Oil prices up, but rising US production tempers gains
Oil prices rose as the shutdown of the UK’s Forties pipeline and OPEC-led supply cuts continued. As well, data to be released later on Tuesday and early Wednesday is expected to show US crude stocks declined for the fifth straight week.
By 1:31 p.m. EST, Benchmark Brent had risen by 34 cents to $63.25/barrel and US WTI was up 36 cents to $57.58. The Canadian Crude Index was down to $33.73.
Investors remain concerned that rising US production will undercut OPEC’s efforts to cut the global glut of crude.
On Monday, the US Energy Information Administration released its monthly drilling activity report showing US shale output next month is forecast to increase by 94,000 barrels per day (b/d) to 6.41 million b/d.
Brent prices were underpinned by the shutdown of the 550,000 b/d Forties pipeline which carries crude from the North Sea to refineries in Scotland. The 105 mile long pipeline was shut down on December 11 after a crack was detected.
“You’ve had a little surge because the pipeline is still plaguing the North Sea,” Rob Haworth, senior investment strategist at U.S. Bank Wealth Management told Reuters. He added “It’s enough to sway some market sentiment but a lot of it is already priced in.”
On Tuesday, the pipeline owner and operator, Ineos, said the shutdown will continue for at least three more weeks.
“Repairs are progressing well and a number of options are currently being developed. The custom parts necessary for some of these options have now been fabricated and are being delivered to the site over the coming days as we progress the preferred method of repair from today,” Ineos said in a media update Tuesday.
Oil prices inched higher after reports that a missile was fired at Riyadh, the capital of Saudi Arabia, from Yemen. Saudi Arabia says it intercepted the missile and no casualties were reported.
On Monday, Russian oil giant Rosneft said the OPEC supply cut agreement could be extended even further beyond the end of 2018 if necessary. So far, the agreement has helped reduce the oversupply of crude on global markets.
The American Petroleum Institute will release its crude inventories later on Tuesday and the US Energy Information Administration will offer its data on oil stocks Wednesday morning.
Analysts participating in a Reuters poll predict another decline in US crude stocks as well as a fall in distillate stocks.
