Oil Holds Gains Above $58 as U.S. Drillers Pause Rig Expansion

Futures were little changed in New York after gaining 2 percent last week. The number of U.S. rigs targeting oil remained unchanged at 747, Baker Hughes data showed Friday. A repair of the North Sea’s Forties Pipeline System is complete and pressure testing has started, operator Ineos Group said Monday. The halt of the line earlier this month sent prices surging.

Oil is heading for a second yearly advance as the Organization of Petroleum Exporting Countries and its allies including Russia prolong supply curbs through the end of 2018. Iraq’s Oil Minister Jabbar Al-Luaibi said Monday that he’s optimistic prices will gain next year with global stockpiles falling and demand rising in China and India.

“The expectations of the return of the Forties pipeline may cap some of the upside potential triggered” by the Iraqi oil minister’s comments, Hans van Cleef, a senior energy economist at ABN Amro, said by email. “I wouldn’t expect much fireworks today as indeed liquidity is low.”

Despite a rally in crude prices, this year’s drilling ramp-up has slowed since peaking in August as investors in the oil industry are pushing for returns over growth, a large backlog of drilled wells still needs to be fracked and technology increasingly allows producers to tap more from each hole.

“It’s a bit too early to say whether U.S. rigs will continue to decline as we can’t ignore the fact that it’s winter and some seasonal factors could be stalling drilling activity,” Will Yun, a commodities analyst at Hyundai Futures Corp., said by phone. “The shutdown of the Forties pipeline has kept prices higher and it will support oil’s bull run until at least the end of this year.”
more at:  https://www.bloomberg.com/news/articles/2017-12-26/oil-holds-gains-above-58-as-u-s-drillers-pause-rig-expansion