Oil Mixed in Wednesday Trade

NEW YORK (DTN) -- New York Mercantile Exchange oil futures turned mixed with the ULSD contract higher on cold weather-inspired demand while crude futures ease on profit-taking after 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 at a time the European market is tightening.

The price pullback was more for the Brent contract trading on the Intercontinental Exchange than NYMEX West Texas Intermediate crude, with the WTI contract expected to find support from an expected drawdown in U.S. crude oil inventories, said analyst Phil Flynn at Price Futures.

Repairs of the al-Zouk pipeline could take about one week, but it will not have a major impact on exports, the head of Libya's National Oil Company told newswires today. The pipeline was operating at 90,000 bpd at the time of the explosion. Libya's oil industry has made significant recovery this year and now produces 1.0 million bpd after years of being stifled by insecurity.

The 450,000-bpd Forties Pipeline System in the North Sea, which shut on Dec. 11 due to a crack found at a section in Scotland, is also expected back in service by early January, pipeline operator Ineos said on Tuesday.

Oil futures rallied on Tuesday due, in part, to the fact that the two pipeline outages have helped tighten the European market further, and on severe cold in the U.S. Northeast that has increased demand for heating oil and natural gas.

The tightening market also comes with nearly one-year of production cuts from the Organization of the Petroleum Exporting Countries and 10 non-OPEC producers, which took effect on Jan. 1 and are now slated to run through the end of 2018. The agreement calls for 1.8 million bpd in total production cuts by the producers. OPEC recently said their compliance rate with the agreement reached 122% in November.

Domestically, analysts expect the Energy Information Administration's oil report for the week-ended Dec. 22 to be released Thursday to show a U.S. crude oil stock draw of as much as 4.0 million bbl, but are mixed on the weekly change in refined product stocks. A draw for crude last week would be the sixth such weekly decline in a row.

As of the week-ended Dec. 15, total crude stocks at 436.5 million bbl were nearly 49.0 million bbl or 10.1% lower than a supply on-hand a year ago. In the two weeks ended Dec. 15, U.S. crude stocks were drawn down 11.6 million bbl, according to EIA.

In early trade, NYMEX February WTI crude futures were 37cts lower at $59.60 bbl, off Tuesday's 2-1/2 year spot high of $60.01. ICE February Brent crude futures were 48cts down at $66.54 bbl, off a $67.10 2-1/2 year spot high posted on Tuesday.

NYMEX January ULSD futures were up 1.29cts to $2.0514 gallon, off a fresh 2-1/2 year spot high of $2.0523, with the contract boosted by arctic weather in the Northeast that will last through early 2018. January RBOB futures were 0.57cts lower at $1.7809 gallon.

George Orwel can be reached at george.orwel@dtn.com