Global benchmark Brent crude yesterday jumped above US$65 a barrel for the first time in two-and-a-half years after one of the most important oil pipelines in the world was shut.
Futures rose 0.8 percent in London, on course for their highest close since June 10, 2015, after advancing 2 percent on Monday.
It would take about two weeks to repair the North Sea Forties Pipeline System after a small hairline crack was discovered during a routine inspection, operator Ineos said.
In the US, crude stockpiles are forecast to drop for a fourth week, a Bloomberg survey showed before US government data today.
Oil is heading for a second yearly gain as OPEC and its allies, including Russia, extend supply cuts through the end of next year.
A strategy to exit the deal can be drafted in June if the market is no longer oversupplied by then, Emirati Minister of Energy Suhail al-Mazrouei said.
“If the market has some visibility on how long it’s going to take to repair the pipeline, that removes some of the uncertainty and reduces the risk premium,” said Ric Spooner, a Sydney-based analyst at CMC Markets. “The relatively high global inventories will possibly cap any rally we have from here.”
Brent for February settlement was at US$65.20 a barrel on the London-based ICE Futures Europe exchange, up US$0.51, at 10:40am in Hong Kong.
Prices rose US$1.29, or 2 percent, to US$64.69 on Monday. The global benchmark traded at a premium of US$6.89 to February West Texas Intermediate (WTI).
WTI for January delivery gained US$0.30 to US$58.29 a barrel on the New York Mercantile Exchange after advancing 1.1 percent on Monday. Total volume traded was about 20 percent below the 100-day average.
The supplies that flow through the Forties Pipeline System are the single largest constituent part of so-called Dated Brent crude that helps to settle more than half the world’s physical oil prices.
The shutdown forced Apache Corp to suspend operations at its nearby Forties field.
US crude stockpiles likely fell by 2.89 million barrels last week, according to the Bloomberg survey before an US Energy Information Administration report today.
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