North American oil prices shot higher on Friday as traders reacted to the shutdown of Enbridge Inc. Line 6A pipeline that carries 670,00 barrels a day of Alberta crude into the Midwest refining hub.
Crude leaked at a rate of up to 600 barrels an hour, but Enbridge said it had contained the spill to the site and no additional oil was flowing into nearby roadways or the adjoining drainage ditch in Romeoville, Ill., west of Chicago. The company had only begun to assess the extent of the break to the underground pipeline and what caused it.
"There is no current estimate of when the Line 6A could be restarted," Enbridge said in a statement Friday. Regulatory officials are insisting on a thorough cleanup and site remediation, as well as a full review of safety considerations, before granting a permit to resume service, a process that could take weeks.
Traders greeted the news by driving crude prices higher in action on the New York Mercantile Exchange, where the contract for October delivery surged 3 per cent, or $2.20 (U.S.) a barrel, to $76.45. "The market is actually in pretty good shape to absorb it because we have a pretty substantial crude supply surplus out there," said Jim Ritterbusch, head of an oil trading advisory firm based in Galena, Ill.
"But when an event like this takes place, the market always tends to price in a worst-case scenario until some clarity is provided. And so far, we haven't seen much definition as to when this pipeline will be back up and going."
The Illinois accident comes only a month after a smaller pipeline break in Michigan that leaked oil into the Kalamazoo River system.
Hearings have begun on Enbridge's proposed Northern gateway pipeline, which would ship some 500,000 barrels a day of crude from Alberta to the west coast for shipment to Asia-Pacific markets. Its problems in the U.S. serve to undermine its safety assurances for the Gateway project.
Both Enbridge and its competitor, TransCanada Corp., are proposing pipeline expansion in the U.S., and the two breaks highlight the risks involved.
The Enbridge problems "don't help our industry," TransCanada chief executive officer Russ Girling said in an interview Friday. Still, he expressed confidence that the spills won't stop TransCanada from gaining approval for its Keystone XL pipeline from Alberta to the Gulf Coast, which he said will be "one of the safest pipelines in the world."
With files from reporter Nathan VanderKlippe in Calgary
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