Brent and US WTI oil prices started the year over $60/barrel
Oil prices that hit mid-2015 highs early in trading on Tuesday later slipped on restarts of major crude pipelines in the UK and Libya and rising US production.
For the first time since January 2014, both Brent and US WTI opened the year over $60/barrel due to anti-government protests in Iran and the OPEC supply cut agreement.
By 12:59 p.m. EST, US WTI had dipped by 13 cents to sit at $60.29/barrel. Earlier in the session, WTI had hit $60.74/barrel, the highest since June 2015.
Brent crude was down 41 cents to $66.46/barrel after reaching a session high of $67.29/barrel, the highest since May 2015. The Canadian Crude Index rose to $37.79.
Reuters reports the spread between US crude and Brent hit its narrowest mark in nearly two weeks.
In the United Kingdom, the Forties pipeline was restarted and returned to full operations on Dec. 30 after a crack in the pipeline shut down operations on Dec. 11.
As well, a Libyan pipeline which was damaged in a suspected attack last week, has been repaired and production is restarting gradually.
“The resolution of the North Sea pipeline issue is having the expected result that the Brent-WTI spread is narrowing today,” David Thompson, executive vice-president at Powerhouse told Reuters.
Thompson adds that volumes are higher as traders return to work after the holidays.
“Despite the day’s price weakness, both Brent and WTI remain in solid, long-term bullish trends – $58.95 is nearby support on WTI front-month futures and $65.60 is the corresponding support on front-month Brent futures,” Thompson said.
In Iran on Tuesday, the country’s Supreme Leader accused the Middle Eastern country’s enemies of stirring unrest. The death toll in anti-government demonstrations that began last week in Iran has risen to 21.
So far, the protests have had no impact on Iranian crude production or imports.
“Geopolitical risks are clearly back on the crude oil agenda after having been absent almost entirely since the oil market ran into a surplus in the second half of 2014,” Bjarne Schieldrop, chief commodities analyst at SEB, told Reuters.
Despite the OPEC supply cut agreement which has helped cut the global crude oversupply and strong demand for oil in China, rising US production has tempered the market’s bullish outlook for oil prices.
“We think US tight oil production growth warrants close monitoring as it could spoil OPEC’s market-balancing efforts, pushing the market into surplus in 2018,” Barclays bank said.
In the US Energy Information Administration’s monthly report, US crude production rose 167,000 barrels per day (b/d) to 9.64 million b/d in October. According to Reuters, if that figure is not revised next month, that will be the highest US monthly production level since May 1971.
