U.S. Pipeline Fire Drives Oil Up $4
Thursday, November 29th 2007, 7:27 am
By: News On 6
BANGKOK, Thailand (AP) _ Oil prices jumped more than $4 Thursday after a deadly fire at a pipeline carrying crude oil from Canada to the U.S. Midwest killed two workers.
The workers were repairing the Enbridge Energy pipeline in northern Minnesota, authorities said. It wasn't immediately clear how the fire and the shutdown of five pipelines would affect supplies.
Denise Hamsher, a spokeswoman for Enbridge in Houston, Texas, said because oil is stored in company stations along the line and at refineries, the pipelines could be shuttered for several days without causing disruptions in supply to the Midwest.
News of alleged terrorist arrests in Saudi Arabia and a rosier outlook for the U.S. economy also helped to reverse oil prices from a decline Wednesday to prices not seen since the end of last month.
``It was the pipeline explosion and reports of the Saudis arresting some people in the Kingdom, and the fact that yesterday's tumble was perhaps a knee-jerk reaction to the U.S. inventory report,'' said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
Any sign of conflict in the Middle East, particularly in Saudi Arabia, the world's largest oil producer, makes oil investors worry about potential supply disruptions.
Also, ``the belief now that the U.S. Fed will likely cut interest rates in December has overnight strengthened the U.S. stock markets,'' said Shum. ``The belief is that the U.S. will do its darnedest to prevent a slowdown in the U.S. economy.''
Light, sweet crude for January delivery jumped $3.78 to $94.40 a barrel in electronic trading on the New York Mercantile Exchange by late afternoon in Singapore. It climbed as much as $4.55 to $95.17 in the electronic session before slipping back.
The contract had plunged $3.80 to $90.62 a barrel Wednesday in New York, adding to the previous session's drop of $3.28. That was a front-month contract's second largest two-day price decline since the Nymex introduced futures trading in 1983.
In London, January Brent crude rose $2.61 Thursday to $92.42 a barrel on the ICE Futures exchange.
On Wednesday, the U.S. government reported an increase in crude oil stocks at the Nymex delivery terminal in Cushing, Oklahoma. Stocks at the terminal are closely watched by traders as a benchmark of inventory tightness.
But ``crude oil futures may have just taken a few steps backwards in the past few days to get ready for another big leap forward next week,'' Shum said.
If the U.S. Federal Reserve does cut interest rates next week that will further weaken the dollar and that may boost crude oil futures, he said.
Also, Shum noted, there are still conflicting signals coming from members of the Organization of Petroleum Exporting Countries.
``If they decide to stay the course and not change the production targets that could be a very good reason for futures to try to break the $100 dollar milestone again,'' he said.
OPEC members are meeting Dec. 5 in Abu Dhabi to decide on their output levels. Federal Reserve Chairman Ben Bernanke and his colleagues meet on Dec. 11 to decide their next move on interest rates.
Also, Nymex heating oil futures rose 6.8 cents to $2.6418 a gallon (3.8 liters) while gasoline prices added 6.12 cents to $2.3369 a gallon.
Natural gas futures gained 13.6 cents to $7.622 per 1,000 cubic feet.