Phil Flynn is writer of The Energy Report, a daily market commentary discussing oil, the Middle East, American government, economics, and their effects on the world's energies markets, as well as other commodity markets. Contact Mr. Flynn at (888) 264-5665
[Myra P. Saefong & Sarah McFarlane, MarketWatch]
WTI crude prices get a boost from demand expectations.
Prices for Brent crude, the global benchmark, rallied Monday to their highest settlement since mid-2015 following reports that a major North Sea pipeline will be shut down for weeks to repair a leak.
U.S. oil prices, meanwhile, finished at a more than one-week high as upbeat economic data helped to raise expectations for crude demand, offsetting some pressure from concerns over growing U.S. production.
February Brent crude LCOG8, +2.05% rose $1.29, or 2%, to settle at $64.69 a barrel on ICE Futures Europe. That was the highest settlement for a front-month contract since late June 11, 2015, according to data from Dow Jones.
On the New York Mercantile Exchange, January West Texas Intermediate crude CLF8, +0.03% tacked on 63 cents, or 1.1% to end at $57.99 a barrel, after losing roughly 1.7% last week.
The Forties pipeline, which carries North Sea crude oil across land for processing at a major refinery in Scotland, could be shut down for about three weeks following the discovery of a crack in the pipeline last week, according to a report Monday from BBC News.
The Financial Times reported that the pipeline transports almost 40% of the U.K. North Sea’s oil and gas production by connecting 85 fields to the British mainland.
There is speculation that the North Sea pipeline closure will set off several oil-field closures and if that happens, we “expect new highs in the very short term,” Scott Gecas, chief market strategist at Long Leaf Trading Group, told MarketWatch.
WTI oil, the U.S. benchmark, however, saw a more modest gain Monday.
The market is worried about an increase in crude production, particularly from shale, from countries that aren’t part of the Organization of the Petroleum Exporting Countries, said Phil Flynn, senior market analyst at Price Futures Group, in a Monday note.
“But the way things are going on the demand side, they may want to focus on that demand instead,” he said.
‘Oil demand is on an upward trajectory the likes of which we have not seen in decades.’
The U.S. economy is “on fire,” adding 228,000 jobs in November, while the unemployment rate remained at a 17-year low of 4.1%, said Flynn, citing data released Friday. “The global economy is growing as well, and oil demand is on an upward trajectory the likes of which we have not seen in decades.”
Data released Monday showed that the number of U.S. job openings fell in October from a record level.
Expectations for further increases in U.S. oil production, however, have weighed on prices. Baker Hughes BHGE, +1.09% on Friday reported that the number of active U.S. oil rigs climbed for a third-straight week.
“Given the recent price rises and the hedging activity we’ve seen and the rise in rig count, it seems almost inevitable that there’s going to be a large rise in U.S. production next year,” said Tom Pugh, commodities economist at Capital Economics.
Weekly U.S. government data showed domestic output hit a record, based on weekly figures dating back to 1983, of over 9.7 million barrels a day in the week ended Dec. 1.
On Nymex, prices for January gasoline RBF8, +0.58% rose 0.6% to $1.727 a gallon. January heating oil HOF8, +0.18% added 1.1% to $1.951 a gallon.
January natural gas NGF18, -0.78% settled at $2.828 per million British thermal units, up 2% for the session, after losing around 9.4% last week following a surprise rise in weekly supplies of the fuel.A Subsidiary of Price Holdings, Inc. – a Diversified Financial Services Firm. Member NIBA, NFA Past results are not necessarily indicative of future results. Investing in futures can involve substantial risk of loss & is not suitable for everyone. Trading foreign exchange also involves a high degree of risk. The leverage created by trading on margin can work against you as well as for you, and losses can exceed your entire investment. Before opening an account and trading, you should seek advice from your advisors as appropriate to ensure that you understand the risks and can withstand the losses. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or futures. The Price Futures Group, its officers, directors, employees, and brokers may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction. Reproduction and/or distribution of any portion of this report are strictly prohibited without the written permission of the author. Trading in futures contracts, options on futures contracts, and forward contracts is not suitable for all investors and involves substantial risks. ©2018