BLBG: Crude Oil Heads for Weekly Decline as Enbridge Says Pipeline Will Start
Oil traded near a one-week low, headed for a weekly drop, after falling as a pipeline that supplies U.S. Midwest refiners will start, easing the possibility the disruption would reduce crude stockpiles.
Futures dropped 1.9 percent yesterday after Enbridge Energy Partners LP received government approval to resume flowing oil on their Line 6A. The system will begin operating tomorrow, the company said. Asian equity markets are higher today following earnings gains at tech companies. U.S. first-time jobless claims unexpectedly dropped to the lowest in two months.
“Yesterday you saw a lot of the pipeline being priced into the market,” said Michael Haigh, global head of commodities research at Standard Chartered Plc in Singapore. “It was a pretty well talked about disruption but these types of leaks have traditionally been fixed pretty quickly. In an environment without supply constraints, macro-economic factors will dominate oil price movements.”
The October contract traded at $74.75 a barrel, up 18 cents in electronic trading on the New York Mercantile Exchange at 11:33 a.m. Singapore time. Yesterday it fell $1.45 to $74.57, the biggest decline since Aug. 31. Prices have fallen 2.2 percent this week and shed 5.8 percent this year.
Oil futures topped $78 a barrel this week following the closure on Sept. 9 of Houston-based Enbridge’s 466-mile (750- kilometer) Line 6A. The pipe spilled about 6,100 barrels of oil from a section in Romeoville, 30 miles southwest of Chicago. The 34-inch line runs from Superior, Wisconsin, to Griffith, Indiana, and can carry 670,000 barrels a day of crude, equal to more than one-third of Midwest imports.
“Earlier Enbridge said they didn’t know when the pipeline would be restarted so I think markets priced that in,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. “ Some people were acting on the possibility that it was going to be a long shutdown.”
Initial jobless claims dropped by 3,000 to 450,000 in the week ended Sept. 11, the lowest level in two months, the Labor Department reported today in Washington.
Contango Deepens
Oil for October delivery’s discount to December supplies has increased as traders expected as short-lived disruption. This is a situation known as contango. The price difference has widened from $1.81 a barrel to $2.93 today.
“The contango has widened back out again and that’s the market’s way of saying people are bidding for storage again and things can go down,” said Standard Chartered’s Haigh.
Brent crude for November settlement traded at $78.88 a barrel, up 40 cents on the London-based ICE Futures Europe exchange. It fell 94 cents, or 1.2 percent, to settle at $78.48 a barrel yesterday.
OPEC will reduce crude shipments by 1.2 percent this month as the global recovery slows and refiners in the U.S. and Europe finish maintenance, Oil Movements said, the ninth weekly decline reported by the tanker-tracker.
The Organization of Petroleum Exporting Countries, which supplies about 40 percent of the world’s crude oil, will ship 23.2 million barrels a day in the four weeks to Oct. 2, down from 23.47 million in the month to Sept. 4, the Halifax, England-based consultant said yesterday in a report. The data exclude Ecuador and Angola.
To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net
