Brent Futures Rally on Shut Pipeline

NEW YORK (DTN) -- Spot-month oil futures on the New York Mercantile Exchange settled higher Monday, with West Texas Intermediate crude posting a one-week high as traders focused on a report showing a big drop in crude oil stocks at the Cushing terminal in Oklahoma. Meanwhile, Brent on the Intercontinental Exchange rallied to a 2-1/2 year high after a North Sea crude oil pipeline was shut for repairs.

The 450,000-bpd pipeline carries Forties crude oil from the North Sea to a terminal in Scotland. It has been operating at reduced capacity for about four days before the shutdown, according to reports. News of the pipeline shutdown spurred a Brent rally, with the Brent premium to WTI increasing to a $6.70 bbl four-week high Monday afternoon.

In the United States, Genscape reported that crude supply at Cushing, the delivery point for WTI, dropped last week by 3.12 million bbl. That beats estimates calling for a 1.0 million bbl decline at the key crude oil hub.

"Genscape report boosted WTI since it backs up the that refineries are running at record highs, drawing down supply there, and so what we have here today (Monday) is a combination of that report and the pipeline shutdown that supported Brent," said analyst Phil Flynn at Price Futures.

Analysts estimate total U.S. crude oil inventories were drawn down during the week-ended Dec. 8 by 3.0-to-5.0 million bbl, while mixed on the weekly changes for refined products.

Monday morning, an attempted terrorist attack occurred near Times Square in New York City at 7:20 AM ET that injured four people although the injuries were not life-threatening, said police commissioner James O'Neill. He said a suspect is in police custody.

The incident raised concerns about geopolitical risks, especially as the suspect allegedly linked the attack to the decision by President Donald Trump last week to recognize Jerusalem as the capital of Israel, a move that has been roundly condemned by most of Middle East leaders.

The NYMEX January WTI crude oil futures contract settled 63cts higher at $57.99 bbl, near a $58.06 one-week spot high. ICE February Brent crude climbed $1.29 to $64.69 bbl, near a $64.93 2-1/2-year high. NYMEX January ULSD futures settled 2.18cts higher at $1.9506 gallon, near a $1.9584 better than one-week spot high. January RBOB futures increased 1.0cts to $1.7266 gallon, off a $1.7368 one-week high.

Looking ahead, the market will focus on a raft of data this week, with the Energy Information Administration's Short-term Energy Outlook for December due out Tuesday (12/12). The Organization of the Petroleum Exporting Countries will release its Monthly Oil Market Report on Wednesday (12/13) and the International Energy Agency is set to issue its Oil Market Report on Thursday (12/14).

George Orwel can be reached at