Crude oil futures settled slightly higher Tuesday as a pipeline shutdown in Alberta, Canada, and escalating tensions in the Middle East lent the complex a bullish note, amid rising equities markets.
NYMEX August crude settled 14 cents higher at $95.32/barrel, while ICE August Brent closed the day up 10 cents at $101.26/b.
The differential between the two front-month crude contracts narrowed to a fresh two-and-a-half year low of $5.68/b in overnight trading, before widening back out above $6.40/b in afternoon US trade. It settled at $5.94/b
NYMEX July ULSD settled up 37 points at $2.8584/gal, while NYMEX July RBOB closed the session down just 2 points at $2.7374/gal.
Flooding in Alberta, Canada, over the weekend prompted Enbridge to shut part of its regional pipeline system Sunday after a leak was detected near Cheecham, Alberta. Enbridge closed its Athabasca and Waupisoo pipeline systems over the leak, but announced late Monday that it had resumed operating its Cheecham to Hardisty Athabasca line.
"The flooding in Alberta, Canada has had an impact on market sentiment and market expectations," Citi Futures analyst Tim Evans said.
BNP Paribas analyst Gareth Lewis-Davis said that the "outage has the impact of lowering imports [in to the US]."
Analysts polled by Platts expect a 2-million-barrel decline in US commercial crude inventories over the week ended June 21, due largely to an expected increase in refinery utilization.
"You can also make a case that the apparent restart of the crude unit at [BP's 405,000 b/d Whiting, Indiana refinery] is also a supportive element that people have been looking for for quite awhile," Evans said. "That reinforces the expectation that inventories at Cushing, Oklahoma will trend lower.
The American Petroleum Institute will release its weekly petroleum report at 4:30 p.m. EDT (2030 GMT) Tuesday, with the US Energy Information Administration's data due Wednesday morning.
Conflict in Lebanon, which began Sunday, was also viewed as a potentially bullish element, highlighting the possibility that Syria's civil war could increasingly spill over in to neighboring countries.
"Geopolitical factors, including the escalation of violence in the Middle East -- this time in Lebanon between the Sunni and the Shia -- raises the specter of what could happen in Iraq," BNP Paribas analyst Gareth Lewis-Davies said.
Equities markets pushed higher in European and US trading following a mixed session in Asia after the People's Bank of China indicated Tuesday that it plans to support banks in the country amid market concerns of a possible liquidity crisis. According to AFP, the People's Bank of China released a statement acknowledging that it had offered funds to financial institutions and intends to continue doing so.
At 2:30 p.m., the S&P 500 had gained 0.91% to 1,587.41, while the Dow Jones Industrial Average was 0.76% higher at 14,770.5.
