By Dow Jones Business News,
January 22, 2014, 09:29:00 AM EDT
--Keystone Gulf Coast pipeline to begin deliveries today
--February futures up 0.9% at $95.82 a barrel
--Tight natural-gas supplies in Northeast could lead to higher heating-oil demand
By Nicole Friedman
NEW YORK--Oil futures gained Wednesday on the expectation the opening of the southern leg of TransCanada Corp.'s
(TRP.T, TRP) Keystone XL pipeline would allow more U.S. crude oil to be transported to refineries on the Gulf Coast.
Light, sweet crude for March delivery rose 85 cents, or 0.9%, to $95.82 a barrel on the New York Mercantile Exchange.
Brent crude on ICE Futures Europe rose 73 cents, or 0.7%, to $107.46 a barrel.
The southern leg of the Keystone XL pipeline, which extends about 485 miles from Cushing, Okla., to Nederland, Texas,
is scheduled to begin commercial service today. The 36-inch pipeline will have an initial capacity of 700,000 barrels a
day and potential capacity of 830,000 barrels a day, according to TransCanada, which is based in Calgary.
U.S. oil production has boomed in recent years, as hydraulic fracturing and horizontal drilling techniques have
enabled energy producers to tap into supplies trapped in shale-oil fields. However, without sufficient transportation
capacity connecting the new sources of oil to existing refineries, much of that supply has been trapped in storage in
Cushing. The storage glut in Oklahoma has kept U.S. oil prices below the price of Brent oil, the international
benchmark, in recent years.
The new pipeline is expected to move more oil to the Gulf Coast, which has the world's largest concentration of
petroleum refineries, lessening the glut and supporting U.S. oil prices.
"The next few inventory reports are going to be closely watched to see if we can see some drops in Cushing supply,"
said John Kilduff, founding partner of Again Capital in New York.
Stockpiles in Cushing sat at 40.87 million barrels as of Jan. 10, according to the U.S. Energy Information
Administration, 21% below the exceptionally high year-ago level but above any other level for the week since at least
Front-month February diesel recently traded up 1.11 cents, or 0.4%, to $3.0258 a gallon. Prices have climbed 3.6%
since Jan. 9. Diesel futures serve as a proxy for heating oil, which is expected to see continued strong demand due to
current frigid weather.
Natural-gas supplies are strained in the Northeast, with prices at some natural-gas delivery points reaching record
highs Tuesday. As utilities scramble to secure supplies, some may switch to heating oil, Mr. Kilduff said.
Brent crude-oil futures also traded higher Wednesday on indications that ongoing unrest in Libya, which has limited
the country's crude-oil exports, wouldn't be easily resolved. Five ministers resigned from the Libyan government
Tuesday, but Prime Minister Ali Zeidan told the press he doesn't plan to step down.
February reformulated gasoline blendstock, or RBOB, recently rose 1.73 cents, or 0.7%, to $2.6379 a gallon.
Write to Nicole Friedman at firstname.lastname@example.org
Corrections & Amplifications
This item was corrected at 15:54 p.m. ET to fix the misstated front month for the New York Mercantile Exchange crude-
oil contract in the second paragraph. It is for March delivery, not February.
(END) Dow Jones Newswires
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