U.S. oil soars past $100, Seaway reversal to ease glut
By Gene Ramos
NEW YORK (Reuters) - U.S. oil prices surged on Wednesday to close above $100 a barrel for the first time since June, propelled by news of a critical pipeline reversal that will ease a year-long oil glut in the Midwest.
In the most active trading session since Libya's civil war erupted in February, U.S. WTI surged more than $3 a barrel while Europe's Brent slipped 30 cents as traders rushed to buy back the roller-coaster Brent/WTI spread, betting that the two markers would once again trade largely in line.
Traders cautioned that Enbridge Inc's move to reverse the 350,000-barrels-per-day (bpd) Seaway pipeline to ship crude from Cushing to the coast would not completely eliminate the distortion in the U.S. domestic market. Bank analysts still rushed to narrow their forecasts for the spread, which has fallen by about a third from a record $28 a month ago.
"The reversal of the Seaway will likely accelerate the anticipated clearing of the Midwest surplus, reducing the reliance next year on expensive barge transportation," Goldman Sachs analyst David Greely wrote in a note to clients. The bank brought forward its $6.50 spread forecast by six months.
Prices shot higher after Canada's Enbridge (ENB.TO: Quote) and Enterprise Products Partners (EPD.N: Quote) announced the reversal plan on Wednesday, shortly after ConocoPhillips (COP.N: Quote) said it had sold its 50 percent share to Enbridge for $1.15 billion.
Rival TransCanada Corp TRP.TO, meanwhile, said it could build the Cushing-to-Gulf-Coast leg of its proposed Keystone XL pipeline by early next year. pending consultations with the U.S. State Department.
Both proposals, if they materialize, are seen helping unclog a bottleneck that has pressured crude prices in the U.S. Midwest for about a year.
The volatile spread between Brent and West Texas Intermediate narrowed by some $3.50 a barrel, the second-largest move since early 2009. It ended just above $9 a barrel, a level last seen in March. Continued...