CALGARY, Alberta - Enbridge Inc shut down the largest of its three major oil pipelines on Thursday, reducing supply on the main transit route for Canadian crude into the United States.
The incident, just six weeks after Enbridge was forced to shut a smaller part of its Lakehead system, pushed prompt crude futures toward $75 as it may ease a glut at the Cushing, Oklahoma delivery point for U.S. crude futures.
Enbridge closed its 670,000 barrel per day Line 6A, which feeds midwest refineries and Cushing, after a leak was discovered near Romeoville, Illinois. Though the size of the spill is not yet known, local fire officials said the line was shut early in the afternoon and that the oil has been contained. Canada is the largest oil exporter to the United States and Enbridge's pipelines carry the lion's share of that crude.
Front-month U.S. crude prices jumped as much as 72 cents to $74.97 a barrel in afterhours trading on the line shutdown. November added just two pennies, as traders bet the outage would create tighter short-term conditions at Cushing.
The discount of front-month WTI crude to the second month shrank to about $1.10, from almost $1.80 a barrel earlier this week, flattening a market structure known as contango, where prompt oil is cheaper than future supplies.
"Some people had been selling WTI and buying Brent crude, but now they are covering their shorts, and thereby they have to buy back WTI at the front of the curve," said Tetsu Emori, a fund manager at Tokyo-based Astmax Co Ltd.
Enbridge shut its 190,000-bpd Line 6B, which runs from Griffiths, Indiana, to Sarnia, Ontario, on July 26 after a rupture near Marshall, Michigan, spilled 19,500 barrels into a river system.
Though repairs were completed last month, U.S. regulators have not yet allowed the company to restart shipments on the line, forcing Enbridge to ration use of its remaining lines.
The closure of Line 6B had already forced down crude prices and the newest outage will probably further depress prices in Canada and force refineries served by the line to find alternative supplies.
"WTI spreads are coming in on this news and Canada grades are being sold off fast," said one U.S. crude trader.
Line 6A, which carries light, medium and heavy crudes, as well as synthetic oil from northern Alberta's oil sands, runs from Superior, Wisconsin to Griffiths and supplies oil to refineries in the Chicago region, as well as to the Cushing storage hub.
The rupture occurred near a 167,000 barrel per day refinery operated by CITGO. Other nearby refineries supplied by Line 6A include BP's 435,000 bpd Whiting, Indiana plant and ExxonMobil's 238,600 bpd Joliet, Illinois, refinery.
"We have employees on scene assessing the situation," said Terri Larson, an Enbridge spokeswoman.
Maggie Carson, a spokeswoman for the Illinois Environmental Protection Agency said Enbridge had deployed absorbent booms and a vacuum truck to clean up the oil and none was spilled into a nearby river.
"The crude released has been contained and has had no impact on the DuPage River," she said.
The U.S. Pipeline and Hazardous Materials Safety Administration, which regulates pipeline safety, has sent an inspector to the scene of the leak.
Enbridge shares closed at C$52.22 on Thursday on the Toronto Stock Exchange, before word of the leak.
(Reporting by Scott Haggett, Bruce Nichols in Houston, Timothy Gardner in Washington and Joshua Schneyer, Edward McAllister in New York and Alejandro Barbajosa in Singapore; Editing by Michael Urquhart)