Oil settled at a two-year high Wednesday after the shutdown of one of the largest crude pipelines from Canada cut supply to the United States.
The restart of the 590,000 barrel-per-day (bpd) Keystone pipeline, shut last week due to a spill, could take several weeks. Operator TransCanada Corp
U.S. West Texas Intermediate crude (WTI) futures
Earlier in the session, crude surged to $58.09 and then pared gains after weekly government data showed crude inventories fell 1.9 million barrels, less than in the API report. [EIA/S]
Crude stocks at the Cushing, Oklahoma, delivery hub for WTI futures
"Current price levels are still inciting U.S. companies to produce more, which will remain a concern for the OPEC ahead of the cartel’s November meeting," said Abhishek Kumar, senior energy analyst at Interfax Energy`s Global Gas Analytics in London.
U.S. energy companies this week added oil rigs, with the monthly rig count rising for the first time since July. Drillers added nine oil rigs in the week to Nov. 22, bringing the total count up to 747, General Electric Co`s
The front-month U.S. crude moved to a premium to the second-month
A backwardation prompts the selling of crude sooner, rather than storing it, which could encourage crude exports.
Additionally, exports could be incentivized by a wide discount for U.S. crude versus Brent crude. Brent`s premium to WTI
"A wide price premium of Brent over WTI crude will encourage more exports of U.S. oil over the coming weeks,” Interfax`s Kumar said.
“Going forward I think those export numbers are going to be what people are going to be watching," said Gene McGillian, vice president at Tradition Energy in Stamford, Connecticut. "The more oil we export in the global market, the more that offsets the effect of the OPEC and Russian cut."
U.S. supplies have been a key factor in determining how quickly a global supply overhang can be reduced. The tug-of-war between concerns over supply cuts due to the Keystone delivery cuts and more robust overall inventories shows how the oil market is grappling to untangle the U.S. supply picture.
Oil has also been supported by an effort led by the Organization of the Petroleum Exporting Countries to end a global supply overhang by restraining output.
The deal to curb production expires in March but is widely expected to be extended at a Nov. 30 meeting.
"There is growing consensus that OPEC will extend their production cut deal at the end of the month. This confidence along with the current geopolitical environment has kept ICE Brent trading firmly above $60 per barrel," Dutch bank ING said.
"However, an outcome at the OPEC meeting which falls short of market expectations will likely lead to a selloff, and given the large speculative long in Brent, this could be fairly severe," it added.
(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)