SINGAPORE / LONDON (Reuters) – Oil prices rose on Friday, supported by the continued outage of the Forties pipeline in the North Sea and lower inventories due to OPEC-led production cuts, but the increase in American production limited the gains.
Brent Crude Futures LCOc1, the international benchmark for oil prices, rose 29 cents to $ 63.60 a barrel at 1400 GMT. US West Texas Intermediate (WTI) Crude Futures CLc1 rose 38 cents to $ 57.42 a barrel.
Both contracts were on track to end the week overall flat.
The ongoing outage of the Forties pipeline, which carries oil from the North Sea to Britain, was the main price support, traders said.
The main physical impact of the blackout is the North Sea region, but it has global relevance as crude is used to underpin the benchmark price of Brent. Operator INEOS has declared a force majeure event on Forties, the first such declaration in decades.
Force majeure is a legal designation that suspends a company’s contractual obligations due to situations beyond its control.
“This is a rarity for crude flows in the North Sea and underscores the severity of the disruption,” analysts at PVM Oil Associates said.
PVM added that the blackout “should continue to act as an important pillar of price support until at least the end of the year.”
Beyond this supply disruption, the market has been largely supported by efforts by the Organization of the Petroleum Exporting Countries and Russia to cut production in their attempt to end a supply glut. , traders and analysts said.
Barclays analysts said product inventory levels in industrialized countries were 2% below the five-year average in early December, down from 10% above the five-year average in early 2017, with a drop due to a combination of outages. and strong growth in demand.
Goldman Sachs said market conditions had allowed the big oil companies, or Big Oil, to enter “a positive cycle of earnings reviews.” He added: “This should allow Big Oil to re-employ capital with double-digit returns.”
Yet American oil production C-OUT-T-EIA, which climbed 16% since mid-2016 to 9.78 million barrels per day (bpd), undermined OPEC’s production restrictions.
US supply, now close to the levels of major Russian and Saudi producers, will likely lead to excess supply in oil markets in the first half of 2018, the International Energy Agency (IEA) said on Thursday.
Reporting by Henning Gloystein and Dmitry Zhdannikov; Editing by Joseph Radford and David Evans