Oil retreated from its highest close in more than two years in London and New York amid low volume, as a pipeline carrying crude to a Libyan export terminal was said to need a week for repairs following an explosion on Tuesday.
West Texas Intermediate crude futures slipped after breaching $60 a barrel on Tuesday for the first time since June 2015. A pipeline run by Waha Oil Co. that carries crude to Libya’s Es Sider terminal exploded Tuesday, reducing output by as much as 100,000 barrels a day. The repair work will take about a week, according to people familiar with the situation.
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. Prices gained this month after the Forties pipeline in the U.K. — one of the most important conduits in the world — was shut because of a crack. Partial flows have now restarted at the Forties Pipeline System’s Kinneil facility, operator Ineos Group said.
“The market is having a counter-reaction to the jump yesterday,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen. “It remains supported by the news out of Libya but at the same time liquidity is very poor.”
West Texas Intermediate for February delivery fell 40 cents to $59.57 a barrel on the New York Mercantile Exchange at 8:41 a.m. in New York. Total volume traded was about 33 percent below the 100-day average. Futures rose as high as $60.01 a barrel in the previous session, when total volume was about 30 percent below the 15-day average of 1.1 million contracts.
Brent for February settlement lost 68 cents to trade at $66.34 a barrel on the London-based ICE Futures Europe exchange. Prices climbed 2.7 percent to $67.02 a barrel Tuesday, the highest close since May 2015. The global benchmark crude traded at a premium of $6.73 to WTI.
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Output in Libya, where fields have endured sporadic shutdowns and disruptions due to protests, power blackouts and fighting, earlier this year peaked at just over 1 million barrels a day, the highest level in four years. Any drop in production due to the blast that occurred 130 kilometers (81 miles) south of Sidra will ease pressure on OPEC-led efforts to drain a glut.
Separately, Saudi Arabia is said to expect oil revenue to jump about 80 percent by 2023 to help the kingdom record its first budget surplus in a decade. Under a six-year program to balance the budget, officials predict rising prices and expanded output will push Saudi income from oil sales to 801.4 billion riyals ($214 billion) from 440 billion riyals this year, according to people with knowledge of the matter.
U.S. crude production is set to surpass 10.5 million barrels a day by the end of next year because of the growth in the Permian “super” Basin, Reed Olmstead, director for energy research and analysis at IHS Markit, said in a note. The U.S. imported about 114,000 barrels a day of gasoline in the week ended Dec. 21, customs data show; that compares with about 46,160 barrels a day a week earlier, which was the lowest since Nov. 2. Ultra-low sulfur diesel fuel traded in New York dropped 0.4 percent after closing on Tuesday at its highest since February 2015.