Crude Futures Down on Forties Restart

NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled mixed Wednesday afternoon. West Texas Intermediate crude and Brent crude on the Intercontinental Exchange down as the Forties crude pipeline service is expected to be fully back by next week, while the ULSD contract edged higher on support from bone-chilling cold weather in the Northeast that's boosting short-term demand.

"The market came under pressure, especially crude, with the [partial] return of Forties crude oil pipeline," said Andy Lipow, president of Lipow Oil Associates in Houston. "The pipeline is now carrying 50% of the oil it had prior to the shutdown [on Dec. 11]. They will continue to ramp up operations slowly."

Operator Ineos said the 450,000-bpd Forties Pipeline System in the North Sea, which shut nearly two weeks ago due to a crack at a section near Aberdeen, Scotland, would be fully back in service by early January. Forties is the biggest of the four main crude streams that feed Brent, making up 40% of the international crude benchmark.

In Africa, Libyan officials said their export crude pipeline shut on Tuesday after an explosion will be repaired in a week's time, allaying fears that it would take longer to fix. Mustafa Sanalla, head of Libya's National Oil Corp. said repairs of the al-Zouk pipeline could take about one week and there's no major impact on oil exports.

Libya's oil industry has made significant recovery this year and now produces 1.0 million bpd after years of being stifled by militia attacks and other security problems in the wake of the Arab Spring.

According to secondary data in the December Monthly Oil Market Report by the Organization of the Petroleum Exporting Countries, Libya produced 973,000 bpd in November, up from slightly above 300,000 bpd in 2016 and about 400,000 bpd in 2015.

In the United States, a record-breaking snowstorm that blasted much of the Midwest and parts of the Northeast during the Christmas weekend gave way Wednesday to freezing cold temperatures and gusty winds. The arctic weather is forecast to continue through the New Year, boosting demand for diesel, heating oil and natural gas.

"Trading is limited because of the holiday season, but cold in the Northeast is supporting ultra-low diesel futures, leading the product complex higher," said Lipow.

This afternoon, the American Petroleum Institute will release its weekly oil report. A survey shows the oil report for the week-ended Dec. 22 is expected to show stock draws of 3.75 million bbl for crude, 1.75 million bbl each for gasoline and diesel. The Energy Information Administration will issue its oil report at 11:00 AM ET Thursday, with the report delayed a day due to the observance of the Christmas holiday on Monday.

At settlement, NYMEX February WTI crude futures were 33cts lower at $59.64 bbl, reversing off Tuesday's 2-1/2 year spot high of $60.01. ICE February Brent crude futures were 58cts down at $66.44 bbl, reversing off a $67.10 2-1/2 year spot high posted on Tuesday.

NYMEX January ULSD futures settled up 0.17cts at $2.0402 gallon after trading early session at a two-year, 10-month spot high of $2.0576. January RBOB futures were 0.49cts higher at $1.7915 gallon.