Oil Eases Off More Than Two-Year High

12/27/17 12:09 PM EST
By Sarah McFarlane and Alison Sider 

Oil markets eased off a 2 1/2 -year high Wednesday after a pipeline blast in Libya disrupted supplies and caused a price spike.

U.S. crude futures recently traded down 32 cents, or 0.53%, to $59.65 a barrel on the New York Mercantile. Brent, the global benchmark, fell 43 cents, or 0.64%, to $66.59 a barrel on ICE Futures Europe.

Prices jumped Tuesday after an explosion on a Libyan pipeline, which is expected to reduce oil production by up to 100,000 barrels a day, the country's National Oil Co. said.

Oil prices have become more vulnerable to the impact of supply disruptions as an overhang of inventory has been worked down over the last year.

"While supply impact is immaterial, it shows that with the market structurally undersupplied and inventories continuing to draw, geopolitical risk has now re-emerged as an important factor in day-to-day trading dynamics," analysts at Tudor, Pickering, Holt & Co. said.

Prices edged lower Wednesday on reports that the pipeline could be repaired in about a week -- quicker than some expected.

This is the second significant supply disruption to the global oil market in recent weeks, following the continuing outage of the Forties Pipeline System in the North Sea, which stopped the flow of 450,000 barrels a day.

The pipeline's operator, Ineos, said Tuesday that repairs were progressing and operations should fully resume early in the new year.

Despite Wednesday's move lower, oil prices have surged in recent months, pushed higher by rising demand and the impact of nearly a year's worth of restraint by the Organization of the Petroleum Exporting Countries and other major producers. Escalating geopolitical tensions and a string of supply disruptions have also boosted prices.

"Any kind of bullish news that comes out, traders seem to be gravitating toward it," said Gene McGillian, research manager at Tradition Energy. "The fundamental picture has changed: demand is strong, these guys are adhering to their cuts, and it's basically eradicating the excess supply that was in the market."

Gasoline futures eased by 0.45%, to $1.7786 a gallon. Diesel futures edged higher by 0.23% to $2.0432 a gallon.

Write to Sarah McFarlane at sarah.mcfarlane@wsj.com and Alison Sider at alison.sider@wsj.com

 

(END) Dow Jones Newswires

December 27, 2017 12:09 ET (17:09 GMT)

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