SHEL Shell Plc

By Kevin Baxter and Jenny W. Hsu 

Crude oil prices were up Friday, clawing back some of the early morning losses after the U.S. published mixed data that showed a big decline in oil stocks, but a build in oil products in storage.

The March contract for Brent crude, the global benchmark, was up 0.6% to $57.22 a barrel while its U.S. counterpart West Texas Intermediate gained 0.52% to $54.03 for February deliveries.

Prices have been buoyed this morning by the decision by Royal Dutch Shell PLC to close down the 140,000-barrel-a-day Trans-Niger Bonny Light pipeline. The company cited a fire as the reason for the shutdown, but the situation highlights the continuing struggle in Nigeria with attacks on the country's oil infrastructure.

"The Nigerian government is reported restarting to pay peace-allowance to militants. This will probably ease things but it will take time before world refiners regain confidence about the reliability of Nigerian supplies," said oil analyst Olivier Jakob from the Switzerland-based Petromatrix.

Oil prices had been choppy overnight and early morning after the U.S. Energy Information Administration reported a significant drawdown of 7.1 million barrels from stockpiles in the week of Dec. 30 due to lower imports, upending the market's expectations for an increase or a smaller decrease.

However, the large growth in distillates and gasoline stocks--of 10.1 million barrels and 8.3 million barrels respectively--is considered bearish and a reflection of poor demand, said analysts at Société Générale.

The data also showed U.S. production of crude grew by 4,000 barrels a day in the same week, a figure that is likely to rise in the postholiday period.

As U.S. production continues to creep up, members of the Organization of the Petroleum Exporting Countries are starting to pull back on output to meet the 32.5 million barrels a day ceiling pledged at the cartel's Nov. 30 meeting.

Saudi Arabia, the de facto leader of the cartel, took the lion's share of the cut. The Wall Street Journal Thursday reported the kingdom made good on its pledge by cutting its January daily production by 468,000 barrels.

"Saudi Aramco has made it clear that it plans to cuts production and this will hopefully convince other producers to fully comply with the promised cuts," said Edward Bell, an analyst from the Dubai-based Emirates NBD bank.

Some market observers believe prices could reach $60-$70 a barrel later this quarter if the cuts are fully enforced, though OPEC has a spotty record of adhering to past production quotas.

Nymex reformulated gasoline blendstock for February--the benchmark gasoline contract-fell 0.16% to $1.6395 a gallon.

ICE gas oil for January changed hands at $498.25 a metric ton, up 0.91%.

Write to Kevin Baxter at Kevin.Baxter@wsj.com and Jenny W. Hsu at jenny.hsu@wsj.com

(END) Dow Jones Newswires

January 06, 2017 07:27 ET (12:27 GMT)

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