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NEW YORK: Oil prices bounced between positive and negative territory on Wednesday after US crude stockpiles fell more than expected, though that was somewhat offset by a larger-than-forecast rise in gasoline inventories and more growth in US oil production.

Expectations for an extended shutdown of a major North Sea crude pipeline continued to bolster Brent crude, the world oil benchmark.

US crude inventories dropped by 5.1 million barrels, more than anticipated, and US production figures hit another new record at 9.78 million barrels a day for weekly data. The US peak, when records were only kept on a monthly basis, is 10.04 million bpd, set in November 1970.

"The report is modestly supportive on the large crude oil inventory decline. That decline was offset mightily by the large increase in gasoline inventories," said John Kilduff, partner at energy hedge fund Again Capital LLC in New York.

US West Texas Intermediate crude fell 3 cents to $57.11 a barrel as of 10:57 a.m. EST (1557 GMT). Brent crude fell 23 cents to $63.04 a barrel. It settled down 2.1 percent on Tuesday on a wave of profit-taking after the North Sea pipeline shutdown helped send the global benchmark above $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. On Wednesday morning, its operator said it was still considering repair options and reiterated that any repairs would take several weeks.

The pipeline, which carries about 450,000 barrels per day (bpd) of Forties crude, was shut after a crack was found. It has particular significance to global markets because Forties is the largest of the five crude oil streams that underpin the dated Brent benchmark.

A number of producers, including BP and Royal Dutch Shell, said they had closed down oil fields in response.

While the Forties shutdown has provided a price floor, early gains quickly evaporated in a global market that is still oversupplied and with output rising in the United States.

"The fact that the market sold off so much after the Forties outage shows that the market struggles to trend higher. Now, we're basically where we were a month ago," Olivier Jakob of Petromatrix consultancy said.

Selling gained pace on Tuesday after the US Energy Information Administration said in its monthly short-term energy outlook that US crude oil output will rise by 780,000 barrels per day (bpd) to a record-high of 10.02 million bpd in 2018.

United Arab Emirates Energy Minister Suhail al-Mazroui said on Wednesday that it was premature to talk about an exit strategy from the current global supply cut agreement between OPEC and non-OPEC producers.

 

Copyright Reuters, 2017