Phil Flynn
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Phil Flynn

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

[Mark DeCambre and Barbara Kollmeyer, MarketWatch]

January heating oil notches 52-week high as cold snap across the U.S. prompts buying

Oil prices settled lower Wednesday, easing back from more-than-two-year highs after a pipeline explosion in Libya helped to deliver a jolt to crude futures.

February West Texas Intermediate oil on the New York Mercantile Exchange CLG8, +0.42%  shed 33 cents, or 0.6%, at $59.64 a barrel. February Brent LCOG8, +0.20%  fell 58 cents, or 0.9%, to $666.44 a barrel.

WTI oil prices hit a 2 ½-year high on Tuesday, while Brent crude rose 2.7% after an explosion at a pipeline that connects crude-oil fields to Es Sider oil terminal. Libya’s state-owned National Oil Corporation said it expects a production loss of 70,000 to 100,000 barrels a day.

Market participants said the downdraft in crude futures on Wednesday reflected investors cashing out of their futures contracts after Tuesday’s run-up.

“Today’s action is just a little bit of profit-taking after the move yesterday,” said Phil Flynn, senior market analyst at Price Futures Group. He said some of the moves this week will be exaggerated in either direction because of the seasonally low volumes as investors are still on vacation between Christmas and New Year’s.

The pipeline blast in Libya was a reminder of the headline risk now facing the oil market with the Organization of the Petroleum Exporting Countries-led production caps remaining in place for 2018 as oil inventories have started falling globally.

However, expectations that the Libyan pipeline damage could be mended as soon as next week also partially contributed to the lower moves in crude.

Looking ahead, the American Petroleum Institute is expected to report U.S. crude inventory data later Wednesday, with expectations for a sizable decline, which could add to bullish sentiment in the oil market. A separate inventory report from the Energy Information Administration is slated for Thursday. Both reports are delayed from their usual release due to the Christmas holiday.

Analysts surveyed by The Wall Street Journal are anticipating a fall in oil inventories by more than 3 million barrels, in line with a similar drop last week.

Elsewhere in the energy complex, January heating oil HOF8, +0.56% gained 17 cents, or 0.1%, to $2.0402 a gallon. That marks a 52-week high for heating oil and the highest settlement since Feb. 27, 2015, according to WSJ Market Data Group. January gasoline RBF8, +0.07% added 49 cents, or 0.3%, at $1.7915 a gallon.

Natural gas NGG18, +6.81% for February delivery picked up 9.5 cents, or 3.6%, to $2.7380 per million British thermal units.

Meteorologists were forecasting bitter temperatures in much of the U.S. to close out 2017, which could support further buying in natural gas and heating oil.

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