LONDON (Reuters) – U.S. oil prices jumped to a two-year high on Friday as North American markets tightened on the partial closure of the Keystone pipeline connecting Canadian oilfields with the United States.
U.S. light crude hit highs not seen since July 1, 2015 on Friday, trading at $58.70 a barrel, before easing to $58.53 by 0952 GMT but still 51 cents up on the day.
Trading activity was expected to be low on Friday due to the U.S. Thanksgiving holiday.
Benchmark Brent crude was trading flat at $63.58 a barrel, up just 3 cents on the day, after spending much of the Asia trading session in negative territory.
PVM Oil Associates strategist Tamas Varga said the oil spill that shut the Keystone pipeline was supporting U.S. crude, flipping prices into backwardation, when front-month prices rise above those for future months, indicating an undersupplied market.
“January is now 4 cents more expensive than February, and I think we have not seen that for three years,” he said.
The pipeline spill on Nov. 16 reduced the usual 590,000 barrel-per-day flow to U.S. refineries, driving down inventories at the storage hub of Cushing, Oklahoma, traders said.
Markets have also tightened globally due to output cuts since January by the Organization of the Petroleum Exporting Countries, Russia and several other producers.
OPEC meets on Nov. 30 and is expected to extend to the pact on cutting output beyond its March expiry, although Russia has sent mixed signals about its support for an extension.
“With the majority of OPEC members endorsing an extension, Russian support is the key risk,” Jon Rigby, head of oil research at UBS, wrote in a note.
President Vladimir Putin indicated in October that Russia backed extending the deal to the end of 2018, but comments by officials and in Russian media have created uncertainty since then, he said.
Rising U.S. oil production has also curbed crude price gains. U.S. output jumped by 15 percent since mid-2016 to a record 9.66 million bpd, thanks largely to shale drilling.