Crude’s rally fizzled out for a third week, with prices stalled near $57 (Dh209) a barrel as concerns over excess supplies next year temper enthusiasm for Opec’s extended production curbs.
Futures in New York closed Friday 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 said Thursday 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 in 2018. But for the quarter, prices are up 11 per cent.
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 $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 $55.”
Crude has increased this year as the Organization of Petroleum Exporting Countries and its allies including Russia limited production to reduce global inventories. The group of producers agreed last month 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 for January delivery gained 26 cents to settle at $57.30 on the New York Mercantile Exchange. Total volume traded was about 19 per cent below the 100-day average.
Brent for February settlement slipped 8 cents to $63.23 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $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’s 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.”
