Oil surged more than $4 a barrel on Thursday after an explosion at a major pipeline temporarily halted nearly a fifth of crude oil imports to top consumer the United States.

But prices fell back from session highs when two of the four pipelines affected restarted.

U.S. crude was up $2.50 at $93.12 a barrel by 7:30 a.m. EST, off a session high of $95.17. Brent crude was up $1.57 at $91.38 a barrel.

Two employees were killed in the explosion on Wednesday that hit the pipeline supplying Canadian crude to U.S. Midwest refineries.

Enbridge Inc, the Calgary, Alberta-based pipeline operator, had to shut down four main pipelines that carried about 1.5 million barrels per day (bpd) of Canadian crude to the United States in the third quarter, nearly a fifth of U.S. crude imports.

Two of the four pipelines, with a total capacity of 646,000 bpd, restarted a few hours ago and the main fire was extinguished, an Enbridge spokesman said.

The explosion caused an abrupt turnaround in crude prices which had fallen more than $3 a barrel on Wednesday, pressured by worries over the U.S. economy, a rally in the U.S. dollar and expectations of a supply increase from OPEC.

The whole story is so different from last night when we saw U.S. crude go towards $90, said Christopher Bellew, senior vice president at Bache Commodities Limited.

Then the market was being so heavily sold that it was clear evidence of people getting out of positions.


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

Bellew said the rebound in prices could have an impact on the Organization of the Petroleum Exporting Countries' meeting on December 5 in Abu Dhabi.

If they see prices up here...when they meet they are more likely to agree to increase output.

But he added that the rally could run out of steam if the supply disruption proved not as great as feared initially.

Nobuo Tanaka, who heads the International Energy Agency, said the pipeline outage was not major.

We have learnt that the current pipeline (capacity) is 1.1 million barrels per day so that's not that substantial, he said at a news conference in Paris.

The pipeline incident more than offset the impact of a smaller-than-expected drop in U.S. crude and distillate stocks, that helped trigger the biggest decline in U.S. oil prices since August 6.

Growing expectations of an output increase from OPEC had added to the pressure on the market.

A Reuters poll of 21 banks, funds, consultants and traders showed a majority expecting OPEC to increase output by at least 500,000 barrels per day (bpd) when it meets.

Top OPEC Gulf officials have expressed concern about oil's record run, but insist supplies are sufficient and do not support prices near $100.

(Reporting by Jiwon Chung in Singapore and Randy Fabi in London; editing by James Jukwey)