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Chinese growth gives support to oil prices

It's been a rather successful year for the world's second-largest economy, the World Bank said.

By
Daniel J. Graeber
A lingering outage for a North Sea oil pipeline system and a World Bank assessment of China's economic growth sends oil prices higher early Tuesday. File photo by Brian Kersey/UPI
A lingering outage for a North Sea oil pipeline system and a World Bank assessment of China's economic growth sends oil prices higher early Tuesday. File photo by Brian Kersey/UPI | License Photo

Dec. 19 (UPI) -- An assessment that China's economy was in a steady pattern of growth and repair assessments on a North Sea pipeline system sent oil prices higher on Tuesday.

China is the second-largest economy in the world behind the United States. Oil demand from China last month was 9 million barrels per day, the second highest on record.

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The World Bank said Tuesday that Chinese growth for the year should be around 6.8 percent, supported by improvements in household incomes and external demand. John Litwak, the lead bank economist for China, said economic planners have done a good job at coordinating a relatively balanced economy with little exposure to risk.

"As a result, 2017 has been a successful year for China on many fronts," he said in a statement.

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The price for Brent crude oil was up 0.3 percent as of 9:18 a.m. EST to $63.62 per barrel. The price for West Texas Intermediate, the U.S. benchmark for the price of oil, was up 0.44 percent to $57.47 per barrel.

Brent is suppressed somewhat because the Forties pipeline system, a network that funnels about 40 percent of North Sea production to inland refineries, remains closed. The system's owner, Ineos, said Tuesday that manufacturers were making custom components to fix a network closed after a hairline crack was discovered onshore near Aberdeen.

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"At this stage, it is still too early to say exactly how long the repair will take to complete, and there is no change to the previously indicated timescale of two to four weeks from Dec. 11," the company stated.

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The shutdown gave a brief lift to the Brent price, but narrowed the spread, or difference, to WTI. U.S. crude oil has been supported by its discount relative to Brent, though the spread has diminished from around $7.60 when the Forties system closed to $6.15 per barrel at the current price.

U.S. oil, nonetheless, is gaining traction. According to the latest federal estimates, shale production could grow another 94,000 barrels per day by January, marking 13 straight months for gains.

"When it comes to the U.S. shale patch, it's very much a case of New Year, same story," Stephen Brennock, an analyst with London oil broker PVM, said in an emailed report.

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U.S. oil is balancing an effort by the Organization of Petroleum Exporting Countries to drain an oversupplied market with coordinated production cuts.

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