Oil falls back after surge on pipeline explosion

Oil gave back nearly all of its big gains on Thursday after Enbridge Pipeline said its fire-damaged crude pipeline in Minnesota could resume normal operations within days.

An explosion along the Canada-to-United States pipeline, which supplies more than 10 percent of U.S. crude imports, killed two workers and choked off crude flows Wednesday.

But Enbridge said Thursday two of the four pipelines shut had already been restarted, and that the remaining lines could come back into service within a few days.

U.S. crude was up 20 cents to $90.82 a barrel by 1855 GMT after zipping as high as $95.17 earlier in the day. Brent crude was up 34 cents to $90.15 a barrel.

The U.S. Department of Energy said it was prepared to open up the emergency crude stockpile to compensate for the disruption, but had yet to receive any requests.

The incident on the Enbridge line comes after four other leaks this year on parts of the system, which runs from Alberta into the Midwest.

I think cooler heads are prevailing here and we are heading back to the level we were going to before this happened, said Phil Flynn, analyst at Alaron Trading in Chicago. It doesn't look as bad as it first looked.

Oil has risen 40 percent since August and has come close to breaking the $100 mark, driven by the weak dollar, concerns over shrinking supplies ahead of winter and speculative inflows.

But prices have fallen back from the highs near $100, pressured by worries over the U.S. economy, a rally in the U.S. dollar and expectations of a supply increase from OPEC.

Also, the Organization of the Petroleum Exporting Countries is set to meet on December 5 in Abu Dhabi, with some members favoring a boost to production.

The recent volatility in the market has shown its sensitivity to supply disruptions.

A long delay in (the pipelines) resuming operation, along with failure by OPEC to increase output at its 5 December meeting and unexpectedly cold weather in the United States, might just be enough to provide the necessary impetus to finally take crude to $100 a barrel, said Lawrence Poole, energy analyst at research firm GlobalInsight.