Oil pares first weekly gain in a month as boost from data fades

By Grant Smith on 12/22/2017

LONDON (Bloomberg) -- Oil fell, paring the first weekly gain in a month, as the support from a plunge in U.S. crude inventories faded and traders looked to 2018.

Front-month futures slid 0.6% in New York, trimming the weekly gain to 1.3%. Prices jumped the last two days after U.S. government data on Wednesday showed crude stockpiles tumbled more than double the expected amount to the lowest level since October 2015. Yet there are signs traders see limited scope for further gains, as ICE Futures Europe exchange data showed hedge funds have cut net bullish bets on Brent crude from record levels.

Oil is poised for a second yearly gain as the Organization of Petroleum Exporting Countries and its allies including Russia cut supply to trim a global glut. Worldwide inventories won’t fall enough to be near the level targeted by OPEC when the group meets in June, Saudi Arabia’s Energy Minister Khalid Al-Falih said this week, signaling the kingdom may keep production restrained to the end of the year.

“Underpinning the solid price recovery over the last 12 months is OPEC, which succeeded in reasserting its pricing influence over the oil market,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd. in London. “Will it be a case of more of the same in 2018? Only time will tell, but the journey to a balanced oil market is faced with strengthening headwinds.”

West Texas Intermediate for February delivery was at $58.02/bbl on the New York Mercantile Exchange, down 34 cents, at 1:49 p.m. in London. Total volume traded was about 55% below the 100-day average. Prices added 27 cents to $58.36 on Thursday, the highest close in almost three weeks.

Brent for February settlement lost 29 cents to $64.61/bbl on the London-based ICE Futures Europe exchange after climbing 0.5% Thursday to the highest since June 2015. Prices are up 2.2% this week. The global benchmark traded at a premium of $6.61 to WTI.

The North Sea’s Forties Pipeline System, which carries crude used to price the benchmark Dated Brent, is set to return to normal flows early next year, according to a statement from operator Ineos Group. It expects to complete repairs to a hairline crack on the link by “around Christmas.”

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