Crude propelled higher on strengthening signs of dwindling glut

By Jessica Summers on 12/19/2017

NEW YORK (Bloomberg) -- Crude bumped higher as traders awaited a U.S. government report that’s expected to show a fifth straight week of shrinking American inventories.

Futures rose as much as 0.8% in New York. Oil stored in U.S. tanks and terminals last week probably dropped to the lowest level in more than two years, according to a Bloomberg survey. If the decline is confirmed in an Energy Department tally scheduled to be released on Wednesday, it will aggravate tightening supply conditions stemming from the shutdown of a key North Sea crude pipeline.

Traders are contending with “a slightly tighter physical market at the moment,” Brad Hunnewell, senior equity analyst at Rockefeller & Co., said by telephone.

Oil has held above $55/bbl in New York since mid-November as the Organization of Petroleum Exporting Countries and allied suppliers such as Russia curbed output to erode a glut. West Texas Intermediate futures, which as recently as June were down more than 20% for the year, now are on track to finish 2017 with a gain of almost 7%.

West Texas Intermediate for January delivery, which expires at the close of Tuesday’s session, added 25 cents to $57.41/bbl at 12:02 p.m. on the New York Mercantile Exchange. Total volume traded was about 37% below the 100-day average. The more-active February contract rose 27 cents to $57.49/bbl.

Brent for February settlement advanced 18 cents to $63.59/bbl on the London-based ICE Futures Europe exchange. The global benchmark traded at a premium of $6.11 to February WTI.

“The global oil market is under-supplied,” Pavel Molchanov, an energy research analyst at Raymond James in Houston, said by telephone. “We envision more upside in oil.”

Repairs are progressing on the Ineos Group-operated Forties Pipeline System that connects North Sea oil fields to the UK mainland, according to a company statement. Custom equipment has been fabricated and will be delivered parts within days to repair the hairline crack that forced a shutdown last week. The Forties system is among the planet’s most important pipelines because the crude it delivers is used to set prices for much of the world’s crude.

U.S. crude stockpiles at the key pipeline hub in Cushing, Oklahoma, probably fell by 2.2 MMbbl last week, according to a forecast compiled by Bloomberg. That would be the sixth weekly drop, the longest run since July, according to data from the U.S. Energy Information Administration.

The industry-funded American Petroleum Institute is scheduled to release its stockpiles estimate on Tuesday.

Related News ///

FROM THE ARCHIVE ///

Comments ///

comments powered by Disqus