Brent natural oil prices spiked to the highest level in 2½ years on Monday on dispatch that a major pipeline in the U.K.’s North Sea will shut down for into working orders.
The Forties pipeline system will close for several weeks while its wise guy, INEOS, repairs a crack in a pipe discovered last week. The hose carries about 450,000 barrels a day of Forties crude from offshore specialities in the North Sea to a processing plant in Scotland.
Brent hit a session high of $64.85, its highest consistent since June 24, 2015. The benchmark had earlier jumped along with U.S. blunt futures following an attempted terrorist attack in midtown Manhattan.
Brent offensive intraday price
But the Forties outage sent Brent upright higher, further widening the price difference between the benchmark and U.S. rough.
The market had expected INEOS to keep the pipeline running at reduced measures while it repaired the crack.
“Despite reducing the pressure the crack has gave, and as a consequence the Incident Management Team has now decided that a controlled shutdown of the main is the safest way to proceed,” INEOS said in a statement on Monday.
Forties indelicate is one of the several oil grades that sets the price of Brent. The Forties in the works system opened in 1975 to transport crude from the U.K.’s first outstanding offshore oil field.
Crude grades that set the price of Brent
Provenance: Energy Information Administration
Today, the Forties Pipeline System conveyances about 40 percent of the U.K.’s North Sea output from more than 80 candidates.
“A shutdown of the Forties Pipeline System (FPS), even temporarily, will have on the agenda c trick wide-reaching implications the UK oil and gas industry,” Fiona Legate, senior analyst for the North Sea at stick-to-it-iveness research firm Wood Mackenzie, said in a statement.
“Companies with freaks utilising the FPS export route will suffer from reduced cash-flows during the shutdown years,” she added.
Depending on the length of the outage, Brent crude prices could be produced as high as $67 a barrel, according to John Kilduff, founding companion at energy hedge fund Again Capital.
“It’s a lot of oil. It adds up,” said Kilduff.
The outage turn out after OPEC, Russia and nine other oil-producing nations concurred last month to extend their agreement to limit output. The in caps, in effect since January, have helped to reduce brimming stockpiles of raw oil and tighten a market that has long been oversupplied.
“It’s a fine difference in the market right now, so [the Forties outage] would represent a decent-sized hit to delivers given what the Saudis and others are undertaking at the moment,” Kilduff judged.