pipeline shutting last Thursday was expected to help reduce stocks at the Cushing, Oklahoma, hub, delivery point for U.S. benchmark crude West Texas Intermediate. Cushing stocks did slip 581,000 barrels last week, according to the EIA.
The recent U.S. distillate stocks drops have helped push the U.S. heating oil crack spread — the profit that refiners make in processing crude into fuel — to surge to its highest level in nearly four months.
The spread jumped on Wednesday to a high of $13.99 a barrel, the highest level since the spread rose to $14.21 on May 20.
A report showing the New York Federal Reserve’s “Empire State” general business conditions index fell and a separate report showing U.S. industrial output rose, but at a slower pace, in August, helped weigh on oil prices before the EIA data.
Most financial markets were roiled by Japan intervening to weaken the yen. The dollar rose more than 3 percent against the yen as Japan intervened to weaken its currency for the first time in six years, kicking off what could be a sustained effort to limit yen strength.
But the dollar was little changed against the euro, the currency pairing most oil traders focus on. The dollar index .DXY, measuring the greenback against a basket of currencies, was stronger but in choppy trading.
Source: Reuters