Oil Falls First Time in Three Days as Enbridge Begins Repairs to Pipeline
Sept. 14 (Bloomberg) -- OPEC Secretary General Abdalla El-Badri talks about production quotas and oil prices. He speaks on Bloomberg Television's "The Pulse" with Andrea Catherwood. (Source: Bloomberg)
Crude oil fell for the first time in three days as Enbridge Energy Partners LP said it expects to finish welding a replacement section into a pipeline today that was shut last week.
Oil dropped 0.5 percent as crews worked to attach the second side of a 12-foot section on Enbridge’s Line 6A, which transports 670,000 barrels a day of Canadian crude to refineries in the central U.S. Prices rallied earlier today as the dollar declined to a 15-year low against the yen, bolstering the appeal of commodities as an investment.
“We are all waiting to see what happens with the Enbridge pipeline,” said Carl Larry, president of Oil Outlooks and Opinions LLC in Houston. “Any news that comes out will have the ability to move the market.”
Crude oil for October delivery fell 39 cents to $76.80 a barrel on the New York Mercantile Exchange. Futures settled at $77.19 yesterday, the highest level since Aug. 11. Prices are down 3.2 percent this year.
Prices slipped from the settlement after the American Petroleum Institute reported at 4:30 p.m. that U.S. crude-oil stockpiles increased 3.33 million barrels to 361.8 million. October oil dropped 45 cents, or 0.6 percent, to $76.74 a barrel in electronic trading at 4:33 p.m.
Brent crude oil for October settlement, which expires tomorrow, rose 13 cents to end the session at $79.16 a barrel on the ICE Futures Europe exchange in London. It was the highest close since Aug. 10. The more actively traded November contract increased 20 cents, or 0.3 percent, to $79.27.
No Timeline
Upon completion of work, crews will X-ray the pipeline section to test the welds, according to Gina Jordan, a company spokeswoman. There is no timeline for a return to service and the company doesn’t know what will be required by regulators to restart the line, said Terri Larson, a company spokesman.
Line 6A leaked about 6,100 barrels of oil from a section in Romeoville, 30 miles (48 kilometers) southwest of Chicago. The 34-inch pipeline runs 466 miles from Superior, Wisconsin, to Griffith, Indiana, according to an Enbridge website.
Citgo Petroleum Corp. said on Sept. 10 that it’s seeking other supplies for its 170,500-barrel-a-day Lemont, Illinois, refinery that gets crude through the pipeline. Marathon Oil Corp. has made adjustments to supply routes feeding its Midwest plants, according to Shane Pochard, a company spokesman.
Canada is the largest exporter of crude to the U.S., sending 2.2 million barrels a day in June, according to the Energy Department. Refiners in the region may obtain supplies from Cushing, Oklahoma, the Midwest oil-storage hub, driving up futures traded in New York.
U.S. Stockpiles
An Energy Department report tomorrow will probably show that U.S. crude-oil inventories declined 2.5 million barrels, or 0.7 percent, last week, according to the median of 18 analyst estimates in a Bloomberg News survey.
The Organization of Petroleum Exporting Countries’ low level of compliance with agreed output cuts is not affecting prices, Secretary General Abdalla El-Badri said. Compliance is at 53 percent of limits, he said today in an interview on Bloomberg Television’s “The Pulse” with Andrea Catherwood.
“If the situation stays as it is, then $70-$80, this price is comfortable,” El-Badri said from Vienna.
OPEC, which has gathered once this year, will next meet on Oct. 14 in Vienna.
Raw material prices surged as the yen traded below 83 cents for the first time since 1995 after Prime Minister Naoto Kan beat Ichiro Ozawa in a party vote today, reducing the likelihood the government will take steps to weaken the currency.
The yen rose 0.7 percent to 83.09 per dollar at 2:37 p.m. in New York, after earlier climbing as much as 0.9 percent to 82.93. The euro gained 1.1 percent to $1.3018, after touching $1.3033, the highest level since Aug. 11.
Safe Haven
“Oil acts as a safe haven because it’s a commodity and holds its value even when the value of money drops,” said Chris Barber, a senior analyst at Energy Security Analysis Inc. in Wakefield, Massachusetts. “There’s a finite supply of oil, so when the dollar goes up or down it tends to move in the opposite direction.”
Gold futures for December delivery rose $24.60, or 2 percent, to settle at $1,271.70 an ounce on the Comex in New York, after touching $1,276.50. The previous all-time high was $1,266.50 on June 21.
“It’s interesting when you see oil prices move in relation to some major indicator,” Daniel Yergin, chairman of IHS Cambridge Energy Research Associates, said in an interview in Montreal, where he’s attending the World Energy Congress. “The biggest unanswered question is what happens to demand when you finally get a global economic recovery.”
Oil volume on the Nymex was 862,469 contracts as of 4:34 p.m. in electronic trading in New York. Volume totaled 876,826 contracts yesterday, 41 percent above the average of the past three months. Open interest was 1.32 million contracts.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net
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