Is a pipeline fire that might temporarily interrupt the flow of oil between Canada and the US worth a 3.5% rise in global oil prices? The market thinks so. Crude is up well over $3 to almost $94 on the news.
But, step back and break that down. The US gets oil from a number of other sources, OPEC nations among them. The US government also keeps a strategic oil reserve for emergency shortages.
The US may still be a big player in oil consumption, but China, Japan, Germany, Russia and India as also huge consumers of crude. The oil fire temporarily blocking the flow into the US does not affect their supply at all.
There is talk that OPEC could raise production next month. That sent oil down about $4 yesterday. The OPEC move would increase global supply and be a much bigger factor in oil prices than a pipeline fire.
But, the rise in oil prices on what would appear to be a minor event is further proof that oil is moving up and not down. There will be small pieces of news like this over the next year. But, what it something more substantial happens. A coup in Venezuela or Nigeria. An outbreak of war with Iran.
If unimportant news can move crude up 3.5%, what would important news do?
Douglas A. McIntyre
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