Crude Futures Turn Positive Amid Weak Dollar and Enbridge's Shut Pipeline

Strategic Insights -

Crude oil prices surged Tuesday as the weak US dollar and the continued shutdown of Enbridge Inc.'s (ENB) pipeline supported oil prices. The weak dollar made oil cheaper to buy for investors using other currencies, while the pipeline shutdown has highlighted concerns about US oil supplies. Potential buyers were already primed to enter the market by the continued shutdown of Enbridge's Line 6a pipeline, which can carry up to 670,000 barrels a day of Canadian crude to US refiners.

Key Takeaways:

  • Crude futures traded 56 cents, or 0.7%, higher at $77.75 a barrel on the New York Mercantile Exchange.
  • Brent crude on the ICE futures exchange traded 60 cents, or 0.8%, higher at $79.63 a barrel.
  • The shutdown of Enbridge's Line 6a pipeline, which can carry up to 670,000 barrels a day of Canadian crude, continued to support oil prices.
  • The potential for a long-term disruption has kept prices from falling, despite mixed economic indicators creating uncertainty about future oil demand.
  • US oil inventories are still well above normal, but the market's attention was focused on US supplies after the discovery of another leak on a smaller pipeline.
  • Tom Bentz, a broker and analyst with BNP Paribas Commodity Futures Inc., stated that the continued shutdown of pipeline 6a makes it seem less likely that they will restart it anytime soon.
  • Oil prices had initially fallen after the ZEW economic research institute cut its closely watched expectations index for Germany's economy to -4.3 in September.
  • The index served as a reminder that not all large economies are growing at the rate of China's, where a 13.9% year-on-year jump in August industrial production sent crude futures as high as $78.04 a barrel on Monday.

Statistics:

  • October light, sweet crude traded 56 cents, or 0.7%, higher at $77.75 a barrel.
  • Brent crude traded 60 cents, or 0.8%, higher at $79.63 a barrel.
  • Enbridge's Line 6a pipeline can carry up to 670,000 barrels a day of Canadian crude.
  • US oil inventories are still well above normal.
  • ZEW economic research institute's closely watched expectations index for Germany's economy is -4.3 in September.

Sources:

  • Dow Jones Commodities News via Comtex
  • BNP Paribas Commodity Futures Inc.
  • ZEW economic research institute
  • Enbridge Inc.
  • Comtex SmarTrend Alert
  • Comtex News Network, Inc.