Oil touches one-month high on pipeline shutdown, demand optimism

08:06, September 14, 2010      

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Oil prices rose to highest level in a month on Monday as possible supply disruption due to a major pipeline closure in the United States and industrial output growth in China lifted the market.

Light, sweet crude for October delivery rallied 74 cents to settle at 77.19 U.S. dollars a barrel on the New York Mercantile Exchange (NYMEX).

Brent crude for October delivery rose 87 cents to settle at 79. 03 dollars a barrel on the International Futures Exchange in London.

Enbridge Energy Partners LP said its pipeline 6A remained shut as cleaning work continued at its leak section near Romeoville, Illinois. The pipeline was closed on Friday and no date of reopening has been set yet.

The incident weighed on the market as investors were concerned about its possible disruption to U.S. oil supply.

Canada is the largest oil exporter to the United States, and Enbridge's pipelines carry the lion's share of that crude. The Line 6A carries 670,000 barrels of crude per day and is the largest of the company's major three pipelines.

Refineries in the Midwest region may have to ship oil from Cushing, Oklahoma, the area's storage hub and the delivery point of NYMEX crude futures, sending up the price of futures.

Front-month contract traded in New York surged to 78.04 dollars a barrel during trading, highest trading price since August 11.

Further lifting the oil prices was news from China, the world's second-largest energy consumption country. A report released from China's statistics bureau showed that production climbed 13.9 percent in August from a year before.

Latest data also showed that China's implied oil demand rose by 7.4 percent in August from a year earlier, due to its accelerating industrial activities.

Meanwhile, global regulators have cut a deal in banking regulation. Although banks will be facing tighter regulations according to the new rules passed during weekend, it was not as harsh as market had feared and will be implemented in a longer time frame.

The dollar slipped against major currencies following the new banking rules and upbeat economic reports. The euro rose to 1.2867 dollars from 1.2718 dollars, and the British pound rose to 1.5408 dollars from 1.5354 dollars.

A weakening greenback offered additional support to oil prices as energy commodities appeal more to risk-seeking investors.

Source: Xinhua


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