Oil Prices Waver as Traders Weigh Output Against Major Pipeline Outage
December 14 2017 - 12:07PM
Dow Jones News
By Sarah McFarlane
Oil prices wavered between gains and losses on Thursday, as
traders weighed higher oil output against a major pipeline
outage.
Light, sweet crude was recently trading near flat at $56.60 a
barrel on the New York Mercantile Exchange. Brent, the global oil
benchmark, rose 42 cents, or 0.7%, to $62.86 a barrel.
Prices rose earlier this week on the shutdown of the Forties
Pipeline system in the North Sea, which could take around 8 million
barrels of oil out of the market if it remains closed for three
weeks, according to brokerage PVM.
However, signs of increasing supply has put pressure on the
market. On Thursday, the International Energy Agency said U.S.
shale producers have pushed global oil supply to the highest level
in a year. The agency also raised its forecasts for U.S. crude
production growth for 2017 and 2018.
"Today's price action is more related to a rather dovish
sounding monthly report from the International Energy Agency," said
Giovanni Staunovo, commodity analyst at UBS Wealth Management.
The IEA forecast the greatest growth at an average of 1.1
million barrels a day in 2018, making it difficult to envisage
further falls in global oil stocks.
"Our current outlook 2018 may not necessarily be a happy New
Year for those who would like to see a tighter market," the IEA
said in its monthly report published Thursday, adding that total
supply growth could exceed demand growth.
On Wednesday, the U.S. Energy Information Administration
reported that U.S. production climbed to a weekly record high last
week of 9.78 million barrels a day, building on a string a fresh
weekly highs.
This poses challenges for OPEC's hope of draining global
stocks.
In a deal struck in November, OPEC and other producers including
Russia agreed to extend supply cuts which began in January through
2018 as it targets bringing stocks in the Organization for Economic
Cooperation and Development back in line with their five-year
average. The IEA said stocks remained 111 million barrels above the
five-year average.
"We see the spate of supply projects, excluding OPEC countries
and the developments in U.S. shale, taking their toll on the market
and keeping prices in check next year," analysts at consultancy JBC
Energy wrote in a note.
In the Wednesday report, the EIA said crude stocks fell 5.1
million barrels in the week ended Dec. 8. However, the fall was
offset to some extent by gasoline stocks rising by 5.7 million
barrels.
"The fear is that the barrels are moving from one place to the
next, essentially not disappearing from the system," Mr. Staunovo
said.
Gasoline futures rose 1.5% to $1.6720 a gallon and diesel
futures fell 0.2% to $1.9004 a gallon.
Stephanie Yang contributed to this article.
Write to Sarah McFarlane at sarah.mcfarlane@wsj.com
(END) Dow Jones Newswires
December 14, 2017 11:52 ET (16:52 GMT)
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