Oil prices lifted by North Sea pipeline outage

Outlook for markets cites ample supplies for 2018 despite OPEC cuts

Oil edged up on Monday, lifted by an ongoing North Sea pipeline outage and over signs that booming US crude output growth may be slowing, although the outlook for oil markets cites ample supplies despite production cuts led by the Organization of the Petroleum Exporting Countries (OPEC).

Brent crude futures LCOc1, the international benchmark for oil prices, were at $63.74 a barrel, up 0.81 percent from their last close as of press time.

Traders said the slightly higher prices came on the back of the North Sea Forties pipeline system outage, which provides crude that underpins the Brent price benchmark, as well as indicators that US oil production growth may be slowing down.

North Sea operator Ineos declared force majeure on all oil and gas shipments through its Forties pipeline system last week after cracks were found.

“The force majeure... is acting as a major prop for crude,” said Sukrit Vijayakar, director of energy consultancy Trifecta.

In the US, energy companies cut rigs drilling for new production for the first time in six weeks to 747 in the last week, energy services firm Baker Hughes said on Friday.

Despite this dip in drilling, activity is still well above what it was this time last year, when the rig count was below 500, and actual US production has soared by 16 percent since mid2016 to 9.8 million barrels per day (bpd).

This means US output is fast approaching that of top producers Saudi Arabia and Russia, which are pumping 10 million bpd and 11 million bpd, respectively.

The rising US output also undermines efforts by the OPEC, led by Saudi Arabia, and a group of non-OPEC producers including Russia to withhold production to tighten the market and prop up prices.

Largely because of rising shale output from the US, the International Energy Agency said global oil markets would show a slight supply surplus of around 200,000 bpd during the first half of 2018.

Data from the US Energy Information Administration showed a similar surplus for that period and still indicate a supply overhang of 167,000 bpd for all of 2018.