Crude Falls From 2015 Highs

Oil prices fell on Wednesday after hitting a near two-and-a-half year high in the previous session as analysts said the rally was gradually running out of steam despite supply outages in Libya and the North Sea.

Brent crude futures dropped to $66.26 a barrel, down 1.15%, or 76 cents, after breaking through $67 for the first time since May 2015 the previous day. US West Texas Intermediate crude futures were at $59.57 a barrel, down 40 cents from their last settlement, CNBC reported.

WTI broke through $60 a barrel for the first time since June 2015 in the previous session.

Vienna-based research group JBC Energy said in a note the market could gradually realize it had overshot: “We would have to argue that sometime over the course of January we will see a major turnaround.”

It said prices could fall below $60 a barrel sometime in February and could even test $55 a barrel. On Tuesday, Libya lost around 90,000 barrels per day of crude oil supplies from a blast on a pipeline feeding its Es Sider port.

That added to supply disruptions of recent weeks, which also included the closure of Britain’s largest Forties pipeline. On Tuesday, its operator said it expected full flows along the Forties link to resume in early January.

The Forties and Libyan outages, which together amount to around 500,000 bpd, are relatively small in a global context of both production and demand approaching 100 million bpd.

“The net global impact of the Libyan pipeline explosion is relatively small and we will not blow out of proportion the impact of the incident on the supply and demand picture,” said Olivier Jakob from Swiss-based Petromatrix.

He said the market could be supported by a US cold spell and expectations of greater heating oil consumption.

Oil markets have tightened significantly over the past year thanks to supply cuts by the Organization of Petroleum Exporting Countries and non-OPEC Russia.

Data from the US Energy Information Administration shows that following rampant oversupply in 2015, global oil markets gradually came into balance by 2016 and started to show a slight supply deficit this year.

EIA data implies a slight supply shortfall of 180,000 bpd for the first quarter of 2018. A major factor countering efforts by OPEC and Russia efforts to prop up prices is US oil production, which has soared more than 16% since mid-2016 and is fast approaching 10 million bpd.