From Reuters/St. Louis Post Dispatch
NEW YORK • Oil prices surged to 2½-year highs and U.S. crude touched $60 a barrel in light trading volume on Tuesday, boosted by news of an explosion on a Libyan crude pipeline as well as voluntary OPEC-led supply cuts.
Armed assailants blew up a pipeline pumping crude oil to the port of Es Sider on Tuesday, cutting Libya’s output by up to 100,000 barrels per day (bpd), according to military and energy sources.
The state-run National Oil Corporation (NOC) said in a statement that output had been reduced by 70,000 to 100,000 bpd. The cause of the blast was unclear, it added.
The North African country’s output had been recovering in recent months after being held down for years amid armed conflict and unrest.
Brent crude, the international benchmark for oil prices, settled at $67.02 a barrel, up by $1.77, or 2.71 percent. During the session, front-month prices touched a high of $67.10 a barrel, their highest since mid-May 2015.
U.S. crude climbed $1.50, or 2.6 percent, to end the session at $59.97 a barrel after touching a session high of $60.01, the highest since late-June 2015.
The impending restart of Forties, a key North Sea pipeline, limited the extent of the rally. Oil and gas flows through the pipeline will be increased gradually, its operator Ineos said on Tuesday, adding that the Kinneil processing plant was partially restarted.
“Keep in mind that the field and pipeline are old and it may have issues and it’s probably why the market isn’t selling off,” said Scott Shelton, a broker at ICAP in Durham, N.C.
Trading activity was thin following the Christmas holiday and London trading was muted during Boxing Day. About 72,000 contracts of front-month Brent futures changed hands on Tuesday, well below the typical daily average of more than 250,000 contracts.
In the United States, the energy complex was led higher by heating oil futures. Prices rose as much as 3.6 percent to a session high of $2.0410, the highest since early June 2015 on forecasts for cold weather.
Brent has risen 17 percent in the year to date while U.S. crude has rallied about 11 percent so far in 2017.
The Organization of the Petroleum Exporting Countries, plus Russia and other non-members, have been withholding some output since Jan. 1 to relieve a glut. The producers have extended the supply cut agreement to cover all of 2018.
Iraq’s oil minister said on Monday there would be a balance between supply and demand by the first quarter, leading to a boost in prices. Global oil inventories have decreased to an acceptable level, he added.
That outlook is earlier than predicted in OPEC’s latest official forecast, which calls for a balanced market by late 2018.
U.S. shipments to China, one of the world’s biggest oil consumers, have benefited from the OPEC-led output cuts. Russia, however, was China’s largest crude oil supplier for the ninth month in a row in November, topping Saudi Arabia for the year so far, China’s customs data showed on Tuesday.
While the OPEC action has lent support to prices all year, market participants have said the unplanned shutdown of the Forties pipeline on Dec. 11 is what helped push Brent to its 2½-year high.
Forties is the biggest of the five North Sea crude streams underpinning Brent, the benchmark for oil trading in Europe, the Middle East, Africa and Asia.
Still, rising production in the United States is offsetting some of the OPEC-led cuts.
The U.S. rig count , an early indicator of future output, held steady at 747 in the week to Dec. 22, according to the latest weekly report by Baker Hughes.
U.S. crude oil inventories were likely down for a sixth straight week, while gasoline stockpiles saw a probable build last week, a preliminary Reuters poll showed on Tuesday.
Oil Falls from 2015 Highs as Rally Runs Out of Steam
From Reuters
CALGARY, Alberta (Reuters) – Oil prices dipped on Wednesday after hitting a near two-and-a-half year high in the previous session as a rally fueled by supply outages in Libya and the North Sea ran out of momentum.
Brent crude futures dropped to $66.62 a barrel, down 0.6 percent, or 40 cents, at 1556 GMT after breaking through $67 for the first time since May 2015 the previous day.
U.S. West Texas Intermediate (WTI) crude futures were at $59.66 a barrel, down 30 cents from their last settlement. WTI broke through $60 a barrel for the first time since June 2015 in the previous session.
“The market continues to gravitate towards bullish news but today we are seeing a little bit of profit-taking,” said Gene McGillian, manager of market research at Tradition Energy in Stamford, Connecticut.
On Tuesday, Libya lost around 90,000 barrels per day (bpd) of crude oil supplies from a blast on a pipeline feeding Es Sider port.
Repair of the pipeline could take about one week but will not have a major impact on exports, the head of Libyan state oil firm NOC told Reuters on Wednesday.
The Libyan outage added to supply disruptions of recent weeks, which also included the closure of Britain’s largest Forties pipeline.
On Wednesday, Forties was pumping at half its normal capacity and its operator was pledging to resume full flows in early January.
The Forties and Libyan outages, which together amount to around 500,000 bpd, are relatively small in a global context of both production and demand approaching 100 million bpd.
“While supply impact is immaterial, it shows that with the market structurally undersupplied and inventories continuing to draw, geopolitical risk has now re-emerged as an important factor in day-to-day trading dynamics,” analysts at Tudor Pickering Holt Energy Research said in a note.
Oil markets have tightened significantly over the past year thanks to voluntary supply restraint led by the Middle East-dominated Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC Russia.
Data from the U.S. Energy Information Administration (EIA) shows that global oil markets gradually came into balance by 2016 and started to show a slight supply deficit this year following rampant oversupply in 2015. The data implied a shortfall of 180,000 bpd for the first quarter of 2018.
A major factor countering OPEC and Russia efforts to prop up prices is U.S. oil production, which has soared more than 16 percent since mid-2016 and is fast approaching 10 million bpd.
The latest U.S. production figures are due to be published by the EIA on Thursday.
