Oil prices rise on US crude stock drop, Keystone pipeline interruption

Oil prices rose on Wednesday after the US EIA reported a drop in US crude stocks. Chevron photo.

US oil prices reach near two-year high early in session

Oil prices rose on Wednesday after report from the US Energy Information Administration showed US crude stockpiles had fallen, even though the data showed a drop smaller than the American Petroleum Institute reported on Tuesday.

By 10:19 a.m. EST, Brent crude prices were up 36 cents to $62.68/barrel and US WTI had risen 87 cents to $57.70/barrel. The Canadian Crude Index sat at $41.03.

According to the EIA, crude inventories in the United States fell by 1.9 million barrels in the week ending Nov. 17.  Crude stocks at the Cushing, Oklahoma, delivery hub dropped by 1.8 million barrels.

On Tuesday, the API weekly report claimed a 6.4 million barrel drop in oil stockpiles.

One of the factors in the declining crude inventory is the disruption of service by the Keystone pipeline which sprung a leak last week, and spewed 5,000 barrels of oil in South Dakota.

The pipeline which carries about 590,000 barrels per day of Alberta crude to US markets will cut deliveries by 85 per cent or more through to the end of November.

Also on Wednesday, Baker Hughes released its weekly rig count early this US Thanksgiving week.  According to the report, at 747, there were nine more oil rigs in the US this week.  This is up from 474 rigs at this time last year.

In Canada, there 107 oil rigs, two fewer than the week previous.  This time last year, there were 94 oil rigs in Canada.

“Current price levels are still inciting U.S. companies to produce more, which will remain a concern for the OPEC ahead of the cartel’s November meeting,” Abhishek Kumar, Senior Energy Analyst at Interfax Energy’s Global Gas Analytics told Reuters.

OPEC members and non-cartel countries participating in the OPEC supply cut agreement will meet in Vienna on Nov. 30 to discuss extending the pact later into 2018.

The Dutch bank ING said “There is growing consensus that OPEC will extend their production cut deal at the end of the month. This confidence along with the current geopolitical environment has kept ICE Brent trading firmly above $60 per barrel.”

“However, an outcome at the OPEC meeting which falls short of market expectations will likely lead to a selloff, and given the large speculative long in Brent, this could be fairly severe,” it added.