United States crude tops two-year high

NEW YORK – US oil prices hit their highest levels in more than two years on Friday after the continued shutdown of a pipeline running from Canada to the United States was expected to reduce supply into a major storage facility.

US West Texas Intermediate crude futures (WTI) CLc1 settled up 93 cents, or 1.6 per cent, at $US58.95 ($F123) a barrel.

Trading volumes were thin on Friday due to the US Thanksgiving holiday.

Benchmark Brent crude LCOc1 rose 31 cents, or 0.49 per cent, to settle at $63.86 a barrel.

TransCanada Corp (TRP.TO)’s 590,000 barrel-per-day Keystone pipeline, linking Alberta’s oil sands to US refineries, shut on November 16 after a spill was found in South Dakota.

It is not clear when the pipeline would return to operation, but it carries a large portion of crude into Cushing, Oklahoma, the delivery point for WTI futures, so its shutdown means fewer barrels going into storage.

The spread between the prompt and second month WTI futures CLc1-CLc2, an indicator of supply-demand balances at Cushing, also traded up to 10 cents in backwardation where prompt barrels are more expensive.

“We’re expecting to continue seeing draws out of Cushing, which turned the WTI market into backwardation,” said Tariq Zahir at Tyche Capital Advisors, referring to a market structure where prompt prices are higher than those in the future.