Crude’s rally fizzled out for a third week, with prices stalled near US$57 a barrel as concerns over excess supplies next year temper enthusiasm for OPEC’s extended production curbs.
Futures in New York on Friday closed just about where they started on Monday, with small gains over the past two days merely offsetting losses in previous sessions.
While the halt of the Forties pipeline in the North Sea sent prices surging, and the International Energy Agency (IEA) on Thursday said that OPEC and its allies had managed to reduce global stockpiles to the lowest level in two years, the agency also cautioned that supply growth would outpace global demand next year.
However, for the quarter, prices are up 11 percent.
This week “you had some decent news to hold up the market, including the pipeline crack out of the North Sea,” Rob Haworth, who helps oversee US$150 billion in assets at US Bank Wealth Management in Seattle, said by telephone.
Markets should remain relatively quiet “with traders comfortable and confident in their positions as long as oil isn’t breaking down below US$55,” he said.
Crude has increased this year as OPEC and its allies, including Russia, limited production to reduce global inventories. The group of producers last month agreed to extend curbs through the end of next year.
Hedge funds boosted their net bullish Brent crude bets to a record, according to weekly ICE Futures Europe data.
West Texas Intermediate (WTI) for January delivery on Friday gained US$0.26 to settle at US$57.30 on the New York Mercantile Exchange. The contract is little changed from last week’s US$57.24 a barrel. Total volume traded was about 19 percent below the 100-day average.
Brent for February settlement on Friday slipped US$0.08 to US$63.23 a barrel on the London-based ICE Futures Europe exchange. The contract is up 0.4 percent from last week’s US$63.01 a barrel.
The global benchmark crude traded at a premium of US$5.90 to February WTI.
The Forties halt forced Ineos Group Ltd, the operator of the pipeline, to declare force majeure, a contractual term that allows it to miss deliveries due to events beyond its control.
That is the first time in nearly 30 years that such a condition has been declared in the North Sea, according to Gary Ross, founder of PIRA Energy, now part of S&P Global Platts.
Meanwhile, the IEA report indicated that the market will be “closely balanced” next year.
“The IEA report wasn’t overwhelmingly negative” and the non-OPEC supply forecast “is not set in stone,” Ashley Petersen, lead oil analyst at Stratas Advisors in New York, said in a telephone interview.
The Forties pipeline shutdown also “definitely helped support prices,” she said.
Energy market news:
‧ Shale explorers gave spending budgets some relief this week by laying down US drilling rigs for the first time since early last month.
‧ Working rigs drilling for crude in the US fell by four this week, bringing the total to 747, according to Baker Hughes data.
‧ Oil traders are increasingly betting that Brent crude will climb to US$80 a barrel from the middle of next year, as OPEC and its allies prepare for a second year of output cuts amid simmering geopolitical tensions.
‧ Exxon Mobil Corp and Brazil’s Petrobras, two of the biggest energy producers in the Western Hemisphere, are linking up as they struggle to expand growth prospects in oil, natural gas and chemicals.
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