NEW YORK (DTN) -- Spot-month oil futures on the New York Mercantile Exchange were mixed with downside bias Thursday morning as investors booked profits following news the Forties pipeline that shut last week would restart in early January and comments by Saudi Arabia that they don't expect the global oil market to rebalance until second half of 2018.
The 450,000 bpd Forties line is the largest of the four main North Sea crude oil streams that underpin Brent, a benchmark oil marker. The line was shut on Dec 11 after a crack was found at a section near Aberdeen, Scotland.
The shutdown supported the oil futures complex for the past several days and was one of the factors that pushed the oil futures complex to settle at three-week highs on Wednesday. However, today's announcement of a January restart of the line by operator Ineos dampened speculative bullish sentiment.
Meantime, Saudi Energy Minister Khalid al-Falih said in a Bloomberg interview that markets have been reacting to short-term events and data that are different from what the Organization of Petroleum Exporting Countries is looking at.
He has a long-term goal of rebalancing of global supply with demand, he said, and added that global oil inventories will not have been cut to near their five-year average by June 2018.
On Nov. 30, OPEC and 10 nonmember producers agreed to extend their output cuts of 1.8 million bpd through December 2018 and said they may revisit their agreement in June 2018 to take into account market conditions. It was understood at the time that the June review language was added to the text of the agreement at the request of Russia, which was reluctant to sign off on the agreement to extend the output cuts.
However, al-Falih said in the interview with Bloomberg today that there is no intent to revisit the supply agreement despite recent comments to the contrary.
On Tuesday (12/19), Goldman Sachs bank released a bullish report saying the oil market rebalancing could happen as early as mid-year, which would be sooner than OPEC envisioned. Al-Falih dismissed that forecast, saying they didn't believe that would happen and he expressed concern about the recent buildup in product supply in the United States.
In its weekly report on Wednesday, the Energy Information Administration showed gasoline inventories increased by 1.2 million bbl to 227.8 million bbl last week, although much of that rise was due to blending components. The report also showed distillate fuel stocks increased 769,000 bbl to 128.8 million bbl although supply remains 16.1% below comparable period last year.
In early trade, NYMEX February West Texas Intermediate crude futures were 35cts lower at $57.74 bbl, reversing off a better than one-week high of $58.19 amid overbought conditions. Resistance was pegged at $59.05, with support at $55.04.
February Brent crude contract on the Intercontinental Exchange were 19cts lower at $64.37 bbl, reversing off a $64.68 better than one-week high. NYMEX January ULSD futures settled marginally lower, down 0.07cts at $1.9435 gallon after inside trade. January RBOB futures added 0.32cts to $1.7385 gallon, near a better than one-week high of $1.7428.
George Orwel can be reached at firstname.lastname@example.org
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