In thin trading in the Friday before Christmas, crude oil prices turn lower as the impact from the pending restart of a North Sea pipeline sinks in. File Photo by Monika Graff/UPI | License Photo
Dec. 22 (UPI) -- Concerns about how long U.S. shale oil production can keep up the pace and the pending restart of a North Sea pipeline sent oil prices lower on Friday.
After finding a hairline crack on the network south of Aberdeen, energy and chemicals company Ineos closed its Forties pipeline system, which it bought this year from BP, in mid December. The closure of a system that carries about 40 percent of North Sea production, including the blend of oils that make up the global benchmark, Brent, caused a spike in crude oil prices.
An announcement Thursday that the pipeline would be back up and running by the start of the New Year spilled over into thin Friday trading as markets watchers take stock of the imminent potential of North Sea oil flowing once again.
The price for Brent crude oil was down 0.32 percent as of 9:15 a.m. EST to $64.69 per barrel. West Texas Intermediate, the U.S. benchmark for the price of oil, was down 0.46 percent to $58.09 per barrel.
The restart challenges short-term metrics showing a global market slowly returning to balance. The Organization of Petroleum Exporting Countries is working to drain the glut of oil on the market through coordinated production cuts, though that effort has been offset somewhat with steady gains in U.S. shale oil production.
Federal estimates show the 10 million barrels per day expected next year from the United States will be a record if forecasts are accurate. Balance is weakened further because WTI is trading at a significant discount to Brent, which makes U.S. oil competitive as it moves toward its third year on the open market.
Phil Flynn, the senior market analyst for the PRICE Futures Group in Chicago, said in a commentary emailed to UPI the spread could be narrowing and spoil the party. By his read, some of the forecasts for U.S. shale oil are overly optimistic.
"Because of that we feel that the wide spread between Brent and WTI will tighten in the new year as shale realities start to be understood by the market," he said. "U.S [domestic] demand for WTI will also surge as U.S. refiners get huge benefits from the Trump tax cut."
That could, in turn, create headwinds for U.S. crude oil export potential.
Elsewhere, the U.S. Commerce Department reported Friday that consumers were spending more than they made in November. The government reported personal income increased 0.3 percent in November, the second month in a row for a decline. Spending, measured by personal consumption expenditures, increased 0.6 percent, compared with a 0.2 percent gain in October.
"Within services, the largest contributor to the increase was spending for electricity and gas," the report read.