Oil prices up slightly on pipeline outage support

16 December, 2017, 05:58 | Author: Barbara Daniel
  • UPDATE 2-Oil prices rise on North Sea pipeline outage, but rising US output looms (BP., RDSA, XOM, CVX, FP)

Ineos, which operates the Forties pipeline system in the North Sea, said Wednesday it was reviewing a range of options to fix cracks in a system that carries about 40 percent of total regional production, or about 450,000 barrels per day.

Brent, the global oil benchmark, rose 42 cents, or 0.7%, to $62.86 a barrel.

INEOS told clients on Tuesday it expected any fix work to last at least two weeks. "At this stage, it is still too early to say how quickly the fix will take, but it is expected to be a matter of weeks rather than days".

Oil prices rose on Friday, supported by the continuing outage of the Forties pipeline in the North Sea and falling inventories due to OPEC-led production cuts, but climbing USA output kept a lid on gains.

Oil prices climbed on Thursday as a pipeline shutdown in the United Kingdom's North Sea continued to lift the prices.

Ineos, the operator of the Forties pipeline, declared force majeure - that it is unable to fulfil contractual obligations - on crude deliveries following the discovery of the leaks.

"After the initial surge that understandably accompanies such a major supply disruption, the market has settled down again and, unless another dramatic event occurs in what remains of 2017, it looks as if the Brent crude price will average about US$54 a barrel for the year, an increase of twenty percent on 2016".

At the same time, OPEC is upbeat about the massive drawdowns in recent months.

"Commercial oil stocks in the OECD fell further in the month of November and the difference to the latest five-year average has been reduced by around 200 million barrels since the beginning of this year", Barkindo said at an energy forum in China on Wednesday. Russia's Urals and the UAE's Murban are some of the alternatives to Forties in terms of similar quality.

The gravity of the Forties outage was magnified by an explosion one day later at a key hub for Russian gas imports into Europe.

Traders are watching the spread, or difference, between Brent and WTI closely.

The firm discovered a hairline crack in the pipe near Netherely, south of Aberdeen, last week, and it shut down the huge Forties pipeline system on Monday. This outage may accelerate the pace of shrinking global inventories and give OPEC's efforts an unexpected boost.

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