Keystone Shutdown Propels Crude Above $79, Supply Woes

Key Takeaway

• Keystone pipeline's partial shutdown due to a pressure drop sends US crude futures above $79/barrel, from closing at $78.93.
• The incident likely reduces oil supply to Cushing, Oklahoma, and Patoka, Illinois refining centers.
• Historical context of Keystone's ruptures adds to market sensitivity; previous 12,000-barrel spill had significant impact.

Keystone Pipeline Shutdown Boosts Oil Prices

The partial shutdown of TC Energy Corp's Keystone oil pipeline, responsible for transporting heavy Canadian crude to the US Midwest and Gulf Coast, caused oil futures to rise in post-settlement trading. The pressure drop on a segment of the line from Hardisty, Canada, to Steele City, Neb., as reported by Wood Mackenzie, indicated a halt in oil movement, leading to increased oil prices.

History of Ruptures and Market Impact

Keystone pipeline has a history of ruptures, with a notable 12,000-barrel spill last December that resulted in a two-week shutdown, impacting global oil markets. Following the recent shutdown at Steele City, less oil is likely being transported to the crucial storage hub of Cushing, Oklahoma, and the refining center around Patoka, Illinois. The pipeline's connection with the Marketlink pipeline, responsible for transporting oil to Gulf Coast refiners and international sea terminals, further exacerbates the supply disruption.

Market Reaction and Price Movement

The shutdown at Steele City has pushed US benchmark crude futures above $79 a barrel, following a close at $78.93. The immediate impact of the pipeline disruption on oil prices underscores the market's sensitivity to supply disruptions and the critical role that infrastructure like Keystone plays in maintaining supply chains.