Crude oil blew past $100 a barrel on Wednesday, climbing above the psychologically-important threshold for the first time since July as economic jitters about the U.S. economy continue to fade and traders eye a sale of a key oil pipeline.
The latest surge left crude oil with its ninth rally in the past 11 sessions and at its highest close since May. Crude has climbed more than 6% so far this month alone.
On Wednesday, crude settled at $102.59 a barrel, up $3.22, or 3.24%. Crude had not traded above $100 on an intraday basis since July 26.
Tom Kloza, chief oil analyst at the Oil Price Information Service, attributed Wednesday’s rally to the sale of the Seaway Crude Pipeline, which routes oil from the Gulf Coast to Oklahoma. Canada’s Enbridge, which paid ConocoPhillips (NYSE:COP) $1.15 billion for the pipeline, said it plans to reverse the flow of crude back toward the Gulf, opening it up to exports.
“That deal has sparked a little bit of a panic in the trading community,” said Kloza. “The thought is this pipeline deal is going to clear the way for disadvantaged U.S. domestic crude to get to the Gulf Coast and reach world markets.”
The latest rally may have also been fueled by the Energy Department’s weekly energy inventory report, which revealed crude oil stockpiles tumbled by 1.1 million barrels last week, exceeding forecast for a decline of 800,000 barrels. However, gasoline stockpiles increased by 1 million barrels last week.
Still, some believe the leap in oil prices is unwarranted given the fundamentals.
"Trading in December is always a bit tricky due to lower volume and an incentive for some market participants to mark-up the book but we fail to find the inputs that justify crude oil pricing at Libyan crisis levels," Olivier Jakob, managing director at Petromatrix GMBH, wrote in a note.
While the U.S. benchmark light, sweet crude rallied, the world benchmark Brent crude tumbled further. Brent was recently down 74 cents a barrel, or 0.66%, to $111.44.
The interplay has narrowed the gap between the two contracts, which once stood at $27, to just $10 now.
Despite the sharp increase in crude oil prices, gasoline prices have slipped in recent weeks. According to AAA, the average price for a gallon of gasoline fell to $3.402 on Wednesday, down from $3.411 on Tuesday and $3.430 a week earlier.
However, gasoline prices are still up on average more than 50 cents a gallon from a year ago.
“You are going to see the highest retail gas prices for Thanksgiving ever,” said Kloza.
RBOB gasoline rallied 0.0106 cents per gallon, or 0.41%, to $2.5969. Natural gasoline prices gained 0.023 cents per million BTU's, or 0.65%, to $3.563.