Oil fell from the highest in more than five months on speculation yesterday's surge above $100 a barrel was exaggerated amid concern Europe's debt crisis will slow economic growth in the U.S., the biggest crude consumer.
Futures dropped as much as 1 percent after closing above $102 a barrel yesterday. Crude's relative strength index rose to 72.8, signaling prices may have advanced too quickly. Equities tumbled after Fitch Ratings said U.S. banks face a "serious risk" their creditworthiness will deteriorate if the European crisis worsens. London-traded Brent's premium to West Texas Intermediate grade narrowed for an eighth day, says BusinessWeek.
Oil traders reacted swiftly to the news. U.S. crude surged by nearly $2 a barrel while Brent crude remained $1 lower - narrowing the so-called Brent/WTI spread to below $10 a barrel for the first time since April.
The spread, rarely more than a few dollars in past years, surged this year due to ballooning inventories around the Cushing, Oklahoma delivery point for the U.S. oil contract and hit a record $28 a barrel in October.
"We believe that reversing the direction of crude oil movement on Seaway and the construction of additional infrastructure will accelerate access to Gulf Coast markets, reduce transportation costs, improve both producer and refiner economics and hasten the development of North America's crude oil reserves," Michael A. Creel, Enterprise president and chief executive officer said in a statement, informs NewsMax.com.
Now Canadian oil, from its huge oil sands deposits, is gushing southward, forcing the need to find more ways, and cheaper ways, to take it beyond Cushing southward.
Analysts say the reversed Seaway pipe will make it cheaper to get crude from the north end down to the southern terminus. And they expect a lot of what is shipped south will be WTI crude.
"This year's disconnection of WTI prices is a clear example of how pipeline logistics can dislocate WTI not only from the rest of the world, but also from other US regions," said Paul Horsnell and Amrita Sen at Barclays Capital, reports DAWN.com.
The reversal should help tap cheaper-priced oil from brimming tanks in the Midwest, which have been filled this year by rising imports from Canada and soaring production in new area like the Bakken shale formation in North Dakota.
"The big picture is that it provides an outlet for crude-oil throughout the midcontinent to make its way to the refining centers along the Gulf Coast," said Andy Lipow, president of Houston oil consultancy Lipow Oil Associates. Those Gulf Coast refiners have been paying Brent-benchmarked prices for much of this year and are eager for a new source of less-expensive crude, according to Ottawa Citizen.
Subscribe to Pravda.Ru Telegram channel, Facebook, Twitter, YouTube, RSS!
Accession of the Kharkiv region to the Russian Federation will be the next phase of the special military operation. It is the Kharkiv region, from where the armed Forces of Ukraine have been shelling Russia's Belgorod