Oil prices hit an all-time high near US$120 a barrel yesterday after a weekend refinery strike closed a pipeline system that delivers a third of Britain’s North Sea oil to refineries in the UK.
The shutdown comes amid other supply outages in Nigeria that have helped to support oil against a strengthening dollar.
“We’ve got a confluence of a number of events that have really disrupted crude oil supply,” said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. “That’s what’s driving oil to a new record even though the US dollar actually strengthened a bit.”
Light, sweet crude for delivery next month rose to a record US$119.93 a barrel in electronic trading on the New York Mercantile Exchange.
The contract eased back to US$119.40 a barrel by midday in Singapore, up US$0.88 from Friday’s close of US$118.52.
BP PLC on Sunday shut down the Forties Pipeline System that carries more than 700,000 barrels of oil a day to the UK because of a 48-hour walkout by employees at a refinery in central Scotland.
Workers walked out of the Grangemouth refinery vowing not to give ground in their dispute with refinery owner Ineos over plans to close a generous pension scheme to new employees. Ineos chief executive Tom Crotty said it could take a week for the plant to return to production once the strike ends today. BP said its pipeline could be up and running within 24 hours.
BP’s Kinneil plant, the onshore processing center for the pipeline system, is powered from the Grangemouth site.
“With the refinery being shut down, it will affect supplies from the North Sea and that has a potentially significant impact,” said David Moore, a commodity strategist with the Commonwealth Bank of Australia in Sydney.
“That comes at the same time that there’s production disruptions from Nigeria so the combined effect of those is the immediate factor that’s put pressure on oil prices,” he said.
In Nigeria, the Movement for the Emancipation of the Niger Delta, or MEND, said its fighters hit an oil pipeline late on Thursday, the fourth conduit the group has attacked in the past week. MEND said the pipeline belongs to a Royal Dutch Shell PLC joint venture. A Shell spokesman confirmed one of its pipelines had been hit, but provided no additional details.
Separately, workers at an Exxon Mobil Corp joint venture there cut production by an unspecified amount to demand more pay.
Demand is high for Nigeria’s light, sweet crude, which is easily refined. After years of militant attacks, however, Nigeria’s output is dropping and the country can produce only about 75 percent of its official production capacity of 2.5 million barrels per day.
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