Oil jumps on Canada pipeline woe

london — Oil prices spiked on Wednesday with US light crude hitting highs not seen since July 2015 after faults on a major pipeline dented Canadian deliveries to the United States, where crude inventories were also reported to be falling.

US light crude hit a two-anda-half year high of $57.98 a barrel before easing to $57.74 by 0950 GMT, up 91 cents on the day. Brent crude was up 48 cents at $63.05 per barrel.

Traders attributed the jump to an 85 per cent cut in the amount of oil TransCanada Corp will deliver to the United States on its Keystone pipeline through the end of November, announced by the company on Tuesday.

Keystone, which carries 590,000 barrels per day of crude from Alberta’s oil sands to markets in the United States, was shut last week after a 5,000-barrel spill in South Dakota.

There is a shortage of crude oil into the United States. Hence the rally in the prices Tamas Varga, PVM Oil Associates strategist

“There is a shortage of crude oil into the United States. Hence the rally in the prices,” PVM Oil Associates strategist Tamas Varga said.

This adds to a picture of falling crude inventories painted by the American Petroleum Institute (API) in its weekly report on Tuesday, with stocks dropping by 6.4 million barrels in the week to November 17, far above analysts’ expectations.

The latest official US production and inventory data is due on Wednesday.

“If we see the US Energy Information Administration confirming the big draw in crude oil stocks reported by the API last night, I think we will see the market going higher,” Varga said.

Outside North America, markets have been supported by an effort led by the Organisation of the Petroleum Exporting Countries to end a global supply overhang by restraining output.

The deal to curb production is due to expire in March, but is widely expected to be extended at the group’s next meeting on November 30. — Reuters