Oil Rises With Gasoline as Pipeline Shutdown Curbs Fuel Supply

How Long Will the Oil Glut Last?
  • Gasoline, diesel surge as Colonial Line 1 restart delayed
  • Oil oversupply will last into 2017 as demand growth slows: IEA

Crude climbed, led by gasoline’s biggest jump since May, after the restart of a pipeline carrying fuel to New York Harbor was delayed.

Gasoline surged 5.1 percent after the projected restart of Colonial Pipeline’s Line 1, which can carry more than 1 million barrels a day of gasoline from the Gulf Coast to the eastern U.S., was pushed back to next week. The crack spread, a rough measure of profit margins from refining crude into gasoline, jumped to the highest level since June. The S&P 500 Index jumped and the dollar slipped against its peers, also bolstering oil futures.

"There’s a bounce going on here being led by gasoline," said Tim Evans, an energy analyst at Citi Futures Perspective in New York. "You can point to the Colonial headlines as a reason for the move. It’s important to remember that while supplies may be getting tighter in New York Harbor they are growing on the Gulf Coast."

Oil has fluctuated since rallying in August amid speculation the Organization of Petroleum Exporting Countries and Russia would agree on measures to stabilize the market at a meeting in Algiers later this month. The glut will last into 2017, longer than previously thought, as demand growth slows, the International Energy Agency said Tuesday. OPEC boosted its estimate for rivals’ output next year in a report Monday.

West Texas Intermediate for October delivery advanced 33 cents, or 0.8 percent, to settle at $43.91 a barrel on the New York Mercantile Exchange. Total volume traded was 40 percent below the 100-day average.

Gasoline for October delivery jumped 6.87 cents to $1.4302 a gallon, the highest close since Aug. 30. October diesel rose 3.45 cents to $1.4162.

Slowing Growth

Global oil consumption growth sagged to a two-year low in the third quarter as demand faltered in China and India, while record output from OPEC’s Gulf members is compounding the glut, the IEA said in a monthly report. As recently as last month, the agency had expected the market to return to equilibrium this year.

"The OPEC and IEA monthly reports this week took the swagger out of the production talk," said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. "They would be freezing production at an all-time high in a sliding demand environment, which isn’t much in the way of support."

Nigeria, Libya

Brent for November settlement rose 74 cents, or 1.6 percent, to $46.59 a barrel on the London-based ICE Futures Europe exchange. The global benchmark closed at a $2.07 premium to WTI for November delivery.

For a story on where Goldman sees oil prices trading, click here.

Prices dropped earlier amid concern the global supply glut will expand as OPEC members Libya and Nigeria prepare to boost exports within weeks. U.S. government data showed crude stockpiles fell 559,000 barrels last week, compared with a forecast gain in a Bloomberg survey.

Libya’s state oil company on Wednesday lifted curbs on sales from three ports, potentially unlocking 300,000 barrels a day. Exxon Mobil Corp. has filled storage facilities at its Qua Iboe export terminal in Nigeria and is awaiting government clearance to resume shipments, a person familiar with the matter said Wednesday. Royal Dutch Shell Plc is scheduled to restart about 200,000 barrels a day of flow within days.

Oil-market news:

  • Kazakhstan sees oil at $35 a barrel in 2017-19 and $45 by 2021. Oil production is seen rising from 79.5 million tons next year to 86.5 million tons in 2021, Economy Minister Kuandyk Bishimbayev told parliament, citing a base-case scenario.
  • Oil prices will become more volatile after next year amid under-investment in production and uncertain growth in demand, Suncor Energy Inc. Chief Executive Officer Steve Williams said.
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