OIL PRICES NEAR $95, AS U.S. SHUTS ALASKAN PIPELINE

OIL prices rose for the first time in three days, after an Alaskan pipeline carrying about 15 per cent of U.S. crude output was shut following a leak.

Crude for February delivery increased as much as $1.95 to $89.98 a barrel in electronic trading on the New York Mercantile Exchange. It was at $89 a barrel at 1:30 p.m. London time.

Brent crude for February settlement rose as much as $1.37, or 1.5 per cent, to $94.70 a barrel on the London-based ICE Futures Europe exchange.

Futures gained as much as 2.2 per cent after the Trans- Alaska Pipeline System was closed January 8, forcing companies including BP Plc to suspend 95 per cent of production from the North Slope area. China's oil imports rose 18 per cent in 2010, customs data showed today. Crude will breach $100 a barrel this year as spare production capacity shrinks, Morgan Stanley said.

'Oil prices are being supported today (yesterday) by the leak at the Trans-Alaska pipeline,' said Robert Montefusco, a senior broker at Sucden Financial in London. 'But overall the bullishness has calmed down a bit, with funds reducing their long positions last week.'

Brent's premium to New York oil futures increased to $6.14 a barrel on January 6, the most since February 13, 2009, based on data compiled by Bloomberg. The spread narrowed to $5.18 yesterday.

Hedge funds and other large speculators lowered their net- long positions, or wagers on rising prices, in crude contracts by 14 per cent to 187,408 in the seven days ended January 4, according to a weekly report from the U.S. Commodity Futures Trading Commission. That was down from 217,046 contracts in the previous week, which was the biggest total in records going back to June 2006.

Crude fell 3.7 per cent last week, the most in seven weeks. Futures gained 15 per cent in 2010.

Operators of the Alaska pipeline, an 800-mile (1,300- kilometer) network crossing the northernmost U.S. state, can't say when the link will open again. The system starts in Prudhoe Bay on the North Slope and runs to Valdez, the northernmost ice- free port in North America.

The line was still closed as of 2:21 p.m. local time yesterday and there's no estimate of when it would be returned to service, said Michelle Egan, a Alyeska Pipeline Service Co. spokeswoman, in a telephone interview.

'We do think that the pipeline won't be closed for any significant length of time and production will very quickly return to normal,' David Lennox, a Sydney-based resource analyst at Fat Prophets, said in an interview. 'With that we'll see the price of crude oil probably drop back down towards the $88 level, where it had been trading.'

The curtailment in Alaska production follows the shutdown of Canadian Natural Resources Limited's 110,000-barrel-a-day Horizon oil sands project after a fire January 6.

The Alyeska closure was expected to cause a narrowing in the price difference between prompt supplies of West Texas Intermediate oil, the grade traded in New York, and later deliveries, according to a January 7 report from JPMorgan Chase & Co. The spread between the February and April contracts has dropped to $1.97 yesterday from $2.52 a barrel on January 6.

'We expect oil markets to tighten through this year, underpinning rising oil prices as spare capacity falls from elevated levels,' Morgan Stanley analysts led by Theepan Jothilingam in London said in a report yesterday.

China's crude imports in 2010 climbed to 239.3 million tonnes, according to the Beijing-based General Administration of Customs. That's about 4.8 million barrels a day. December imports declined to 20.86 million tons from 20.9 million the month before.