NEW YORK (Reuters) - Oil edged up toward $64 a barrel on Tuesday, helped by a North Sea pipeline outage, OPEC-led supply cuts and expectations that U.S. crude inventories had fallen for a fifth week.
But rising U.S. output has put a lid on gains. Shale production will rise to a record in January, according to a government forecast published on Monday, as higher prices encourage increased drilling.
The shutdown of the North Sea’s Forties pipeline since last week has supported Brent, as Forties is the largest of the five crude grades underpinning the benchmark. On Dec. 12, Brent reached $65.83, its highest since mid-2015.
“We got the news that the fabricated piece for the Forties pipeline is on its way to the site, but the outage is still registering in the market,” said John Kilduff, partner at Again Capital LLC in New York. “While the market is dealing with it, we could see this go on into the new year.”
Ineos, the operator of the Forties pipeline, said on Tuesday it was moving forward with a preferred repair option and the timeframe for the fix remained two to four weeks starting from Dec. 11, the date of the shutdown.
Oil ticked up after reports that a missile was fired at the Saudi Arabian capital Riyadh from Yemen, but Saudi Arabia said it intercepted the missile and no casualties were reported.
Prices have also drawn support from a deal by the Organization of the Petroleum Exporting Countries and non-member producers including Russia to cut crude output to curb a global glut.
OPEC and its allies have extended the agreement until the end of 2018 and Russia's Rosneft ROSN.MM said on Monday it could be maintained beyond next year, continuing cuts that have trimmed global inventories.
U.S. crude stockpiles fell last week more than expected, while gasoline inventories increased and distillate stocks drew, industry group the American Petroleum Institute said Tuesday.
Crude inventories fell by 5.2 million barrels in the week to Dec. 15 to 438.7 million, compared with analysts’ expectations for a decrease of 3.8 million barrels, API said after settlement. Crude stocks at the Cushing, Oklahoma, delivery hub rose by 70,000 barrels, it said.
The U.S. Energy Department’s Energy Information Administration report is due at 10:30 a.m. EST on Wednesday.
Rising U.S. production is countering lower supply elsewhere. U.S. shale output in January is forecast to increase by 94,000 barrels per day to 6.41 million bpd, according to the EIA’s monthly drilling productivity report published Monday.
Additional reporting by Alex Lawler and Henning Gloystein; editing by David Gregorio and Diane Craft
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