SINGAPORE, 12 Dec 2017:
Brent crude oil prices jumped above US$65 per barrel for the first time since 2015 after the shutdown of the Forties North Sea pipeline knocked out significant supply from a market that was already tightening due to OPEC-led production cuts.
Brent crude futures rose another 73 cents to US$65.42 a barrel, after jumping US$1.35 on Monday. That marks the first time Brent has risen above US$65 since June, 2015. US crude futures added 36 cents to US$58.35 a barrel.
“Brent crude raced higher … as news broke that the North Sea’s Forties Pipeline system would have to be shut down for a ‘number of weeks’ after a hairline crack was found in it,” said Jeffrey Halley, senior market analyst at futures brokerage OANDA in Singapore.
“The pipeline … is a significant component underpinning the Brent benchmark.”
Britain’s Forties oil pipeline, the country’s largest at a capacity of 450,000 barrels per day (bpd), shut down yesterday after cracks were revealed.
“The market reaction shows that in a tight market, any supply issue will quickly be reflected in higher prices,” said ANZ bank.
The jump in Brent prices widened its premium to WTI prices to almost US$7 a barrel, up from around US$5 last week – making US oil exports more attractive.
The cheaper WTI is also a result of rising US oil production – which has jumped by more than 15% since mid-2016 to 9.71 million bpd – levels not seen since the early 1970s.
US production is now also not far off that of top producers Russia and Saudi Arabia.
The rising US output threatens to undermine efforts led by the Organisation of the Petroleum Exporting Countries (OPEC) and a group of non-OPEC producers, most importantly Russia, to support prices by withholding supplies.
OPEC and its allies started withholding supplies last January and currently plan to continue doing so throughout 2018.
– Reuters