Oil Extends Rally Above $58 as Keystone Outage Cuts U.S. Supply
Oil held near a two-year high as U.S. crude inventories dropped, adding to optimism OPEC’s output curbs are working.
(Bloomberg) -- Oil extended its rally above $58 a barrel as supply disruptions on the Keystone pipeline added to optimism that the U.S. glut is waning and that OPEC will prolong its output curbs.
Futures gained as much as 0.7 percent in New York to a two-year high. TransCanada Corp. was said to have cut 85 percent of Keystone’s November shipments because of last week’s spill in South Dakota. The line’s shutdown means that between 550,000 and 600,000 barrels a day of crude are not heading to the Cushing, Oklahoma distribution hub, said Michael Loewen, a commodities strategist at Scotiabank.
“WTI is getting a bit of a bid from the Keystone outage,” Loewen said in a phone interview from Toronto.
Oil closed above $58 a barrel in New York for the first time since mid-2015 on Wednesday amid signs that the Organization of Petroleum Exporting Countries and its allies may agree to prolong curbs when they meet on Nov. 30. The group will likely agree to extend output cuts by nine months to the end of next year, according to a Bloomberg survey of analysts and traders.
Ministers from six OPEC countries and Russian Energy Minister Alexander Novak are holding informal talks in Bolivia a week before their meeting in Vienna.
“Most investors expect OPEC to extend the cuts through the end of 2018,” Loewen said. Once those cuts are ratified, prices should gain $2 to $3 a barrel with West Texas Intermediate futures testing the $60 threshold, he said.
WTI futures for January delivery rose 54 cents, or 0.9 percent, to $58.56 a barrel at 12:59 p.m. in New York, when trading halted, after touching $58.58, the highest since July 2015. There’ll be no settlement Thursday because of the Thanksgiving holiday in the U.S., and all transactions will be booked Friday. Total volume traded was about 69 percent below the 100-day average.
Brent crude rose 23 cents to $63.55 a barrel. The global benchmark traded at a premium of $4.99 to WTI.
U.S. crude inventories declined by 1.86 million barrels to about 457.1 million in the week ended Nov. 17, according to the Energy Information Administration. Crude stockpiles at Cushing, Oklahoma, the delivery point for WTI and the biggest oil-storage hub, slid by 1.83 million barrels, the largest draw since July. Meanwhile, American output surged for a fifth week to 9.66 million barrels a day.
Oil-market news:
- Working rigs drilling for crude in the U.S. rose by nine to 747 this week, Baker Hughes said.
- OPEC was said to get few answers on shale before deciding on cuts.
- Venezuelan Oil Minister Eulogio Del Pino, speaking at a natural-gas conference in Bolivia, said he sees oil’s equilibrium price at $60 to $70 a barrel as global inventories drain, according to a ministry statement.
- The Keystone oil spill may have been a slow leak, according to South Dakota’s public utilities commission.
--With assistance from Heesu Lee and Grant Smith
To contact the reporter on this story: Robert Tuttle in Calgary at rtuttle@bloomberg.net.
To contact the editor responsible for this story: Carlos Caminada at ccaminada1@bloomberg.net.
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