The oil price topped $65 per barrel Tuesday, a price not achieved since 2015, on news a major North Sea pipeline would be shutdown for ‘a matter of weeks’. The news exacerbates growing output concerns on geopolitical tensions and pushed the price of Brent Crude and US WI oil higher.
By 1120 BST, the oil price was firmly in the green. The price of Brent crude was 1.36% higher at $65.67, while US WTI crude oil, was up 0.53% at $58.30.
Crack detected last week has grown
INEOS, who manages the Forties oil and gas pipeline from the North Sea, said it noticed a small, hairline crack on October 31st. Despite taking action and additional precautions, the crack has become larger.
“Despite reducing the pressure the crack has extended, and as a consequence the Incident Management Team has now decided that a controlled shutdown of the pipeline is the safest way to proceed,” INEOS said in a statement on its website.
“This will allow for a suitable repair method to be worked up based on the latest inspection data, while reducing the risk of injury to staff and the environment.”
The crack was found in the pipe at Red Moss near Netherley, just south of Aberdeen, Scotland. INEOS said that while they don’t know exactly how long the repair will take, “it is expected to be a matter of weeks rather than days”.
Output concerns take precedence
The oil price has hovered around the $62-$64 per barrel price for some time. However, this latest oil pipeline shutdown comes amid a number of other potential output issues due to geopolitical tensions, including in Nigeria and Yemen.
Recent data has also shown that demand for oil from China ramped up again in November, if that’s repeated in December, then oil stock drawdowns could be higher than expected as the year comes to a close.
It appears then, that investors are more concerned over the loss of output and rise in demand, than the increase of it from the US.
Recent figures show there are now 751 oil rigs on line, giving the country the capacity to produce around 9.71 million barrels per day, falling just a little short of Russia and Saudi Arabia’s capacity.