Oil prices soared on Thursday, December 28, buoyed by strong data from top importer China amid thin trading activity ahead of the New Year weekend.
Heading into 2018, traders said market conditions were relatively tight due to ongoing supply cuts led by the Middle East-dominated Organization of the Petroleum Exporting Countries (OPEC), as well as top producer Russia.
U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $59.82 a barrel at 0744 GMT, up 18 cents or 0.3 percent from their last settlement. WTI broke through $60 a barrel earlier this week, the first time since June 2015.
WTI received support from a report by the American Petroleum Institute (API) showing a 6 million barrel drop in crude oil inventories to 432.8 million.
Brent crude futures LCOc1 were at $66.68 a barrel, up 24 cents or 0.4 percent. Brent broke through $67 earlier this week, the first time since May 2015 this week.
Amid strong global demand and rising investor interest, trading in crude derivatives is booming, with annual Brent and spot WTI volumes hitting a new record in 2017.
Traders said the higher prices came after China released strong import quotas for 2018, which could lead to another record for purchases by the world’s biggest importer.
China’s oil thirst has also led to a 3 percent monthly drawdown in its crude inventories in November, to 26.15 million tonnes, the lowest level in seven years, according to Xinhua data on Thursday.
Oil markets have also been tightened following a year of OPEC and Russia-led production cuts, which were started last January and scheduled to cover all of 2018.
Pipeline outages in Libya and the North Sea have also been supporting oil prices.
“Given the much stronger price response to supply disruptions in the wake of OPEC supply cuts, the market is poised to make further gains,” said Stephen Innes, head of trading for Asia/Pacific at futures brokerage Oanda.
“With geopolitical risk no less sure ahead of Libyan elections next year, we should expect more regional chaos and disorder to underpin oil prices,” he added.
Around 100,000 barrels per day (bpd) in oil supplies were disrupted in Libya this week after an attack on a pipeline.
In the North Sea, the 450,000 bpd capacity Forties pipeline system was shut earlier this month due to a crack.
Both pipelines are expected to return to normal operations in January, with Forties already in start-up process.
Countering efforts by OPEC and Russia efforts to prop up prices is U.S. oil production C-OUT-T-EIA, which has soared more than 16 percent since mid-2016 and is fast approaching 10 million bpd.
Only OPEC king-pin Saudi Arabia and Russia produce more, Reuters reports.
