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Forties pipeline shutdown, drop in US crude stocks bump up oil prices

Oil prices up slightly on Thursday

Oil prices

Oil prices rose slightly on Thursday on a shuttered UK pipeline and a drop in US crude stocks. Chevron photo.

Oil prices rose slightly on Thursday due to the continued outage of the Forties pipeline, the network that moves about 450,000 barrels of crude per day from North Sea platforms to refineries in Scotland.

By 1:25 p.m. EST, US WTI rose by 18 cents to $56.78/barrel and Brent crude was up 31 cents to $62.75/barrel.  The Canadian Crude Index was up to $32.91.

The operator of the Forties pipeline, Ineos, declared a force majeure on crude oil, gas and condensate deliveries from the pipeline, according to a Reuters’ source.

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“At present you can’t ignore the impact of the Forties pipeline outage,” John Kilduff, partner at Again Capital Llc in New York told Reuters.  He added “It’s a significant amount of oil that the market is going to miss and is missing. And it’s almost surprising it’s not generating more support.”

As well, oil prices were buoyed by a drop in US crude stocks last week.  According to the US Energy Information Administration, US crude inventories fell by 5.1 million barrels in the week ending Dec.8.

This is the fourth straight week of declines in US crude stocks, which now sit at 442.99 million barrels, the lowest since October 2015.

Data from the International Energy Agency forecasts the oil market during the first half of 2018 will be in surplus by 200,000 b/d, but by the second half of the year, the market will switch to a deficit position.

As a result, the IEA predicts 2018 should be “a closely balanced market”.

The IEA factored in growing US production, predicting it will increase by 870,000 b/d, up from the Paris-based group’s November forecast of 790,000 b/d.

“The IEA underlined the same take that the U.S. Energy Department had the day before yesterday and OPEC had yesterday,” Bjarne Schieldrop, chief commodities analyst with SEB Bank told Reuters.  Schieldrop added that further upward revisions may occur.

Reuters’ oil market analyst John Kemp wrote “The bigger picture is of a cyclically tightening oil market but with considerable uncertainty about how far and how quickly U.S. shale producers will dampen any further price increases by boosting their production.”

According to the IEA, the US is on track to deliver up to 80 per cent of the world’s production gains through 2025.

OPEC’s latest estimate for US oil output growth for 2018 is now at 1.05 million b/d, while the US EIA increased its growth forecast to 780,000 b/d.

 

 

 

 

Posted in: Energy Financial

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