Oil stalls below $60/bbl with resumption of Libya pipeline in sight

By Jessica Summers on 12/28/2017
NEW YORK (Bloomberg) -- Crude slipped for the first time in more than a week following reports that a damaged Libyan pipeline should be repaired next week.
Futures fell 0.6% in New York on Wednesday, with trading volumes about 50% below the 100-day average. The Waha Oil Co. pipeline that carries crude to Libya’s largest terminal will need about a week for repairs following an explosion on Tuesday, people familiar with the situation said. Meanwhile, an American Petroleum Institute report which was said to show U.S. crude stockpiles falling by 5.96 MMbbl last week didn’t faze the market.

Some traders are “wrapping up their books” at the end of the year, according to Ashley Petersen, lead oil analyst at Stratas Advisors in New York. At the same time, the market is “probably reassured now” that it won’t take long to fix the Libya conduit, she said.

West Texas Intermediate for  February delivery traded at $59.55/bbl at 4:47 p.m. after settling at $59.64/bbl on the New York Mercantile Exchange. Prices rose above $60/bbl for the first time since June 2015 in intraday trading Tuesday. 

Brent for February settlement dropped 58 cents to end the session at $66.44/bbl on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $6.80 to WTI.

Prices have received a boost this month as supply cuts from the Organization of Petroleum Exporting Countries and its allies will run through the end of next year. A pipeline outage in the North Sea also contributed while additions to the U.S. oil rig count have stalled even with oil prices in the upper-$50s.

“The Forties pipeline is coming closer to being back online, so that’s capping some of the price optimism that you might have otherwise seen from the Libya supply outage,” Michael Bokoff, an investment analyst at Manulife Asset Management in Boston, said by telephone.

The API report was also said to find that gasoline inventories rose by 3.13 MMbbl last week and supplies at the key Cushing, Oklahoma, pipeline hub declined by 1.27 MMbbl, the people said. Distillates rose by 2.76 MMbbl.

U.S. crude inventories probably fell by 3.75 MMbbl last week, according the median estimate of analysts in a Bloomberg survey before the release of Energy Information Administration data Thursday. Stockpiles at the key pipeline hub in Cushing, Oklahoma, probably slid 590,000 bbl last week, according to a forecast compiled by Bloomberg.

“Inventories are trending directionally in a favorable way,” Bokoff said. “Demand has been very strong for both crude and products.”

Oil-market news. A new U.K. North Sea oil field came online last week, offering one of the country’s largest independent operators some relief from a pipeline halt that forced a significant portion of the region’s output to stop. The startup of Premier Oil Plc’s Catcher field caps the biggest year for new offshore oil and gas projects in the country for about a decade. Shipments of fuel oil to Singapore from the West of Suez will rise to more than 4 million tons this month for the first time since August, helping to keep the market well-supplied in the near term, according to Energy Aspects Ltd.

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