Brent Crude Oil Slides as North Sea Pipeline System Resumes

Published Mar 7, 2013 9:29 AM by The Maritime Executive

PHOTO: Traders in the energy options pit at the New York Mercantile Exchange (NYMEX) in New York, U.S. Scott Ellis/Bloomberg

Brent crude prices slid after a pipeline system used to transport the grade of North Sea oil resumed operation after a five-day halt. West Texas Intermediate rose from near its lowest closing price this year.

London-traded Brent futures sank as much as 0.5 percent, reversing an earlier gain. The Brent pipeline is flowing at less than full capacity, a spokesman for operator Abu Dhabi National Energy Co. PJSC, known as Taqa, said by telephone from Abu Dhabi, capital of the United Arab Emirates.

“Brent is pulling a little lower” after earlier gaining support from “supply hiccups,” said Andrey Kryuchenkov, an analyst at VTB Capital in London.

Brent for April settlement on the ICE Futures Europe exchange fell as much as 58 cents to $110.48 a barrel, and were at $110.58 at 1:06 p.m. London time. The volume of all futures traded was 59 percent above the 100-day average. The European benchmark crude was at a premium of $19.76 to WTI futures, compared with $20.63 yesterday, as the spread narrowed for a second consecutive day.

WTI for April delivery rose, gaining as much as 46 cents, and was last up 38 cents at $90.82 a barrel in electronic trading on the New York Mercantile Exchange. WTI had closed at $90.12 a barrel on March 4, the lowest settlement since Dec. 24. The U.S. oil futures gained as the dollar weakened against the euro, making assets priced in the U.S. currency more attractive.

The euro climbed 0.4 percent to $1.3017 at 12:54 p.m. in London, as the European Central Bank kept interest rates on hold at a meeting in Frankfurt.

North Sea

Production from the 27 North Sea oil fields that make up the Brent system was shut March 2 after Taqa reported a leak in one leg of the Cormorant Alpha platform. The pipeline normally carries 90,000 barrels a day of oil, equivalent to 10 percent of U.K. output, though 10,000 barrels a day was already offline after a similar incident at the same platform on Jan. 14. a barrel at 10:54 a.m. in London.

The company didn’t specify when operations resumed at the pipeline, which accounts for about 10 percent of U.K. oil production, nor did it say when the network would reach the targeted flow of 80,000 barrels a day.
Exports of North Sea Forties crude in April are planned at 21 cargoes of 600,000 barrels each, one more than this month, a loading program obtained by Bloomberg News showed.

Forties is one of four North Sea oil grades that make up the Dated Brent benchmark, which is used to price crude from the Middle East, Africa and Russia. The other blends are Brent, Oseberg and Ekofisk.

Cushing Inventories

U.S. crude stockpiles at Cushing, Oklahoma, the delivery point for WTI and the country’s biggest oil-storage hub, rose 257,000 barrels to 50.8 million, the highest level in a month, data from the Energy Information Administration, the Energy Department’s statistical unit, showed yesterday. Supplies nationwide climbed to 381.4 million, the most since June.

U.S. distillate inventories, including heating oil and diesel, fell 3.8 million barrels, according to the EIA. They were projected to fall by 1 million barrels. Gasoline supplies were down by 616,000 barrels, less than a forecast decline of 1 million barrels.

Refinery utilization decreased 2.9 percentage points from the previous week to 82.2 percent, the lowest U.S. rate since March 16, 2012. Processing had been forecast to rise 0.4 percentage point in a Bloomberg survey of analysts.

Overstated Demand

Weakness in U.S. oil demand may be overstated because of disruptions at pipelines and terminals from Hurricane Sandy in October that have made it difficult for refiners to ship products, Stefan Wieler, a London-based analyst at Goldman Sachs Group Inc., said in a report yesterday.

The death of Venezuelan President Hugo Chavez on March 5 should have a limited impact on the country’s oil production in the short term, while a change of leadership may foster longer- term investment and boost output, the bank said. Venezuela pumped 2.86 million barrels a day of crude last month, according to a Bloomberg survey of producers and analysts.

WTI has technical support along its lower Bollinger Band, about $89.70 a barrel today, according to data compiled by Bloomberg. Futures yesterday traded below the indicator before rebounding to settle higher for a second day, signaling chart support, where buy orders may be clustered.