Crude falls as Trans Alaska pipeline restarts

Crude oil futures fell in Asian trade Tuesday amid mixed regional equities after a major pipeline in Alaska was restarted, restoring crude-oil supplies to the world's largest oil consumer.
Relatively bullish Brent crude futures on the London's ICE Futures exchange rose, however, helped by a weaker US dollar against the euro, widening Brent's premium to Nymex's West Texas Intermediate light, sweet crude to around $6.50 a barrel, double the end-2010 spread.
Nymex futures for delivery in February traded at $90.95 a barrel at 0624 GMT, down $0.59 in the Globex electronic session. With floor trade suspended due to a holiday in the U.S. Monday, the basis of comparison is still Friday. March Brent crude rose $0.17 from Monday's settlement, to $97.60 a barrel. "Resumption of flow in the Trans Alaska Pipeline System is putting downward pressure on Nymex," said Victor Shum at Purvin & Gertz. The Trans Alaska Pipeline was restarted Monday after crews installed a new section of pipe to bypass a damaged segment. Oil produced at Alaska's North Slope and transported through the 800-mile pipeline system represents 11% of total US output.

With the restart, WTI could come under further pressure, with Nymex prices already having a hard time sustaining above $90 a barrel, Shum said. Analysts said Brent remains on course to take another shot at hitting $100 a barrel, while restart of the U.S. pipeline will keep the U.S. market supply-heavy ad WTI at a wide discount. While buying continues to be boosted by bullish global economic news, the move to above $90 a barrel since December has also prompted caution, as triple-digit crude-oil prices could hurt any recovery. The Organization of Petroleum Exporting Countries has said that the market is well supplied and the higher prices are driven by speculation, a weaker U.S. dollar and temporary events like the US pipeline outage. Nymex reformulated gasoline blendstock for February--the benchmark gasoline contract--fell 76 points to $2.4870 a gallon, while February heating oil traded at $2.6290, 162 points lower. ICE gasoil for February changed hands at $810.50 a metric ton, up $0.50 from Monday's settlement.