Oil Stalls Below $60 as Pipeline Fixes Overshadow Crude Draw

(Bloomberg) -- Oil was little changed in New York as traders shrugged off declining U.S. stockpiles and kept eyes on two key pipelines set to resume normal operations soon.

Futures rose 0.3 percent after the government said U.S. inventories shrank to the lowest in more than two years. Damage from a blast at a pipeline supplying Libya's biggest export terminal, which sent futures briefly above $60 a barrel Tuesday, is said to need about a week for repairs. The Forties system in the U.K., one of the world's most important, is also nearing a return from an unexpected shutdown.

“If this week indicates anything, it's that the price is pretty susceptible to supply shocks,” Brian Kessens, a portfolio manager at Tortoise Capital Advisers LLC in Leawood, Kansas, said by phone. “Prices spiked on that news more than what we're seeing them respond to overall inventories.”

Oil has rallied for four straight months as the combination of declining storage in the U.S. and OPEC's efforts to limit production brightens the outlook for a more balanced market. The two major pipeline disruptions this month took gains up a notch. Meanwhile, increasing production from American shale fields remain a concern.

West Texas Intermediate for February delivery settled at $59.84 a barrel on the New York Mercantile Exchange, after having climbed above $60 a barrel on Tuesday for the first time since 2015. Total volume traded was about 54 percent below the 100-day average. 

Brent for February settlement rose 28 cents to $66.72 on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $6.88 to WTI.

Libya's production dropped to 950,000 barrels a day on Wednesday, a person directly involved in the matter said. Output was 1.08 million barrels a day as of Dec. 18, indicating a decline of 12 percent. Loadings at Es Sider port are said to be down about 50 percent. The port was scheduled to ship 13 cargoes this month, each carrying 600,000 barrels of crude, according to a loading plan obtained by Bloomberg.

In the U.S., the amount of crude hoarded in tanks fell for the sixth straight week, by 4.61 million barrels, the U.S. Energy Information Administration said Thursday. That beat the 3.75 million average estimate in a Bloomberg survey of analysts. 

Gasoline inventories rose by 591,000 barrels last week, about half the increase that was expected.

"There's been really strong holiday season demand" for gasoline, said John Kilduff, founding partner at Again Capital in New York. "It should drop off precipitously in coming weeks."

The market's reaction to the data remained muted.

“It's a little end-of-year apathy, as well as the fact that these end-of-year draws are expected to some degree,” Ashley Petersen, lead oil market analyst at Stratas Advisors in New York, said by phone. “You always see sharper draws in the last weeks of December due to some tax maneuvers the refiners in Texas are doing.”

Oil-market news:

• Drillinginfo Inc. is offering a daily tally of the total number of U.S. rigs searching for oil and natural gas on its dailyrigcount.com website.
• Premier Oil Plc started the Catcher oil field in the U.K. North Sea last week, capping the biggest year for new offshore oil and gas projects in the country for about a decade.

--With assistance from Grant Smith and Heesu Lee

To contact the reporter on this story: Catherine Traywick in Washington at ctraywick@bloomberg.net.

To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net, Carlos Caminada, Joe Richter

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