HOUSTON/LONDON (Reuters) - A fatal explosion crippled the biggest pipeline supplying Canadian crude to U.S. Midwest refineries, shutting off more than 1 million barrels per day of imports to the world's biggest consumer.
By Erwin Seba and Randy Fabi
HOUSTON/LONDON (Reuters) - A fatal explosion crippled the biggest pipeline supplying Canadian crude to U.S. Midwest refineries, shutting off more than 1 million barrels per day of imports to the world's biggest consumer.
The cause of the explosion on the Enbridge Pipeline system Wednesday that killed two employees was not immediately known. The U.S. Department of Homeland Security said there were no known links to terrorism related to the blast in Minnesota.
The Department of Transportation said it will likely order the company to operate at reduced rates while it investigates the blast, adding the probe will take weeks.
!ADVERTISEMENT!U.S. crude oil prices Thursday vaulted more than $4 to just over $95 per barrel in early trading, before easing below $93 after news the main fire had been put out and that two of four connected lines had restarted.
The U.S. Department of Energy said it was ready to tap the Strategic Petroleum Reserve to help offset the disruption, which stirred supply concerns ahead of peak winter demand.
"The timing is pretty bad. We are coming to the strongest demand period for crude with the approach of the northern winter," said Mark Pervan of ANZ.
During the third quarter, the pipeline had carried around 1.5 million bpd of Canadian crude, about 15 percent of U.S. imports.
There was no word on when the nearly 700,000 bpd line 4, the biggest of the connected pipes, would restart.
Line 3, with capacity of nearly 450,000 bpd, had been shut earlier to inspect a leak and was also still out of action.
"Two of the four pipelines have restarted," Larry Springer, a spokesman for Canadian operator Enbridge, said Thursday. "The fire in line 3 in the last hour has been extinguished, but there could be other fires around it."
He did not specify how much throughput had been restored.
LIMITED OPTIONS
Officials at several Midwest refineries were not immediately available to comment on whether the outage would affect fuel production from their plants.
Most Midwestern refineries have some limited alternative supply options on underused pipelines such as Capline, which supplies the Wood River and Chicago areas, and the Wood River pipeline, which supplies plants in Minnesota.
The explosion also raised prospects for a supply increase from the Organization of the Petroleum Exporting Countries, which meets on December 5, analysts said.
Canada is the top crude exporter to the United States, with most of that oil delivered via the Enbridge system.
A lasting disruption to Lines 3 and 4 -- which together pump more than 1.1 million bpd of heavy and medium crude -- would put a strain on landlocked Midwest refiners, which have few immediate alternatives to the Canadian supplies.
That could have a knock-on effect on stocks in the Cushing, Oklahoma, delivery point for oil futures traded on the New York Mercantile Exchange.
If Washington does release U.S. reserves, it would be the first time President George W. Bush authorized an emergency response since Hurricane Katrina caused massive disruption in 2005.
At the same time, the International Energy Agency, which represents 26 oil consuming nations, also ordered its members to make stocks available.
Thursday, the head of the IEA said it was monitoring the situation, but the disruption was "not that substantial."
"If necessary, we will use our emergency measures," said Nobuo Tanaka, the IEA chief.
Enbridge said it will not proceed with a previously announced public offering of its Class A common units after the explosion.
(Additional reporting by Bill Berkrot and Robert Campbell in New York, Luke Pachymuthu, Jiwon Chung and Nick Trevethan in Singapore and Muriel Boselli in Paris; Writing by Peg Mackey and Barbara Lewis; Editing by Christian Wiessner)
