Oil Soars Past $100, Seaway Reversal to Ease Glut

By: Reuters, CNBC.com

U.S. oil prices surged Wednesday to close above $100 a barrel for the first time since June, propelled by news of a critical pipeline reversal that will ease a year-long oil glut in the Midwest.

In the most active trading session since Libya’s civil war erupted in February, U.S. WTI surged more than $3 a barrel while Europe’s Brent slipped 30 cents as traders rushed to buy back the roller-coaster Brent/WTI spread, betting that the two markers would once again trade largely in line.

Traders cautioned that Enbridge’s [EEP 30.02 0.17 (+0.57%) ]move to reverse the 350,000-barrels-per-day Seaway pipeline to ship crude from Cushing to the coast would not completely eliminate the distortion in the U.S. domestic market. Bank analysts still rushed to narrow their forecasts for the spread, which has fallen by about a third from a record $28 a month ago.

“The reversal of the Seaway will likely accelerate the anticipated clearing of the Midwest surplus, reducing the reliance next year on expensive barge transportation,” Goldman Sachs analyst David Greely wrote in a note to clients. The bank brought forward its $6.50 spread forecast by six months.

Prices shot higher after Canada’s Enbridge and Enterprise Products Partners [EPD 45.02 -0.11 (-0.24%)] announced the reversal plan Wednesday, shortly after ConocoPhillip [COP 69.76 -2.23 (-3.1%) ] said it had sold its 50 percent share to Enbridge for $1.15 billion.

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