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Oil prices stay high

Oil prices stay high

Oil prices rose on Wednesday, with USA light crude hitting highs not seen since June 2015 after disruptions to a major pipeline dented Canadian deliveries to the United States, where crude inventories were also reported to be falling.

Diesel futures closed at the highest level in more than two years on Friday, up 1.1% at $2.0755 a gallon. USA stockpiles declined for the sixth consecutive week last week, according to EIA data.

A sharp increase in East Coast activity helped boost overall refining use, where refiners are operating at 98.4 percent of capacity, highest on record for this time of year.

Oil's revival from the biggest crash in a generation persisted, with prices set for a second annual gain after weathering everything from hurricanes and Middle East conflict to the tussle between OPEC and US shale.

"The tug-of-war between OPEC and the USA will continue to pressure oil from trading above $60 a barrel in 2018", said Kim Kwangrae, a Seoul-based commodities analyst at Samsung Futures Inc. Even so, the gap between WTI and Brent prices has persisted, at one point reaching more than $7 a barrel, amid expectations that supply of Middle Eastern and North Sea oil will shrink.

This week, WTI broke above $60 a barrel for the first time since June 2015, while Brent breached $67 for the first time since May 2015.

A Reuters monthly poll showed analysts expect Brent crude to stay close to $60 in 2018.

The analysts theorize that large supplies of crude will head to Asia to satisfy strong demand from the region, and they pointed to USA exports to that region having already increased thanks to higher Middle East oil prices because of the OPEC cuts and a wide WTI-Brent spread. The cuts started last January and are scheduled to cover all of 2018.

USA output is still up by nearly 16% since mid-2016, but most analysts had expected production to break through ten million bpd by the end of this year - a level only surpassed by top exporter Saudi Arabia and top producer Russian Federation.

Some expect USA shale production to pick up again in 2018, flooding the market with more supply.

Oil soared this week after media reports stated that Libya lost around 90,000 barrels per day (bpd) of supplies from a blast on a pipeline feeding Es Sider port on Tuesday. Flows through Forties are likely to return to normal early in the New Year, the operator Ineos stated.

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