LONDON - Oil edged lower towards $65 a barrel on Tuesday, but remained within sight of its highest level since mid-2015, as the looming restart of a North Sea oil pipeline offset support from OPEC-led supply cuts.
The North Sea Forties pipeline, which plays an important role in the global oil market, is being tested following repairs and full flows should resume in early January, its operator Ineos said on Monday.
Brent crude, the international benchmark for oil prices, slipped 15 cents to $65.10 a barrel at 1153 GMT. Prices hit $65.83 on Dec. 12, the highest since June 2015. U.S. crude was down 7 cents at $58.40.
"The confirmation that Forties is coming back is the main development of the long weekend," said Olivier Jakob, analyst at Petromatrix. "For sure it has the potential for capping Brent."
Trading activity was thin due to the ongoing Christmas holiday in many countries.
Brent has risen 17 percent in 2017. The Organization of the Petroleum Exporting Countries, plus Russia and other non-members, have been withholding output since Jan. 1 to get rid of a glut.
The producers have extended the supply cut agreement to cover all of 2018.
Iraq's oil minister said on Monday there would be a balance between supply and demand by the first quarter, leading to a boost in prices. Global oil inventories have decreased to an acceptable level, he added.
That's earlier than seen by OPEC's latest official forecast, which calls for a balanced market by late 2018.
While the OPEC action has lent support to prices all year, the unplanned shutdown of the Forties pipeline on Dec. 11 pushed Brent to its mid-2015 high.
Forties plays an important role in the global market as it is the biggest of the five North Sea crude streams underpinning Brent, the benchmark for oil trading in Europe, the Middle East, Africa and Asia.
Rising production in the United States is offsetting some of the OPEC-led cuts.
The U.S. rig count, an early indicator of future output, held at 747 in the week to Dec. 22, according to the latest weekly report by Baker Hughes.