NEW YORK (Dow Jones)--Oil futures advanced Tuesday as the dollar slid against the euro and TransCanada Corp. (TRP, TRP.T) shut down a pipeline network serving a key U.S. oil hub.
Light, sweet crude for July delivery gained $2.53, or 2.5%, to $103.12 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange added $2.16, or 1.9%, to $116.84 a barrel.
The euro rose to a three-week high against the dollar Tuesday after the Wall Street Journal reported that Germany is considering dropping its push to reschedule Greek bonds, raising optimism that a settlement to the country's debt crisis could be closer.
A weaker dollar often raises oil prices as the dollar-denominated commodity becomes cheaper for holders of other currencies.
"During the past week the euro has kind of stabilized--strengthened by half-a-percent over the past week or so--which obviously supports the oil price," said James Zhang, commodity strategist at Standard Bank in London.
The ICE Dollar Index, which tracks the greenback against a basket of foreign currencies, was recently down 0.5% to 74.558.
Separately, a 40-barrel spill at a Kansas pump station along TransCanada's Keystone network led the operator to shut down the entire pipeline system, a spokesman said Tuesday. The Keystone network connects heavy-oil fields in Alberta with the oil hub of Cushing, Okla., which is the delivery point for the Nymex light, sweet oil contract.
Record oil levels at Cushing have depressed the front-month Nymex contract versus other contracts recently, and the outage on the network--which can deliver up to 591,000 barrels a day to Cushing--is causing the Nymex to regain territory.
The company is working to bring the pipe network back online "as soon as possible," spokesman Terry Cunha said. The spill was caused by damage to a fitting at the pump station, he said.
The Nymex contract and the rival Brent crude contract typically have historically traded within a few dollars of each other, but the high supplies at Cushing have caused the Nymex contract to trade at a discount of as much as $19 a barrel this year. On Tuesday, the discount--or "spread"--narrowed slightly and was recently holding between $13 and $14 a barrel.
Brent is likely to continue trading at a premium to the Nymex contract through the summer, said Jim Ritterbusch, head of the oil-trading advisory firm Ritterbusch and Associates, due to "the Cushing factor, North Sea production issues and the ongoing loss of Libyan barrels."
Front-month June reformulated gasoline blendstock, or RBOB, gained 3.6 cents, or 1.2%, to $3.1280 a gallon. June heating oil added 4.6 cents, or 1.5%, to $3.0365 a gallon.