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Oil Heads for Weekly Gain as TransCanada Shuts Keystone

19 Oct 2012

Oil headed for a second weekly gain in New York after TransCanada (TRP) Corp. shut its Keystone pipeline for repairs, disrupting crude supplies to the U.S. Midwest.

Futures rose as much as 0.2 percent, extending the longest run in more than a decade of daily price moves of less than 25 cents. Crude pared a decline of as much as 1.6 percent yesterday after TransCanada shut the 590,000 barrel-a-day link for three days, saying it found a “small anomaly” in a section running from Missouri to Illinois. Improving U.S. fuel demand is being met by rising local supplies, a government report this week showed. The latest U.S. growth data were mixed.

“The macro-economic side is not showing big enough figures to pull the market up significantly,” Thina Saltvedt, an analyst at Nordea Bank AB, said by telephone from Oslo. “Any move upwards will be driven by the political risk increasing or further supply disruptions such as the pipeline in the U.S. having to close for three days.”

Crude for November delivery was little changed at $92.09 a barrel, in electronic trading on the New York Mercantile Exchange at 12:09 p.m. London time. Futures slid 2 cents yesterday to $92.10. Prices are 0.3 percent higher this week and down 6.8 percent this year.

Brent for December settlement was at $112.66 a barrel, up 24 cents, on the London-based ICE Futures Europe exchange. The front-month European benchmark’s premium to the corresponding West Texas Intermediate contract was at $20.56. The gap has narrowed since reaching a one-year high of $23.95 on Oct. 15.

Keystone Closing

WTI has gained 19 percent in New York since the intraday low this year of $77.28 on June 28. Prices have closed within 25 cents of the previous settlement for the past five days, the longest streak of moves that small in more than 10 years, according to data compiled by Bloomberg.

TransCanada may have to deliver extra crude in November to make up for what shippers will lose this month as a result of Keystone being down, James Millar, a company spokesman in Calgary, said in an e-mail.

The company identified possible safety issues on the section during testing, Jeannie Layson, a spokeswoman for the U.S. Pipeline and Hazardous Materials Safety Administration, said yesterday in an e-mailed statement. PHMSA sent an inspector to observe the repairs, and hasn’t issued an enforcement action, she said.

Anomaly Risk

“For now the shutdown of the Keystone pipeline had a limited impact,” Olivier Jakob, managing director of Petromatrix GmbH in Zug, Switzerland, said today in a note.“Nobody is exactly sure about the anomaly and the weekend will therefore include a risk that we come back on Monday to a worse-than-expected situation.”

Jobless claims in the U.S. rose more than forecast, an index of leading indicators gained in September by the most in seven months, and manufacturing in the Philadelphia region expanded in October for the first time in six months.

Petroleum demand in the U.S., the world’s biggest oil user, rose 4.3 percent last week to 19.5 million barrels a day for the biggest gain in two months, data from the Energy Department showed Oct. 17. Crude inventories climbed 2.9 million barrels to 369 million, the highest for this time of year since government records began in 1982. Production increased for a sixth week to 6.61 million barrels a day, the highest level since May 1995, the report showed.

Oil may decline in New York next week on concern that supply is outpacing demand, according to Bloomberg survey of analysts and traders. Nineteen of 33 respondents, or 58 percent, forecast crude will decrease through Oct. 26. Seven people, or 21 percent, predicted a gain and seven forecast little change.

WTI has technical support around $90 a barrel in the coming week as futures trade within a symmetrical triangle on the daily chart, according to data compiled by Bloomberg. A settlement below the lower boundary of the formation will signal a so- called bearish breakout, where losses tend to accelerate.