LONDON - Global oil prices rose on Monday after the completion of a major US pipeline expansion project that will cut oversupplied inventories in the US.
Dealers also took their cue from the weak greenback, which makes dollar-priced oil cheaper for buyers using stronger currencies, thereby stimulating demand. In London, Brent North Sea crude for delivery in Feb added 62 cents to $111.26 a barrel.
NY’s main contract, light sweet crude for Feb, gained 66 cents to $94.22. The Seaway Pipeline expansion completed on Friday means 400,000 barrels of crude oil can now be brought each day from the oversupplied midcontinent market around Cushing, Oklahoma, to refiners on the Gulf Coast.
Previously, only 150,000 barrels could be transported to refiners, leading to a build-up in stocks.
“Crude prices have been going up because the pipeline... started up with expanded capacity, reducing the crude inventory in Cushing,” said Victor Shum, managing director of IHS Purvin and Gertz research group in Singapore.
A fall in inventory stocks usually indicates an increased demand for oil that supports prices .
The demand for oil in the United States, which is the world’s largest oil consumer, has the ability to affect its prices around the world.
“From now on, up to 400,000 barrels of crude oil can be transported from Cushing to the US Gulf Coast every day, thus allowing the record-high Cushing stocks to be reduced,” said analyst Carsten Fritsch at Commerzbank.
The oil market also won further support on Monday from stubborn supply worries in the crude-rich Middle East region.