- POSTED: 03 Oct 2013 04:49
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Oil prices rallied on Wednesday, despite a larger-than-expected jump in US crude stockpiles, on news that TransCanada's southern leg of its Keystone pipeline is near completion.
NEW YORK: Oil prices rallied on Wednesday, despite a larger-than-expected jump in US crude stockpiles, on news that TransCanada's southern leg of its Keystone pipeline is near completion.
The main US contract, West Texas Intermediate (WTI) for delivery in November, settled at $104.10 a barrel on the New York Mercantile Exchange, jumping $2.06 from Tuesday's closing level.
Brent North Sea crude for November, the European crude-oil benchmark, rose $1.25 to settle at $109.19 a barrel in London trade.
According to media reports, TransCanada was nearly finished building its Gulf Coast pipeline, which will add another 700,000 barrels per day of capacity to move crude oil from the Cushing, Oklahoma delivery point for crude oil to the Texas Coast.
The opening of the pipeline could lessen the backup of crude flows into the Cushing depot, which has helped depress prices over the past couple years.
"The WTI crude oil futures staged a morning swing into positive territory" on the news, said Tim Evans at Citi Futures.
Evans, however, pointed out that "while additional pipeline capacity allows more inventory to be transferred at a lower cost, it doesn't actually increase the volume of oil being processed by refiners or used by consumers."
TransCanada said Wednesday in a securities filing that it has given up on obtaining White House approval before year's end to proceed with construction of its Keystone XL pipeline, which will bring crude from Canadian oil sands to Steele City, Nebraska, which lies to the north of the Cushing depot.
The project was proposed in 2008, but after years of delays, TransCanada split the project in two, and construction began on the southern section, the Gulf link, that did not require US presidential approval.
The US Department of Energy, meanwhile, reported Wednesday that US crude supplies increased by 5.5 million barrels last week, far higher than analyst expectations of a 2.1 million barrel rise. A build in supplies can indicate weaker demand.
"The report on stocks (inventories) today should be bearish, but it also showed higher imports," said Carl Larry of Oil Outlooks and Opinions.