CALGARY (REUTERS) - US crude hit a two-year high in thin trade on Thursday (Nov 23) as the shutdown of a major crude pipeline from Canada and a draw on fuel inventories pointed to a tightening market, despite rising output from US producers.
US crude was up 35 cents at US$58.39 per barrel by 10:58 am EST (1548 GMT), close to a two-year peak of US$58.44 touched earlier in the session.
Brent crude traded at US$63.40 per barrel, 8 cents above its last close.
Trading volumes were thin because of the Thanksgiving holiday in the United States.
The shutdown on TransCanada Corp's 590,000-barrel-per-day Keystone pipeline following a spill last week has helped drive oil prices higher because of expectations it will reduce crude stocks in the US storage hub of Cushing, Oklahoma.
"Inventories should drain sharply in the next few weeks given the uncertain timeline for a restart of the Keystone pipeline, a major artery for Canadian heavy oil barrels into the heart of the Cushing hub," said Martin King, a GMP FirstEnergy analyst in Calgary.
Prices also found support from a drawdown in commercial fuel inventories in the United States.
US stocks fell 1.9 million barrels in the week to Nov 17, and have dropped 15 per cent from record highs in March to below 2016 levels.
The market shrugged off data showing US output C-OUT-T-EIA has risen by 15 per cent since mid-2016 to a record 9.66 million bpd, helping turn the United States from the world's biggest importer to a major exporter.
Climbing US output threatens efforts by the Organisation of the Petroleum Exporting Countries, Russia and some other non-Opec producers to reduce global supplies by limiting their production.
"Whatever Opec will be discussing and... agreeing upon can be made redundant by the actions of US suppliers, which are likely to hike up production in a similar order," said Eugen Weinberg, head of commodities research at Commerzbank.
He said another rise of 800,000 to 1 million bpd in US output in 2018 would mean "attempts by OPEC to tighten the market may not be successful".
Opec meets on Nov 30 to discuss policy, with Saudi Arabia lobbying for extending cuts that are due to expire in March.