Oil prices rose on Friday, supported by the continuing outage of the Forties pipeline in the North Sea and falling inventories due to OPEC-led production cuts, but climbing U.S. output kept a lid on gains.
Brent crude futures, the international benchmark for oil prices, were up 29 cents at $63.60 a barrel at 1400 GMT. U.S. West Texas Intermediate (WTI) crude futures were up 38 cents at $57.42 a barrel.
Both contracts were on track to end the week broadly flat.
The ongoing outage of the Forties pipeline, which carries North Sea oil to Britain, was the main price support, traders said.
The outage’s main physical impact is the North Sea region, but it has global relevance as the crude is used to underpin the Brent price benchmark. Operator INEOS declared force majeure on Forties, the first such declaration in decades.
Force majeure is a legal designation that suspends a firm’s contractual obligations due to situations beyond its control.
“This is a rarity for crude streams in the North Sea and underscores the seriousness of the disruption,” analysts at PVM Oil Associates said.
PVM added that the outage “should continue to act as an important pillar of price support until the turn of the year at the very least.”
Beyond that supply disruption, the market was broadly supported by efforts led by the Organization of the Petroleum Exporting Countries and Russia to curb output in their bid to end a supply glut, traders and analysts said.
Analysts at Barclays said product inventory levels in industrialized nations were 2 percent below the five-year average at the start of December, compared with 10 percent above the five-year average at the start of 2017, with the drawdown driven by a combination of outages and strong demand growth.
Goldman Sachs said market conditions allowed major oil companies, or Big Oil, to enter “a positive earnings-revision cycle”. It added: “This should allow Big Oil to re-employ capital at double-digit returns.”
Still, U.S. oil production, which has soared 16 percent since mid-2016 to 9.78 million barrels per day (bpd), has undermined OPEC’s output curbs.
U.S. supply, now close to matching levels of top producers Russia and Saudi Arabia, will likely move oil markets into a supply surplus in the first half of 2018, the International Energy Agency (IEA) said on Thursday.—Reuters