Crude declines as Nigeria oil workers strike is suspended

By Jessica Summers on 12/18/2017

NEW YORK (Bloomberg) -- Crude edged lower as an oil-worker strike in Nigeria was suspended and the time line for fixing a key North Sea pipeline didn’t worsen.

Futures traded in a 96-cent range in New York, erasing gains from earlier in the session. In Nigeria, oil workers agreed to suspend their strike and reopen talks with management next month. Meanwhile, the owner of the Forties Pipelines System, one of the most important in the region, said the conduit’s restart date hadn’t changed, even as it worked to determine the best repair options for a crack that forced a halt to oil deliveries on Dec. 11.

“People that bought on the word of the strike are probably taking some profits,” said  Phil Flynn, senior market analyst at Price Futures Group Inc. in Chicago.

The Nigerian union, which represents managerial employees, stopped work after talks deadlocked late Sunday, according to a spokesman for the Petroleum and Natural Gas Senior Staff Association of Nigeria, or Pengassan. The union, the labor minister and Neconde Energy Ltd. will restart talks in January, the spokesman said.

A hairline crack which caused the Forties Pipeline System to shut down “has not propagated” since the shutdown, owner Ineos Group said in an email. Hedge-fund managers have amassed a record number of bullish wagers on London crude prices, creating conditions that could trigger a selloff as the Forties restart date approaches, said Bob Yawger of Mizuho Securities USA.

“The only thing that’s holding the market here at these levels is the Forties problem,” said Yawger, Mizuho’s New York-based director of futures. “The potential is there for people to start bailing on the loaded-up speculative position. I would tend to think there will be a slow unwinding of these positions in anticipation” of the line restarting soon.

Oil in New York is poised for about a 6% gain this year after production limits by the Organization of Petroleum Exporting Countries and other major suppliers eroded a worldwide glut. The effort to curb excess output could be dashed by U.S. shale drillers, who are forecast to lift American oil production to a record next year.

West Texas Intermediate for January delivery, which expires Tuesday, dropped 37 cents to $56.93/bbl at 1:06 p.m. on the New York Mercantile Exchange. Total volume traded was about 21% below the 100-day average.

Brent for February settlement slipped 12 cents to $63.11/bbl on the London-based ICE Futures Europe exchange. The global benchmark traded at a premium of $6.11 to February WTI.

Unwinding positions

The Brent net-long position -- the difference between bets on a price increase and wagers on a drop -- rose 1.8% to a record 544,051 contracts in the week ended Dec. 12, according to data from ICE Futures. Longs increased for a third week, also reaching an all-time high.

Related News ///

FROM THE ARCHIVE ///

Comments ///

comments powered by Disqus