Oil up at year end, U.S. crude hits highest since mid-2015
CALGARY, Alberta, Dec 29 (Reuters) - U.S. oil prices rose above $60 a barrel on the final trading day of the year, touching their highest since mid-2015, as an unexpected fall in American output and a decline in commercial crude inventories stoked buying in generally thin trading.
International benchmark Brent crude futures also rose, supported by ongoing supply cuts by top producers OPEC and Russia as well as strong demand from China.
Oil prices are set to close 2017 with strong gains on signs the global glut that has dogged the market since 2014 is shrinking. Brent is up 17 percent since the beginning of the year and U.S. West Texas Intermediate is 12 percent higher.
U.S. West Texas Intermediate (WTI) crude futures hit $60.32, the highest since June 2015. At 1641 GMT, they were up 32 cents at $60.16 a barrel. Brent crude futures rose 41 cents to $66.57 a barrel. Brent broke through $67 this week for the first time since May 2015.
WTI prices were supported by data from the U.S. Energy Information Administration late on Thursday showing domestic oil production
Earlier this year, oil prices slumped on concerns that rising crude production from Nigeria, Libya and elsewhere would undermine output cuts led by the Organization of the Petroleum Exporting Countries and Russia. Prices have rallied nearly 50 percent since the middle of the year on robust demand and strong compliance with the production limits.
"That trend is likely to continue into 2018 and worldwide oil inventories will continue their decline," said Andrew Lipow, president of Lipow Oil Associates in Houston.
Lipow said he expected U.S. crude prices to creep up to around $63 a barrel by the end of next year, while Brent would remain around $67 a barrel as U.S. oil exports rise to record levels.
U.S. output is up almost 16 percent since mid-2016, but still shy of the 10 million bpd most analysts had expected by year end, which would trail only top exporter Saudi Arabia and top producer Russia.
Analysts expect U.S. production to top 10 million bpd in the next few weeks and to keep growing, limiting efforts by other producers to cap global supplies.
"The U.S. shale impact is now encroaching on uncharted territory," analysts at RBC Capital Markets wrote this month, saying it had "redrawn the global crude flow map."
WTI prices were further boosted by an EIA report of a 4.6 million barrel weekly drop in U.S. commercial crude storage levels. Inventories are down by almost 20 percent from historic highs last March, and well below this time last year or in 2015.
A YEAR OF CUTS
In international markets, China has issued crude oil import quotas totalling 121.32 million tonnes for 44 companies in its first batch of allowances for 2018.
China's imports at around 8.5 million bpd, already the world's biggest, are expected to hit another record in 2018 as new refining capacity is brought online and Beijing allows more independent refiners to import crude.
Pipeline outages in Libya and the North Sea have supported oil prices, although both disruptions are expected to be resolved by early January.
The Forties pipeline was already pumping close to normal levels, trading sources said.
(Additional reporting by Henning Gloystein in Singapore, Dmitry Zhdannikov in London and David Gaffen in New York; Editing by David Evans and David Gregorio)