By Mark Shenk
Oil in New York climbed above $100 a barrel to a five-month high as Enbridge Inc. said it will reverse the direction of the Seaway pipeline, adding an outlet for crude from the central U.S. and Canada.
Futures rose as much as 3.1 percent after Enbridge agreed to acquire ConocoPhillips (COP)?s share of the pipeline that runs between Cushing, Oklahoma, and the Gulf Coast and announced the reversal. The change may alleviate a bottleneck at the Cushing storage hub that has lowered the price of West Texas Intermediate, the grade traded in New York, against other oils.
?In the short term, this will definitely clear some of the crude out of Oklahoma,? said Francisco Blanch, head of commodities research at Bank of America Corp. in New York. ?This may not be enough to eliminate the glut in the Midwest because output is growing by hundreds of thousands of barrels a year. We still need additional transportation capacity.?
Crude oil for December delivery rose $2.74, or 2.8 percent, to $102.11 a barrel at 1:57 p.m. on the New York Mercantile Exchange. Futures reached $102.46, the highest level since June 1. The contract traded at $99.70 before the Seaway announcement.
Brent oil for January settlement dropped 48 cents, or 0.4 percent, to $111.70 a barrel on the ICE Futures Europe exchange in London. The European contract?s premium to West Texas crude narrowed to as little as $8.32 a barrel, the smallest spread since March 9. The differential surged to a record high of $27.88 on Oct. 14.
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