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Oil Advances; Keystone Pipeline Set to Start

Oil advanced from a two-week low in New York on speculation last week’s losses were excessive. TransCanada Corp. planned to start its Keystone pipeline today after a second delay.

Futures climbed as much as 0.8 percent after falling the most in more than two weeks on Oct. 19. Prices also advanced after the White House denied a New York Times report that administration officials agreed to one-on-one talks with Iran’s government over its nuclear program. TransCanada originally planned to resume operations Oct. 20 on the line that runs from Alberta to the main U.S. oil-storage hub in Cushing, Oklahoma.

“I would expect a small rebound after heavy losses on Friday, given continued supply risks,” said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt. Geopolitical tensions in the Middle East and delays in loadings of North Sea Forties crude lent some support to prices, he said.

Crude for November delivery rose as much as 75 cents to $90.80 a barrel in electronic trading on the New York Mercantile Exchange and was at $90.61 at 12:50 p.m. in London. Oil fell 2.2 percent on Oct. 19 to $90.05, the lowest close since Oct. 8. The contract expires today. The more actively traded December futures were 54 cents higher at $90.98 a barrel.

Brent for December settlement added 32 cents to $110.46 on the London-based ICE Futures Europe exchange. The European benchmark crude was at a premium of $19.85 to New York-traded West Texas Intermediate grade, compared with $19.70 on Oct. 19.

Technical Support

Oil in New York is rising after rebounding from long-term technical support at $89.83 a barrel, data compiled by Bloomberg showed. On the weekly chart, that’s the 50 percent Fibonacci retracement of the decline to $32.40 in December 2008 from an intraday record high of $147.27 in July that year. Buy orders tend to be clustered near chart-support levels.

While the U.S. remains open to negotiations with Iran, there was no deal to meet with officials after the Nov. 6 presidential election, National Security Council spokesman Tommy Vietor said yesterday.

International sanctions against the Persian Gulf nation in response to its nuclear program have removed 1 million barrels a day of oil from the global markets, Maria van der Hoeven, the executive director of the International Energy Agency, said at a conference in Singapore today.

Hedge Funds

Hedge-fund managers and other large speculators increased their net-long position in crude futures in the week ended Oct. 16, according to Commodity Futures Trading Commission data.

Managed money bets that prices will rise, in futures and options combined, outnumbered short positions by 166,278 futures, the Washington-based regulator said in its weekly Commitments of Traders report. Net long positions rose by 5,274 contracts, or 3.3 percent, from a week earlier.

In London, hedge funds and other money managers also raised bullish bets on Brent crude by 5,098 contracts in the week ended Oct. 16, according to data from ICE Futures Europe.

Speculative bets that prices will rise, in futures and options combined, outnumbered short positions by 119,576 lots, the exchange said today in its weekly Commitment of Traders report. That compares with 114,478 a week earlier.

The 590,000 barrel-a-day Keystone pipeline will resume today, James Millar, a TransCanada (TRP) spokesman, said in an e-mail yesterday. The company shut down Keystone on Oct. 17 after routine maintenance testing revealed an “anomaly” on the outside of the line. The Calgary-based company had estimated the pipeline inspections would be complete in three days, and initially planned a resumption of operations on Oct. 20.

The U.S. imported 1.65 million barrels of oil a day into the midcontinent, or PADD 2 region, in the week ended Oct. 12, according to the Energy Department. Most of the crude imported into the Midwest comes from Canada, which is the U.S.’s largest source of overseas oil.

North Sea

Brent may decline as the Buzzard field in the North Sea resumes production, according to Morgan Stanley.

The price difference between the first and second month futures, or time spread, for Brent has also narrowed, pushing prices lower, Hussein Allidina, the bank’s head of commodities research, said in a note dated today.

The 200,000 barrel-a-day Buzzard field has had its return from maintenance delayed by two days past its Oct. 21 resumption date, the note said.

Organization of Petroleum Exporting Countries governors gather in Vienna to select a new secretary-general for the first time in six years, with Iran, Iraq, Saudi Arabia and Ecuador vying for the position. The governors started their two-day meeting at 10 a.m. local time at OPEC’s headquarters and will interview nominees. A final decision will be taken by ministers in December.

To contact the reporters on this story: Jacob Adelman in Tokyo at jadelman1@bloomberg.net; Sherry Su in London at lsu23@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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