Oil gains on Forties Pipeline shutdown, New York blast
Reuters
Published Dec 11, 2017 03:32PM ET
Oil gains on Forties Pipeline shutdown, New York blast
By Jessica Resnick-Ault
NEW YORK (Reuters) - Oil prices rose on Monday, overcoming declines early in the session, after a North Sea pipeline shut for repairs and investors focused on commodities following an explosion in New York.
Brent crude futures (LCOc1) settled up $1.29, or about 2 percent, at $64.69 a barrel.
U.S. West Texas Intermediate (WTI) crude futures (CLc1) settled at $57.99 a barrel, 63 cents or 1 percent above their last settlement.
The difference between the two benchmarks WTCLc1-LCOc1 was the greatest since late October, as Brent rallied after the shutdown of the pipeline that carries the biggest of the five North Sea crude oil streams that underpin the benchmark.
The pipeline, which can carry 450,000 barrels per day of Forties crude from the North Sea to the Kinneil processing terminal in Scotland, has been operating at reduced capacity for about four days before the shutdown.
"It is a supply concern not only because the pipeline transports a significant portion of North Sea crude oil output, but also because it may take weeks before the issue is resolved," said Abhishek Kumar, Senior Energy Analyst at Interfax Energy's Global Gas Analytics in London.
The market had expected the pipeline to return to service quickly and was surprised by the extended shutdown, said John Kilduff, partner at Again Capital LLC in New York.
"It's a significant amount of crude oil in a market that has been the tightest for crude oil," Kilduff said.
Earlier in the session, both benchmarks popped higher after an explosion rocked New York's Port Authority Bus Terminal, one of the city's busiest commuter hubs.
Investors tend to head for hard-asset commodity markets like gold and silver during high-risk events, and oil can also attract investment, Kilduff said.
Brent and WTI have gained well over a third from 2017 lows, drawing support from a cut in production by the Organization of the Petroleum Exporting Countries and a group of non-OPEC producers, including Russia, which has been in place since the start of the year.
During the weekend, Kuwait's oil minister suggested that an exit from the supply-cut agreement would be studied before June.
The United Arab Emirates energy minister said on Monday that OPEC plans to announce in June an exit strategy from the cuts, though he added it did not mean the pact would end by then.
Gains from the cuts could also be undermined by rising output from the United States, which is not participating in the deal to withhold production.
The number of rigs drilling for new oil in the United States last week rose by two to 751, the highest since September, energy services company Baker Hughes said on Friday.
Get The News You Want
"The largest concern for investors currently remains the rise in the U.S. rig count," said Shane Chanel, equities and derivatives adviser at ASR Wealth Advisers.
A higher rig count points to a further rise in U.S. crude production
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.