Oil prices up as investors shift to hard-asset commodity markets following NY explosion
Oil prices reversed early declines on Monday after reports of a shutdown at a North Sea pipeline and an explosion rocked the New York Port Authority Bus Terminal.
By 1:32 p.m. EST, Brent had risen by $1.23 to $64.63/barrel and US WTI was up 43 cents to $57.79/barrel. The Canadian Crude Index rose to $37.49.
The difference between Brent and US WTI is the largest its been since late October on the Brent rally following the shutdown of the pipeline which carries Forties crude from the North Sea to the Kinneil processing terminal in Scotland.
The 450,000 barrels per day (b/d) pipeline had been operating at a reduced capacity for the last four days following a leak and is now completely shutdown for repairs.
It is not known how long the pipeline will be offline.
John Kilduff, partner at Again Capital LLC told Reuters the market expected the pipeline to return to service and was surprised by the extended shutdown.
“It’s a significant amount of crude oil in a market that has been the tightest for crude oil,” Kilduff said.
Following an explosion at the busy New York Port Authority Bus Terminal, investors followed their pattern of shifting to hard-asset commodity markets following high-risk events.
Often that means gold and silver, but oil can also attract investments at such times.
Earlier in the session, prices had been facing downward pressure on increased US drilling and production which undermines OPECs efforts to cut the global crude glut.
On Friday, Baker Hughes reported the US rig count rose last week by two to 751, the highest since September.
“The largest concern for investors currently remains the rise in the U.S. rig count,” Shane Chanel, equities and derivatives adviser at ASR Wealth Advisers told Reuters.
US crude production is up over 15 per cent since mid-2016 and now sits at 9.71 million b/d, the highest since the early 1970s and close to output levels from Saudi Arabia and Russia.
