Forexpros – Crude oil futures rallied for a second day on Thursday, jumping to a six-month high after news of the reversal of a major U.S. oil pipeline boosted hopes that a supply glut in the U.S. will be eased.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in January traded at USD103.03 a barrel during European morning trade, gaining 0.41%.
It earlier rose by as much as 0.65% to trade at USD103.37 a barrel, the highest price since May 11.
Markets were caught off guard by news that Enbridge, Canada’s largest transporter of crude oil, agreed to buy a 50% stake in the Seaway Crude Pipeline that moves oil from the Gulf of Mexico to Cushing, Oklahoma, the delivery point of the benchmark NYMEX oil.
Enbridge announced it would reverse the flow of the pipeline with 50% Seaway pipeline owner and operator Enterprise Product Partners to ship oil to export terminals on the U.S. Gulf Coast.
The Seaway pipeline would transport up to 400,000 barrels of oil a day from Cushing to the Gulf by 2013, Enbridge added.
A supply gut in Cushing has been the major influencer of record premiums between New York-traded crude and Brent, Europe’s benchmark traded in London.
The news prompted Wall Street lender JP Morgan to upgrade its oil price forecast for 2012 to USD110 a barrel, from a previous estimate of USD97.50. The bank projected prices to average USD118 a barrel in 2013.
In a report, the lender added that it expects the Brent-WTI spread to trend towards a more stable relationship between USD1 a barrel and USD2 in 2013.
“The flow reversal by the second quarter of 2012 will help to further debottleneck the U.S. Midwest, lowering the cost of moving Canadian sour crude and Bakken light sweet crude to U.S. Gulf Coast refineries,” it said.
Meanwhile, commodity traders remained cautious ahead of closely-watched bond auctions from France and Spain later in the day, in what would be viewed as a key test of market appetite for European sovereign debt.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for January delivery shed 0.33% to trade at USD111.52 a barrel, with the spread between the Brent and crude contracts narrowing to USD8.49 a barrel.
The gap between the two contracts is well off the record high of USD27.88 a barrel it hit in mid-October.
Forexpros
