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Tuesday, February 25th, 2020

Fall in U.S. crude stocks, North Sea outage supports prices

by December 20, 2017 General

By David Gaffen

NEW YORK (Reuters) – Crude prices rose on Wednesday, supported by a larger-than-expected drop in U.S. inventories and the continued outage of the Forties pipeline system.

U.S. crude stocks fell by 6.5 million barrels, more than expected, in the week to Dec. 15, while gasoline stocks rose 1.2 million barrels, less than anticipated, the Information Administration </a>said on Wednesday, even though refining activity rose.=ECI>

Intermediate crude futures settled up 53 cents at $58.09 a barrel, while Brent crude ended up 76 cents at $64.56 a barrel.

Crude stocks, excluding the U.S. Strategic Reserve, are at 436.5 million barrels, the lowest since October 2015.

Inventories have been steadily declining in the due to strong export demand and efforts by major producers to restrict supply.

Refiners in the continue to run at above-average rates than is typical for this time of year, which is offsetting strong U.S. production, and resulting in product that is ready for export or domestic use.

For the most recent week, refiner capacity utilization rose to 94.1 percent, the highest since the summer, and above average for December, notes Richard Hastings, at Seaport Securities in

“Crude stocks are getting gobbled up and that is preventing a buildup from U.S. production,” he said. “It’s a stable story where the floor for crude prices is looking very firm.”

OPEC and 10 other producers led by last month extended an agreement to cut production by 1.8 million bpd until the end of next year to eliminate an glut.

Some producers, including Russia, had raised concerns over whether the deal should continue through the end of 2018. On Wednesday, Saudi Arabian minister </a>said it would be premature to discuss changes to OPEC’s policy. He said the drawdown of inventories would likely take through the second half of 2018.

On Wednesday, Kuwait’s minister said compliance among both OPEC and non-OPEC members currently stands at 122 percent, highest since the deal was implemented in January.

Rising U.S. crude production , which has soared by 16 percent since mid-2016 to 9.8 million bpd, was capping prices. The all-time U.S. production record of more than 10 million bpd was set in the early 1970s and is based on monthly EIA figures.

Most analysts expect U.S. output to break that record soon, and take it to levels on a par with top exporter and close to top Russia, which pumps around 11 million bpd.

Prices have been supported by the continuing outage of in the North Sea, which delivers crude underpinning Brent futures.

Operator Ineos said repairs were under way on Wednesday after a crack was found that closed the pipeline on Dec. 11. Repairs are expected to take two to four weeks.

(Additional reporting by in New York, Ahmad Ghaddar in London and Henning Gloystein in Singapore, Editing by and Susan Thomas)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)