Oil rises towards $64 on UK pipeline outage, U.S. supply weighs
London. Oil edged up towards $64 a barrel on Tuesday, supported by the Forties pipeline outage in the North Sea, OPEC-led supply cuts and expectations that U.S. crude inventories fell for a fifth week, Reuters reported.
Rising output in the United States put a lid on gains, however. Shale production will rise to a record in January, according to a government forecast published on Monday, as higher prices encourage companies to pump more.
Brent crude LCOc1, the global benchmark, was up 16 cents to $63.57 a barrel at 0943 GMT. U.S. crude CLc1 gained 31 cents to $57.47.
The unplanned shutdown of Forties since last week has supported Brent in particular, as Forties is the largest of the North Sea crude grades that underpin the benchmark. Brent reached $65.83, its highest since mid-2015, on Dec. 12.
“This should ensure buying pressures remain at the fore of the Brent structure until the turn of the year at the very least,” said Stephen Brennock of oil broker PVM.
Ineos, operator of the Forties pipeline, said on Tuesday the timeframe for repairs remains two to four weeks starting from Dec. 11, the date of the shutdown.
A deal by the Organization of the Petroleum Exporting Countries and non-member producers including Russia to cut supplies in an attempt to get rid of a supply glut that has built up since 2014 has also boosted prices.
OPEC and its allies have extended the agreement until the end of 2018 and Russia’s Rosneft (ROSN.MM) said on Monday it could be maintained beyond next year.
As a result of the cuts, oil inventories are falling globally and the latest weekly supply reports are expected to show a further reduction in U.S. crude inventories.
The first of these reports, from the American Petroleum Institute, is due at 2130 GMT on Tuesday. [EIA/S]
Still, rising U.S. production is countering OPEC’s cuts and other supply losses.
U.S. shale output in January is forecast to increase by 94,000 barrels per day to 6.41 million bpd, according to the EIA’s monthly drilling productivity report.
“The U.S. shale oil report issued late yesterday is on the bearish side as it confirms an acceleration in U.S. production,” said Olivier Jakob, analyst at Petromatrix.
That forecast follows an EIA prediction last week that total oil production, including non-shale, will grow by 780,000 bpd to a record 10.02 million bpd in 2018.