Oil rises to near $89 after Alaska pipeline leak
Published: Monday, January 10, 2011 at 10:41 a.m.
Last Modified: Monday, January 10, 2011 at 10:41 a.m.
Oil prices rose to near $89 a barrel Monday though a stronger dollar limited gains caused by a pipeline leak which cut Alaskan crude output.
By early afternoon in Europe, benchmark oil for February delivery was up 84 cents to $88.87 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 30 cents to settle at $88.03 in Friday.
The 800-mile (1,300-kilometer) trans-Alaska pipeline, which normally carries between 630,000 and 650,000 barrels a day, was shut Saturday after a leak was discovered at a North Slope pump station, said Alyeska Pipeline Service Co., which manages the line. North Slope production was reduced to 5 percent of normal.
Analysts said the pipeline transported about 12 percent of U.S. oil production.
Alyeska Pipeline said cleanup crews have contained the leak, but the company didn't know when the pipeline would restart operations.
"The 95 percent drop in output from Alaska is bullish," energy consultant The Schork Report said. "Such high levels of uncertainty will have traders scrambling."
The jump in crude prices will likely be temporary unless the pipeline is down for an extended period, The Schork Report said.
"We don't believe the news as it stands is enough to push crude oil above the $100 barrier," The Schork Report said. "If production is reduced to 5 percent until March or April, then we'll change our mind."
Oil prices were kept in check by a stronger dollar, which makes crude more expensive for investors holding other currencies.
The euro was down to $1.2890 on Monday from $1.2934 late Friday in New York, while the British pound dipped to $1.5503, from $1.5548.
"The euro continues to be under pressure ... as renewed concerns about the European debt crisis hurt market sentiment following news that Portugal is under growing pressure to receive an EU/IMF aid package," said a report from Sucden Financial in London.
In other Nymex trading in February contracts, heating oil gained 1.77 cents to $2.5004 a gallon while gasoline futures added 1.04 cents to $2.4235 per gallon. February natural gas futures lost 1.4 cents to $4.408 per 1,000 cubic feet.
In London, Brent crude was up 80 cents to $94.13 a barrel on the ICE Futures exchange.
Associated Press writer Alex Kennedy in Singapore contributed to this report.