Oil ticks higher as North Sea supply hiccup enters second week

By Jessica Summers on 12/18/2017

NEW YORK (Bloomberg) -- Crude edged higher for a third session as the shutdown of one of the world’s most important oil pipelines stretched into a second week.

Futures pushed toward $58/bbl in New York. The owner of the Forties Pipelines System, a North Sea conduit that plays a central role in setting global crude prices, said on Monday that it was still determining the best repair options for a crack that forced a halt to oil deliveries on Dec. 11. Meanwhile, hedge-fund managers have amassed a record number of bullish wagers on London crude prices, creating conditions that could trigger a selloff when the pipe resumes shipments, 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 is poised for about a 7% 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, added 1 cent to $57.31/bbl at 10:02 a.m. on the New York Mercantile Exchange. Total volume traded was about 25% below the 100-day average.

Brent for February settlement gained 22 cents to $63.45 on the London-based ICE Futures Europe exchange. The global benchmark traded at a premium of $6.03 to February WTI.

A hairline crack which caused the Forties Pipeline System to shut down “has not propagated” since the Dec. 11 shutdown, owner Ineos Group said in an email.

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