Oil markets eased off a 2 1/2 -year high Wednesday after a pipeline blast in Libya disrupted supplies and caused a price spike.
U.S. crude futures fell 33 cents, or 0.55%, snapping a five-session winning streak to settle at $59.64 a barrel. Brent, the global benchmark, fell 58 cents, or 0.87%, to $66.44 a barrel, snapping a six session streak of gains.
Prices are still at their second highest levels of the year. They jumped Tuesday after an explosion on a Libyan pipeline, which is expected to reduce oil production by up to 100,000 barrels a day, the country's National Oil Co. said.
But prices retreated Wednesday on reports the pipeline could be repaired in about a week.
Oil prices have become more vulnerable to the impact of supply disruptions as an overhang of inventory has been worked down over the last year.
"While supply impact is immaterial, it shows that with the market structurally undersupplied and inventories continuing to draw, geopolitical risk has now re-emerged as an important factor in day-to-day trading dynamics," analysts at Tudor, Pickering, Holt & Co. said.
This is the second significant supply disruption to the global oil market in recent weeks, following the continuing outage of the Forties Pipeline System in the North Sea, which stopped the flow of 450,000 barrels a day.
That pipeline is also due to come back online soon. Its operator, Ineos, said Tuesday that repairs were progressing and operations should fully resume early in the new year.
Despite Wednesday's move lower, oil prices have surged in recent months, pushed higher by rising demand and the impact of nearly a year's worth of restraint by the Organization of the Petroleum Exporting Countries and other major producers. Escalating geopolitical tensions and a string of supply disruptions have also boosted prices.
"Any kind of bullish news that comes out, traders seem to be gravitating toward it," said Gene McGillian, research manager at Tradition Energy. "The fundamental picture has changed: demand is strong, these guys are adhering to their cuts, and it's basically eradicating the excess supply that was in the market."
Market participants are also watching data on U.S. petroleum stockpiles due Thursday from the U.S. Energy Information Administration. Analysts surveyed by The Wall Street Journal are anticipating the data will show oil inventories fell again last week, dropping by 3.7 million barrels.
Gasoline futures rose 0.27% to $1.7915 a gallon. Diesel futures rose 0.08% to $2.0402 a gallon.
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(END) Dow Jones Newswires
December 27, 2017 15:53 ET (20:53 GMT)