* U.S. crude stocks fell last week - EIA
* Restart process begins for Brent pipeline system
* Natural gas field attacked in OPEC-member Algeria
* Coming up: U.S. jobless claims data 8:30 a.m. EST Thursday
By Robert Gibbons and David Sheppard
NEW YORK, Jan 16 Oil prices rose on Wednesday
after an Algerian gas field came under attack from Islamist
militants and as data showed crude stocks fell in the United
States last week.
Gains in the Brent contract were capped, however, by news of
a restart of a North Sea pipeline system. The Brent February
crude contract seesawed as it approached expiration at the end
of Wednesday's session, eventually finishing 31 cents higher
The March contract pared its early gains after the operator
of the Cormorant Alpha platform in the North Sea said it is
preparing to restore the flow of an estimated 80,000 barrels per
day (bpd) of crude oil in the Brent pipeline system.
A leak found on Tuesday halted production at the Cormorant
Alpha platform and shut the pipeline system that handles
production from oilfields that contribute to the Brent stream.
"Brent supply has been pretty unreliable over the past
year," said Jason Gammel, a commodities analyst at Macquarie in
New York. "Pipeline outages in the North Sea have been putting
(upward) pressure on Brent prices."
The possibility of supply disruptions in Africa and the
Middle East remain a supportive factor for oil after Al
Qaeda-linked Islamists on Wednesday claimed to have seized up to
41 hostages, including seven Americans, in a raid on a gas field
plant in OPEC-member Algeria.
"Given how successful Algeria has been at protecting its oil
and gas installations over the decades, a raid like this was
seen as fairly unlikely," said Sam Ciszuk, analyst with
British-based consultancy KBC Energy Economics.
"Either the Islamist group got lucky, or it really
demonstrates how their capabilities have grown," Ciszuk added.
The gas field is operated by a joint venture including BP
, Norwegian oil firm Statoil and Algerian state
company Sonatrach. BP said the attack had shut in more than 10
percent of Algeria's gas production and about 60,000 bpd of
The expiring Brent February crude contract rose 31
cents to settle at $110.61 a barrel, having traded from $110.24
to $110.84. March Brent finished 5 cents higher at
$109.68 a barrel, having swung from $109.34 to $110.35.
U.S. February crude settled up 96 cents at $94.24 a
barrel, having traded from $93.10 to $94.36. Its discount to
front-month Brent fell to its lowest since September
and finished below $16.50 a barrel.
Traders expect the recent expansion of the Seaway pipeline
to help ease stocks of crude oil from record levels around
Cushing, Oklahoma, delivery point of the U.S. benchmark
The spread between the contracts for delivery in June has
narrowed to around $12.50 a barrel, having started the year
around $15 a barrel.
U.S. OIL INVENTORIES
U.S. commercial crude inventories fell 951,000 barrels last
week, the weekly report from the Energy Information
Administration said on Wednesday, contrary to consensus
expectations that crude stocks had increased.
Crude stocks at Cushing rose by 1.78 million barrels to an
all-time high of 51.86 million barrels, though inventories in
the Gulf Coast refining hub fell as imports dropped by more than
300,000 bpd to less than 8 million bpd.
"Last week's temporary shut down of the Seaway pipeline to
get ready for the expansion of capacity had a bigger impact than
some expected," said Phil Flynn, analyst at Price Futures Group
"Saudi Arabia's recent production cuts probably helped cause
the drop in crude imports," Flynn added.
U.S. gasoline stocks rose 1.91 million barrels and
distillate stocks rose 1.69 million barrels, smaller builds than
expected in a Reuters poll of analysts.
Separate reports on Wednesday showing U.S. manufacturing
output climbed in December, while low inflation lifted
consumer's purchasing power, also lent support to oil prices.
DEMAND CONCERNS REMAIN
In Europe, however, demand for new cars fell in December to
the lowest level since 1995, adding to numbers the previous day
showing Germany's economy shrank at the fastest pace in almost
three years in the final quarter of 2012.
OPEC said it expected demand for its crude this year to be
lower than initially thought because of higher supply from rival
producers, indicating inventories could rise even after the
recent output cut by Saudi Arabia.
Oil traders will be closely watching China's GDP numbers on
Friday for another indicator of prospects for energy demand.
The data is expected to show the pace of China's economic
growth improved to 7.8 percent in the fourth quarter, according
to a Reuters poll, snapping seven straight quarters of slowing