Both Brent and WTI strengthened yesterday and are up slightly this morning. According to Reuters, the main driver of stronger crude oil prices has been the shutdown of the Forties pipeline in the North Sea. Repairs are expected to take several weeks. While the pipelines only affect a small region, they are a critical component for determining Brent crude prices. Given Brent's status as a global crude oil benchmark, prices are strengthening as a result. The big risk to the current crude oil rally is rising US production. According to recent estimates from the IEA, crude oil markets are likely to move into a surplus in the first half of 2018. According to its latest projections, the crude oil market is likely to experience a surplus of 200,000 barrels per day in early 2018. Our medium-term outlook on crude remains bullish.
WTI is currently trading just above $57.30. Brent crude is currently above $63.40.
Looking at US crude oil stocks, the most recent EIA figures (December 13) showed falling crude oil stocks and rising gasoline inventories. Crude oil inventories were lower than estimates (-5.1m vs. -4m expected). Gasoline stocks were up (+5.6m vs. +2.3m expected) while distillate stocks (-1.4m vs. +1.2m expected) were lower. Looking at reactions in markets, crude oil prices fell following the EIA report.