Don’t miss the latest developments in business and finance.

Oil near mid-2015 highs on strong China data, tighter outlook

Image
Reuters SINGAPORE/LONDON
Last Updated : Dec 28 2017 | 10:25 PM IST

By Henning Gloystein and Dmitry Zhdannikov

SINGAPORE/LONDON (Reuters) - Oil prices stood near their highest in two and a half years, supported by strong data from top importer China amid thin trading activity ahead of the New Year weekend.

Heading into 2018, traders said market conditions were relatively tight because of supply cuts led by the Middle East-dominated Organization of the Petroleum Exporting Countries (OPEC) and Russia.

U.S. West Texas Intermediate (WTI) crude futures were up 2 cents at $59.66 a barrel by 1328 GMT.

WTI this week broke through $60 a barrel for the first time since June 2015 and was supported by a report from the American Petroleum Institute (API) showing a 6 million barrel drop in crude oil inventories to 432.8 million barrels.

Brent crude futures were flat at $66.44 a barrel, having breached $67 this week for the first time since May 2015.

More From This Section

Support also came from China's release of strong import quotas for 2018, which could lead to another record for purchases by the world's biggest importer.

China's oil thirst has also led to a 3 percent monthly drawdown in its crude inventories in November, to a seven-year low of 26.15 million tonnes, Xinhua data showed on Thursday.

Oil markets have also been tightened by a year of OPEC and Russia-led production cuts that started last January and are scheduled to continue throughout 2018.

A Reuters monthly poll showed on Thursday that analysts expect Brent crude to stay close to $60 in 2018.

Pipeline outages in Libya and the North Sea have also supported prices.

"Given the much stronger price response to supply disruptions in the wake of OPEC supply cuts, the market is poised to make further gains," said Stephen Innes, head of trading for Asia/Pacific at futures brokerage Oanda.

Libyan oil supplies were disrupted by an attack on a pipeline this week and flows towards the port of Es Sider were reduced by about 70,000 bpd on Thursday.

In the North Sea, the 450,000 bpd capacity Forties pipeline system was shut this month after a crack was found.

Both pipelines are expected to return to normal operations over the new year or in early January. Forties removed a restriction on shipping on Thursday but force majeure remains in place for supplies.

Countering efforts by OPEC and Russia to prop up prices is U.S. oil production that has soared more than 16 percent since mid-2016 and is fast approaching 10 million bpd.

Only OPEC king-pin Saudi Arabia and Russia produce more.

The latest official U.S. production figures are due to be published on Thursday.

(Reporting by Henning Gloystein; Editing by Kenneth Maxwell and David Goodman)

Also Read

First Published: Dec 28 2017 | 10:16 PM IST

Next Story