The benchmark West Texas Intermediate crude oil price has breached the $100 per barrel mark, climbing to $100.79.
The price of benchmark crude has jumped more than 25% since the close of September on the back of economic improvement. The impetus on the Federal Reserve to spur economic growth is mounting in the face of slowing inflation.
With the threat of a double-dip recession in the US, oil prices had been falling from the 2011 height of almost $114. However, consumer spending has been picking up and manufacturing levels are looking increasingly healthy. The Commerce Department reported an increase in retail sales for five months in a row including October, and corporate profits saw some relief paying out less for cars, gas and other products, with a slowdown in inflation.
Fall In Energy Demand
Elsewhere, the Eurozone saw 0.2% economic growth in the third quarter, steering the EU away from recession. The EU is not yet in the clear, but an unfavorable economic climate leading to a falling off in energy demand has already been factored in to pricing concerns for the majority of oil traders.
Tension in oil-producing countries is also driving oil prices up, with the UN reporting Iran may be developing nuclear weapons. If that is true, it could lead to international trade sanctions and Israeli military action. Oil spills and pillaging in Nigeria have also impacted production, pushing prices higher.
US retail gasoline prices fell to just over $3.40 per gallon, over 50 cents higher compared with the same period in 2010. Heating oil prices rose around the same amount to over $3.15 per gallon, with gasoline futures up to almost $2.60 per gallon and natural gas settling at $3.40 per 1,000 cubic feet.
Enbridge’s Seaway Pipeline Reversal Boosts Oil Prices
In other developments impacting oil prices, Enbridge Inc. reported it would reverse the Seaway pipeline, allowing the company to shift 150,000 barrels of oil from Cushing to the Gulf on a daily basis.
Enbridge acquired Texas-based energy company ConocoPhillip’s 50% share of the pipeline - which runs between Cushing, Oklahoma and the Gulf Coast - in a deal worth $1.15 billion. Completion of the deal is expected to take place in December, pending the meeting of customary conditions and logistics services arrangements.
The pipeline reversal will boost crude flow from Cushing to the Gulf Coast at a rate of 150,000 barrels per day in the first half of 2012. Capacity should be increased to 400,000 bpd after certain adjustments, including new stations, early in 2013.
Conoco also plans to sell its near 17% stake in two US pipeline companies, Colonial Ventures LLC and Colonial Pipeline Co, to a subsidiary of Canadian pension fund Caisse de Depot et Placement du Quebec. The deals are worth $2 billion combined, and should be completed in early 2012.
Key Statistics – Global Crude Oil (source: MarketLine)
- Growth in the global crude oil market is expected to slow to under 5% yearly in the five-year period ending 2015, bringing overall market worth to over $2,680 billion.
- The global crude oil market volume is expected to rise over 12% in the five-year period ending 2015 to 20.5 billion barrels.
- The Americas represent close to 37% of the overall world crude oil market value.
- Growth in global production of crude oil is expected to slow to 1% in the five-year period ending 2015, bringing the industry’s worth to over $1,550 billion.