Ineos may have just put solid resistance in oil prices. The pipeline operator said yesterday it is expected to complete repairs at the end of this month on the Forties pipeline in the North Sea. It will begin a gradual restart to the 450,000 barrel per day crude oil pipeline and return it to normal shipping rates early next month.
As last minute shoppers scramble to find that awe inspiring gift for that special someone on their “nice list”, Kris Kringle appears to deliver a tight $2 range bound market for crude bulls till the end of the year. As of 12pm EST, WTI for January delivery is up $0.25 at $57.41, HO is up $0.0067 at $1.9319, and RBOB is up $0.0162 at $1.6887. For a month and a half WTI crude has been stuck in a range of around $56.00 – $58.00.
Refined products trade higher today as cold weather is forecasted to return, Nigerian oil workers strike, concerns linger about the Forties pipeline force majeure, and the U.S. oil rig count dropped.
The market is trying to find direction today after yesterday’s steep sell off in refined products caused by the DOE inventory and IEA reports; however the Forties pipeline force majeure leaves short-term price direction unclear for WTI.
The big story this week is North Sea Forties Pipeline System halt for maintenance. The pipeline supplies 40% of UK crude supply and supported the Brent/WTI price spread.
As Brits across the UK sip their tea and nosh on their crumpets during a winter freeze they certainly will scream “criminy” when they receive a higher than normal heating bill at months’ end due to Britain’s biggest pipeline from its North Sea oil and gas fields being shut for several weeks catapulting international crude prices to their highest levels since mid-2015. The Forties pipeline carries around 450,000 barrels per day and is the largest component of the Brent-Forties-Oseberg-Ekofisk-Troll (BFOE) complex of crudes that are the basis for the Brent futures contract. Brent futures have jumped to a premium of more than $7 per barrel over WTI from under $5 at the start of last week.
OPEC and non-OPEC members seem to be all on the same page about an exit strategy for the global production cuts come June of 2018. The only issue that has risen is that OPEC/non-OPEC members believe that it should not be discussed until the data is analyzed in the market. Alexander Novak, Russia’s Energy Minister, chimed in by saying that they believe an exit strategy should be implemented but in a gradual manner. Reuters reported “Russia, which this year reduced production significantly with OPEC for the first time, has been pushing for a clear message on how to exit the production cuts so the market doesn’t flip into a deficit too soon, prices don’t rally too fast and rival U.S. shale firms don’t boost output further.” Based off of this quote, it is clear to see that U.S. production is still a very real concern for OPEC and its nonmembers. Russia has said that the exit strategy should take roughly three to six months to implement and that this should not be discussed until the market shows significant progress.
A big story in the coming days will be the arrival of winter weather with colder than normal temperatures in much of the country.
Yesterday we all wanted to focus on the stock levels of crude, distillate, and gasoline; however, the story continues to be the soaring U.S. crude production and here is why.