Oil prices recover on big US crude stock drawdown, pipeline shutdown supports

The Grangemouth oil refinery west of Edi

The Forties pipeline system is one of the oldest and largest in the North Sea

Oil prices rose on Wednesday as industry data showed a larger-than-expected drawdown in US crude stockpiles, while expectations for an extended shutdown of a major North Sea crude pipeline also continued to bolster the market.

Distillate stockpiles, which include diesel and heating oil, fell by 1.4 million barrels, versus expectations for a 902,000-barrel increase, the EIA data showed. It had settled down US$1,35, or 2,1%, on Tuesday on a wave of profit-taking after news of a key North Sea pipeline shutdown helped send the global benchmark above US$65 for the first time since mid-2015.

Britain's biggest pipeline from its North Sea oil and gas fields is likely to be shut for several weeks for repairs. "At this stage, it is still too early to say how quickly the fix will take, but it is expected to be a matter of weeks rather than days".

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This development will naturally increase the appeal of alternatives to Brent-linked oil grades, including USA and Russian crude as the spread between the benchmarks widens. She said until then it is normal to for Brent crude oil to hover above $60 per barrel. A three per cent upturn in the global economy has paved the way to readjust policy towards longer-term issues, such as addressing climate change, tackling existing inequalities and removing institutional obstacles to development, according to a new United Nations report on global economic prospects out yesterday.

Refineries processed 17 million barrels of crude daily last week, the EIA also said, producing 10.1 million barrels of gasoline, up from 9.8 million bpd last week. However, Vandana Hari, a market analyst, told CNBC-TV18 that despite OPEC and non-OPEC countries vowing to cut oil output in an effort to boost the price, will start softening by June next year once the winter demand starts falling. The Organization of Petroleum Exporting Countries is working to erase a surplus, though that effort has been undermined by gains in US oil production.

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