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Oil prices spiked on Wednesday with US light crude hitting highs not seen since July 2015 after faults on a major pipeline dented Canadian deliveries to the United States, where crude inventories were also reported to be falling.
US light crude hit a 2-1/2-year high of $57.98 a barrel before easing to $57.74 by 0950 GMT, up 91 cents on the day.Brent crude was up 48 cents at $63.05 per barrel.
Traders attributed the jump to an 85 per cent cut in the amount of oil TransCanada Corp will deliver to the United States on its Keystone pipeline through the end of November, announced by the company on Tuesday.
Keystone, which carries 590,000 barrels per day of crude from Alberta's oil sands to markets in the United States, was shut last week after a 5,000-barrel spill in South Dakota.
“There is a shortage of crude oil into the United States. Hence the rally in the prices,” PVM Oil Associates strategist Tamas Varga said.
Crude inventories
This adds to a picture of falling crude inventories painted by the American Petroleum Institute (API) in its weekly report on Tuesday, with stocks dropping by 6.4 million barrels in the week to November 17, far above analysts' expectations.The latest official US production and inventory data is due on Wednesday.
“If we see the U.S. Energy Information Administration ... confirming the big draw in crude oil stocks reported by the API last night, I think we will see the market going higher,” Varga said.
Outside North America, markets have been supported by an effort led by the Organization of the Petroleum Exporting Countries to end a global supply overhang by restraining output.
OPEC meet
The deal to curb production is due to expire in March, but is widely expected to be extended at the group's next meeting on November 30.
“There is growing consensus that OPEC will extend their production cut deal at the end of the month. This confidence along with the current geopolitical environment has kept ICE Brent trading firmly above $60 per barrel,” Dutch bank ING said.
“However, an outcome at the OPEC meeting which falls short of market expectations, will likely lead to a selloff, and given the large speculative long in Brent, this could be fairly severe,” it added.
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